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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-29339
2,970,554 SHARES
[i2 LOGO]
i2 TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.00025 PER SHARE)
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This Prospectus relates to the public offering, which is not being
underwritten, of up to 2,970,554 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"). None of the proceeds from the sale of
the Shares by the Selling Stockholders will be received by the Company. See
"Selling Stockholders."
The Shares may be offered by the Selling Stockholders from time to time
in transactions on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Of the Shares,
2,945,910 were originally issued by the Company in connection with the
acquisition of Think Systems Corporation, a New Jersey corporation ("Think"), by
and through a statutory merger of Think with and into a wholly owned subsidiary
of the Company. Such Shares are being registered by the Company pursuant to a
Registration Rights Agreement entered into by and among the Company and the
Selling Stockholders as a condition to the Think merger. The remaining 24,644
shares were originally issued by the Company in connection with the exercise of
stock options assumed by the Company in the Think merger. All of the Shares were
issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by Section
4(2) thereof. 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 or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). See "Selling Stockholders" and "Plan of Distribution."
The Company has agreed to bear certain expenses (other than fees and
expenses, if any, of counsel or other advisors to the Selling Stockholders and
any brokerage fees or commissions) in connection with the registration and sale
of the Shares being offered by the Selling Stockholders. 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.
The Common Stock is traded on the Nasdaq National Market under the
symbol "ITWO." On June 12, 1998, the last sale price for the Common Stock as
reported by the Nasdaq National Market was $31.875 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.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE 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.
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THE DATE OF THIS PROSPECTUS IS JUNE 15, 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 fiscal year ended
December 31, 1997;
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998;
3. The Company's Current Reports on Form 8-K dated March 24 and May 5,
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 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 and 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" 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 recently been diagnosed with a brain tumor. While
Mr. Sharma is currently providing services to the Company, there can be no
assurance
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as to how long 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.
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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 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 of such third-party products.
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
8
<PAGE> 9
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 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 2,970,554 shares of Common Stock. Of the
Shares, 2,945,910 were acquired by the Selling Stockholders in connection with
the Think Merger. Such Shares are being registered by the Company pursuant to a
Registration Rights Agreement entered into by and among the Company and certain
of the Selling Stockholders as a condition to the Think Merger. The remaining
24,644 shares were originally issued by the Company in connection with the
exercise of stock options assumed by the Company in the Think Merger.
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>
SHARES TO BE
NUMBER OF OWNED AFTER
SHARES OWNED NUMBER OF THE OFFERING
BEFORE THE SHARES BEING ----------------
NAME OF SELLING STOCKHOLDER OFFERING OFFERED (1) NUMBER PERCENT
--------------------------- -------- ----------- ------ -------
<S> <C> <C> <C> <C>
Sandeep R. Tungare(2) (3)................... 1,180,774 573,192 607,582 *
Vidhya Tungare(3)........................... 1,146,384 573,192 573,192 *
Ravi B. Reddy(4) (5)........................ 1,180,774 573,192 607,582 *
Pratibha Reddy(5)........................... 1,146,384 573,192 573,192 *
M.R. Rangaswami(6).......................... 75,290 6,468 68,822 *
InSight Venture Partners I, L.P.(7)......... 37,922 18,960 18,962 *
InSight Venture Associates, LLC(7).......... 20,060 20,060 0 *
Integral Capital Partners III, L.P.(8)...... 303,192 142,356 60,836 *
Integral Capital Partners International
III, L.P.(8).............................. 71,626 33,718 37,908 *
Quality Technology Decisions, Inc........... 4,584 4,584 0 *
Vincent Smith............................... 70,652 70,652 0 *
Wagner & Brown.............................. 65,958 65,958 0 *
Morton H. Meyerson.......................... 43,972 43,972 0 *
Jerry Murdock............................... 34,220 34,220 0 *
Jeffrey Horing(7)........................... 31,064 31,064 0 *
Cyril Wagner, Jr............................ 29,314 29,314 0 *
Barbara Lewis............................... 21,986 21,986 0 *
J.F. Venture, Inc........................... 14,656 14,656 0 *
Harry W. Schlough........................... 14,656 14,656 0 *
Kenneth A. Hersh............................ 13,074 13,074 0 *
Wexford Special Situations 1996, L.P........ 10,936 10,936 0 *
Steven Friedman............................. 10,674 10,674 0 *
Randy Chappel............................... 8,910 8,910 0 *
Lacy H. Edwards and Joan Kniskern
Edwards Family Trust.................... 8,598 8,598 0 *
Michael A. Goldberg......................... 8,598 8,598 0 *
Jerry Murdock, Sr........................... 8,598 8,598 0 *
David Doyle................................. 7,328 7,328 0 *
Sheldon Horing.............................. 7,328 7,328 0 *
David S. Lundeen............................ 7,328 7,328 0 *
J. Thomas Morse............................. 7,328 7,328 0 *
Charles Davis............................... 5,590 5,590 0 *
Reiner Pinot-Noack.......................... 5,208 5,208 0 *
Delaware Charter Guarantee & Trust
f/b/o Jeffrey Horing's IRA(7)............ 3,664 3,664 0 *
I.V. Associates(7).......................... 2,864 2,864 0 *
Wexford Euris Special Situations 2,714
1996, L.P................................ 2,714 0 *
Steven Brooks............................... 2,540 2,540 0 *
Wexford Special Situations 1996
Institutional, L.P....................... 2,048 2,048 0 *
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
SHARES TO BE
NUMBER OF OWNED AFTER
SHARES OWNED NUMBER OF THE OFFERING
BEFORE THE SHARES BEING ----------------
NAME OF SELLING STOCKHOLDER OFFERING OFFERED (1) NUMBER PERCENT
--------------------------- -------- ----------- ------ -------
<S> <C> <C> <C> <C>
David Gitlitz............................... 1,270 1,270 0 *
Wexford Special Situations 1996
Limited.................................. 564 564 0 *
</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 17,195 shares subject to currently exercisable options.
(3) Sandeep R. Tungare has served as a director of the Company since the
Think Merger. Sandeep R. Tungare and Vidhya Tungare are husband and
wife and each may be deemed to beneficially own the shares held by the
other. The shares indicated as held by each stockholder represents
outstanding shares and shares underlying options directly held by such
stockholder.
(4) Includes 17,195 shares subject to currently exercisable options.
(5) Ravi B. Reddy and Pratibha Reddy are husband and wife and each may be
deemed to beneficially own the shares held by the other. The shares
indicated as held by each stockholder represents outstanding shares and
shares underlying options directly held by such stockholder.
(6) Includes 31,176 shares subject to currently exercisable options. If
exercised, 15,000 of these shares would be unvested and therefore
subject to a right of repurchase in favor of the Company.
(7) The sole general partner of InSight Venture Partners I, L.P. is InSight
Venture Associates, LLC ("InSight Associates"). The terms of the
partnership agreement of InSight Venture Partners I, L.P. and the
operating agreement of InSight Associates give the members of InSight
Associates control over InSight Associates and control of the day to
day operations of InSight Venture Partners I, L.P. (subject, with
respect to certain matters, to the consent of its limited partners).
Jeffrey Horing is a member of InSight Associates and served as a
director of Think until the consummation of the Think Merger. Mr.
Horing is also a member of I.V. Associates, LLC ("I.V. Associates"),
the sole general partner of InSight Venture Partners II, L.P. The terms
of the partnership agreement of InSight Venture Partners II, L.P. and
the operating agreement of I.V. Associates give the members of I.V.
Associates control over I.V. Associates and control of the day to day
operations of InSight Venture Partners II, L.P. (subject, with respect
to certain matters, to the consent of its limited partners). InSight
Venture Partners II, L.P. holds 225,821 shares of Common Stock, which
are excluded from the shares held by InSight Venture Partners I, L.P.
The shares indicated as owned by InSight Associates, I.V. Associates
and Jeffrey Horing are also excluded from the shares held by InSight
Venture Partners I, L.P.
(8) The sole general partner of Integral Capital Partners III, L.P. is
Integral Capital Management III, L.P. ("Integral Management") and the
sole general partners of Integral Capital Partners International III,
L.P. are Integral Management and a wholly-owned subsidiary of Integral
Management. The general partners of Integral Management are Roger B.
McNamee, John A. Powell and Pamela K. Hagenah. No limited partner of
such stockholder or Integral Management acts as a general partner of or
has control over such stockholder or Integral Management. The terms of
the partnership agreements of such stockholder and Integral Management
give the general partners of Integral Management control over Integral
Management and, ultimately, such stockholder.
11
<PAGE> 12
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Stockholders 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 has agreed to 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 certain of the Selling Stockholders and their respective
officers and directors and each person who controls (within the meaning of the
Securities Act) such Selling Stockholder against certain losses, claims, damages
and expenses arising under the securities laws in connection with this offering.
Certain of the Selling Stockholders have 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 in connection with this offering with respect
to written information furnished to the Company by such Selling Stockholders.
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 consolidated financial statements of i2 Technologies, Inc. included
in the Company's Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such reports 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.
------------------------------------
TABLE OF CONTENTS
PAGE
Available Information................................2
Documents Incorporated by Reference..................2
The Company..........................................3
Risk Factors.........................................3
Selling Stockholders................................10
Plan of Distribution................................12
Legal Matters.......................................12
Experts.............................................12
==========================================================
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2,970,554 SHARES
i2 TECHNOLOGIES, INC.
COMMON STOCK
[i2 LOGO]
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JUNE 15, 1998
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