I2 TECHNOLOGIES INC, 10-Q, 1998-11-13

I2 TECHNOLOGIES INC
10-Q, 1998-11-13
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 1998

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
---------- -----------

Commission file number 0 - 28030

i2 TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 75-2294945
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

909 E. LAS COLINAS BLVD., 16TH FLOOR,
IRVING, TEXAS 75039
(Address of principal executive offices) (Zip code)

(214) 860-6000
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.

Yes X No
----- -----

As of November 3, 1998, the Registrant had outstanding 71,248,016 shares of
Common Stock, $.00025 par value. ----------

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<PAGE> 2

i2 TECHNOLOGIES, INC.

TABLE OF CONTENTS

Page
----
<S> <C>
PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1998 3

Condensed Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 1997 and 1998 4

Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1998 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9

PART II OTHER INFORMATION

Item 2. Changes in Securities 21

Item 5. Other Information 21

Item 6. Exhibits and Reports on Form 8-K 22

SIGNATURES 23

</TABLE>

<PAGE> 3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

December 31, September 30,
1997 1998
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................... $ 127,433 $ 95,456
Short-term investments .............................................. 14,538 67,463
Accounts receivable, net ............................................ 75,037 101,341
Prepaid and other current assets .................................... 3,836 6,184
Income tax receivable ............................................... 1,097 --
Deferred income taxes ............................................... 3,823 5,552
---------- ----------
Total current assets ........................................... 225,764 275,996
Furniture and equipment, net .............................................. 20,895 25,637
Deferred income taxes and other assets .................................... 3,604 7,514
---------- ----------
Total assets ................................................... $ 250,263 $ 309,147
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................... $ 7,712 $ 8,779
Accrued liabilities ................................................. 26,411 40,717
Revolving line of credit ............................................ 657 --
Deferred revenue .................................................... 29,713 40,965
Income taxes payable ................................................ -- 1,260
Deferred income taxes ............................................... 230 --
---------- ----------
Total current liabilities ...................................... 64,723 91,721
Deferred income taxes ..................................................... 1,780 216
---------- ----------
Total liabilities .............................................. 66,503 91,937
---------- ----------
Stockholders' equity:
Preferred Stock, $0.001 par value, 5,000,000 shares authorized,
none issued .................................................... -- --
Common Stock, $0.00025 par value, 200,000,000 shares
authorized, 67,810,274 and 70,875,264 shares issued
and outstanding, respectively .................................. 17 18
Additional paid-in capital .......................................... 167,852 189,587
Deferred compensation ............................................... (1,125) (657)
Retained earnings ................................................... 17,016 28,262
---------- ----------
Total stockholders' equity ..................................... 183,760 217,210
---------- ----------
Total liabilities and stockholders' equity ..................... $ 250,263 $ 309,147
========== ==========

</TABLE>

See accompanying notes.

<PAGE> 4

i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>

Revenues:
Software licenses .......................... $ 38,207 $ 59,775 $ 96,024 $ 157,406
Services ................................... 14,119 23,324 37,385 63,576
Maintenance ................................ 5,770 11,082 14,162 28,218
---------- ---------- ---------- ----------
Total revenues ......................... 58,096 94,181 147,571 249,200
---------- ---------- ---------- ----------

Costs and expenses:
Cost of software licenses .................. 82 1,529 2,604 5,677
Cost of services and maintenance ........... 12,819 19,388 32,746 51,369
Sales and marketing ........................ 19,016 31,627 50,942 84,896
Research and development ................... 15,122 22,054 36,943 59,705
General and administrative ................. 5,785 8,710 15,864 22,976
In-process research and development and
acquisition costs ........................ -- 560 5,649 7,044
---------- ---------- ---------- ----------
Total costs and expenses ............... 52,824 83,868 144,748 231,667
---------- ---------- ---------- ----------

Operating income ................................. 5,272 10,313 2,823 17,533

Other income, net ................................ 777 1,774 2,231 5,163
---------- ---------- ---------- ----------

Income before income taxes ....................... 6,049 12,087 5,054 22,696
Provision for income taxes ....................... 2,782 4,870 2,349 11,450
---------- ---------- ---------- ----------
Net income ....................................... $ 3,267 $ 7,217 $ 2,705 $ 11,246
========== ========== ========== ==========

Net income per share ............................. $ 0.05 $ 0.10 $ 0.04 $ 0.16

Net income per share, assuming dilution .......... $ 0.05 $ 0.10 $ 0.04 $ 0.15

Weighted average common shares outstanding ....... 62,724 70,325 61,858 69,560

Weighted average common shares outstanding,
assuming dilution .......................... 71,028 75,233 70,277 76,207

</TABLE>

See accompanying notes.

<PAGE> 5

i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

Nine Months Ended September 30,
-------------------------------
1997 1998
---------- ----------
<S> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 2,705 $ 11,246
Adjustments to reconcile net income to net cash provided
by operating activities:
Write-off of in-process research and development ..... 907 4,379
Depreciation and amortization ........................ 3,576 7,269
Amortization of deferred compensation ................ 555 468
Deferred income taxes ................................ (1,139) (5,872)
Tax benefit of stock options ......................... 5,810 12,932
Changes in operating assets and liabilities:
Accounts receivable, net ......................... (18,416) (26,304)
Income tax receivable/payable .................... (3,459) 2,357
Prepaid and other assets ......................... (2,020) (3,386)
Accounts payable ................................. 3,052 1,067
Accrued liabilities .............................. 14,595 13,906
Deferred revenue ................................. 8,207 11,252
---------- ----------
Net cash provided by operating activities ... 14,373 29,314
---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of acquired cash ................ (1,000) (1,822)
Purchases of furniture and equipment ...................... (12,392) (11,983)
Net purchases of short-term investments ................... (4,903) (52,925)
---------- ----------
Net cash used in investing activities ....... (18,295) (66,730)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving line of credit .................. (100) (657)
Proceeds from sale of common stock and
exercise of stock options ............................ 1,402 6,096
---------- ----------
Net cash provided by financing activities ... 1,302 5,439
---------- ----------

Net decrease in cash and cash equivalents ....................... (2,620) (31,977)
Cash and cash equivalents at beginning of period ................ 41,390 127,433
---------- ----------
Cash and cash equivalents at end of period ...................... $ 38,770 $ 95,456
========== ==========
</TABLE>

See accompanying notes.

<PAGE> 6

i2 TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include
the accounts of i2 Technologies, Inc. and its wholly owned subsidiaries
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.

The accompanying unaudited interim condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring entries,
except as discussed in Note 3) which, in the opinion of the Company's
management, are necessary for a fair presentation of the results for the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission's rules and regulations. These financial statements
should be read in conjunction with the audited supplemental financial statements
and notes thereto for the three-year period ended December 31, 1997, included in
the Company's Current Report on Form 8-K dated June 19, 1998.

The results of operations for the three and nine months ended September
30, 1998 are not necessarily indicative of results that may be expected for any
other interim period or for the full year.

Certain prior year financial statement items have been reclassified to
conform to the current year's format.

2. NET INCOME PER SHARE

The Company computes net income per share in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Net income per share is based upon the weighted average
number of common shares outstanding and excludes the effect of dilutive
potential common stock from the exercise of stock options. Net income per share,
assuming dilution, includes the effect of dilutive potential common stock from
the exercise of stock options using the treasury stock method, except in loss
periods where the effect would be antidilutive. All net income per share
computations herein give retroactive effect to the exchange of shares in
connection with the InterTrans Logistics Solutions ("ITLS") acquisition (see
Note 3). In addition, share amounts for all prior periods presented herein have
been restated to reflect the two-for-one stock split on June 2, 1998.

<PAGE> 7

Reconciliations of the net income per share and net income per share,
assuming dilution, computations for the three and nine months ended September
30, 1997 and 1998 are as follows (amounts in thousands, except per share
amounts):

Three Months Ended Nine months Ended
September 30, September 30,
--------------------- ---------------------
1997 1998 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INCOME PER SHARE:

Weighted-average common shares outstanding ............. 62,724 70,325 61,858 69,560
======== ======== ======== ========
Net income ............................................. $ 3,267 $ 7,217 $ 2,705 $ 11,246
======== ======== ======== ========
Net income per share ................................... $ 0.05 $ 0.10 $ 0.04 $ 0.16
======== ======== ======== ========

NET INCOME PER SHARE, ASSUMING DILUTION:

Weighted-average common shares outstanding ............. 62,724 70,325 61,858 69,560

Common shares issuable on exercise of stock options,
net of shares assumed to be repurchased ............. 8,304 4,908 8,419 6,647
-------- -------- -------- --------
Weighted-average common shares outstanding, assuming
dilution ............................................ 71,028 75,233 70,277 76,207
======== ======== ======== ========
Net income ............................................. $ 3,267 $ 7,217 $ 2,705 $ 11,246
======== ======== ======== ========
Net income per share, assuming dilution ................ $ 0.05 $ 0.10 $ 0.04 $ 0.15
======== ======== ======== ========
</TABLE>

3. BUSINESS COMBINATIONS

In April 1998, the Company completed the acquisition of ITLS. Under the
terms of the agreement, the Company agreed to issue approximately 3.3 million
shares of its common stock for all of the outstanding capital stock and all
unexpired and unexercised options of ITLS. The ITLS acquisition was accounted
for as a pooling of interests, and accordingly, the accompanying condensed
consolidated financial statements give retroactive effect to the combination and
include the combined operations of the Company and ITLS for all periods
presented.

In connection with the ITLS acquisition, the Company incurred expenses
that included, among other things, investment banking, legal and accounting fees
and expenses. In addition, in the second and third quarters of 1998, the Company
completed acquisitions, accounted for using the purchase method, for an
aggregate purchase price of $6.6 million, which included stock, cash,
acquisition costs and the assumption of net liabilities. A portion of the
purchase price of these transactions represented the value of in-process
research and development and was expensed immediately. The total purchase price
payable to the shareholders of the acquired company may increase in the future
depending upon the achievement of certain revenue targets associated with the
acquired or in-process technologies through the year 2000. For the nine months
ended September 30, 1998, the total of all acquisition-related expenses resulted
in a one-time charge to the Company's operating results of $7.0 million, or
$0.09 per share, assuming dilution.

The historical operations of the companies acquired in the second and
third quarters of 1998 accounted for using the purchase method are not material
to the Company's consolidated operations or financial position, and therefore,
supplemental pro forma information has not been presented. The amounts allocated
to in-process research and development were determined through established
valuation techniques in the software industry and were expensed upon acquisition
because technological feasibility had not been established and no alternative
future uses existed. Research and development costs to bring the acquired
technologies or products to technological feasibility are not expected to have a
material impact on the Company's future results of operations, cash flows or
liquidity.

<PAGE> 8

In May 1997, the Company acquired Think Systems Corporation ("Think")
and Optimax Systems Corporation ("Optimax"). Under the terms of these
agreements, the Company issued approximately 7.7 million shares and
approximately 2.7 million shares of its common stock for all the outstanding
capital stock and all unexpired and unexercised options of Think and Optimax,
respectively. These acquisitions were both accounted for as a pooling of
interests. The Think product offerings broadened the Company's suite of decision
support products by providing premium demand chain solutions, including an
integrated line of flexible, client/server-based software applications, for
sales, marketing and logistics departments representing a variety of industries
including consumer packaged goods, high technology, pharmaceutical, apparel,
automotive and other product-driven specializations. Optimax provided supply
chain sequencing software using unique genetic algorithms for customer-driven,
make-to-order manufacturing, further expanding the Company's suite of decision
support products.

For the nine months ended September 30, 1997, the Company incurred
approximately $5.6 million in certain acquisition-related expenses in connection
with the Think, Optimax and other business combinations. These costs included,
among other things, investment banking, legal and accounting fees and expenses
and the write-off of in-process research and development. In total, these
expenses resulted in a one-time charge to the Company's operating results and
reduced net income by $3.1 million, or $0.04 per share, assuming dilution, for
the nine months ended September 30, 1997.

4. STOCK OPTION REPRICING PROGRAM

In October 1998, the Company's Board of Directors authorized all
employees, except executive officers, the right to exchange certain outstanding
stock options for option grants with an exercise price of $13.9375 per share
(the fair market value on the date of grant). As a condition to the repricing,
the vesting period of each repriced option will restart as of the date of
repricing.

5. RECENT ACCOUNTING PRONOUNCEMENTS

In the second quarter of 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which requires derivatives be marked-to-market on an ongoing basis
along with the underlying hedged items. This standard becomes effective in 2000.
The effect on the Company is not expected to be material.

Accounting standard SOP 98-1 was issued in the first quarter of 1998
and becomes effective January 1, 1999. It requires capitalization of costs
incurred to acquire or develop software to be used internally. The Company
expects to adopt the standard in the first quarter of 1999 for qualifying costs
in that quarter and thereafter. The effect on the Company is not expected to be
material.

<PAGE> 9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that involve risks and uncertainties, such as statements
concerning: growth and future operating results; 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. These forward-looking statements and other statements made
elsewhere in this report are made in reliance on the Private Securities
Litigation Reform Act of 1995. The section below entitled "Factors That May
Affect Future Results" sets forth and incorporates by reference certain factors
that could cause actual future results of the Company to differ materially from
these statements.

OVERVIEW

The Company is the leading provider of client/server-based decision
support software products for supply chain management and related applications.
The Company also provides services such as consulting, training and maintenance
related to these products. 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 products, collectively known as
RHYTHM, are designed to provide customers with an end-to-end decision support
solution, enabling customers to model complex, multi-enterprise 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 unique, constraint-based methodology which
simultaneously considers a broad range of factors -- from changing revenue
forecasts to machine capabilities to individual customer commitments -- to
optimize all aspects of the supply chain.

Recently, the Company announced its new product direction to include
not only the Electronic Business Process Optimization ("eBPO") of supply chain
management, but also to encompass other significant business processes of its
customers. These processes include customer service, financial optimization,
product portfolio management, sales and marketing and others. The focus of the
Company remains on providing decision support solutions to optimize
forward-looking operations.

<PAGE> 10

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the
percentages that selected items in the unaudited Condensed Consolidated
Statements of Income bear to total revenues. The period to period comparisons of
financial results are not necessarily indicative of future results.

Three Months Ended Nine months Ended
September 30, September 30,
---------------- ----------------
1997 1998 1997 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>

Revenues:
Software licenses ............................................ 65.8% 63.5% 65.1% 63.2%
Services ..................................................... 24.3 24.7 25.3 25.5
Maintenance .................................................. 9.9 11.8 9.6 11.3
----- ----- ----- -----
Total revenues ............................................ 100.0 100.0 100.0 100.0
----- ----- ----- -----
Costs and expenses:
Cost of software licenses .................................... 0.1 1.6 1.8 2.3
Cost of services and maintenance ............................. 22.1 20.6 22.2 20.6
Sales and marketing .......................................... 32.7 33.6 34.5 34.1
Research and development ..................................... 26.0 23.4 25.0 24.0
General and administrative ................................... 10.0 9.2 10.8 9.2
In-process research and development and acquisition costs .... -- 0.6 3.8 2.8
----- ----- ----- -----
Total costs and expenses .................................. 90.9 89.0 98.1 93.0
----- ----- ----- -----
Operating income ................................................. 9.1 11.0 1.9 7.0
Other income, net ................................................ 1.3 1.9 1.5 2.1
----- ----- ----- -----
Income before income taxes ....................................... 10.4 12.9 3.4 9.1
Provision for income taxes ....................................... 4.8 5.2 1.6 4.6
----- ----- ----- -----
Net income ....................................................... 5.6% 7.7% 1.8% 4.5%
===== ===== ===== =====
</TABLE>

REVENUES

The Company's revenues consist of software license revenues, service
revenues and maintenance revenues. Software license revenues consist of sales
of software licenses which, for periods subsequent to December 31, 1997, are
recognized in accordance with the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 97-2, "Software Revenue
Recognition". Under SOP 97-2, software license revenues are recognized upon
execution of a contract and delivery of software, provided that the license fee
is fixed and determinable, no significant production, modification or
customization of the software is required and collection is considered probable
by management. For periods prior to December 31, 1997, software license
revenues were recognized in accordance with SOP 91-1, "Software Revenue
Recognition." Under SOP 91-1, software license revenues were recognized upon
execution of a contract and shipment of the software, provided that no
significant vendor obligations remained outstanding, amounts were due within
one year and collection was considered probable by management. The application
of SOP 97-2 did not have a material impact on the Company's consolidated
financial statements for the three and nine months ended September 30, 1998.
However, because SOP 97-2 does not give specific implementation guidance and
limited industry practice has been established regarding the provisions of SOP
97-2, there can be no assurance that SOP 97-2 will not have a material impact
on the Company's revenue recognition in the future, which could be material to
the Company's consolidated financial statements. Service revenues are primarily
derived from fees for implementation, consulting and training services and are
recognized as the services are performed. Maintenance revenues are derived from
customer support agreements generally entered into in connection with initial
license sales and subsequent renewals. Maintenance revenues are recognized
ratably over the term of the maintenance period. Payments for maintenance fees
are generally made in advance.

<PAGE> 11

Total revenues increased 62% to $94.2 million in the quarter ended
September 30, 1998 from $58.1 million in the quarter ended September 30, 1997.
In the first nine months of 1998, total revenues increased 69% to $249.2 million
from $147.6 million in the first nine months of 1997. The Company currently
derives substantially all of its revenues from licenses associated with its
RHYTHM suite of decision support products which includes demand planning,
factory planning, supply chain planning, distribution planning, transportation
planning and other supply chain management related applications as well as
related services and maintenance. The Company expects that revenues from the
RHYTHM suite of products will continue to account for substantially all of the
Company's revenues in the foreseeable future. As a result of the Company's
dependence on the continued market acceptance of the RHYTHM suite of products
and enhancements thereto, there can be no assurance that total revenues will
continue to increase at the rates experienced in prior periods, if at all.

SOFTWARE LICENSES. Revenues from software licenses increased 56% to
$59.8 million in the quarter ended September 30, 1998 from $38.2 million in the
quarter ended September 30, 1997. In the first nine months of 1998, revenues
from software licenses increased 64% to $157.4 million from $96.0 million in the
first nine months of 1997. The significant increases in software license
revenues were primarily due to an increased awareness of the benefits of supply
chain management, growing market acceptance of the Company's software products
and continued expansion into new geographic and vertical markets. To date, sales
of software licenses have been derived principally from direct sales to
customers. Although the Company believes that direct sales will continue to
account for a majority of software license revenues, the Company's strategy is
to increase the level of indirect sales activities. The Company expects that
sales of its software products through sales alliances, distributors, resellers
and other indirect channels will increase as a percentage of software license
revenues. However, there can be no assurance that the Company's efforts to
expand indirect sales will be successful.

SERVICES. Revenues from services increased 65% to $23.3 million in the
quarter ended September 30, 1998 from $14.1 million in the quarter ended
September 30, 1997. In the first nine months of 1998, revenues from services
increased 70% to $63.6 million from $37.4 million in the first nine months of
1997. The significant increases in the dollar amount of service revenues were
primarily due to the significant increase in the number of RHYTHM licenses sold
and a significant investment in the Company's consulting organization as a
result of the increased demand for the Company's products. The increases were
also due to an increase in the use of third-party consultants to provide
implementation services to the Company's customers which has allowed the Company
to more rapidly penetrate international markets. Service revenues as a
percentage of total revenues have fluctuated, and are expected to continue to
fluctuate on a period-to-period basis, based upon the demand for implementation,
consulting and training services.

MAINTENANCE. Revenues from maintenance increased 92% to $11.1 million
in the quarter ended September 30, 1998 from $5.8 million in the quarter ended
September 30, 1997. In the first nine months of 1998, revenues from maintenance
increased 99% to $28.2 million from $14.2 million in the first nine months of
1997. The significant increases in the dollar amount of maintenance revenues
were primarily due to the continued increase in the number of RHYTHM licenses
sold and a high percentage of maintenance agreement renewals. The Company
expects that the dollar amount of maintenance revenues will continue to
increase.

CONCENTRATION OF REVENUES. 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 the second and third quarters of 1998
and in each quarter of 1997, one or more customers each accounted for at least
15% of total software license revenues. While the Company believes that the
loss of any of these particular customers would not have a material adverse
effect upon the Company's business, operating results or financial condition,
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.

<PAGE> 12

INTERNATIONAL REVENUES. The Company's international revenues, primarily
generated from customers located in Europe, Asia and Canada, in the three and
nine months ended September 30, 1998, were approximately 17% and 19% of total
revenues, respectively, compared to approximately 22% and 28% of total revenues,
respectively, in the three and nine months ended September 30, 1997. The
decreases in international revenues were due to a confluence of factors,
including execution issues related to the previous international management team
and the resulting international management reorganization in 1998 and overall
weakness in certain international economies, primarily in the Asia-Pacific
region, resulting in decreased levels of customer spending in those markets. The
Company believes that continued growth and profitability will require expansion
of its sales in international markets. In order to successfully increase the
level of international sales, the Company has utilized and will continue to
utilize substantial resources to expand existing international operations,
establish additional international operations and hire additional personnel.

COSTS AND EXPENSES

COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily
of (i) commissions paid to third-parties in connection with joint marketing and
other related agreements, (ii) royalty fees associated with third-party software
included with sales of RHYTHM, (iii) the cost of user documentation and (iv) the
cost of reproduction and delivery of the software. Cost of software licenses was
$1.5 million and $0.1 million in the quarters ended September 30, 1998 and 1997,
representing 3% and 0.2% of software license revenues, respectively. Cost of
software licenses was $5.7 million and $2.6 million in the first nine months of
1998 and 1997, representing 4% and 3% of software license revenues,
respectively. The increases in the dollar amount of the cost of software
licenses were primarily due to an increase in commissions paid to third-parties
in connection with joint marketing and other related agreements.

COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance
consists primarily of costs associated with implementation, consulting and
training services. Cost of services and maintenance also includes the cost of
providing software maintenance to customers such as hotline telephone support
and packaging and shipping costs related to new releases of software and updated
user documentation, none of which costs have been material to date. Cost of
services and maintenance was $19.4 million and $12.8 million in the quarters
ended September 30, 1998 and 1997, representing 56% and 64% of total services
and maintenance revenues, respectively. Cost of services and maintenance was
$51.4 million and $32.7 million in the first nine months of 1998 and 1997,
representing 56% and 64% of total services and maintenance revenues,
respectively. The increases in the dollar amount of cost of services and
maintenance were primarily due to the increase in the number of consultants,
product support and training staff and the increased use of third-party
consultants to provide implementation services. The decreases in cost of
services and maintenance as a percentage of total services and maintenance
revenues were primarily due to the Company's ability to leverage its growing
base of consultants, product support and training staff to serve its growing
customer base. The Company expects to continue to increase the number of its
consulting, product support and training personnel in the foreseeable future as
a means to expand into different geographic and vertical markets. To the extent
that the Company's license sales do not increase at anticipated rates, the
hiring of additional personnel could adversely affect the Company's gross and
operating margins.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel costs, commissions, office facilities, travel, promotional events such
as trade shows, seminars and technical conferences, advertising and public
relations programs. Sales and marketing expenses were $31.6 million and $19.0
million in the quarters ended September 30, 1998 and 1997, representing 34% and
33% of total revenues, respectively. These same expenses were $84.9 million and
$50.9 million in the first nine months of 1998 and 1997, representing 34% and
35% of total revenues, respectively. The increases in the dollar amount of sales
and marketing expenses were primarily due to (i) increased staffing as the
Company established new domestic and international sales offices and expanded
its existing direct sales force, (ii) increased sales commissions as a result of
higher revenues and (iii) increased marketing and promotional activities. The
Company expects to continue to increase its sales and marketing activities in
order to expand its sales force, both domestically and internationally, and
enter into new vertical markets. As a result, the Company believes that the
dollar amount of sales and marketing expenses will continue to increase and
sales and marketing expenses as a percentage of total revenues may also increase
from the levels attained in the three and nine months ended September 30, 1998.

<PAGE> 13

RESEARCH AND DEVELOPMENT. Research and development expenses were $22.1
million and $15.1 million in the quarters ended September 30, 1998 and 1997,
representing 23% and 26% of total revenues, respectively. These same expenses
were $59.7 million and $36.9 million in the first nine months of 1998 and 1997,
representing 24% and 25% of total revenues, respectively. The increases in the
dollar amount of research and development expenses were primarily due to the
hiring of additional research and development personnel and other related costs
incurred in connection with expanding the Company's research and development
centers. The Company expects that the dollar amount of research and development
expenses will continue to increase as the Company continues to invest in
developing new products, applications and product enhancements for new vertical
markets.

In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. To
date, the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.

GENERAL AND ADMINISTRATIVE. General and administrative expenses include
the personnel and other costs of the finance, human resources, information
systems, administrative and executive departments of the Company and the fees
and expenses associated with legal, accounting and other requirements. General
and administrative expenses were $8.7 million and $5.8 million in the quarters
ended September 30, 1998 and 1997 representing 9% and 10% of total revenues,
respectively. These same expenses were $23.0 million and $15.9 million in the
first nine months of 1998 and 1997, representing 9% and 11% of total revenues,
respectively. The increases in the dollar amount of general and administrative
expenses were primarily the result of increased staffing and related costs
associated with the growth of the Company's business. The decreases in general
and administrative expenses as a percentage of total revenues were primarily due
to the substantial increase in total revenues and the Company's ability to
leverage its base of resources to support a larger organization. The Company
expects that the dollar amount of general and administrative expenses will
continue to increase in the foreseeable future.

IN-PROCESS RESEARCH AND DEVELOPMENT AND ACQUISITION COSTS. In the
recent past, the Company has sought to expand the depth of its current product
offerings through various technology or business acquisitions. Some of these
business combinations involve technology that is not yet determined to be
technologically feasible and has no alternative future use in its current stage
of development at the acquisition date. In such instances, in accordance with
appropriate accounting guidelines, the portion of the purchase price allocated
to in-process research and development is expensed immediately upon acquisition.
Further, the final purchase price on certain transactions is ultimately
dependent upon future events such as payouts based on the attainment of future
revenue targets for the acquired products or technologies. Such future earnouts,
if any, may be considered additional cost of the acquired company and would be
allocated to in-process research and development, acquired technology, goodwill
or a combination of the three, based on the initial valuation of the acquired
and in-process technologies and resulting purchase price allocation. None of the
business acquisitions accounted for using the purchase method of accounting in
the first nine months of 1998 were material to the Company's results of
operations or financial position, and therefore no separate disclosures have
been made.

In April 1998, the Company completed the acquisition of ITLS, which was
accounted for as a pooling of interests. Additionally, in the second and third
quarters of 1998, the Company completed other business acquisitions, accounted
for using the purchase method, and a portion of the purchase prices was recorded
as in-process research and development. For the nine months ended September 30,
1998, the Company incurred a total of $7.0 million in acquisition-related
expenses, which included, among other things, investment banking, legal and
accounting fees and expenses and the write-off of in-process research and
development. See Note 3 of the Notes to Condensed Consolidated Financial
Statements for further discussion.

<PAGE> 14

In the first nine months of 1997, the Company completed an acquisition
for a cash purchase price of $1.0 million. The acquisition was accounted for
using the purchase method, and a substantial portion of the purchase price was
recorded as in-process research and development. Also in the first nine months
of 1997, the Company completed the acquisitions of Think and Optimax in
transactions each accounted for as a pooling of interests. The Company incurred
approximately $5.6 million in certain acquisition-related expenses in connection
with these three business combinations, which were recorded in the second
quarter of 1997. These costs included, among other things, investment banking,
legal and accounting fees and expenses and the write-off of in-process research
and development. See Note 3 of the Notes to Condensed Consolidated Financial
Statements for further discussion.

OTHER INCOME, NET

Other income, net consists primarily of interest income on short-term
investments and overnight repurchase agreements partially offset by interest
expense. Other income, net was $1.8 million and $0.8 million in the quarters
ended September 30, 1998 and 1997, representing 2% and 1% of total revenues,
respectively. Other income, net was $5.2 million and $2.2 million in the first
nine months of 1998 and 1997, representing 2% of total revenues in both periods.
The increases in other income, net were primarily due to interest earned on
higher balances of cash, cash equivalents and short-term investments resulting
from improved operating cash flow and the net proceeds of the public offering of
the Company's common stock that was completed in December 1997.

PROVISION FOR INCOME TAXES

The Company's effective tax rate for the three and nine months ended
September 30, 1998 was 40% and 50%, respectively, compared to 46% for both the
three and nine months ended September 30, 1997. The effective tax rate for the
three and nine months ended September 30, 1998 and 1997 varied significantly
from the U.S. statutory rate due primarily to the non-deductibility of certain
acquisition-related expenses. Without these expenses, the Company's effective
tax rate for the three and nine months ended September 30, 1998 would have been
38.5%.

EARNINGS PER SHARE

The Company's earnings per share are calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share". This
method requires calculation of both earnings per share and earnings per share,
assuming dilution. Earnings per share excludes the dilutive effect of common
stock equivalents such as stock options, while earnings per share, assuming
dilution includes such dilutive effects. For the three months ended September
30, 1998, the decrease in weighted average common shares outstanding, assuming
dilution as compared to prior periods was due to a decreased number of
in-the-money stock options as calculated by comparing the exercise prices of
outstanding options to the average stock price for the period. As a result of
the stock option repricing that occurred in October 1998, the fourth quarter
1998 share base may return to a more historical level. Future shares outstanding
will be impacted by the following factors: (i) the ongoing issuance of common
stock associated with stock option exercises; (ii) the issuance of common shares
associated with the Company's employee stock purchase program; (iii) any
fluctuations in the Company's stock price, which could cause changes in the
number of common stock equivalents included in the earnings per share, assuming
dilution computation; and (iv) the issuance of common stock to effect business
combinations should the Company enter into such transactions.

<PAGE> 15

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has primarily financed its operations
and met its capital expenditure requirements through cash flows from operations,
long-term borrowings and sales of equity securities. The Company maintained a
strong liquidity and financial position with $184.3 million of working capital
as of September 30, 1998 as compared to $161.0 million as of December 31, 1997.
The increase in working capital was primarily related to an increase in cash,
cash equivalents and short-term investments to $162.9 million at September 30,
1998 from $142.0 million at December 31, 1997. Cash flows from operations were
$29.3 million and $14.4 million for the nine months ended September 30, 1998 and
1997, respectively. Operating cash flows increased primarily due to increases in
net income, deferred revenue and the tax benefit from stock option activity
offset somewhat by an increase in accounts receivable. The tax benefit from
stock option activity is primarily the result of disqualifying dispositions of
stock acquired under the Company's stock plans.

Accounts receivable, net of allowance for doubtful accounts, increased
to $101.3 million at September 30, 1998 from $75.0 million at December 31, 1997.
However, quarter-end days' sales outstanding decreased slightly to 98 days at
September 30, 1998 from 103 days at December 31, 1997. Accounts receivable and
days' sales outstanding can fluctuate for a variety of reasons including (i) the
amount and timing of revenues earned; (ii) the Company's collection experience;
(iii) the amount of receivables generated from international customers which
generally have longer payment terms compared to customers in the United States
and (iv) the number of large sales for which some amounts may not be due upon
execution of the contract. The Company believes that the allowance for doubtful
accounts at September 30, 1998 is adequate to cover any collection difficulties
with respect to accounts receivable. However, a significant portion of the
Company's accounts receivable are derived from sales of large licenses, often to
new customers with whom the Company does not have a payment history.
Accordingly, there can be no assurance that the allowance will be adequate to
cover any receivables which are later determined to be uncollectible,
particularly if one or more large receivables become uncollectible.

Cash used in investing activities was $66.7 million for the nine months
ended September 30, 1998 as compared to $18.3 million for the nine months ended
September 30, 1997. The increase in cash used in investing activities was
primarily due to the continued investment in financial instruments classified as
short-term investments as a result of improved operating cash flows. At
September 30, 1998, the Company did not have any material commitments for
capital expenditures.

Cash provided by financing activities was $5.4 million for the nine
months ended September 30, 1998 as compared to $1.3 million for the nine months
ended September 30, 1997. The increase in cash provided by financing activities
was due to an increase in net proceeds received by the Company upon the exercise
of stock options by its employees partially offset by the payment of the
remaining balance on the Company's revolving line of credit.

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. Any material acquisition
or joint venture could result in a decrease to the Company's working capital
depending on the amount, timing and nature of the consideration to be paid.

In October 1998, the Company entered into a $15.0 million revolving
credit agreement. Borrowings under the agreement bear interest at various
customary market rates. The maximum borrowings available under the facility are
reduced by the value of outstanding letters of credit issued by the lender on
behalf of the Company. This facility contains customary restrictive covenants,
including covenants requiring the Company to maintain certain financial ratios.

The Company utilizes third-party vendor equipment, telecommunication
products and software products that 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. See further discussion below in "Factors That
May Affect Future Results".

<PAGE> 16

The Company believes that existing cash and cash equivalent balances,
short-term investment balances, available borrowings under the revolving credit
agreement and potential cash flow from operations will satisfy the Company's
working capital and capital expenditure requirements for at least the next
twelve months. However, any material acquisitions of complementary businesses,
products or technologies could require the Company to obtain additional equity
or debt financing. There can be no assurance that such financing will be
available on acceptable terms, if at all.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Numerous factors may affect the Company's business and future results
of operations. These factors include, but are not limited to, the potential for
significant fluctuations in quarterly results; dependence on significant
individual sales; competition; management of growth; product concentration;
dependence on product line expansion; integration of recent acquisitions;
potential future acquisitions; international operations and currency
fluctuations; risks associated with strategic relationships; dependence upon key
personnel; intellectual property and proprietary rights; use of licensed
technology; complexity of software products; rapid technological change and new
products; dependence on technical and implementation personnel; Year 2000
compliance issues; product liability claims; and volatility of stock price. The
discussion below addresses some of these factors. For a more thorough discussion
of these and other factors that may affect the Company's business and future
results, see the discussion under the caption "Factors That May Affect Future
Results" in Exhibit 99.2 to the Company's Current Report on Form 8-K dated June
19, 1998.

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 decision support
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 the second and third
quarters of 1998 and in each quarter of 1997, one or more customers each
accounted for at least 15% of total software license revenues. While the Company
believes that the loss of any of these particular customers would not have a
material adverse effect on the Company's business, operating results or
financial condition, 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.

<PAGE> 17

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 and Baan Company N.V.,
each of which currently offers sophisticated 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 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.

<PAGE> 18
INTEGRATION OF RECENT ACQUISITIONS; POTENTIAL FUTURE ACQUISITIONS

In the first nine months of 1998, the Company completed the
acquisitions of ITLS and other software companies. The success of these and all
of the Company's 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 and the recently acquired companies, or that the benefits
expected from such integration will be realized. Failure to successfully
integrate the recently acquired companies' 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.

INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS

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 related to 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.

18
<PAGE> 19
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 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.

The Company also continues to heavily invest resources in developing
new products, such as the recently announced eBPO solutions. eBPO is a new
layer of intelligent decision support software that is expected to optimize and
integrate the workflows of key business processes, such as supply chain
management, customer service, financial optimization, product portfolio
management, sales and marketing and others. eBPO solutions support e-business
initiatives, such as collaboration with suppliers, partners and customers
through the Internet, to improve a company's ability to respond to changes and
opportunities in its business environment. To date, only a limited number of
customers have licensed these solutions, and the market for these products is
new and evolving. If the market for these eBPO solutions fails to develop,
develops more slowly than expected, or if the Company's products do not achieve
market acceptance, the Company's business, operating results and financial
condition could be adversely affected.

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, 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

<PAGE> 20

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 Year 2000 issues may affect the purchasing
patterns of customers and potential customers in a variety of ways. Many
companies are expending significant resources to correct, patch or replace their
current software systems to achieve Year 2000 compliance. These expenditures may
result in reduced funds available to purchase 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.

In addition, an inventory and analysis of internal management and other
information systems has been performed and the Company has determined that it
will be required to modify certain portions of its internal infrastructure so
that its computer systems will be Year 2000 compliant. These modifications and
replacements are being and will continue to be made in conjunction with the
Company's overall information systems initiatives. Areas being addressed include
reviews of the Company's telephone and voice mail systems, security systems and
other office support systems. No information technology initiatives have been
deferred by the Company as a result of its Year 2000 project. The Company
expects to complete its Year 2000 by June 1999. The Company currently expects to
incur pre-tax expenses of less than $100,000 during 1998 and 1999 in connection
with correction of Year 2000 issues. Such expenses are being funded through
operating cash flows, and are expected to be less than 1% of the Company's
information technology budgets for both 1998 and 1999. Based on available
information, the Company does not believe any material exposure to significant
business interruption exists as a result of Year 2000 compliance issues, or that
the cost of remedial actions will have a material adverse effect on its
business, financial condition or results of operations. Accordingly, the Company
has not adopted any formal contingency plan in the event its Year 2000 project
is not completed in a timely manner.

<PAGE> 21
i2 TECHNOLOGIES, INC.

PART II

ITEM 2. CHANGES IN SECURITIES.

From July 1 through September 30, 1998, the Company issued
approximately 0.7 million shares of its common stock to employees pursuant to
exercises of stock options (with exercise prices ranging from $0.01 to $6.06 per
share) under the Company's stock plans. These issuances were deemed exempt from
registration under Section 5 of the Securities Act of 1933 in reliance upon Rule
701 thereunder. In addition, the recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to, or for sale in connection with, any
distribution thereof and appropriate restrictive transfer legends were affixed
to the share certificates issued in each such transaction.

ITEM 5. OTHER INFORMATION

Submission of Stockholder Proposals. Pursuant to the Company's Bylaws
as amended by the Board of Directors in October 1998, stockholder proposals
intended to be presented at the Company's 1999 annual meeting of stockholders
must be received by the Secretary of the Company at its principal executive
offices (909 E. Las Colinas Blvd., 16th Floor, Irving, Texas 75039) not later
than December 25, 1998 in order to be included in the Company's proxy statement
and form of proxy relating to the 1999 annual meeting. Notice must include (i)
the name and address of the stockholder who intends to make the nominations or
propose the business and, as the case may be, the name and address of the person
or persons to be nominated or the nature of the business to be proposed; (ii) a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and, if applicable, intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice or introduce the business specified in the notice; (iii) if
applicable, a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, or the matter been proposed, or intended to be proposed by the
board of directors; and (v) if applicable, the consent of each nominee to serve
as director of the corporation if so elected. Stockholder proposals for which
such notice is not timely given may not be brought before the meeting.

Management's Discretionary Voting Authority. Pursuant to new amendments
to Rule 14a-4(c) of the Securities Exchange Act of 1934, as amended, and
amendments to the Company's Bylaws adopted by its Board of Directors in October
1998, if a stockholder who intends to present a proposal at the 1999 annual
meeting of stockholders does not notify the Company of such proposal on or prior
to the 120th day (December 25, 1998) and on or after the 150th day (November 25,
1998) prior to the first anniversary of the date of the proxy statement
delivered to stockholders in connection with the 1998 annual meeting, then
management proxies would be allowed to use their discretionary voting authority
to vote on the proposal when the proposal is raised at the 1999 annual meeting,
even though there is no discussion of the proposal in the 1999 proxy statement.

<PAGE> 22

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibit Index
--------------

Number Exhibit Description
------ -------------------

3.1 Amended and Restated Bylaws of the Company

3.2 Restated Certificate of Incorporation of the
Company

27.1 Financial Data Schedule

(b) Reports on Form 8-K
-------------------

None.

<PAGE> 23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

i2 TECHNOLOGIES, INC.
--------------------------------------------

November 12, 1998 /s/ Sanjiv S. Sidhu
----------------- --------------------------------------------
(Date) Sanjiv S. Sidhu
Chairman of the Board and
Chief Executive Officer
(Principal executive officer)

November 12, 1998 /s/ David F. Cary
----------------- --------------------------------------------
(Date) David F. Cary
Vice President and Chief Financial Officer
(Principal finance and accounting officer)

<PAGE> 24

Index to Exhibits

Number Exhibit Description
------ -------------------

3.1 Amended and Restated Bylaws of the Company

3.2 Restated Certificate of Incorporation of the Company

27.1 Financial Data Schedule

<PAGE> 1

EXHIBIT 3.1

AMENDED AND RESTATED

BYLAWS

i2 TECHNOLOGIES, INC.

(a Delaware corporation)

(AS AMENDED THROUGH OCTOBER 21, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS . . . . . . . . . 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . 4
2.7 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . 5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . . . . . . . 5
2.13 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . . . . . . . 6
2.15 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . 7
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . . . 8
3.6 FIRST MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.7 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.12 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

</TABLE>

ii
<PAGE> 3
<TABLE>
<S> <C>
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . 10
3.14 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.16 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE IV COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5.1 NUMBER OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 VICE CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 CHIEF EXECUTIVE OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 PRESIDENTS AND VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 ASSISTANT SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.11 CONTROLLER AND ASSISTANT FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . 15
5.12 AUTHORITY AND DUTIES OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE VI INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . 16
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VII RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7.1 MAINTENANCE AND INSPECTION OF RECORDS . . . . . . . . . . . . . . . . . . . . . . 17
7.2 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . . . . . . 18

ARTICLE VIII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

8.1 STOCK CERTIFICATES; PARTLY PAID SHARES . . . . . . . . . . . . . . . . . . . . . 18
8.2 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

iii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.7 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 STOCK TRANSFER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 REGISTERED STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE X DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE XI CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES . . . . . . . . . . . . . . . . . . . 21
11.2 DUTIES OF CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

iv
<PAGE> 5
ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation in the State of Delaware
shall be in the City of Wilmington, County of New Castle, State of Delaware.
The name of the registered agent of the corporation at such location is
Corporation Trust Company.

1.2 OTHER OFFICES

The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at the principal executive
offices of the corporation, or at any other place, within or outside the State
of Delaware, designated by the board of directors. In the absence of any such
designation, stockholders' meetings shall be held at the principal executive
offices of the corporation.

2.2 ANNUAL MEETING

An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the board of directors from
time to time. Any other proper business may be transacted at the annual
meeting.

2.3 SPECIAL MEETINGS

A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, by the president or by the
chief executive officer, or by one or more stockholders holding shares in the
aggregate entitled to cast not less than ten percent of the votes at that
meeting (the "10% Stockholders"); provided that, notwithstanding the above and
any provision contained in these Bylaws to the contrary, effective upon the
closing of a public offering of the corporation's Capital Stock pursuant to an
effective registration statement filed
<PAGE> 6
under the Securities Act of 1933, as amended (a "Public Offering"), the 10%
Stockholders shall no longer be entitled to call such meeting.

If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president,
chief executive officer, or the secretary of the corporation. No business may
be transacted at such special meeting otherwise than specified in such notice.
The officer receiving the request shall cause notice to be promptly given to
the stockholders entitled to vote, in accordance with the provisions of
Sections 2.4 and 2.5, that a meeting will be held at the time requested by the
person or persons who called the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS

All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.6 of these bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.

2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS

To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not later than the close of business on the one
hundred twentieth (120th) day nor earlier than the close of business on the one
hundred fiftieth (150th) day prior to the first anniversary of the date of the
proxy statement delivered to stockholders in connection with the preceding
year's annual meeting; provided, however, that if either (i) the date of the
annual meeting is advanced more than thirty (30) days or delayed (other than
as a result of adjournment) more than sixty (60) days from such an anniversary
date or (ii) no proxy statement was delivered to stockholders in connection
with the preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the
ninetieth (90th) day prior to such annual meeting and not later than the close
of business on the later of the sixtieth (60th) day prior to such annual
meeting or the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first

<PAGE> 7
made by the corporation. To be in proper form, a stockholder's notice to the
secretary shall set forth:

(i) the name and address of the stockholder who intends
to make the nominations or propose the business and, as the
case may be, the name and address of the person or persons to
be nominated or the nature of the business to be proposed;

(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or by
proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified in
the notice;

(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made
by the stockholder;

(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission
had the nominee been nominated, or intended to be nominated,
or the matter been proposed, or intended to be proposed by the
board of directors; and

(v) if applicable, the consent of each nominee to serve
as director of the corporation if so elected.

The chairman of the meeting shall determine whether a nomination or
any business proposed to be transacted by the stockholders has been properly
brought before the meeting and, if any proposed nomination or business has not
been properly brought before the meeting, the chairman shall declare that such
proposed business or nomination shall not be presented for stockholder action
at the meeting. For purposes of this Section 2.5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant
to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Notwithstanding any provision in this Section 2.5 to the
contrary, requests for inclusion of proposals in the corporation's proxy
statement made pursuant to Rule 14a-8 under the Exchange Act shall be deemed to
have been delivered in a timely manner if delivered in accordance with such
Rule. Notwithstanding compliance with the requirements of this Section 2.5,
the chairman presiding at any meeting of the stockholders may, in his sole
discretion, refuse to allow a stockholder or stockholder representative to
present any proposal which the corporation would not be required to include in
a proxy statement under any rule promulgated by the Securities and Exchange
Commission.

<PAGE> 8
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.

2.7 QUORUM

The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting or
(ii) the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.

When a quorum is present or represented at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of the
question.

2.8 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled vote at the
meeting.

2.9 VOTING

The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 and Section
2.14 of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).

Except as may otherwise be provided in the certificate of
incorporation or the last paragraph of this Section 2.9, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.

<PAGE> 9
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock of any class or series who elects to cumulate votes shall be
entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them, as he may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior to the voting
and the stockholder, or any other holder of the same class or series of stock,
has given notice at the meeting prior to the voting of the intention to
cumulate votes; provided that, except as may otherwise be provided in the
certificate of incorporation, effective upon a Public Offering the cumulative
voting rights set forth in this Section 2.9 shall terminate.

2.10 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time Stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or
these bylaws.

2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Effective upon a Public Offering, the stockholders of the corporation
may not take action by written consent without a meeting but must take any such
actions at a duly called annual or special meeting.

2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to express consent or dissent to corporate action in
writing without a meeting (it otherwise permitted by these bylaws and the
corporation's certificate of incorporation), or entitled to receive payment of
any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date, which shall be not more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action.

<PAGE> 10
If the board of directors does not so fix a record date, the fixing of
such record date shall be governed by the provisions of Section 213 of the
General Corporation Law of Delaware.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.

2.13 PROXIES

Each stockholder entitled to vote at a meeting of stockholders or
entitled to express consent or dissent to corporate action in writing without a
meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation) may authorize another person or persons to act
for him by a written proxy, signed by the stockholder and filed with the
secretary of the corporation, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(c) of the General Corporation Law of
Delaware.

2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the corporation, or to vote in person or by proxy
at any meeting of stockholders and of the number of shares held by each such
stockholder.

2.15 CONDUCT OF BUSINESS

Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the president, or in his absence by a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting,
but in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and conduct of business.

<PAGE> 11
ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction
of the board of directors.

3.2 NUMBER OF DIRECTORS

The number of directors of the corporation is fixed at five (5). No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

Except as provided in Section 3.4 of these bylaws, at each annual
meeting of stockholders, directors of the corporation shall be elected to hold
office until the expiration of the term for which they are elected, and until
their successors have been duly elected and qualified; except that if any such
election shall not be so held, such election shall take place at a
stockholders' meeting called and held in accordance with the Delaware General
Corporation Law. At the annual meeting of stockholders following a Public
Offering, the directors of the corporation shall be divided into three classes
as nearly equal in size as is practicable, hereby designated Class I, Class II
and Class III. The term of office of the initial Class I directors shall
expire at the next succeeding annual meeting of stockholders, the term of
office of the initial Class II directors shall expire at the second succeeding
annual meeting of stockholders and the term of office of the initial Class III
directors shall expire at the third succeeding annual meeting of stockholders.
For the purposes hereof, the initial Class I, Class II and Class III directors
shall be those directors so designated and elected at the first annual meeting
of stockholders following a Public Offering. At each annual meeting after the
annual meeting of stockholders scheduled to be held thereafter, directors to
replace those of a Class office whose terms, expire at such annual meeting
shall be elected to hold office until the third succeeding annual meeting and
until their respective successors shall have been duly elected and qualified.
If the number of directors is hereafter changed, any newly created
directorships or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is practicable.

Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Election of directors need not be by written
ballot.

<PAGE> 12
3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon written notice to the
corporation. Stockholders may remove directors with or without cause. Any
vacancy occurring in the board of directors with or without cause may be filled
by a majority of the remaining members of the board of directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a
meeting of stockholders, and each director so elected shall hold office until
the expiration of the term of office of the director whom he has replaced.

Unless otherwise provided in the certificate of incorporation or these
bylaws:

(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote as
a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director.

(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors
by the provisions of the certificate of incorporation,
vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section 211 of the General
Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

<PAGE> 13
3.6 FIRST MEETINGS

The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to
fix the time or place of such first meeting of the newly elected board of
directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors, or as shall be specified in a written
waiver signed by all of the directors.

3.7 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice
at such time and at such place, within or without the State of Delaware, as
shall from time to time be determined by the board.

3.8 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors may be held at such time
and at such place, within or without the State of Delaware, whenever called by
the chairman of the board, the president, the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone or facsimile to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, facsimile or by telegram, it shall be
delivered personally or by telephone, facsimile or to the telegraph company at
least forty-eight (48) hours before the time of the holding of the meeting.
Any oral notice given personally or by telephone may be communicated either to
the director or to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director.
The notice need not specify the place of the meeting, if the meeting is to be
held at the principal executive office of the corporation.

3.9 QUORUM

At all meetings of the board of directors, a majority of the number of
authorized directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation.

3.10 WAIVER OF NOTICE

<PAGE> 14
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.

3.11 ADJOURNED MEETING; NOTICE

If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.

3.12 CONDUCT OF BUSINESS

Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his absence by the president, or in their
absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the
meeting.

3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation or
these bylaws, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.

3.14 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the certificate of incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.

3.15 APPROVAL OF LOANS TO OFFICERS

The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be

<PAGE> 15
unsecured, or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section shall be deemed to deny, limit or restrict the powers
of guaranty or warranty of the corporation at common law or under any statute.

3.16 REMOVAL OF DIRECTORS

Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire board of directors. If at any time a class or series of shares is
entitled to elect one or more directors, the provisions of this Article 3.16
shall apply to the vote of that class or series and not to the vote of the
outstanding shares as a whole.

No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers that may
require it; but no such committee shall have the power or authority to (i)
amend the certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of shares of stock adopted by the board of directors as provided in Section
151(a) of the General Corporation Law of Delaware, fix any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares or any other class or classes or any other
series of the same or any other class or classes of stock of the corporation),
(ii) adopt an agreement of merger or

<PAGE> 16
consolidation under Section 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), Section 3.12 (conduct of business) and Section 3.13 (action
without a meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may also be called by resolution of the board of directors and
that notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

5.1 NUMBER OF OFFICERS

The officers of the corporation shall be a chief executive officer, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, a vice chairman
of the board, one or more presidents of designated function, one or more vice
presidents, assistant vice presidents, assistant secretaries, controllers,
assistant financial officers, and any such other officers as may be appointed
in accordance with the provisions of Section 5.2 of these bylaws. Any number
of offices may be held by the same person.

<PAGE> 17
5.2 ELECTION OF OFFICERS

Except as otherwise provided in this Section 5.2, the officers of the
corporation shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment. The board of directors
may appoint, or empower the chief executive officer to appoint (whether or not
such officer is described in this Article V), such officers and agents of the
business as the corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these bylaws or as the board of directors may from time to time determine. Any
vacancy occurring in any office of the corporation shall be filled by the board
of directors or may be filled by the chief executive officer (if the chief
executive officer appointed such officer).

5.3 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
the chief executive officer, by the chief executive officer.

Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

5.4 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
chief executive officer, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.5 of these bylaws.

5.5 VICE CHAIRMAN OF THE BOARD

In the absence or disability of the chairman of the board, the vice
chairman of the board, if such an officer be elected, shall perform all the
duties of the chairman of the board. The vice chairman of the board shall have
such other powers and perform such other duties as from time to time may be
prescribed by the board of directors, these bylaws or the chairman of the
board.

5.6 CHIEF EXECUTIVE OFFICER

Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the chief executive officer, unless otherwise determined by the board of
directors, shall be the senior executive officer of the

<PAGE> 18
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business, officers and
affairs of the corporation. He shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board and
a vice chairman of the board, at all meetings of the board of directors. He
shall have the general powers and duties of management usually vested in the
office of a chief executive officer or president of a corporation and shall
have such other powers and duties as may be prescribed by the board of
directors or these bylaws.

5.7 PRESIDENTS AND VICE PRESIDENTS

The board of directors may, in its discretion, designate one or more
presidents and one or more vice presidents, and furthermore, may identify in
such designation the function of such officers. The presidents and vice
presidents, if designated, shall have such powers and perform such duties as
from time to time may be prescribed for them, respectively, by the board of
directors, these bylaws, the chief executive officer or the chairman of the
board.

5.8 SECRETARY

The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.

The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one to be
adopted, in a safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these bylaws.

5.9 CHIEF FINANCIAL OFFICER

The chief financial officer shall have the power, which may be
redelegated in writing, on behalf of the corporation, to borrow funds and to
otherwise incur liabilities, to sell or discount bills, receivables and other
instruments and rights, to enter into and deliver repurchase, credit,
guarantee, surety, loan, interest rate, currency and other agreements, which
may contain covenants restricting the corporation's ability to take certain
actions or require it to take certain actions, to sign and deliver acceptances,
notes and other obligations, to buy and sell foreign exchange, whether for
current or future delivery, or options on foreign exchange, to purchase, sell,
exchange or otherwise deal in stock or other securities, to procure letters of
credit, travelers'

<PAGE> 19
checks or similar instruments, to open and close accounts with any banking
institution or other depository of funds, to sign, manually, by facsimile
signature or otherwise, checks, drafts or other orders for the payment of funds
(which each such institution is hereby authorized and directed to honor), to
issue written, telephonic, electronic or oral instructions for the transfer of
funds by wire or other electronic means or otherwise, to enter into agreements
or documents with any banking or financial institution with respect to any
services, including, without limitation, electronic services, and to do all
things in connection with any of these as any of them sees fit. The chief
financial officer shall also have the power, which may be redelegated in
writing, on behalf of the corporation, to guarantee, or to act as surety with
respect to, any of the obligations of any entity of which any of the
outstanding stock or securities is owned, directly or indirectly by the
corporation. In addition, the chief financial officer shall have the authority
to vote all shares or securities in any entity directly or indirectly owned by
the corporation and to redelegate that authority in writing to others.

The chief financial officer shall have the custody of all of the funds
and securities of the corporation. He shall be empowered to endorse on behalf
of the corporation all checks, notes or other obligations and evidences of the
payment of money, payable to the corporation or coming into his possession, and
shall deposit the funds arising therefrom, together with all other funds of the
corporation, coming into his possession, in such banks as may be selected as
the depositories of the corporation, or properly care for them in such other
manner as the board of directors may direct. All checks and other instruments
drawn on or payable out of the funds of the corporation and all bills, notes or
other evidence of indebtedness shall be signed by such officers and employees
as the board of directors may designate. Whenever required by the board of
directors so to do, he shall exhibit a complete and true statement of property
in his possession, custody or control. He shall provide for the entry
regularly, in records belonging to the corporation, a full and accurate account
of all money received and paid on account of the corporation, together with all
other business transactions. He shall, at all reasonable times within the
hours of business, exhibit his records and accounts to any director. He shall
perform all duties which are incident to the office of treasurer of a
corporation, subject, however, at all times to the direction and control of the
board of directors. If the board of directors shall so require, he shall give
bond, in such sum and with such securities as the board of directors may
direct, for the faithful performance of his duties and for the safe custody of
the funds and property of the corporation coming into his possession.

5.10 ASSISTANT SECRETARY

The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.

5.11 CONTROLLER AND ASSISTANT FINANCIAL OFFICER

The controller or other assistant financial officer, or, if there is
more than one, the controllers and assistant financial officers, in the order
determined by the stockholders or the

<PAGE> 20
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the chief financial officer or in the
event of his or her inability or refusal to act, perform the duties and
exercise the powers of the chief financial officer and shall perform such other
duties and have such other powers as the board of directors, the stockholders,
the chief executive officer or the chief financial officer may from time to
time prescribe.

5.12 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.

ARTICLE VI

INDEMNITY

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceedings, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, including, without
limitation, any direct or indirect subsidiary of the corporation, or (iii) who
was a director or officer of a corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such predecessor
corporation.

6.2 INDEMNIFICATION OF OTHERS

The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceedings, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including, without limitation, any
direct or indirect subsidiary of the corporation, or (iii) who was an employee
or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.

<PAGE> 21
6.3 INSURANCE

The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether
a director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or aware such other and further
relief as the Court may deem just and proper.

<PAGE> 22
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority
granted herein may be exercised either by such person directly or by any other
person authorized to do so by proxy or power of attorney duly executed by such
person having the authority.

ARTICLE VIII

GENERAL MATTERS

8.1 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the
board of directors, every holder of stock represented by certificates and, upon
request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the name of the corporation by the chairman or
vice-chairman of the board of directors, or the president or vice-president,
and by the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.

The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefore and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.

8.2 LOST CERTIFICATES

Except as provided in this Section 8.2, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and

<PAGE> 23
cancelled at the same time. The corporation may issue a new certificate of
stock or uncertificated shares in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
corporation may require the owner of the lost, stolen or destroyed certificate,
or his legal representative, to give the corporation a bond sufficient to
indemnify it against any claims that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate or uncertificated shares.

8.3 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.

8.4 DIVIDENDS

The directors of the corporation, subject to any restrictions
contained in the certificate of incorporation, may declare and pay dividends
upon the shares of its capital stock pursuant to the General Corporation Law of
Delaware. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.

The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.

8.5 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.

8.6 SEAL

The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.

8.7 TRANSFER OF STOCK

Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.

<PAGE> 24
8.8 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.

8.9 REGISTERED STOCKHOLDERS

The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.

ARTICLE IX

AMENDMENTS

The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws.

Notwithstanding any other provision of these bylaws or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of the capital stock required by law or
by these bylaws, the affirmative vote of at least two-thirds (2/3) of the
combined voting power of all of the then-outstanding shares of the corporation
entitled to vote shall be required to alter, amend or repeal Article II,
Section 2.9 or Section 2.11 of these bylaws or this Article IX or any provision
thereof, or to add or amend any other bylaw in order to change or nullify the
effect of such provisions, unless such amendment shall be approved by a
majority of the directors of the corporation not affiliated or associated with
any person or entity holding (or which has announced an intent to obtain) 26%
or more of the voting power of the corporation's outstanding capital stock.

ARTICLE X

DISSOLUTION

If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution

<PAGE> 25
to that effect by a majority of the whole board at any meeting called for that
purpose, shall cause notice to be mailed to each stockholder entitled to vote
thereon of the adoption of the resolution and of a meeting of stockholders to
take action upon the resolution.

At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation
entitled to vote thereon votes for the proposed dissolution, then a certificate
stating that the dissolution has been authorized in accordance with the
provisions of Section 275 of the General Corporation Law of Delaware and
setting forth the names and residences of the directors and officers shall be
executed, acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such
certificate's becoming effective in accordance with Section 103 of the General
Corporation Law of Delaware, the corporation shall be dissolved.

ARTICLE XI

CUSTODIAN

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES

The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:

(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect
successors to directors whose terms have expired or would have
expired upon qualification of their successors; or

(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are
so divided respecting the management of the affairs of the
corporation that the required vote for action by the board of
directors cannot be obtained and the stockholders are unable
to terminate this division; or

(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve,
liquidate or distribute its assets.

11.2 DUTIES OF CUSTODIAN

The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.

<PAGE> 1

EXHIBIT 3.2

RESTATED
CERTIFICATE OF INCORPORATION
OF
i2 TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)

i2 Technologies, Inc., a corporation organized and existing under the
Delaware General Corporation Law, hereby certifies as follows:

1. That this corporation was originally incorporated on
January 9, 1992 under the name Intellection, Inc., pursuant to the Delaware
General Corporation Law.

2. Pursuant to Section 245 of the Delaware General Corporation
Law, this Restated Certificate of Incorporation has been duly adopted and
restates and integrates and does not further amend the provisions of the
Certificate of Incorporation of this corporation as heretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation, except that all
references to Articles herein have been revised to reflect the deletion of
Article Fifth of the Certificate of Incorporation (Incorporator).

3. The text of the Certificate of Incorporation of this
corporation is hereby restated in its entirety to read as follows:

FIRST: The name of the corporation is i2 Technologies, Inc. (the
"Corporation").

SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, Wilmington,
Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized
under the General Corporation Law of Delaware.

FOURTH: A. The total number of shares which the Corporation
shall have authority to issue is TWO HUNDRED AND
FIVE MILLION (205,000,000) shares of capital
stock.

B. Of such authorized shares, TWO HUNDRED MILLION
(200,000,000) shares shall be designated "Common
Stock", and have a par value of $.00025.

C. Of such authorized shares, FIVE MILLION
(5,000,000) shares shall be designated "Preferred
Stock", and have a par value of $.001. The
Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of
the Corporation is authorized to determine or
alter the powers, preferences and rights and the
<PAGE> 2
qualifications, limitations or restrictions
granted to or imposed upon any wholly unissued
series of Preferred Stock, and within the
limitations or restrictions stated in any
resolution or resolutions of the Board of
Directors originally fixing the number of shares
constituting any series, to increase or decrease
(but not below the number of shares of any such
series then outstanding) the number of shares of
any such series subsequent to the issuance of
shares of that series, to determine the
designation of any series, and to fix the number
of shares of any series. In case the number of
shares of any series shall be so decreased, the
shares constituting such decrease shall resume
the status which they had prior to the adoption
of the resolution originally fixing the number of
shares of such series.

FIFTH: The Corporation is to have perpetual existence.

SIXTH: Elections of directors need not be by written ballot
unless a stockholder demands election by written ballot at
the meeting and before voting begins.

SEVENTH: A. At each annual meeting of stockholders, directors
of the Corporation shall be elected to hold
office until the expiration of the term for which
they are elected, and until their successors have
been duly elected and qualified; except that if
any such election shall not be so held, such
election shall take place at a stockholders'
meeting called and held in accordance with the
Delaware General Corporation Law. At the annual
meeting of stockholders (the "First Public
Company Annual Meeting") following the closing of
a public offering of the Corporation's Capital
Stock pursuant to an effective registration
statement filed under the Securities Act of 1933,
as amended (a "Public offering"), the directors
of the Corporation shall be divided into three
classes as nearly equal in size as is
practicable, hereby designated Class I, Class II
and Class III. The term of office of the initial
Class I directors shall expire at the next
succeeding annual meeting of stockholders, the
term of office of the initial Class II directors
shall expire at the second succeeding annual
meeting of stockholders and the term of office of
the initial Class III directors shall expire at
the third succeeding annual meeting of the
stockholders. For the purposes hereof, the
initial Class I, Class II and Class III directors
shall be those directors so designated and
elected at the First Public Company Annual
Meeting. At each annual meeting after the First
Public Company Annual Meeting, directors to
replace those of a Class whose terms expire at
such annual meeting shall be elected to hold
office until the third succeeding annual meeting
and until their respective successors shall have
been duly elected and qualified. If the number
of directors is hereafter changed, any newly
created directorships or decrease in
directorships

2
<PAGE> 3
shall be so apportioned among the classes as to
make all classes as nearly equal in number as is
practicable.

B. Vacancies occurring on the Board of Directors for
any reason may be filled by vote of a majority of
the remaining members of the Board of Directors,
although less than a quorum, at a meeting of the
Board of Directors. A person so elected by the
Board of Directors to fill a vacancy shall hold
office until the next succeeding annual meeting
of stockholders of the Corporation and until his
or her successor shall have been duly elected and
qualified.

EIGHTH: The number of directors which constitute the whole Board
of Directors of the Corporation shall be designated in the
Bylaws of the Corporation.

NINTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized to make, alter, amend or repeal the Bylaws of
the Corporation.

TENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as it may hereafter
be amended, no director of the Corporation shall be
personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this
Article, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the effect of this
Article in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Article, would
accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.

ELEVENTH: At the election of directors of the Corporation, each
holder of stock of any class of series shall be entitled
to as many votes as shall equal the number of votes which
(except for such provision as to cumulative voting) he
would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast
all of such votes for a single director or may distribute
them among the number to be voted for, or for any two or
more of them as he may see fit, so long as the name of the
candidate for director shall have been placed in
nomination prior to the voting and the stockholder, or any
other holder of the same class or series of stock, has
given notice at the meeting prior to the voting of the
intention to cumulate votes; provided that,
notwithstanding the above and any provision contained in
this Certificate of Incorporation to the contrary,
effective upon a Public Offering, the holders of stock of
any class or series shall no longer be entitled to such
cumulative voting rights.

3
<PAGE> 4
TWELFTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books
of the Corporation may be kept (subject to any provision
contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of
the Corporation.

THIRTEENTH: Effective upon the closing of a Public Offering,
stockholders of the Corporation may not take action by
written consent in lieu of a meeting but must take any
actions at a duly called annual or special meeting.

FOURTEENTH: Notwithstanding any other provisions of this Certificate
of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of the capital
stock required by law or this Certificate of
Incorporation, the affirmative vote of the holders of at
least two-thirds (2/3) of the combined voting power of all
of the then-outstanding shares of the Corporation entitled
to vote shall be required to alter, amend or repeal
Articles SEVENTH, ELEVENTH, THIRTEENTH or FOURTEENTH or
any provision thereof, unless such amendment shall be
approved by a majority of the directors of the Corporation
not affiliated or associated with any person or entity
holding (or which has announced an intention to obtain)
26% or more of the voting power of the Corporation's
outstanding capital stock.

FIFTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

IN WITNESS WHEREOF, i2 Technologies, Inc. has caused this Restated
Certificate of Incorporation to be signed by its Chief Financial Officer this
6th day of November, 1998.

i2 Technologies, Inc.

/s/ David F. Cary
--------------------------------------
David F. Cary,
Chief Financial Officer

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 95,456
<SECURITIES> 67,463
<RECEIVABLES> 101,341
<ALLOWANCES> 6,585
<INVENTORY> 0
<CURRENT-ASSETS> 275,996
<PP&E> 43,465
<DEPRECIATION> 17,828
<TOTAL-ASSETS> 309,147
<CURRENT-LIABILITIES> 91,721
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 217,192
<TOTAL-LIABILITY-AND-EQUITY> 309,147
<SALES> 157,406
<TOTAL-REVENUES> 249,200
<CGS> 5,677
<TOTAL-COSTS> 231,667
<OTHER-EXPENSES> (5,163)
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<INTEREST-EXPENSE> 230
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