<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
i2 TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7372 75-2294945
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
ONE i2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
(469) 357-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
WILLIAM M. BEECHER
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
i2 TECHNOLOGIES, INC.
ONE i2 PLACE, 11701 LUNA ROAD
DALLAS, TEXAS 75234
(469) 357-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
ROD J. HOWARD RONALD G. SKLOSS RICHARD E. CLIMAN
BROBECK, PHLEGER & HARRISON LLP ANDREW W. DUETTRA KEITH A. FLAUM
TWO EMBARCADERO PLACE BROBECK, PHLEGER & HARRISON LLP MICHELLE L. BUSHORE
2200 GENG ROAD 301 CONGRESS AVENUE, SUITE 1200 COOLEY GODWARD LLP
PALO ALTO, CALIFORNIA 94303 AUSTIN, TEXAS 78701 FIVE PALO ALTO SQUARE
TELEPHONE: (650) 424-0160 TELEPHONE: (512) 477-5495 3000 EL CAMINO REAL
FACSIMILE: (650) 496-2885 FACSIMILE: (512) 477-5813 PALO ALTO, CA 94306
TELEPHONE: (650) 843-5000
FACSIMILE: (650) 849-7400
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger of a wholly owned subsidiary of the Registrant with
and into Aspect Development, Inc. ("Aspect"), which shall occur as soon as
practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE PRICE(2) FEE
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Common Stock, par value $0.00025 per share....... 37,509,042 N/A $2,732,192,711 $721,299
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(1) Based upon the maximum number of shares of the Registrant's common stock
expected to be issued in connection with the merger, calculated as the
product of (a) 68,198,258, the aggregate number of shares of Aspect common
stock outstanding on March 12, 2000 and shares issuable pursuant to
outstanding options prior to the date the merger is expected to be
consummated and (b) an exchange ratio of 0.55 of a share of the Registrant's
common stock for each share of Aspect common stock.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) under the Securities Act calculated as the average of the
high and low per share sale prices of the Aspect common stock as reported by
the Nasdaq National Market for April 17, 2000 multiplied by the total number
of shares of Aspect common stock expected to be exchanged for the shares of
the Registrant's common stock registered hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
[i2 TECHNOLOGIES, INC. LOGO]
i2 TECHNOLOGIES, INC.
ONE i2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
, 2000
Dear i2 Technologies, Inc. Stockholders:
I am writing to you today about our proposed merger with Aspect
Development, Inc. This merger will create a combined company that will offer an
expanded range of intelligent eBusiness solutions.
In the merger, each share of Aspect common stock will be exchanged for 0.55
of a share of i2 common stock. We expect to issue a maximum of 44.9 million
shares of our common stock in the merger, including shares to be issued upon the
exercise of Aspect options assumed by i2 in the merger. All share-related
information reflects the stock dividends described in the accompanying joint
proxy statement/prospectus on page 11 under "Market Price Information." The
merger is described more fully in the accompanying joint proxy
statement/prospectus.
You will be asked to vote upon the issuance of shares of i2 common stock
pursuant to a merger agreement among i2, Hoya Merger Corp., a wholly owned
subsidiary of i2, and Aspect, at a special meeting of i2 stockholders to be held
on , 2000 at .m., local time, at . The
holders of a majority of the shares of i2 common stock present in person or by
proxy and entitled to vote at the special meeting must approve the issuance of
these shares. Only stockholders who hold shares of i2 common stock at the close
of business on April 14, 2000 will be entitled to vote at the special meeting.
We are very excited by the opportunities we envision for the combined
company. YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU APPROVE THE ISSUANCE OF THE SHARES OF i2 COMMON
STOCK IN THE MERGER.
The accompanying joint proxy statement/prospectus provides detailed
information about i2, Aspect and the merger. Please give all of this information
your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE
DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE 13 OF THE JOINT PROXY
STATEMENT/PROSPECTUS.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. To
vote your shares, you may use the enclosed proxy card, grant your proxy by
telephone or the Internet or attend the special stockholders' meeting. To vote
in favor of the issuance of shares of i2 common stock pursuant to the merger
agreement, you MUST vote "FOR" the proposal by following the instructions stated
on the enclosed proxy card. We urge you to vote FOR this proposal, a necessary
step in the merger of i2 and Aspect. In addition, to approve the other proposal
submitted for your approval, you must vote "FOR" that proposal by following the
instructions stated on the enclosed proxy card, and we encourage you to do so.
Sincerely,
[/s/Sanjiv S. Sidu]
Sanjiv S. Sidhu
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
i2 TO BE ISSUED IN THE MERGER, OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The accompanying joint proxy statement/prospectus is dated ,
2000, and is first being mailed to i2 stockholders on or about ,
2000.
REFERENCE TO ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus incorporates important
business and financial information about i2 and Aspect from documents that are
not included in or delivered with the accompanying joint proxy
statement/prospectus. This information is available to you without charge upon
your written or oral request. You can obtain documents incorporated by reference
in the accompanying joint proxy statement/prospectus by requesting them in
writing or by telephone from i2 or Aspect, as the case may be, at the following
addresses and telephone numbers:
<TABLE>
<S> <C>
i2 Technologies, Inc. Aspect Development, Inc.
Investor Relations Investor Relations
One i2 Place 1395 Charleston Road
11701 Luna Road Mountain View, California 94042
Dallas, Texas 75234 (650) 428-2700
(469) 357-1000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY , 2000
IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
In addition, see "Where you Can Find More Information" on page 83.
<PAGE> 4
i2 TECHNOLOGIES, INC.
ONE i2 PLACE
11701 LUNA ROAD
DALLAS, TEXAS 75234
(469) 357-1000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2000
We will hold a special meeting of stockholders of i2 Technologies, Inc. at
.m., local time, on , 2000 at :
1. To consider and vote upon a proposal to approve the issuance of
shares of i2 common stock pursuant to a merger agreement among i2, Hoya
Merger Corp., a wholly owned subsidiary of i2, and Aspect Development,
Inc., under which Aspect will become a wholly owned subsidiary of i2;
2. To grant i2's board of directors discretionary authority to adjourn
the special meeting to solicit additional votes for approval of the share
issuance; and
3. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
All share-related information in the accompanying joint proxy
statement/prospectus reflects the stock dividends described in the joint proxy
statement/prospectus on page 11 under "Market Price Information."
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE ISSUANCE OF i2 COMMON STOCK IN THE
MERGER.
We describe the merger more fully in the accompanying joint proxy
statement/prospectus, which we urge you to read.
Only i2 stockholders of record at the close of business on April 14, 2000
are entitled to notice of and to vote at the special meeting or any adjournment
or postponement thereof.
YOUR VOTE IS IMPORTANT. TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
SPECIAL MEETING, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, OR CALL THE
TOLL-FREE TELEPHONE NUMBER OR USE THE INTERNET BY FOLLOWING THE INSTRUCTIONS
INCLUDED WITH YOUR PROXY CARD. WE ENCOURAGE YOU TO DO THIS WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE
MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY
TIME BEFORE IT HAS BEEN VOTED AT THE SPECIAL MEETING. IT MAY BE POSSIBLE FOR YOU
TO VOTE IN PERSON AT THE SPECIAL MEETING EVEN IF YOU HAVE RETURNED A PROXY.
PLEASE REVIEW THE JOINT PROXY STATEMENT/PROSPECTUS FOR MORE INFORMATION.
By Order of the Board of Directors,
[/s/Robert C. Donohoo]
Robert C. Donohoo
Secretary
Dallas, Texas
, 2000
<PAGE> 5
[ASPECT DEVELOPMENT, INC. LOGO]
ASPECT DEVELOPMENT, INC.
1395 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94042
, 2000
Dear Aspect Development, Inc. Stockholders:
I am writing to you today about our proposed merger with i2 Technologies,
Inc.
In the merger, each share of Aspect common stock will be exchanged for 0.55
of a share of i2 common stock. i2 expects to issue a maximum of 44.9 million
shares of its common stock in the merger including shares to be issued upon the
exercise of Aspect options assumed by i2 in the merger. All share-related
information reflects the stock dividends described in the accompanying joint
proxy statement/prospectus on page 11 under "Market Price Information." i2
common stock is traded on the Nasdaq National Market under the trading symbol
"ITWO," and closed at $78.94 per share on April 17, 2000. The merger is
described more fully in the accompanying joint proxy statement/prospectus.
You will be asked to vote upon the merger at a special meeting of Aspect
stockholders to be held on , 2000 at .m., local
time, at . The holders of a majority of the outstanding shares of
Aspect common stock must approve the merger. Only stockholders who hold shares
of Aspect common stock at the close of business on , 2000 will be
entitled to vote at the special meeting.
We are very excited by the opportunities we envision for the combined
company. YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO YOU
AND IN YOUR BEST INTERESTS, AND UNANIMOUSLY RECOMMENDS THAT YOU ADOPT THE MERGER
AGREEMENT.
The accompanying joint proxy statement/prospectus provides detailed
information about i2, Aspect and the merger. Please give all of this information
your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE
DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE 13 OF THE JOINT PROXY
STATEMENT/PROSPECTUS.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. To
vote your shares, you may use the enclosed proxy card or attend the special
stockholders' meeting. To vote in favor of the merger agreement, you MUST vote
"FOR" the proposal by following the instructions stated on the enclosed proxy
card. If you do not vote at all, it will, in effect, count as a vote against the
merger. We urge you to vote FOR this proposal, a necessary step in the merger of
Aspect and i2. In addition, to approve the other proposal submitted for your
approval, you must vote "FOR" that proposal by following the instructions stated
on the enclosed proxy card, and we encourage you to do so.
Sincerely,
[Romesh T. Wadhwani Signature]
Romesh T. Wadhwani
Chairman of the Board and
Chief Executive Officer
<PAGE> 6
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
i2 TO BE ISSUED IN THE MERGER, OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The accompanying joint proxy statement/prospectus is dated
, 2000, and is first being mailed to Aspect stockholders on
or about , 2000.
REFERENCE TO ADDITIONAL INFORMATION
The accompanying joint proxy statement/prospectus incorporates important
business and financial information about i2 and Aspect from documents that are
not included in or delivered with the accompanying joint proxy
statement/prospectus. This information is available to you without charge upon
your written or oral request. You can obtain documents incorporated by reference
in the accompanying joint proxy statement/prospectus by requesting them in
writing or by telephone from i2 or Aspect, as the case may be, at the following
addresses and telephone numbers:
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<S> <C>
i2 Technologies, Inc. Aspect Development, Inc.
Investor Relations Investor Relations
One i2 Place 1395 Charleston Road
11701 Luna Road Mountain View, California 94042
Dallas, Texas 75234 (650) 428-2700
(469) 357-1000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY , 2000 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
In addition, see "Where you Can Find More Information" on page 83.
<PAGE> 7
ASPECT DEVELOPMENT, INC.
1395 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 428-2700
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2000
We will hold a special meeting of stockholders of Aspect Development, Inc.
at .m., local time, on , 2000 at :
1. To consider and vote upon a proposal to adopt the merger agreement
among i2 Technologies, Inc., Hoya Merger Corp., a wholly owned subsidiary
of i2, and Aspect, under which each outstanding share of Aspect common
stock will be converted into 0.55 of a share of i2 common stock;
2. To grant Aspect's board of directors discretionary authority to
adjourn the special meeting to solicit additional votes for adoption of the
merger agreement; and
3. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
All share-related information in the accompanying joint proxy
statement/prospectus reflects the stock dividends described in the joint proxy
statement/prospectus on page 11 under "Market Price Information."
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO YOU AND
IN YOUR BEST INTERESTS, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT THE
MERGER AGREEMENT.
We describe the merger more fully in the accompanying joint proxy
statement/prospectus, which we urge you to read.
Only Aspect stockholders of record at the close of business on
, 2000 are entitled to notice of and to vote at the special meeting
or any adjournment or postponement thereof.
YOUR VOTE IS IMPORTANT. TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
SPECIAL MEETING, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN
THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY
TIME BEFORE IT HAS BEEN VOTED AT THE SPECIAL MEETING. IT MAY BE POSSIBLE FOR YOU
TO VOTE IN PERSON AT THE SPECIAL MEETING EVEN IF YOU HAVE RETURNED A PROXY.
PLEASE REVIEW THE JOINT PROXY STATEMENT/PROSPECTUS FOR MORE INFORMATION.
By Order of the Board of Directors,
[DAVID S. DURY]
David S. Dury
Secretary
Mountain View, California
, 2000
<PAGE> 8
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iii
SUMMARY OF THIS JOINT PROXY STATEMENT/PROSPECTUS............ 1
RISK FACTORS................................................ 13
FORWARD-LOOKING STATEMENTS IN THIS JOINT PROXY
STATEMENT/PROSPECTUS...................................... 29
THE SPECIAL MEETINGS........................................ 30
General................................................... 30
Date, Time and Place...................................... 30
Matters to be Considered at the Special Meetings.......... 30
Record Date............................................... 31
Voting of Proxies......................................... 31
Vote Required............................................. 32
Quorum; Abstentions and Broker Non-Votes.................. 32
Solicitation of Proxies and Expenses...................... 33
THE MERGER.................................................. 34
Background of the Merger.................................. 34
Reasons for the Merger; Recommendations of Boards of
Directors.............................................. 36
Opinions of Financial Advisors............................ 40
Interests of Certain Persons in the Merger................ 52
Applicable Waiting Periods and Regulatory Approvals....... 53
United States Federal Income Tax Consequences of the
Merger................................................. 53
No Appraisal Rights....................................... 55
Delisting and Deregistration of Aspect's Common Stock
Following the Merger................................... 55
Listing of i2 Common Stock to be Issued in the Merger..... 55
Restrictions on Sale of Shares By Affiliates of Aspect.... 56
Operations Following the Merger........................... 56
THE MERGER AGREEMENT AND RELATED AGREEMENTS................. 57
The Merger................................................ 57
Effective Time............................................ 57
Directors and Officers of Aspect After the Merger......... 57
Conversion of Aspect Shares in the Merger................. 57
No Fractional Shares...................................... 57
Aspect Stock Option and Stock Incentive Plans............. 57
Aspect Employee Stock Purchase Plan....................... 58
The Exchange Agent........................................ 58
Exchange of Aspect Stock Certificates for i2 Stock
Certificates........................................... 58
Distributions with Respect to Unexchanged Shares.......... 58
Representations and Warranties............................ 58
Aspect's Conduct of Business Before Completion of the
Merger................................................. 61
i2's Conduct of Business Before Completion of the
Merger................................................. 63
No Solicitation of Transactions........................... 63
Director and Officer Indemnification and Insurance........ 65
Conditions to the Merger.................................. 65
Termination of the Merger Agreement....................... 66
Payment of Fees and Expenses.............................. 67
Extension, Waiver and Amendment of the Merger Agreement... 68
Related Agreements........................................ 69
</TABLE>
i
<PAGE> 9
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PAGE
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UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ 71
COMPARISON OF RIGHTS OF HOLDERS OF ASPECT COMMON STOCK AND
i2 COMMON STOCK........................................... 79
Classified Board of Directors............................. 79
Number of Directors....................................... 79
Removal of Directors...................................... 79
Filling Vacancies on the Board of Directors............... 79
Ability to Call Special Meetings.......................... 80
Advance Notice Provisions for Stockholder Nominations and
Proposals.............................................. 80
Amendment of Certificate of Incorporation................. 81
Amendment of Bylaws....................................... 82
EXPERTS..................................................... 83
LEGAL MATTERS............................................... 83
WHERE YOU CAN FIND MORE INFORMATION......................... 83
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 84
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
APPENDICES
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A -- Agreement and Plan of Reorganization................... A-1
B -- Form of i2 Stockholder Voting Agreement................ B-1
C -- Form of Aspect Stockholder Voting Agreement............ C-1
D -- Opinion of Goldman, Sachs & Co., financial advisor to
i2........................................................ D-1
E -- Opinion of Credit Suisse First Boston Corporation,
financial advisor to Aspect............................... E-1
</TABLE>
ii
<PAGE> 10
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL ASPECT STOCKHOLDERS RECEIVE IN THE
MERGER?
A. If the merger is completed, Aspect stockholders
will receive 0.55 of a share of i2 common stock for each share of Aspect
common stock they own. i2 will not issue fractional shares of common
stock. Instead of a fractional share, Aspect stockholders will receive
cash based on an average trading price for i2 common stock.
Q: WILL i2 STOCKHOLDERS RECEIVE ANY SHARES AS A
RESULT OF THE MERGER?
A. No. i2 stockholders will continue to hold the i2
shares they currently own.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We are working to complete the merger by
of 2000. Because the merger is subject to satisfaction of a number
of conditions, we cannot predict the exact timing.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After we complete the merger, i2 will send
instructions to Aspect stockholders explaining how to exchange their
Aspect stock certificates for i2 stock certificates. i2 stockholders will
keep their existing stock certificates.
Q: HOW DO I VOTE?
A. As soon as possible after you carefully read this
document, mail your signed proxy card in the enclosed return envelope or,
if you are an i2 stockholder, grant your proxy by telephone or the
Internet so that your shares may be represented at the special
stockholders' meetings. You may also attend your company's meeting in
person instead of submitting a proxy.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY
BROKER, WILL MY BROKER VOTE MY SHARES FOR ME?
A. No. If you do not provide your broker with
instructions on how to vote your "street name" shares, your broker will
not be permitted to vote them on any of the actions proposed in this
joint proxy statement/prospectus. If you are an i2 stockholder and do not
give voting instructions to your broker, your broker may not vote your
shares on either proposal without instructions from you, and you will not
be counted as voting for either proposal unless you appear in person at
the i2 meeting with a legal, valid proxy from the record holder. If you
are an Aspect stockholder and do not give voting instructions to your
broker, you will, in effect, be voting against the merger unless you make
arrangements to vote, and do vote, the shares personally. You should
therefore be sure to provide your broker with instructions on how to vote
your shares. If you are an i2 stockholder, please check the voting form
used by your broker to see if it offers telephone or Internet voting.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY
PROXY CARD?
A. Yes. You can change your vote at any time
before your proxy is voted at your company's stockholder meeting. You can
do this in one of three ways:
- timely delivery of a valid, later-dated proxy, including in the case of
i2 stockholders, a proxy given by telephone or Internet;
- written notice to your company's Secretary before the meeting that you
have revoked your proxy; or
- voting by ballot at either the i2 special meeting or the Aspect special
meeting.
If you have instructed a broker to vote your shares, you must follow
directions from your broker to change those instructions.
Q: WHOM CAN I CALL WITH QUESTIONS?
A. If you are an Aspect stockholder with questions
about the merger, please call Aspect Investor Relations at (650)
428-2700.
If you are an i2 stockholder with questions about the merger, please call
i2 Investor Relations at (469) 357-1000.
iii
<PAGE> 11
SUMMARY OF THIS JOINT PROXY STATEMENT/PROSPECTUS
The following summary highlights selected information in this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. You should carefully read this entire joint proxy
statement/prospectus, including the appendices, and the other documents we refer
to for a more complete understanding of the merger. In addition, we incorporate
by reference important business and financial information about i2 and Aspect
into this joint proxy statement/prospectus. You may obtain the information
incorporated by reference into this joint proxy statement/prospectus without
charge by following the instructions in the section entitled "Where You Can Find
More Information" on page 83.
THE COMPANIES
i2 TECHNOLOGIES, INC.
One i2 Place
11701 Luna Road
Dallas, Texas 75234
(469) 357-1000
i2 is a leading provider of intelligent eBusiness solutions that help
enterprises optimize business processes both internally and among trading
partners. i2's solutions enable enterprises to significantly improve
efficiencies, collaborate with suppliers and customers, respond to market
demands and engage in dynamic business interactions over the Internet. i2's
RHYTHM product suite principally includes solutions for supply chain management,
customer management, product lifecycle management, inter-process planning and
strategic planning. i2 is launching public and private Internet-based
marketplaces, or eMarketplaces, which consist of communities of trading partners
that, among other things, enable real-time collaboration and exchange of
information among suppliers, manufacturers, distributors, logistics providers
and customers. In addition, i2's recently announced TradeMatrix portal solution
is designed to provide value-added services for eMarketplace participants
spanning multiple digital marketplaces, which is intended to foster enhanced
collaboration within and between enterprises.
ASPECT DEVELOPMENT, INC.
1395 Charleston Road
Mountain View, California 94043
(650) 428-2700
Aspect is the leading global provider of collaborative solutions for
business-to-business (B2B) eCommerce and inbound supply management. Aspect
solutions for the enterprise and for eMarkets and trade exchanges provide
decision support and content for procurement, product development, operations,
and eCommerce between trading partners. The Aspect solutions enable aggregation
and collaboration among design, procurement and operations functions across
multiple divisions within an enterprise, as well as solutions for establishing a
collaborative Internet Exchange, or portal. Aspect believes its B2B eCommerce
solutions can enable customers to reduce direct and indirect Maintenance, Repair
and Operations (MRO) spending and to accelerate new product introductions. Over
180 of the world's 200 largest companies are customers of Aspect. Aspect's
decision support software, content, and data and consulting services can reduce
the cost of purchased parts and supplies, mission-critical MRO and plant
equipment; speed time to market through multi-division design collaboration; and
improve innovation and product quality through effective supplier collaboration.
STOCKHOLDER APPROVALS (SEE PAGE 32)
i2 Stockholders
The holders of a majority of the shares of i2 common stock present or
represented by proxy and entitled to vote at the i2 stockholders' meeting must
approve the issuance of i2 common stock in the merger. i2 stockholders are
entitled to cast one vote per share of i2 common stock owned at the close of
business on April 14, 2000. Pursuant to voting agreements in the form attached
to this joint proxy
1
<PAGE> 12
statement/prospectus as Appendix B, i2 officers and directors owning
beneficially approximately 42% of i2's common stock outstanding as of April 14,
2000 have agreed to vote all of their shares for approval of the issuance of i2
common stock in the merger. However, these officers and directors may be
permitted to sell a small percentage of their i2 shares prior to the record date
for the i2 special meeting.
Aspect Stockholders
The holders of a majority of the outstanding shares of Aspect common stock
must adopt the merger agreement. Aspect stockholders are entitled to cast one
vote per share of Aspect common stock owned at the close of business on
, 2000. Pursuant to voting agreements in the form attached to this
joint proxy statement/prospectus as Appendix C, Aspect officers and directors
owning beneficially approximately % of Aspect's common stock outstanding as of
, 2000 have agreed to vote all of their shares of Aspect common
stock for adoption of the merger agreement. However, these officers and
directors may be permitted to sell a small percentage of their Aspect shares
prior to the record date for the Aspect special meeting.
THE MERGER (SEE PAGE 34)
i2 and Aspect have entered into a merger agreement that provides for the
merger of Aspect and a newly formed subsidiary of i2. As a result, Aspect will
become a wholly owned subsidiary of i2. Stockholders of Aspect will become
stockholders of i2 following the merger, and each share of Aspect common stock
will be exchanged for 0.55 of a share of i2 common stock. We urge you to read
carefully the entire merger agreement, which is attached to this joint proxy
statement/prospectus as Appendix A.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS (SEE PAGE 36)
The i2 and Aspect boards of directors have approved the merger agreement.
The i2 board unanimously recommends that i2 stockholders vote FOR issuing the
shares of i2 common stock in the merger, and the Aspect board unanimously
recommends that Aspect stockholders vote FOR adoption of the merger agreement.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 40)
In deciding to approve the merger, each of the i2 and Aspect boards of
directors considered opinions from their respective financial advisors.
On March 11, 2000, Goldman, Sachs & Co., i2's financial advisor, delivered
its oral opinion to the board of directors of i2 that, as of such date, the
exchange ratio in the merger was fair from a financial point of view to i2.
Goldman Sachs subsequently confirmed its oral opinion by delivery of its written
opinion dated March 12, 2000. The full text of the written opinion of Goldman
Sachs, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached to this joint
proxy statement/prospectus as Appendix D. YOU SHOULD READ THIS OPINION IN ITS
ENTIRETY. GOLDMAN SACHS' OPINION IS DIRECTED TO i2'S BOARD OF DIRECTORS AND
ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO PURSUANT TO THE MERGER
AGREEMENT FROM A FINANCIAL POINT OF VIEW TO i2 AS OF THE DATE OF THE OPINION,
AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW ANY HOLDER OF i2 COMMON STOCK
SHOULD VOTE ON ANY MATTER RELATING TO THE MERGER.
Aspect's financial advisor, Credit Suisse First Boston Corporation, has
delivered a written opinion to the Aspect board of directors as to the fairness,
from a financial point of view, of the exchange ratio provided for in the merger
to the holders of Aspect common stock. The full text of Credit Suisse First
Boston's written opinion is attached to this joint proxy statement/prospectus as
Appendix E. We encourage you to read this opinion carefully in its entirety for
a description of the procedures followed, assumptions made, matters considered
and limitations on the review undertaken. CREDIT SUISSE FIRST BOSTON'S OPINION
IS DIRECTED TO ASPECT'S BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF
THE EXCHANGE RATIO IN THE MERGER FROM A FINANCIAL POINT OF VIEW TO ASPECT'S
STOCKHOLDERS AS OF THE DATE OF THE OPINION AND DOES NOT CONSTITUTE A
RECOMMENDATION AS TO HOW ANY STOCKHOLDER SHOULD VOTE ON ANY MATTER RELATING TO
THE MERGER.
2
<PAGE> 13
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 52)
When considering the recommendation of the Aspect board, you should be
aware that some directors and officers of Aspect have interests in the merger
that are different from, or in addition to, other Aspect stockholders. These
interests are discussed on page 52 under "Interests of Certain Persons in the
Merger."
EXPIRATION OR TERMINATION OF APPLICABLE WAITING PERIOD (SEE PAGE 53)
The merger is subject to certain filing requirements under United States
antitrust laws. We have made the required filings with the Department of Justice
and Federal Trade Commission. We are not, however, permitted to complete the
merger until the applicable waiting period has expired or terminated. We expect
the applicable waiting period to expire at 11:59 p.m. (EST) on May 11, 2000. The
Department of Justice and the Federal Trade Commission, as well as a state
antitrust authority or a private person, may challenge the merger at any time
before or after it is completed.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 53)
The merger has been structured so as to qualify as a reorganization for
United States federal income tax purposes. If the merger qualifies as a
reorganization, Aspect stockholders will not recognize gain or loss for United
States federal income tax purposes in the merger, except for taxes payable
because of cash they receive instead of fractional shares. It is a condition to
completion of the merger that Aspect receive a legal opinion from its outside
counsel that the merger constitutes a reorganization within the meaning of the
Internal Revenue Code.
NO DISSENTERS' OR APPRAISAL RIGHTS (SEE PAGE 55)
Under Delaware law, stockholders of Aspect and i2 are not entitled to
dissenters' or appraisal rights in connection with the merger.
RESTRICTIONS ON THE ABILITY OF ASPECT AFFILIATES TO SELL i2 STOCK (SEE PAGE 56)
All shares of i2 common stock that Aspect stockholders receive in
connection with the merger will be freely transferable unless the holder is
considered an "affiliate" of Aspect for purposes of the federal securities laws.
Shares of i2 common stock held by these affiliates may be sold only pursuant to
a registration statement or an exemption under the Securities Act of 1933.
RESTRICTIONS ON ALTERNATE TRANSACTIONS (SEE PAGE 63)
The merger agreement prohibits Aspect from soliciting, participating in
discussions with third parties or taking other actions related to alternative
transactions to the merger, except as discussed on page 63 under "No
Solicitation of Transactions."
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 65)
The respective obligations of the parties to complete the merger are
subject to the prior satisfaction or waiver of conditions specified in the
merger agreement.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 66)
The merger agreement may be terminated under circumstances that are
described on page 66 under "Termination of the Merger Agreement."
TERMINATION FEE AND EXPENSES (SEE PAGE 67)
Aspect has agreed to pay i2 a termination fee of either $15 million or $225
million in cash if the merger agreement terminates under circumstances that are
described on page 67 under "Payment of Fees and Expenses."
3
<PAGE> 14
Each of us will pay our own legal, accounting and investment banking fees
and other expenses related to the merger.
TRADEMARKS
i2, the i2 logo and TradeMatrix are registered trademarks of i2. This
document contains trademarks of Aspect and may contain other trademarks of i2
and trademarks of others.
4
<PAGE> 15
i2 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
You should read the following table in conjunction with i2's consolidated
financial statements and related notes and i2's "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contained in i2's
annual reports, quarterly reports and other information on file with the
Securities and Exchange Commission. Historical results are not necessarily
indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses........................... $24,162 $62,063 $141,766 $234,316 $352,597
Services.................................... 10,837 30,569 58,218 91,726 147,893
Maintenance................................. 3,462 8,881 21,792 43,115 70,620
------- ------- -------- -------- --------
Total revenues...................... 38,461 101,513 221,776 369,157 571,110
------- ------- -------- -------- --------
Costs and expenses:
Cost of software licenses................... 390 260 2,746 7,967 17,981
Cost of services and maintenance............ 7,601 21,761 48,422 77,459 125,934
Sales and marketing......................... 10,487 35,484 77,071 129,978 194,752
Research and development.................... 8,503 23,559 57,392 94,199 132,278
General and administrative.................. 5,286 11,108 24,984 38,191 53,188
In-process research and development and
acquisition-related expenses(1).......... -- 1,133 9,306 7,618 6,552
------- ------- -------- -------- --------
Total costs and expenses............ 32,267 93,305 219,921 355,412 530,685
------- ------- -------- -------- --------
Operating income.............................. 6,194 8,208 1,855 13,745 40,425
Other income (expense) net.................... (167) 1,671 3,309 8,753 7,642
------- ------- -------- -------- --------
Income (loss) before income taxes............. 6,027 9,879 5,164 22,498 48,067
Provision for income taxes.................... 2,054 4,705 6,916 17,279 24,552
------- ------- -------- -------- --------
Net income (loss)............................. $ 3,973 $ 5,174 $ (1,752) $ 5,219 $ 23,515
======= ======= ======== ======== ========
Net income (loss) per share................... $ 0.04 $ 0.04 $ (0.01) $ 0.04 $ 0.16
======= ======= ======== ======== ========
Net income (loss) per share, assuming
dilution.................................... $ 0.03 $ 0.04 $ (0.01) $ 0.03 $ 0.14
======= ======= ======== ======== ========
Weighted average common shares outstanding.... 90,656 119,580 128,884 143,588 150,419
Weighted average common shares outstanding,
assuming dilution........................... 121,788 136,232 128,884 157,060 167,839
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments................................. $ 8,122 $59,694 $151,889 $155,998 $579,391
Working capital............................... 7,408 62,636 167,877 182,778 585,039
Total assets.................................. 28,251 113,546 264,923 344,808 861,549
Total debt.................................... -- 600 2,114 5,032 350,000
Total stockholders' equity.................... 10,378 75,236 192,964 228,986 332,168
</TABLE>
- ---------------
(1) i2 incurred acquisition-related expenses related to business combinations of
$1.1 million in 1996, $9.3 million in 1997, $7.6 million in 1998 and $6.6
million in 1999, including write-offs of in-process research and development
of $1.1 million in 1996, $4.6 million in 1997, $4.7 million in 1998 and $3.3
million in 1999. The remaining costs included amortization of goodwill and
acquired technology and investment banking, legal and accounting fees and
expenses. Excluding these expenses, net income and net income per share,
assuming dilution, would have been $6.3 million and $0.05 per share in 1996,
$5.0 million and $0.03 per share in 1997, $12.8 million and $0.08 per share
in 1998, and $30.1 million and $0.18 per share in 1999.
5
<PAGE> 16
ASPECT SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
You should read the following table in conjunction with Aspect's
consolidated financial statements and related notes and Aspect's "Management's
Discussion and Analysis of Financial Condition and Results to Operations,"
contained in Aspect's annual reports, quarterly reports and other information on
file with the Securities and Exchange Commission. Historical results are not
necessarily indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Licenses................................. $ 8,123 $16,043 $26,892 $ 51,132 $ 52,440
Subscription and maintenance............. 5,141 9,392 13,594 17,509 24,514
Service and other........................ 2,299 5,023 9,443 17,724 18,191
------- ------- ------- -------- --------
Total revenue.................... 15,563 30,458 49,929 86,365 95,145
------- ------- ------- -------- --------
Cost of revenue:
Licenses................................. 298 612 346 1,419 1,152
Subscription and maintenance............. 1,142 1,206 2,676 3,737 5,278
Service and other........................ 1,291 2,689 5,027 6,400 9,120
------- ------- ------- -------- --------
Total cost of revenues........... 2,731 4,507 8,049 11,556 15,550
------- ------- ------- -------- --------
Gross profit............................... 12,832 25,951 41,880 74,809 79,595
Operating expenses:
Research and development................. 6,031 8,762 11,213 15,882 20,061
Sales and marketing...................... 7,128 13,540 26,730 33,246 44,625
General and administrative............... 2,253 4,030 5,304 7,909 11,136
Costs incurred in merger................. -- -- 4,312 -- --
------- ------- ------- -------- --------
Total operating expenses......... 15,412 26,332 47,559 57,037 75,822
------- ------- ------- -------- --------
Net income (loss) before interest and
taxes.................................... (2,580) (381) (5,679) 17,772 3,773
Interest and other income.................. 268 1,805 3,066 3,526 6,872
Interest and other expense................. (83) (209) (665) (751) (634)
------- ------- ------- -------- --------
Net income (loss) before taxes............. (2,395) 1,215 (3,278) 20,547 10,011
Provision for income taxes................. 150 330 1,593 4,522 2,212
------- ------- ------- -------- --------
Net income (loss).......................... $(2,545) $ 885 $(4,871) $ 16,025 $ 7,799
======= ======= ======= ======== ========
Net income (loss) per share................ $ (0.07) $ 0.02 $ (0.09) $ 0.27 $ 0.13
======= ======= ======= ======== ========
Net income (loss) per share, assuming
dilution................................. $ (0.07) $ 0.02 $ (0.09) $ 0.24 $ 0.12
======= ======= ======= ======== ========
Weighted average common shares
outstanding.............................. 36,100 48,020 55,268 59,862 58,726
Weighted average common shares outstanding,
assuming dilution........................ 36,100 55,020 55,268 66,300 66,180
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments.............................. $ 6,095 $57,831 $55,056 $ 81,473 $ 76,204
Working capital............................ 3,927 56,440 48,521 79,438 83,672
Total assets............................... 14,159 73,273 81,720 114,782 135,904
Long-term obligations, less current
portion.................................. 2,620 2,365 11 -- --
Stockholders' equity....................... 3,855 58,746 58,574 88,840 98,779
</TABLE>
6
<PAGE> 17
i2 TECHNOLOGIES, INC.
SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
In the table below, we provide you selected unaudited pro forma combined
financial data to give effect to i2's acquisition of various IBM assets and i2's
proposed acquisitions of SupplyBase, Inc. Aspect, and Aspect's acquisition of
Transition Analysis Component Technology, Inc. ("TACTech") as if the
acquisitions had been completed on January 1, 1999 for statement of operations
purposes and December 31, 1999 for balance sheet purposes. This selected
unaudited pro forma combined financial data should be read in conjunction with
the unaudited pro forma combined financial statements and accompanying notes
which are included in this joint proxy statement/prospectus, the separate
historical financial statements and accompanying notes of i2 and of Aspect,
which are incorporated by reference in this joint proxy statement/prospectus,
and the historical financial statements of SupplyBase and TACTech which are
included in this joint proxy statement/prospectus. It is also important that you
read the i2 1999 Annual Report on Form 10-K which we incorporate by reference.
See "Where You Can Find More Information" on page 83.
On March 12, 2000, i2 entered into a definitive agreement to acquire Aspect
in a transaction to be accounted for as a purchase. Under the agreement, i2 will
acquire all of the outstanding capital stock of Aspect and will assume all
outstanding stock options of Aspect, in exchange for approximately 44.9 million
shares of i2 common stock and stock options valued at approximately $8.5 billion
including acquisition charges.
On January 17, 2000, Aspect entered into a definitive agreement to acquire
TACTech in a transaction to be accounted for as a purchase. Under the agreement,
Aspect will acquire all of the outstanding capital stock of TACTech and will
assume all outstanding options of TACTech, in exchange for approximately 450,848
shares of Aspect common stock and stock options valued at approximately $15.0
million, including acquisition charges.
On March 12, 2000, i2 entered into a definitive agreement to acquire
SupplyBase in a transaction to be accounted for as a purchase. Under the
agreement, i2 will issue approximately 1.9 million shares of i2 common stock and
stock options for all of the outstanding capital stock and stock options of
SupplyBase, valued at approximately $356 million including acquisition charges.
On March 27, 2000, i2 purchased from IBM specific software assets,
cross-patent rights and software licenses with an aggregate value of
approximately $234 million.
The selected unaudited pro forma combined financial data are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have been realized had the acquired assets or companies been
operated as a single entity during this period. Note also that the consummations
of the acquisition of SupplyBase and Aspect's acquisition of TACTech are not a
condition to the acquisition of Aspect. The selected unaudited pro forma
combined financial data are derived from the unaudited pro forma combined
financial statements included elsewhere in the joint proxy statement/prospectus
and should be read in conjunction with those statements and the related notes.
See "Unaudited Pro Forma Combined Financial Statements."
7
<PAGE> 18
i2 TECHNOLOGIES, INC.
SELECTED UNAUDITED PROFORMA
COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 671,422
Total costs and expenses.................................. 3,601,526
Net loss.................................................. (2,895,724)
Net loss per share........................................ (15.50)
Net loss per share assuming dilution...................... (15.50)
Weighted average shares used in per share calculation..... 186,804
Weighted average shares used in per share
calculation-dilution................................... 186,804
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1999
------------
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $ 657,767
Working capital........................................... 629,478
Total assets.............................................. 9,950,332
Long term obligations..................................... 350,167
Stockholders' equity...................................... 9,254,544
</TABLE>
8
<PAGE> 19
COMPARATIVE PER SHARE DATA
The following table sets forth historical net income and book value per
share data of i2 and Aspect and unaudited pro forma combined net loss, book
value and EBITDA per share data after giving effect to:
- i2's purchase of various IBM assets;
- i2's proposed acquisition of SupplyBase;
- i2's proposed acquisition of Aspect and TACTech; and
- i2's acquisition of the IBM assets, SupplyBase, and Aspect and TACTech.
This data should be read in conjunction with the pro forma combined financial
statements included in this joint proxy statement/prospectus, the consolidated
financial statements and related notes of i2 and Aspect incorporated by
reference in this joint proxy statement/prospectus, and the historical financial
statements and related notes of SupplyBase and TACTech included in this joint
proxy statement/prospectus. The unaudited pro forma combined per share data is
not necessarily indicative of the net income (loss), or book value or EBITDA per
share that would have been achieved had the transactions been completed as of
the beginning of the period presented.
References below to i2 and Aspect's historical book value per share is
computed by dividing stockholders' equity by the number of shares of common
stock outstanding as of December 31, 1999. The pro forma combined book values
per share are computed by dividing pro forma stockholders' equity, including the
effect of pro forma adjustments, by the pro forma number of shares of i2 common
stock outstanding as of December 31, 1999. EBITDA per share, as calculated in
the table below, is equal to operating income (loss) plus depreciation and
amortization and in process research and development. We believe that EBITDA is
a meaningful measure of performance due to the large amounts of amortization
which are resulting in net losses. However, EBITDA is not intended to be a
performance measure that should be regarded as an alternative either to
operating income or net income as an indicator of operating performance or to
cash flows as a measure of liquidity, as determined in accordance with generally
accepted accounting principles. The unaudited equivalent pro forma combined per
share amounts are calculated by multiplying unaudited pro forma per share
amounts by the exchange ratio of .55 of a share of i2 common stock for each
outstanding share of Aspect common stock.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
i2 HISTORICAL:
Net income per share...................................... $ 0.16
Net income per share, assuming dilution................... $ 0.14
Book value per share...................................... $ 2.14
ASPECT HISTORICAL:
Net income per share...................................... $ 0.13
Net income per share, assuming dilution................... $ 0.12
Book value per share...................................... $ 1.67
PRO FORMA COMBINED i2 AND IBM ASSETS (UNAUDITED):
Net loss per share........................................ $ (0.05)
Net loss per share, assuming dilution..................... $ (0.05)
Book value per share...................................... $ 3.61
EBITDA per share, assuming dilution....................... $ 0.37
PRO FORMA COMBINED i2 AND SUPPLYBASE (UNAUDITED):
Net loss per share........................................ $ (0.66)
Net loss per share, assuming dilution..................... $ (0.66)
Book value per share...................................... $ 4.32
EBITDA per share, assuming dilution....................... $ 0.33
</TABLE>
9
<PAGE> 20
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
PRO FORMA COMBINED i2, ASPECT AND TACTECH (UNAUDITED):
Net loss per share........................................ $(14.89)
Net loss per share, assuming dilution..................... $(14.89)
Book value per share...................................... $ 43.30
EBITDA per share, assuming dilution....................... $ 0.33
PRO FORMA COMBINED i2, IBM ASSETS, SUPPLYBASE, ASPECT AND
TACTECH (UNAUDITED):
Net loss per share........................................ $(15.50)
Net loss per share, assuming dilution..................... $(15.50)
Book value per share...................................... $ 45.48
EBITDA per share, assuming dilution....................... $ 0.30
EQUIVALENT PRO FORMA COMBINED i2, IBM ASSETS, SUPPLYBASE,
ASPECT AND TACTECH (UNAUDITED):
Net loss per share........................................ $ (8.53)
Net loss per share, assuming dilution..................... $ (8.53)
Book value per share...................................... $ 25.01
</TABLE>
10
<PAGE> 21
MARKET PRICE INFORMATION
i2 MARKET PRICE DATA
i2's common stock has traded on the Nasdaq National Market under the symbol
"ITWO" since April 25, 1996. The following table sets forth the range of high
and low sales prices reported on the Nasdaq National Market for i2 common stock
for the periods indicated, adjusted to reflect (1) a two-for-one stock split in
the form of a dividend distributed on June 2, 1998 and (2) a two-for-one stock
split in the form of a dividend distributed on February 17, 2000.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
2000
Second quarter (through April 17)......................... $139.88 $69.00
First quarter............................................. $223.50 $70.16
1999
Fourth quarter............................................ $109.00 $18.69
Third quarter............................................. 24.19 13.06
Second quarter............................................ 21.78 8.88
First quarter............................................. 18.00 11.25
1998
Fourth quarter............................................ $ 15.97 $ 4.63
Third quarter............................................. 21.13 6.32
Second quarter............................................ 20.00 13.50
First quarter............................................. 16.41 12.53
</TABLE>
ASPECT MARKET PRICE DATA
Aspect's common stock has traded on the Nasdaq National Market under the
symbol "ASDV" since May 24, 1996. The following table sets forth the range of
high and low sales prices reported on the Nasdaq National Market for Aspect
common stock for the periods indicated, adjusted to reflect (1) a two-for-one
stock split in the form of a dividend distributed on August 17, 1998 and (2) a
two-for-one stock split in the form of a dividend distributed on March 13, 2000.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
2000
Second quarter (through April 17)......................... $ 72.00 $36.00
First quarter............................................. $100.00 $30.50
1999
Fourth quarter............................................ $ 34.25 $12.63
Third quarter............................................. 13.00 7.50
Second quarter............................................ 11.21 3.28
First quarter............................................. 20.50 11.35
1998
Fourth quarter............................................ $ 22.16 $ 8.88
Third quarter............................................. 21.28 14.28
Second quarter............................................ 19.03 13.28
First quarter............................................. 13.72 10.57
</TABLE>
RECENT CLOSING PRICES
On March 10, 2000, the last trading day before announcement of the proposed
merger, the actual closing prices on the Nasdaq National Market were $208.00 per
share of i2 common stock and $85.00 (giving effect to the two-for-one stock
split in the form of a dividend distributed on March 13, 2000) per share of
Aspect common stock. On April 17, 2000, the closing prices on the Nasdaq
National Market were $78.94 per share of i2 common stock and $42.69 per share of
Aspect common stock.
11
<PAGE> 22
Because the market price of i2 common stock is subject to fluctuation, the
market value of the shares of i2 common stock that holders of Aspect common
stock will receive in the merger may increase or decrease prior to and following
the merger. WE URGE STOCKHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS FOR i2
COMMON STOCK AND ASPECT COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE FUTURE
PRICES OR MARKETS FOR i2 COMMON STOCK OR ASPECT COMMON STOCK.
Neither i2 nor Aspect has ever paid cash dividends on its stock, and both
anticipate that they will continue to retain any earnings for the foreseeable
future for use in the operation of their respective businesses.
12
<PAGE> 23
RISK FACTORS
By voting in favor of the merger agreement, Aspect stockholders will be
choosing to invest in i2 common stock. An investment in i2 common stock involves
a high degree of risk. By voting in favor of the issuance of i2 common stock in
connection with the merger, i2 stockholders will be voting to acquire Aspect.
The acquisition of Aspect involves a high degree of risk. In addition to the
other information contained in or incorporated by reference into this joint
proxy statement/prospectus, you should carefully consider the following risk
factors in deciding whether to vote in favor of any proposal relating to the
merger. If any of the following risks actually occurs, the business and
prospects of Aspect or i2 may be seriously harmed. In such case, the trading
price of i2 common stock would decline, and you may lose all or part of your
investment.
RISKS RELATED TO THE MERGER
ASPECT STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF i2 COMMON STOCK
DESPITE CHANGES IN MARKET VALUE OF ASPECT COMMON STOCK OR i2 COMMON STOCK.
Upon the merger's completion, each share of Aspect common stock will be
exchanged for 0.55 of a share of i2 common stock. There will be no adjustment
for changes in the market price of either Aspect common stock or i2 common
stock. In addition, neither Aspect nor i2 may terminate the merger agreement or
"walk away" from the merger or resolicit the vote of its stockholders solely
because of changes in the market price of i2 common stock. Accordingly, the
specific dollar value of i2 common stock that Aspect stockholders will receive
upon the merger's completion will depend on the market value of i2 common stock
when the merger is completed and may decrease from the date you submit your
proxy. The share price of i2 common stock is by nature subject to the general
price fluctuations in the market for publicly traded equity securities and has
experienced significant volatility. We urge you to obtain recent market
quotations for i2 common stock and Aspect common stock. i2 cannot predict or
give any assurances as to the market price of i2 common stock at any time before
or after the completion of the merger.
i2 AND ASPECT MAY NOT ACHIEVE THE BENEFITS THEY EXPECT FROM THE MERGER.
We entered into the merger agreement with the expectation that the merger
will result in significant benefits. Achieving the benefits of the merger
depends on the timely, efficient and successful execution of a number of
post-merger events. Key events include:
- integrating the operations and personnel of the two companies;
- offering the existing products and services of each company to the other
company's customers; and
- developing new products and services that utilize the assets of both
companies.
We will need to overcome significant issues, however, to realize any
benefits or synergies from the merger. The successful execution of these
post-merger events will involve considerable risk and may not be successful.
Operations and personnel. i2 is a provider of intelligent eBusiness
solutions that help enterprises optimize business processes both internally and
among trading partners. Aspect develops, markets and supports enterprise
client/server software and content products that enable manufacturers to improve
product development and business processes through component and supplier
management. i2's principal offices are located in Dallas, Texas, while Aspect's
principal offices are located in Mountain View, California. Currently, there are
no plans to relocate either of these principal offices. In order for the merger
to be successful, Aspect's operations and personnel must be successfully
integrated with i2's operations and personnel. The failure of i2 to complete the
integration successfully could result in the loss of key personnel and
customers.
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Products and services. Each company initially intends to offer its
respective products and services to the customers of the other company. There
can be no assurance that either company's customers will have any interest in
the other company's products and services. The failure of such cross-marketing
efforts would diminish the synergies expected to be realized by the merger.
In addition, i2 intends after the merger to develop new products and
services that combine the assets of both the i2 and Aspect businesses. To date,
the companies have not thoroughly investigated the technological, market-driven
or other obstacles in developing and marketing these new products and services
in a timely and efficient way. There can be no assurance that i2 will be able to
overcome these obstacles in developing new products and services, or that there
will be a market for the new products or services developed by i2 after the
merger.
In general, we cannot offer any assurances that we can successfully
integrate or realize the anticipated benefits of the merger. Our failure to do
so could have a material adverse effect on the combined company's business,
financial condition and operating results or could result in loss of key
personnel. In addition, the attention and effort devoted to the integration of
the two companies will significantly divert management's attention from other
important tasks, and could seriously harm the combined company.
THE MERGER COULD ADVERSELY AFFECT THE COMBINED COMPANY'S FINANCIAL RESULTS.
If the benefits of the merger do not exceed the costs associated with the
merger, including any dilution to i2's stockholders resulting from the issuance
of shares in connection with the merger, i2's financial results, including
earnings per share, could be adversely affected. i2 expects to incur an
in-process research and development charge of approximately $89.4 million
related to the merger and a annual amortization during 2000, 2001 and 2002 of
approximately $2.9 billion related to goodwill and intangible assets.
THE MARKET PRICE OF i2 COMMON STOCK MAY DECLINE AS A RESULT OF THE MERGER.
The market price of i2 common stock may decline as a result of the merger
if:
- the integration of i2 and Aspect is unsuccessful;
- i2 does not achieve the anticipated benefits of the merger as rapidly or
to the extent expected by financial or industry analysts; or
- the effect of the merger on i2's financial results is not consistent with
the expectations of financial or industry analysts.
ASPECT'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.
The directors and officers of Aspect participate in arrangements and have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or in addition to, other Aspect
stockholders, including the following:
- The officers and directors of Aspect own stock options to purchase an
aggregate of shares of Aspect common stock. If the merger is
completed, many of these options that are unvested will automatically
become vested and exercisable as described on page 52 under "Interests of
Certain Persons in the Merger."
- Various officers of Aspect are entitled to special benefits, including
immediate vesting of stock options, under their employment agreements
with Aspect if their employment is terminated at the completion of or
following the merger.
- Two Aspect executive officers have entered into employment agreements
with i2.
- i2 has agreed to indemnify each present and former Aspect officer and
director against liabilities arising out of such person's services as an
Aspect officer or director. In addition, i2 will cause
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Aspect, as the surviving corporation in the merger, to maintain officers'
and directors' liability insurance to cover any such liabilities for the
next six years.
- i2 has agreed to expand its board and to appoint Romesh T. Wadhwani, the
Chairman of the Board and Chief Executive Officer of Aspect, as the Vice
Chairman of i2's board, with an initial term expiring at the annual i2
stockholders' meeting to be held in 2003.
Aspect stockholders should consider whether these interests may have
influenced Aspect's directors and officers to support or recommend the merger.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ASPECT'S STOCK PRICE AND
FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Aspect may be subject to a
number of material risks, including the following:
- Aspect may be required to pay i2 a termination fee of either $15 million
or $225 million;
- the price of Aspect common stock may decline to the extent that the
current market price of Aspect common stock reflects a market assumption
that the merger will be completed; and
- various costs related to the merger, such as legal and accounting fees
and the expenses and fairness opinion fee of Aspect's financial advisor,
must be paid even if the merger is not completed.
In addition, Aspect customers and information sources may, in response to
the announcement of the merger, delay or defer decisions concerning Aspect. Any
delay or deferral in those decisions by Aspect customers or suppliers could have
a material adverse effect on Aspect's business, regardless of whether the merger
is ultimately completed. Similarly, current and prospective Aspect employees may
experience uncertainty about their future roles with i2 until i2's strategies
with regard to Aspect are announced or executed. This may adversely affect
Aspect's ability to attract and retain key management, sales, marketing and
technical personnel.
Further, if the merger is terminated and Aspect's board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than the price to be paid in the merger. In addition,
while the merger agreement is in effect, Aspect is prohibited from soliciting,
initiating, knowingly encouraging, inducing the entry into, entering into or
taking various other actions with respect to extraordinary transactions, such as
a merger, sale of assets or other business combination, with any party other
than i2.
i2 MUST MANAGE THE INTEGRATION OF ACQUIRED COMPANIES SUCCESSFULLY IN ORDER TO
ACHIEVE DESIRED RESULTS.
As a part of its business strategy, i2 expects to enter into additional
business combinations and acquisitions. Acquisition transactions are accompanied
by a number of risks, including:
- the difficulty of assimilating the operations and personnel of the
acquired companies;
- the potential disruption of the ongoing businesses and distraction of
management of i2 and the acquired companies;
- the difficulty of incorporating acquired technology and rights into i2's
products and services;
- unanticipated expenses related to technology integration;
- difficulties in maintaining uniform standards, controls, procedures and
policies;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- potential unknown liabilities associated with acquired businesses.
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The combined company may not succeed in addressing these risks or any other
problems encountered in connection with any future business combinations and
acquisitions.
THE MERGER MAY GO FORWARD EVEN THOUGH MATERIAL ADVERSE CHANGES RESULT FROM THE
ANNOUNCEMENT OF THE MERGER, INDUSTRY-WIDE CHANGES AND OTHER CAUSES.
In general, either party can refuse to complete the merger if there is a
material adverse change affecting the other party between now and the closing.
But certain types of changes will not prevent the merger from going forward,
even if they would have a material adverse effect on i2 or Aspect. Industry-
wide changes, changes affecting the economy as a whole, and changes resulting
from the announcement of the merger will not allow either party refuse to
complete the merger.
If adverse changes occur but i2 and Aspect must still complete the merger,
i2's stock price may suffer. This in turn may reduce the value of the merger to
i2 and Aspect stockholders.
RISKS RELATED TO i2
In addition to the risks relating to the merger, as discussed above, i2 is
subject to its own specific risks relating to its business model, strategy,
markets and legal and regulatory environment, including those set forth below.
i2'S FINANCIAL RESULTS MAY VARY SIGNIFICANTLY FROM QUARTER TO QUARTER AND i2 MAY
FAIL TO MEET EXPECTATIONS, WHICH MAY NEGATIVELY IMPACT THE PRICE OF i2'S COMMON
STOCK.
i2's operating results have varied significantly from quarter to quarter in
the past, and i2 expects its operating results to continue to vary from quarter
to quarter in the future, due to a variety of factors, many of which are outside
of i2's control. Factors that could affect quarterly operating results include:
- volume and timing of customer orders;
- length of the sales cycle;
- customer budget constraints;
- announcement or introduction of new products or product enhancements by
i2 or its competitors;
- changes in prices of i2's products and those of its competitors;
- foreign currency exchange rate fluctuations;
- market acceptance of new products;
- mix of direct and indirect sales;
- changes in i2's strategic relationships; and
- changes in i2's business strategy.
Furthermore, customers may defer or cancel their purchases of products if
they experience a downturn in their business or if there is a downturn in the
general economy. i2 will continue to determine its investment and expense levels
based on expected future revenues. A significant portion of i2's expenses is not
variable in the short term, and i2 cannot reduce its costs quickly to respond to
decreases in revenues. Therefore, if revenues are below expectations, this
shortfall is likely to adversely and disproportionately affect i2's operating
results. In addition, i2 may reduce its prices or accelerate investment in
research and development efforts in response to competitive pressures or to
pursue new market opportunities. Any of these activities may further limit i2's
ability to adjust spending in response to revenue fluctuations. Revenues may not
grow at historical rates in future periods, or they may not grow at all.
Accordingly, i2 may not maintain positive operating margins in future quarters.
Any of these factors could cause i2's
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operating results to be below the expectations of public market analysts and
investors, and the price of its common stock may fall.
i2 ANTICIPATES SEASONAL FLUCTUATIONS IN REVENUES, WHICH MAY CAUSE VOLATILITY IN
ITS STOCK PRICE.
The market price of i2's common stock has been volatile in the past, and
the market price of its common stock may be volatile in the future.
Historically, i2's revenues have tended to be strongest in the fourth quarter of
the year. i2 believes that its seasonality is due to the calendar year budgeting
cycles of many of i2's customers and i2's compensation policy that rewards sales
personnel for achieving annual revenue quotas. In future periods, these seasonal
trends may cause i2's quarter-to-quarter operating results to vary, which may
result in failing to meet the expectations of public market analysts and
investors.
i2 DEPENDS ON SIGNIFICANT INDIVIDUAL LICENSE SALES. THEREFORE, i2'S OPERATING
RESULTS FOR A GIVEN PERIOD COULD SUFFER SERIOUS HARM IF i2 FAILS TO CLOSE THE
LARGE SALES TARGETED FOR THAT PERIOD.
i2 generally derives a significant portion of revenues in each quarter from
a small number of relatively large sales. For example, in each quarter of 1999,
in the last three quarters of 1998 and in each quarter of 1997, one or more
customers individually accounted for at least 10% of i2's total software license
revenues in each quarter. Moreover, due to customer purchasing patterns, i2
typically realizes a significant portion of its software license revenues in the
last few weeks of a quarter. As a result, i2 is subject to significant
variations in license revenues and results of operations if it incurs any delays
in customer orders. If in any future period i2 fails to close one or more
substantial license sales that it has targeted to close in that period, this
failure could seriously harm i2's operating results for that period.
i2 MAY NOT REMAIN COMPETITIVE, AND INCREASED COMPETITION COULD SERIOUSLY HARM
ITS BUSINESS.
i2's competitors offer a variety of eBusiness solutions, including
solutions relating to supply chain and other core processes. These competitors
include:
- vendors establishing electronic marketplaces and indirect procurement
capabilities, such as Ariba and Commerce One;
- enterprise resource application software vendors such as SAP AG,
PeopleSoft Inc., Oracle Corporation and Baan Company, N.V., each of which
currently offers sophisticated enterprise resource planning, solutions
that currently or may in the future incorporate applications competitive
with i2's products;
- supply chain software vendors including Manugistics Group, Inc. and
Logility, Inc.;
- other business application software vendors which may broaden their
product offerings by internally developing, or by acquiring or partnering
with independent developers of, advanced planning and scheduling
software;
- internal development efforts by corporate information technology
departments; and
- companies offering standardized or customized products for mainframe
and/or mid-range computer systems.
Historically, a number of enterprise resource planning vendors have from
time to time jointly marketed i2's products as a complement to their own
systems. However, as i2 attempts to increase its market share and expand its
product offerings, and as enterprise resource planning vendors expand their own
product offerings, i2's relationships with these vendors have and may continue
to become more competitive. i2 believes that enterprise resource planning
vendors are focusing significant resources on establishing and increasing the
functionality of their own eBusiness solutions, and other enterprise resource
planning vendors have recently acquired independent developers of advanced
planning and scheduling software which compete with i2's RHYTHM products.
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Relative to i2, many of its 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.
Current and potential competitors have established, or may establish,
cooperative relationships among themselves or with third parties to enhance
their products, which may result in increased competition. In addition, i2
expects to experience increasing price competition as i2 competes for market
share, and i2 may not be able to compete successfully with its existing or new
competitors. If i2 experiences increased competition, substantial harm may
result to its business, operating results and financial condition.
i2'S STRATEGY OF ESTABLISHING AND PROMOTING i2'S TRADEMATRIX IS UNPROVEN AND MAY
BE UNSUCCESSFUL.
As part of i2's business strategy, it is offering the TradeMatrix platform
to trading community participants in digital marketplaces. This strategy is
unproven, and currently i2 is providing only a limited portion of its intended
TradeMatrix services in only a small number of digital trading communities. i2
has limited experience developing and operating digital marketplaces, and cannot
be certain that these trading communities will be operated effectively, that
enterprises will join and remain in these trading communities, that i2 will
develop and provide successfully all intended TradeMatrix services, or that i2
will generate significant revenues from these services. To date, i2 has not
generated significant revenues from these services. If this business strategy is
flawed, or if i2 is unable to execute effectively, its business, operating
results and financial condition could be substantially harmed.
In addition, i2 expects to rely on third parties' efforts to promote its
TradeMatrix platform. Because i2's revenues from these sources are likely to be
largely based on subscriptions to or utilization of i2's digital marketplaces,
any failure by these third parties to successfully promote the TradeMatrix
platform, or any reluctance to participate in i2's digital marketplaces on the
part of suppliers, manufacturers, distributors, logistics providers or
customers, could harm i2's business, results of operations and financial
condition.
RAPID GROWTH IN i2'S OPERATIONS COULD CONTINUE TO STRAIN i2'S MANAGERIAL AND
OPERATIONAL RESOURCES.
i2 has experienced rapid growth. Revenues have increased to $571.1 million
in 1999 from $369.2 million in 1998 and from $221.8 million in 1997. i2's
employee count has increased to approximately 2,800 at December 31, 1999, from
approximately 2,200 at December 31, 1998, and from approximately 1,200 at
December 31, 1997. i2 has also increased the scope of its operating and
financial systems and the geographic distribution of its operations and
customers. This growth has strained i2's management and operations, and they
will continue to be strained if rapid growth continues. i2's officers and other
key employees will need to implement and improve i2's operational, customer
support and financial control systems and effectively expand, train and manage
i2's employee base. Further, i2 expects that it will be required to manage an
increasing number of relationships with various customers and other third
parties. i2 may not be able to manage future expansion successfully, and i2's
inability to do so would harm its business, operating results and financial
condition.
ANY DECREASE IN DEMAND FOR i2'S RHYTHM SUITE OF PRODUCTS AND SERVICES COULD
SIGNIFICANTLY REDUCE i2'S REVENUES.
i2 derives substantially all of its revenues from licenses of its RHYTHM
suite of products and related services. RHYTHM-related revenues, including
maintenance and consulting contracts, will continue to account for substantially
all of i2's revenues for the foreseeable future. As a result, i2's future
operating
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results will depend upon continued market acceptance of RHYTHM and enhancements
thereto. However, RHYTHM may not achieve continued market acceptance.
Competition, technological change or other factors could decrease demand for, or
market acceptance of, RHYTHM. Any decrease in demand or market acceptance of
RHYTHM could substantially harm i2's business, operating results and financial
condition.
i2 IS INVESTING SIGNIFICANT RESOURCES IN DEVELOPING AND MARKETING ITS
INTELLIGENT eBUSINESS SOLUTIONS. THE MARKET FOR THESE SOLUTIONS IS NEW AND
EVOLVING, AND, IF THIS MARKET DOES NOT DEVELOP AS i2 ANTICIPATES, OR IF i2 IS
UNABLE TO DEVELOP ACCEPTABLE SOLUTIONS, SERIOUS HARM WOULD RESULT TO i2'S
BUSINESS.
i2 currently derives a substantial portion of its revenues from licenses
for decision-support software products associated with supply chain management
software and related services. However, i2 is investing significant resources in
further developing and marketing enhanced products and services to facilitate
eBusiness over public and private networks. For the first few months after i2
introduces new products and services, the demand for and market acceptance of
those products and services are subject to a high level of uncertainty,
especially where acquisition of i2's products or services requires a large
capital commitment or other significant commitment of resources. Adoption of
eBusiness software solutions, particularly by those individuals and enterprises
that have historically relied upon traditional means of commerce and
communication, will require a broad acceptance of new and substantially
different methods of conducting business and exchanging information. These
products and services involve a new approach to the method of conducting
business, and, as a result, intensive marketing and sales efforts may be
necessary to educate prospective customers regarding the uses and benefits of
these products and services in order to generate demand. The market for this
broader functionality may not develop, competitors may develop superior products
and services, or i2 may not develop acceptable solutions to address this
functionality. Any one of these events could seriously harm i2's business,
operating results and financial condition.
RAPID ADOPTION OF i2'S TRADEMATRIX PLATFORMS COULD REDUCE i2'S SOFTWARE
LICENSING REVENUES.
i2's current revenue model is mainly focused on license revenue, with
additional revenues earned from consulting, maintenance and training. The
TradeMatrix platform offers a more diverse and expansive set of service
offerings that will generate additional revenue streams for hosting, transaction
processing and set-up fees. The TradeMatrix pricing model differs from i2's
historical model of deriving revenues from licenses of the RHYTHM suite of
products, which i2 largely recognizes upon executing a contract and delivering
software. Under the TradeMatrix model, up-front license fees may be less
substantial and the fees derived from subscriptions to i2's utilization of the
digital marketplace services may be more robust. i2 cannot predict the rate at
which i2's customers will adopt the TradeMatrix platform or whether these
expanded service offerings will adversely impact i2's license revenues.
i2 DOES NOT HAVE SIGNIFICANT EXPERIENCE IN HOSTING ELECTRONIC MARKETPLACES AND
MAY NOT ADEQUATELY PREDICT THE VOLUME OF TRAFFIC.
If the volume of traffic on the web site for i2's TradeMatrix platform
increases, the platform may experience slower response times or other problems.
i2 will rely on several third parties to expand, manage and maintain the
necessary computer equipment, software, Internet and telecommunication services
required for efficient access to TradeMatrix as demand increases. Any delays in
response time or performance problems could cause TradeMatrix users to perceive
this service as not functioning properly and therefore cause them to reduce or
discontinue use of i2's products and services.
i2'S TRADEMATRIX PLATFORM MAY EXPERIENCE PERFORMANCE PROBLEMS OR DELAYS AS A
RESULT OF SERVICE INTERRUPTIONS.
i2 must protect i2's network infrastructure and equipment against damage
from human error, physical or electronic security breaches, power loss and other
facility failures, fire, earthquake, flood, telecommunications failure,
sabotage, vandalism and other similar events. Despite precautions taken by i2
and third-party service providers, a natural disaster or other unanticipated
problems at i2's data centers
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could result in interruptions in i2's services or significant damage to
equipment supporting the platform. In addition, failure of any of i2's
telecommunications providers to provide consistent data communications capacity
could result in interruptions in i2's services. Each of these could experience
outages, delays and other difficulties due to system failures unrelated to i2's
systems. Any damage to or failure of i2's systems or service providers could
result in reductions in, or terminations of, services supplied to i2's
customers, which could have a material adverse effect on i2's business.
IF i2 PUBLISHES INACCURATE CATALOG CONTENT DATA, ITS BUSINESS COULD SUFFER.
The accurate publication of catalog content is critical to i2's customers'
businesses. The TradeMatrix platform contains content management tools that help
suppliers manage the collection and publication of catalog content. Any defects
or errors in these tools or the failure of these tools to accurately publish
catalog content could deter businesses from participating in the TradeMatrix
marketplaces, damage i2's business reputation, harm i2's ability to win new
customers and potentially expose i2 to legal liability. In addition, from time
to time some of i2's customers may submit inaccurate pricing or other inaccurate
catalog information. Even though such inaccuracies are not caused by i2's work
and are not within i2's control, such inaccuracies could deter current and
potential customers from using i2's products and could harm its business,
operating results and financial condition.
THE MARKETS IN WHICH i2 COMPETES EXPERIENCE RAPID TECHNOLOGICAL CHANGE. IF i2
DOES NOT RESPOND TO THESE TECHNOLOGICAL ADVANCES, IT COULD SERIOUSLY HARM i2'S
BUSINESS.
Enterprises are increasing their focus on decision-support solutions for
eBusiness challenges. As a result, they are requiring their application software
vendors to provide greater levels of functionality and broader product
offerings. Moreover, competitors continue to make rapid technological advances
in computer hardware and software technology and frequently introduce new
products, services and enhancements. i2 must continue to enhance its current
product line and develop and introduce new products and services that keep pace
with the technological developments of i2's competitors. i2 must also satisfy
increasingly sophisticated customer requirements. If i2 cannot successfully
respond to the technological advances of others, or if its new products or
product enhancements and services do not achieve market acceptance, these events
could seriously harm i2's business, operating results and financial condition.
IF USE OF THE INTERNET FOR COMMERCE AND COMMUNICATION DOES NOT INCREASE AS i2
ANTICIPATES, i2'S BUSINESS WILL SUFFER.
i2 is offering new and enhanced products and services, which depend on
increased acceptance and use of the Internet as a medium for commerce and
communication. Rapid growth in the use of the Internet is a recent phenomenon.
As a result, acceptance and use may not continue to develop at historical rates,
and a sufficiently broad base of business customers may not adopt or continue to
use the Internet as a medium of commerce. Demand and market acceptance for
recently introduced services and products over the Internet are subject to a
high level of uncertainty, and there exist few proven services and products.
i2's business could be seriously harmed if:
- use of the Internet and other online services does not continue to
increase or increases more slowly than expected;
- the necessary communication and computer network technology underlying
the Internet and other online services does not effectively support any
expansion that may occur;
- new standards and protocols are not developed or adopted in a timely
manner; or
- for any other reason -- such as concerns about security, reliability,
cost, ease of use, accessibility or quality of service -- the Internet
does not create a viable commercial marketplace, inhibiting the
development of electronic commerce and reducing the need for and
desirability of i2's products and services.
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FUTURE REGULATION OF THE INTERNET MAY SLOW ITS GROWTH, RESULTING IN DECREASED
DEMAND FOR i2'S PRODUCTS AND SERVICES AND INCREASED COSTS OF DOING BUSINESS.
Due to increasing popularity and use of the Internet, it is possible that
state and federal regulators could adopt laws and regulations that impose
additional burdens on companies conducting business online. For example, the
growth and development of the market for Internet-based services may prompt
calls for more stringent consumer protection laws. Moreover, the applicability
to the Internet of existing laws in various jurisdictions governing issues such
as property ownership, sales tax, libel and personal privacy is uncertain and
may take years to resolve. Any new legislation or regulation, the application of
laws and regulations from jurisdictions whose laws do not currently apply to
i2's business, or the application of existing laws and regulations to the
Internet and other online services could decrease the expansion of the Internet,
causing i2's costs to increase and i2's growth to be harmed.
CONCERNS THAT i2'S PRODUCTS DO NOT ADEQUATELY PROTECT THE PRIVACY OF CONSUMERS
COULD INHIBIT SALES OF ITS PRODUCTS.
One of the principal features of i2's customer management software
applications is the ability to develop and maintain profiles of consumers for
use by businesses. Typically, these products capture profile information when
consumers, business customers and employees visit a web site and volunteer
information in response to survey questions concerning their backgrounds,
interests and preferences. i2's products augment these profiles over time by
collecting usage data. Although i2 has designed its customer management products
to enable the development of applications that permit web site visitors to
prevent the distribution of any of their personal data beyond that specific web
site, privacy concerns may nevertheless cause visitors to resist providing the
personal data necessary to support this profiling capability. If i2 cannot
adequately address consumers' privacy concerns, these concerns could seriously
harm its business, financial condition and operating results.
IF i2'S ENCRYPTION TECHNOLOGY FAILS TO ENSURE THE SECURITY OF ITS CUSTOMERS'
ONLINE TRANSACTIONS, SERIOUS HARM TO i2'S BUSINESS COULD RESULT.
The secure exchange of value and confidential information over public
networks is a significant concern of consumers engaging in online transactions
and interaction. i2's customer management software applications use encryption
technology to provide the security necessary to effect the secure exchange of
value and confidential information. Advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments could
result in a compromise or breach of the algorithms that these applications use
to protect customer transaction data. If any compromise or breach were to occur,
it could seriously harm i2's business, financial condition and operating
results.
i2 MAY NOT SUCCESSFULLY INTEGRATE OR REALIZE THE INTENDED BENEFITS OF i2'S
RECENT ACQUISITIONS.
i2 acquired InterTrans Logistics Solutions Limited, or ITLS, in April 1998
and SMART in July 1999. In addition, i2 has acquired other businesses and
products to help broaden and strengthen its product portfolio. The success of
these acquisitions will depend primarily on i2's ability to:
- retain, motivate and integrate the acquired personnel;
- integrate multiple information systems; and
- integrate acquired software with i2's existing products and services.
i2 may encounter difficulties in integrating i2's operations and products
with those of ITLS, SMART and others. i2 may not realize the benefits that it
anticipated when i2 made these acquisitions. i2's failure to successfully
integrate its operations and products with those of ITLS, SMART and others could
seriously harm i2's business, operating results and financial condition.
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i2 MAY MAKE FUTURE ACQUISITIONS OR ENTER INTO JOINT VENTURES THAT MAY NOT BE
SUCCESSFUL.
In the future, i2 may acquire additional businesses, products and
technologies, or enter into joint venture arrangements, that could complement or
expand i2's business. In furtherance of this strategy, in March 2000 i2 entered
into agreements to acquire Aspect and SupplyBase. Management's negotiations of
potential acquisitions or joint ventures and management's integration of
acquired businesses, products or technologies could divert their time and
resources. Future acquisitions could cause i2 to issue dilutive equity
securities, incur debt or contingent liabilities, amortize goodwill and other
intangibles, or write off in-process research and development and other
acquisition-related expenses that could seriously harm i2's financial condition
and operating results. i2 expects that it will be required to amortize a
significant amount of goodwill and write-off significant amounts of in-process
research and development and other acquisition-related expenses if i2 completes
the pending Aspect and SupplyBase acquisitions. Further, i2 may not be able to
integrate any acquired business, product or technology with i2's existing
operations or train, retain and motivate personnel from the acquired business.
If i2 is unable to fully integrate an acquired business, product or technology
or train, retain and motivate personnel from the acquired business, i2 may not
receive the intended benefits of that acquisition.
i2 FACES RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS THAT COULD
HARM IT.
i2's international operations are subject to risks inherent in
international business activities. In addition, i2 may expand its international
operations in the future which would increase i2's exposure to these risks. The
risks i2 faces internationally include:
- difficulties and costs of 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;
- political instability; and
- general economic conditions in international markets.
CHANGES IN THE VALUE OF THE U.S. DOLLAR, AS COMPARED TO THE CURRENCIES OF
FOREIGN COUNTRIES WHERE i2 TRANSACTS BUSINESS, COULD HARM i2'S OPERATING
RESULTS.
To date, i2's international revenues have been denominated primarily in
U.S. dollars. The majority of i2's international expenses and some revenues have
been denominated in currencies other than the U.S. dollar. Therefore, changes in
the value of the U.S. dollar as compared to these other currencies may adversely
affect i2's operating results. As its international operations expand, i2 will
use an increasing number of foreign currencies, causing i2's exposure to
currency exchange rate fluctuations to increase. Although i2 has implemented
limited hedging programs to mitigate its exposure to currency fluctuations,
currency exchange rate fluctuations have caused, and will continue to cause,
currency transaction gains and losses. While these transactional gains and
losses have not been material to date, they may harm i2's business, results of
operations or financial condition in the future.
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i2 DEPENDS ON ITS STRATEGIC PARTNERS AND OTHER THIRD PARTIES. IF i2 FAILS TO
DERIVE BENEFITS FROM ITS EXISTING AND FUTURE STRATEGIC RELATIONSHIPS, i2'S
BUSINESS WILL SUFFER.
From time to time, i2 has collaborated with other companies, including IBM
and PricewaterhouseCoopers, in areas such as product development, marketing,
distribution and implementation. Maintaining these and other relationships is a
meaningful part of i2's business strategy. However, some of i2's current and
potential strategic partners are either actual or potential competitors, which
may impair the viability of these relationships. In addition, some of i2's
relationships have failed to meet expectations and may fail to meet expectations
in the future. i2 may not be able to enter into successful new strategic
relationships in the future.
THE LOSS OF ANY OF i2'S KEY PERSONNEL OR ITS FAILURE TO ATTRACT ADDITIONAL
PERSONNEL COULD SERIOUSLY HARM i2.
i2 relies upon the continued service of a relatively small number of key
technical and senior management personnel, particularly Sanjiv Sidhu, i2's
chairman and chief executive officer. i2's future success depends on retaining
its key employees and i2's continuing ability to attract, train and retain other
highly qualified technical and managerial personnel. Very few of i2's key
technical personnel and none of i2's senior management personnel are bound by
employment agreements. As a result, i2's employees could leave with little or no
prior notice. In the past, i2 has had difficulty recruiting qualified personnel.
i2 may not be able to attract, assimilate or retain other highly qualified
technical and managerial personnel in the future. i2's loss of any of its key
technical and senior management personnel or i2's inability to attract, train
and retain additional qualified personnel could seriously harm i2's business,
operating results and financial condition.
IF i2 FAILS TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY RIGHTS OR FACES A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, i2 COULD LOSE ITS
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.
i2 relies primarily on a combination of copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions to protect
its proprietary rights. In addition, i2 generally licenses RHYTHM products to
end users in object code (machine-readable) format, and i2's license agreements
generally allow the use of RHYTHM products solely by the customer for internal
purposes without the right to sublicense or transfer the RHYTHM products.
However, these measures afford only limited protection. Unauthorized parties may
attempt to copy aspects of i2's products or to obtain and use information that
i2 regards as proprietary. Although i2 believes software piracy may be a
problem, it is not able to determine the extent to which piracy of i2's software
products exists. Policing unauthorized use of i2's products is difficult, and i2
cannot be certain that the steps it has taken will prevent misappropriation of
i2's technology. This is particularly true in foreign countries where the laws
may not protect proprietary rights to the same extent as the laws of the United
States and may not provide i2 with an effective remedy against piracy.
As the number of products and competitors continues to grow, the
functionality of products in different industry segments is increasingly
overlapping. As a result, i2 increasingly may be subject to claims of
intellectual property infringement. Although i2 is not aware that any of its
products infringe upon the proprietary rights of third parties, third parties
may claim infringement by i2 with respect to current or future products. Any
infringement claims, with or without merit, could be time-consuming, result in
costly litigation or damages, cause product shipment delays or the loss or
deferral of sales, or require i2 to enter into royalty or licensing agreements.
If i2 enters into royalty or licensing agreements in settlement of any
litigation or claims, these agreements may not be on terms acceptable to i2.
Unfavorable royalty and licensing agreements could seriously harm i2's business,
operating results and financial condition.
i2 resells some software that it licenses from third parties. Although i2
may continue this practice, third-party software licenses may not continue to be
available to us on commercially reasonable terms. i2's inability to maintain or
obtain any of these software licenses will delay or reduce its product shipments
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until i2 can identify, license and integrate equivalent software. Any loss of
these licenses or delay or reduction in product shipments could harm i2's
business, operating results and financial condition.
i2'S PRODUCTS' FAILURE TO REMAIN COMPATIBLE WITH EXISTING AND NEW COMPUTERS AND
SOFTWARE OPERATING SYSTEMS WOULD SERIOUSLY HARM i2'S BUSINESS.
i2's RHYTHM software can operate on hardware platforms from Digital
Equipment, Hewlett-Packard, IBM and Sun Microsystems and operating systems from
Sun Microsystems and Microsoft. RHYTHM can access data from most widely-used
structured query language databases, including Informix, Oracle and Sybase. If
additional hardware or software platforms gain significant market acceptance, i2
may be required to attempt to adapt RHYTHM to those platforms in order to remain
competitive. However, those platforms may not be architecturally compatible with
RHYTHM's software product design, and i2 may not be able to adapt RHYTHM to
those additional platforms on a timely basis, or at all. Any failure to maintain
compatibility with existing platforms or to adapt to new platforms that achieve
significant market acceptance would seriously harm i2's business, operating
results and financial condition.
i2'S SOFTWARE IS COMPLEX AND MAY CONTAIN UNDETECTED ERRORS.
i2's software programs are complex and may contain undetected errors or
"bugs." Although i2 conducts extensive testing, it may not discover bugs until
i2's customers install and use a given product or until the volume of services
that a product provides increases. On occasion, i2 has experienced delays in the
scheduled introduction of new and enhanced products because of bugs. Undetected
errors could result in loss of customers or reputation, adverse publicity, loss
of revenues, delay in market acceptance, diversion of development resources,
increased insurance costs or claims against i2 by customers, any of which could
seriously harm i2's business, operating results and financial condition.
RELEASES AND PROBLEMS WITH NEW PRODUCTS MAY CAUSE PURCHASING DELAYS, WHICH WOULD
HARM i2'S REVENUES.
Customers may delay their purchasing decisions in anticipation of i2's new
or enhanced products, or products of competitors. Delays in customer purchasing
decisions could seriously harm i2's business and operating results. Moreover,
significant delays in the general availability of new releases, significant
problems in the installation or implementation of new releases, or customer
dissatisfaction with new releases could seriously harm i2's business, operating
results and financial condition.
i2'S FAILURE TO SUCCESSFULLY RECRUIT AND RETAIN TECHNICAL AND IMPLEMENTATION
PERSONNEL COULD REDUCE i2'S LICENSE REVENUES OR LIMIT THE GROWTH OF i2'S LICENSE
REVENUES.
A shortage of qualified technical sales support personnel could harm i2's
ability to expand sales and enter into new vertical markets. i2 will depend on
its trained implementation personnel or those of independent consultants to
implement i2's products and services. A shortage in the number of trained
implementation personnel could limit i2's ability to implement its software and
services on a timely and effective basis. Delayed or ineffective implementation
of i2's software and services may limit i2's ability to expand its revenues and
may result in customer dissatisfaction and harm to i2's reputation. Any of these
events could seriously harm i2's business, operating results and financial
condition.
i2 MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
i2's license agreements typically seek to limit its exposure to product
liability claims from its customers. However, these contract provisions may not
preclude all potential claims. Additionally, i2's general liability insurance
may be inadequate to protect it from all liabilities that it may face. Product
liability claims could require i2 to spend significant time and money in
litigation or to pay significant damages. As a result, any claim, whether or not
successful, could harm i2's reputation and business, operating results and
financial condition.
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i2'S EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE OF VOTING
SECURITIES.
i2's executive officers and directors together beneficially own
approximately 42% of the total voting power of i2. Accordingly, these
stockholders will be able to exert significant influence over the composition of
i2's board of directors and over i2's affairs in general.
i2'S CHARTER AND BY-LAWS HAVE ANTI-TAKEOVER PROVISIONS.
Provisions of i2's Certificate of Incorporation and Bylaws as well as
Delaware law could make it more difficult for a third party to acquire i2, even
if doing so would be beneficial to i2's stockholders. i2 is subject to the
provisions of Section 203 of the Delaware General Corporation Law, which
restricts certain business combinations with interested stockholders. The
combination of these provisions may inhibit a non-negotiated merger or other
business combination.
i2'S STOCK PRICE HISTORICALLY HAS BEEN VOLATILE, WHICH MAY MAKE IT MORE
DIFFICULT FOR YOU TO RESELL I2'S COMMON STOCK WHEN YOU WANT AT PRICES YOU FIND
ATTRACTIVE.
The market price of i2's common stock has been volatile in the past, and
the market price of i2's common stock may be volatile in the future. The
following factors may significantly affect the market price of the common stock:
- quarterly variations in i2's results of operations;
- the announcement of new products, product enhancements, joint ventures
and other alliances by i2 or its competitors;
- technological innovations by i2 or its competitors; and
- general market conditions or market conditions specific to particular
industries.
In particular, the stock prices of many companies in the technology and
emerging growth sectors have fluctuated widely due to events unrelated to their
operating performance. These fluctuations may harm the market price of i2's
common stock.
RISKS RELATED TO ASPECT
Aspect operates in a rapidly changing environment that involves a number of
risks, some of which are beyond Aspect's control. The following discussion
highlights some of these risks. These risks should be read in conjunction with
the "Risk Factors" section included in Aspect's Form 10-K for the fiscal year
ended December 31, 1999.
ASPECT'S REVENUES AND OPERATING RESULTS MAY FLUCTUATE AND CAUSE ASPECT'S STOCK
PRICE TO DECLINE.
Aspect's revenues and operating results have fluctuated in the past and may
continue to do so in the future. If Aspect's quarterly or annual operating
results do not meet the expectations of securities analysts and investors, the
market price of Aspect's common stock could decline significantly. Aspect's
revenues and operating results could be materially adversely affected by many
factors, some of which are outside the control of Aspect. The factors that could
adversely affect Aspect's revenues and operating results include, among others:
- the relatively long sales and implementation cycles for Aspect's
products;
- the size and timing of individual license transactions;
- seasonality of revenues;
- changes in Aspect's operating expenses;
- changes in the mix of products and services sold;
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<PAGE> 36
- timing of introduction or enhancement of products by Aspect or its
competitors;
- market acceptance of new products;
- technological changes in software or database technology;
- personnel changes and difficulties in attracting and retaining qualified
sales, marketing, technical and consulting personnel;
- changes in customers' budgeting cycles;
- foreign currency exchange rates;
- quality control of products sold; and
- economic conditions generally and in specific industry segments.
ASPECT'S BUSINESS DEPENDS ON SEASONAL SALES, WHICH MAY SUBJECT IT TO FINANCIAL
RISKS.
Aspect's business has experienced and is expected to continue to experience
seasonality, in part due to customer buying patterns, in part due to Aspect's
expense patterns and in part due to other factors. In recent years, Aspect has
generally experienced stronger demand for its products during the quarter ending
December 31 and has incurred higher personnel costs in the quarters ending March
31 and June 30. Aspect believes that these patterns will continue for the
foreseeable future.
BECAUSE ASPECT'S BUSINESS DEPENDS ON SHORT-TERM LICENSE REVENUES, ASPECT'S
INABILITY TO COMPENSATE FOR AN UNEXPECTED SHORTFALL COULD HURT ITS BUSINESS.
Licenses of Aspect's decision support software and reference data products
have historically accounted for the substantial majority of Aspect's revenues,
and Aspect anticipates that this trend will continue for the foreseeable future.
Aspect generally ships its products within a short period of time after
execution of a license agreement. As a result, Aspect typically does not have a
material backlog of unfilled license orders, and revenues in any quarter are
substantially dependent on license revenues recognized in that quarter. Aspect's
expense levels are based, in part, on its expectations as to future revenues and
to a large extent are fixed in the short term. Accordingly, Aspect may be unable
to adjust spending in a timely manner to compensate for any unexpected shortfall
in revenues, and any significant shortfall of demand in relation to Aspect's
expectations or any material delay of customer orders would have an almost
immediate material adverse effect on Aspect's business, financial condition and
results of operations. As a result, it is likely that in some future period
Aspect's results of operations could fail to meet the expectations of securities
analysts or investors. In such event, the price of Aspect's common stock would
likely drop significantly.
ASPECT'S SALES TO CUSTOMERS MAY BE DELAYED.
The licensing of Aspect's decision support software and reference data
products generally requires Aspect to engage in a sales cycle lasting six to
twelve months or longer, during which Aspect typically provides a significant
level of education to prospective customers regarding the use and benefits of
Aspect's products. The combination of products sold may also reach a price level
(over a million dollars) that requires approval from senior management of the
buying company. In addition, the implementation of Aspect's products typically
involves a significant commitment of resources by its customers over an extended
period of time and is commonly associated with reengineering of product
development and business processes. For these reasons, sales and customer
implementation cycles are subject to delays over which Aspect may have little or
no control. Any delay in the sale or customer implementation of Aspect's
products during a particular period would have a material adverse effect on
Aspect's business, financial condition and results of operations in that period.
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ASPECT'S BUSINESS WOULD BE ADVERSELY AFFECTED IF ASPECT'S CUSTOMERS WERE
DISSATISFIED WITH ASPECT'S PRODUCTS.
Aspect believes that to date its customers have not experienced significant
problems with Aspect's products. If Aspect's customers were to experience
problems with Aspect's products in the future or if they were dissatisfied with
product functionality or performance, Aspect's business, financial condition and
results of operations could be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE MAY HURT ASPECT'S BUSINESS.
There can be no assurance that Aspect's products will achieve broader
market acceptance or that Aspect will be successful in marketing its products or
enhancements thereto. In the event that Aspect's current or future competitors
release new products that have more advanced features, offer better performance
or are more price competitive than Aspect's products, demand for Aspect's
products would decline. A decline in demand for, or a decline in the market
acceptance of, Aspect's software or reference content databases as a result of
competition, technological change, evolution of the Internet or other factors
would have a material adverse effect on Aspect's business, financial condition
and results of operations.
ASPECT MAY NOT BE ABLE TO SUPPORT ITS GROWTH EFFECTIVELY.
Aspect has experienced significant growth in the number of its employees,
the scope of its operating and financial systems and the geographic area of its
operations, which has placed a significant strain on Aspect's management.
Aspect's future results of operations will depend in part on the ability of its
officers and other key employees to continue to successfully and efficiently
implement and expand its operational, customer support and financial control
systems and to successfully and efficiently expand, train and manage its
employee base.
ASPECT'S INABILITY TO ATTRACT, TRAIN AND RETAIN SKILLED EMPLOYEES WOULD HURT
ASPECT'S BUSINESS.
Aspect believes that its future success will also depend to a significant
extent upon its ability to attract, train and retain highly skilled technical,
management, sales, marketing and consulting personnel. Competition for such
personnel is intense, and Aspect expects that such competition will continue for
the foreseeable future. Aspect has from time to time experienced difficulty in
locating candidates with appropriate qualifications. There can be no assurance
that Aspect will be successful in attracting or retaining such personnel, and
the failure to attract or retain such personnel could have a material adverse
effect on Aspect's business, financial condition and results of operations.
ASPECT'S FAILURE TO BE YEAR 2000 COMPLIANT COULD HURT ITS BUSINESS.
Although Aspect believes that all of its current products record, store,
process, calculate and present calendar dates falling on or after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as such products record,
store, process, calculate and present calendar dates on or before December 31,
1999, Year 2000 compliance issues may arise with respect to customers, internal
management systems or third-party suppliers that may result in unforeseen costs
or delays to Aspect and therefore may have a material adverse effect on Aspect.
ASPECT MAY MAKE FUTURE ACQUISITIONS THAT WOULD DIVERT MANAGEMENT'S ATTENTION AND
OTHERWISE ADVERSELY IMPACT ITS BUSINESS.
To implement its business plans, Aspect may make acquisitions in the
future, which will require significant financial and management resources both
at the time of the transaction and during the process of integrating the
newly-acquired business into Aspect's operations. Aspect's operating results
could be adversely affected if it is unable to successfully integrate such new
businesses into its operations. There can be no assurance that any acquired
products, technologies or businesses will contribute at anticipated levels
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to Aspect's sales or earnings, or that sales and earnings from combined
businesses will not be adversely affected by the integration process. Certain
acquisitions or strategic transactions may be subject to approval by the other
party's board of directors or stockholders, domestic or foreign governmental
agencies or other third parties. Accordingly, there is a risk that important
acquisitions or transactions could fail to be concluded as planned. Future
acquisitions by Aspect could also result in issuances of equity securities or
options or other rights associated with equity securities, which could
potentially dilute earnings per share. In addition, future acquisitions could
result in the incurrence of additional debt, taxes, contingent liabilities,
amortization expenses related to goodwill and other intangible assets and other
expenses. These factors could adversely affect Aspect's future operating
results. In addition, as some of Aspect's competitors have pursued a strategy of
growth through acquisition, there is a risk that future acquisitions could be
more expensive due to competition among bidders for target companies.
ASPECT'S SUCCESS DEPENDS ON SALES TO A RELATIVELY SMALL NUMBER OF CUSTOMERS.
Historically, a relatively small number of customers have accounted for a
significant percentage of Aspect's total revenues, and Aspect expects that it
will continue to experience significant customer concentration for the
foreseeable future. There can be no assurance that such customers or any other
customers will in the future continue to license or purchase products or
services from Aspect at levels that equal or exceed those of prior periods, or
at all.
ASPECT DEPENDS ON A LIMITED NUMBER OF PRODUCTS.
Aspect currently derives substantially all of its revenues from the
licensing of its decision support software, family of reference content
databases and fees from related services. Aspect expects these products and
services to continue to account for substantially all of its revenues for the
foreseeable future. While Aspect believes that, to date, its customers have not
experienced significant problems with these products, if its customers were to
do so in the future or if they were dissatisfied with product functionality or
performance, Aspect's business, financial condition or results of operations
could be materially impacted.
ASPECT'S SUCCESS DEPENDS ON CERTAIN STRATEGIC RELATIONSHIPS.
Aspect believes that, in order to provide competitive solutions, it will be
necessary to develop, maintain and enhance close associations with other
enterprise data management vendors such as eProcurement, database, hardware,
data, Enterprise Resource Planning (ERP), Product Data Management (PDM),
Advanced Planning & Scheduling, Computer Aided Design (CAD),
business-to-business eCommerce, and professional service companies. Aspect has
established marketing, selling and consulting relationships with many such
vendors, but there can be no assurance that Aspect will be able to maintain its
existing relationships or enter into new relationships with such vendors.
ASPECT'S INTERNATIONAL BUSINESS OPERATIONS EXPOSE ASPECT TO RISKS.
Aspect has operations in Bangalore, India with 422 employees as of February
1, 2000. Aspect is dependent to a significant extent upon the ability of its
Indian operations to successfully maintain and upgrade its reference data
products. Aspect believes that the success of its Indian operations will depend
in large part upon its ability to attract, train and retain highly skilled
technical and management personnel in India. Competition for such personnel in
India is intense, and there can be no assurance that Aspect will be successful
in attracting a sufficient number of qualified personnel. Aspect is directly
affected by the political and economic conditions to which India is subject. In
addition, many of Aspect's expenses in India are paid in Indian currency,
thereby subjecting Aspect to the risk of foreign currency fluctuations. Any
difficulties in coordinating or managing the Indian operations due to cultural,
geographic, communication or other reasons could have a material adverse effect
on Aspect's business, financial condition and results of operations.
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ASPECT MAY NOT SUCCESSFULLY IMPLEMENT ITS BUSINESS STRATEGY.
As part of Aspect's business strategy, it intends, directly and through
relationships with its strategic partners, to support marketplaces which conduct
business to business electronic commerce. If this business strategy is flawed,
or if Aspect is unable to execute it effectively, Aspect's business, operating
results, and financial condition could be materially impacted. This strategy is
unproven and Aspect has limited experience in this area. Aspect cannot assure
you that it will generate significant revenues from these areas.
ASPECT'S MARKET IS HIGHLY COMPETITIVE.
The market for business to business electronic commerce solutions is highly
competitive. We expect competition to intensify as current competitors expand
their product offerings and new competitors enter the market.
FORWARD-LOOKING STATEMENTS IN THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus and the documents incorporated by
reference into this joint proxy statement/prospectus contain forward-looking
statements within the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 with respect to i2's and Aspect's financial
condition, results of operations and businesses and the expected impact of the
merger on i2. Words such as "anticipate," "expect," "intend," "plan," "believe,"
"seek," "estimate," "should," "would," "could," "may" or similar expressions
that convey uncertainty of future events or outcome indicate forward-looking
statements. Although i2 and Aspect believe that the respective forward-looking
statements made in this joint proxy statement/prospectus are reasonable, they
are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from the
results contemplated by the forward-looking statements. In evaluating the
merger, you should carefully consider the discussion of risks and uncertainties
in the immediately preceding section entitled "Risk Factors." These factors and
other cautionary statements made in this joint proxy statement/prospectus should
be read as being applicable to all related forward-looking statements whenever
they appear in this joint proxy statement/prospectus. Neither i2 nor Aspect
undertake any obligation to update any forward-looking statements.
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THE SPECIAL MEETINGS
GENERAL
i2
We are furnishing this joint proxy statement/prospectus to holders of i2
common stock in connection with the solicitation of proxies by the i2 board of
directors for use at the special meeting of stockholders of i2 to be held on
, 2000, and any adjournment or postponement thereof.
This joint proxy statement/prospectus is first being mailed to i2
stockholders on or about , 2000.
Aspect
We are furnishing this joint proxy statement/prospectus to holders of
Aspect common stock in connection with the solicitation of proxies by the Aspect
board of directors for use at the special meeting of stockholders of Aspect to
be held on , 2000, and any adjournment or postponement thereof.
This joint proxy statement/prospectus is first being mailed to stockholders
of Aspect on or about , 2000. This joint proxy statement/prospectus
is also furnished to Aspect stockholders as a prospectus in connection with the
issuance by i2 of shares of i2 common stock as contemplated by the merger
agreement.
DATE, TIME AND PLACE
i2
The i2 special meeting will be held on , 2000 at .m.,
local time, at .
Aspect
The Aspect special meeting will be held on , 2000 at
.m., local time, at .
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
i2
At the i2 special meeting and any adjournment or postponement of the
special meeting, i2 stockholders will be asked:
- to consider and vote upon the proposal to approve the issuance of i2
common stock as contemplated by the merger agreement;
- to grant i2's board of directors discretionary authority to adjourn the
special meeting to solicit additional votes for approval of the share
issuance; and
- to transact such other business as may properly come before the special
meeting.
Aspect
At the Aspect special meeting and any adjournment or postponement of the
special meeting, Aspect stockholders will be asked:
- to consider and vote upon the adoption of the merger agreement;
- to grant Aspect's board of directors discretionary authority to adjourn
the special meeting to solicit additional votes for adoption of the
merger agreement; and
- to transact such other business as may properly come before the special
meeting.
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RECORD DATE
i2
The committee of the i2 board empowered to fix the record date, meeting
date and location for the i2 special meeting has fixed the close of business on
April 14, 2000, as the record date for the determination of i2 stockholders
entitled to notice of and to vote at the i2 special meeting.
Aspect
Aspect's board has fixed the close of business on , 2000, as
the record date for the determination of Aspect stockholders entitled to notice
of and to vote at the Aspect special meeting.
VOTING OF PROXIES
i2
We request that i2 stockholders complete, date and sign the accompanying
proxy and promptly return it in the accompanying envelope or otherwise mail it
to i2. Brokers holding shares in "street name" may vote the shares only if the
stockholder provides instructions on how to vote. Brokers will provide
directions on how to instruct the broker to vote the shares. All properly
executed proxies that i2 receives prior to the vote at the i2 special meeting,
and that are not revoked, will be voted in accordance with the instructions
indicated on the proxies or, if no instructions are indicated, (1) to approve
the issuance of shares of i2 as contemplated by the merger agreement (2) in
favor of granting i2's board discretionary authority to adjourn the i2 special
meeting in order to solicit additional votes in favor of the proposal to issue
i2 shares in the merger and (3) in favor of granting the named proxies
discretionary authority to act on other matters as may properly come before the
i2 special meeting. i2's board does not currently intend to bring any other
business before the special meeting and, so far as i2's board knows, no other
matters are to be brought before the special meeting. If other business properly
comes before the special meeting, the proxies will be voted in accordance with
the judgment of the proxyholders.
A stockholder may revoke his or her proxy at any time prior to its use:
- by delivering to the Secretary of i2 a signed notice of revocation or a
later-dated, signed proxy; or
- by attending the special meeting and voting in person.
Attendance at the special meeting does not in itself constitute the
revocation of a proxy. In addition, if your shares are held in the name of your
broker, bank or other nominee, you must obtain a proxy, executed in your favor,
from the holder of record to be able to vote at the meeting.
Aspect
We request that stockholders of Aspect complete, date and sign the
accompanying proxy and promptly return it in the accompanying envelope or
otherwise mail it to Aspect. Brokers holding shares in "street name" may vote
the shares only if the stockholder provides instructions on how to vote. Brokers
will provide directions on how to instruct the broker to vote the shares. All
properly executed proxies that Aspect receives prior to the vote at the Aspect
special meeting, and that are not revoked, will be voted in accordance with the
instructions indicated on the proxies or, if no instructions are indicated, (1)
to adopt the merger agreement, (2) in favor of granting Aspect's board
discretionary authority to adjourn the Aspect special meeting in order to
solicit additional votes in favor of adopting the merger agreement and (3) in
favor of granting the named proxies discretionary authority to act on other
matters as may properly come before the Aspect special meeting. Aspect's board
does not currently intend to bring any other business before the special meeting
and, so far as Aspect's board knows, no other matters are to be brought before
the special meeting. If other business properly comes before the special
meeting, the proxies will be voted in accordance with the judgment of the
proxyholders.
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A stockholder may revoke his or her proxy at any time prior to its use:
- by delivering to the Secretary of Aspect a signed notice of revocation or
a later-dated, signed proxy; or
- by attending the special meeting and voting in person.
Attendance at the special meeting does not in itself constitute the
revocation of a proxy. In addition, if your shares are held in the name of your
broker, bank or other nominee, you must obtain a proxy, executed in your favor,
from the holder of record to be able to vote at the meeting.
VOTE REQUIRED
i2
As of the close of business on April 14 , 2000, there were 159,021,673
shares of i2 common stock outstanding and entitled to vote. Pursuant to i2's
Bylaws, the holders of a majority of the shares of i2 common stock present or
represented by proxy and entitled to vote at the i2 special meeting must approve
the issuance of i2 common stock in the merger. i2 stockholders have one vote per
share of i2 common stock owned on the record date.
As of April 14, 2000, directors and executive officers of i2 and their
affiliates beneficially owned an aggregate of 66,853,872 shares of i2 common
stock (including shares issuable upon the exercise of options that are currently
exercisable or that will become exercisable within 60 days of such date) or
approximately 42% of the shares of i2 common stock outstanding on such date.
Pursuant to voting agreements in the form attached to this joint proxy
statement/prospectus as Appendix B, such directors and executive officers of i2
and their affiliates have agreed to vote all of their shares of i2 common stock
for approval of the issuance of i2 common stock in the merger. As of April 14,
2000, directors and executive officers of Aspect owned 700 shares of i2 common
stock.
Aspect
As of the close of business on , 2000, there were shares
of Aspect common stock outstanding and entitled to vote. The holders of a
majority of the shares of Aspect common stock outstanding as of the close of
business on , 2000 must adopt the merger agreement. Aspect
stockholders have one vote per share of Aspect common stock owned on the record
date.
As of , 2000, directors and executive officers of Aspect and
their affiliates beneficially owned an aggregate of shares of Aspect common
stock (exclusive of any shares issuable upon the exercise of options) or
approximately % of the shares of Aspect common stock outstanding on such date.
Pursuant to voting agreements in the form attached to this joint proxy
statement/prospectus as Appendix C, such directors and executive officers of
Aspect and their affiliates have agreed to vote all of their shares of Aspect
common stock for adoption of the merger agreement. As of , 2000,
directors and executive officers of i2 owned shares, or %, of
Aspect common stock. See "The Merger -- Interests of Certain Persons in the
Merger."
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
i2
The required quorum for the transaction of business at the i2 special
meeting is a majority of the shares of i2 common stock issued and outstanding on
the record date. Abstentions and broker non-votes each will be included in
determining the number of shares present at the meeting for the purpose of
determining the presence of a quorum. Brokers holding shares for beneficial
owners cannot vote on the actions proposed in this joint proxy
statement/prospectus without the owners' specific instructions. Accordingly, i2
stockholders are urged to return the enclosed proxy card marked to indicate
their vote. Broker non-votes will not be included in vote totals and will have
no effect on the outcome of the vote on the issuance of i2 shares in the merger
or either of the other i2 proposals. Abstentions, however, will have the same
effect as a vote against all i2 proposals.
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<PAGE> 43
Aspect
The required quorum for the transaction of business at the Aspect special
meeting is a majority of the shares of Aspect common stock issued and
outstanding on the record date. Abstentions and broker non-votes each will be
included in determining the number of shares present at the meeting for the
purpose of determining the presence of a quorum. Because adoption of the merger
agreement requires the affirmative vote of a majority of the outstanding shares
of Aspect common stock as of the record date, abstentions and broker non-votes
will have the same effect as votes against adoption of the merger agreement and
each of the other Aspect proposals. In addition, the failure of an Aspect
stockholder to return a proxy or otherwise vote will have the effect of a vote
against the adoption of the merger agreement and each of the other Aspect
proposals. Brokers holding shares for beneficial owners cannot vote on the
actions proposed in this joint proxy statement/prospectus without the owners'
specific instructions. Accordingly, Aspect stockholders are urged to return the
enclosed proxy card marked to indicate their vote.
SOLICITATION OF PROXIES AND EXPENSES
i2 and Aspect have retained the services of and ,
respectively, to assist in the solicitation of proxies from their respective
stockholders. The fees to be paid to such firms for such services by i2 and
Aspect are not expected to exceed $ and $ , respectively, plus, in each
case, reasonable out-of-pocket expenses. i2 and Aspect each will bear its own
expenses in connection with the solicitation of proxies for its special meeting
of stockholders.
In addition to solicitation by mail, the directors, officers and employees
of i2 and Aspect may solicit proxies from their respective stockholders by
telephone, facsimile, e-mail or in person. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
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<PAGE> 44
THE MERGER
This section of the joint proxy statement/prospectus describes material
aspects of the proposed merger. While we believe that the description covers the
material terms of the merger and the related transactions, this summary may not
contain all of the information that is important to i2 stockholders and Aspect
stockholders. Stockholders should read the entire merger agreement, and the
other documents to which we refer, carefully and in their entirety for a more
complete understanding of the merger.
BACKGROUND OF THE MERGER
Beginning in September 1999, members of the senior management of i2 and
Aspect met to discuss joint business opportunities, licensing agreements,
marketing agreements and potential strategic partnerships. On October 12, 1999,
i2 and Aspect announced a strategic partnership having as its goal the delivery
of a complete product lifecycle management solution.
On the morning of February 23, 2000, Romesh T. Wadhwani, Aspect's Chairman
and Chief Executive Officer, sent an e-mail to Gregory Brady, i2's President, to
suggest that i2 and Aspect consider investing in or acquiring SupplyBase, Inc.,
another company in the business-to-business solutions industry. In the evening
of February 23, 2000, Mr. Brady met with Mr. Wadhwani and informed Mr. Wadhwani
that i2 was interested in acquiring Aspect.
On February 28, 2000, William M. Beecher, i2's Executive Vice President and
Chief Financial Officer, and David Dury, Aspect's Chief Financial Officer, had a
telephone conversation to discuss the relative market capitalizations of the two
companies and the process related to negotiating a merger agreement. On February
29, 2000, Messrs. Wadhwani and Brady met in Dallas, Texas to discuss the
possibility of a merger, the synergies that might be present in such a
combination, and a possible purchase price applicable to such a transaction.
On March 1, 2000, Sanjiv S. Sidhu, i2's Chairman and Chief Executive
Officer, David Becker, i2's Vice President of Finance, and Messrs. Brady and
Wadhwani met at i2's headquarters in Dallas and agreed that the stage of their
discussions justified commencing mutual due diligence and negotiating definitive
documentation, all subject to the approval of each company's board of directors.
In addition, the parties discussed a possible purchase price for the
transaction.
On March 1, 2000, Robert C. Donohoo, i2's Corporate Counsel, and Messrs.
Becker and Beecher held a conference call with representatives of Brobeck,
Phleger & Harrison LLP, i2's legal counsel with respect to the transaction, and
Goldman, Sachs & Co., i2's financial advisor with respect to the transaction, to
discuss the broad outlines for a term sheet and an exclusivity agreement as well
as the logistics for the transaction. On March 2, 2000, i2 presented Aspect with
a form of nondisclosure agreement. On March 3, 2000, Mr. Becker sent Mr. Dury
initial drafts of a term sheet and an exclusivity agreement.
On March 3, 2000, Messrs. Wadhwani and Dury, along with Robert L. Evans,
Aspect's President, met with representatives of Cooley Godward LLP, Aspect's
legal counsel with respect to the transaction, to discuss the process of a
merger and the draft term sheet and exclusivity agreement. Later that day, i2
and Aspect entered into a mutual nondisclosure agreement.
In several telephone conversations held on March 3 and March 4, 2000,
Messrs. Beecher and Dury discussed the logistics of completing the due diligence
process. Over the same time period, the parties participated in several
conference calls regarding the valuation of Aspect in the merger and the
logistics of the transaction.
On March 4, 2000, Messrs. Wadhwani, Dury and Evans met with representatives
of Credit Suisse First Boston to discuss the potential merger and the
possibility of engaging Credit Suisse First Boston as Aspect's financial advisor
with respect to the merger. Aspect's board subsequently engaged Credit Suisse
First Boston as Aspect's financial advisor in connection with the merger through
an engagement letter dated March 4, 2000.
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<PAGE> 45
On March 5, 2000, Messrs. Beecher and Becker met with representatives of
Brobeck, Phleger & Harrison and Goldman Sachs to discuss valuation and other
issues related to the merger. i2 subsequently engaged Goldman Sachs as i2's
financial advisor in connection with the merger through a letter agreement dated
March 6, 2000.
Also on March 5, 2000, Mr. Brady met with Mr. Evans in Dallas to discuss
certain issues related to the merger, and on March 6, 2000, Mr. Brady discussed
with Mr. Sidhu the progress of the discussions with Aspect.
Also on March 6, 2000, Mr. Dury and representatives of Cooley Godward and
Credit Suisse First Boston met in Dallas with Messrs. Beecher and Becker and
representatives of Brobeck, Phleger & Harrison and Goldman Sachs to discuss the
transaction and negotiate a non-binding term sheet and exclusivity agreement. At
the meeting in Dallas, the parties discussed an exchange ratio of 0.55 of a
share of i2 common stock (on a post-stock split basis) for each share of
Aspect's common stock. This meeting included extensive discussion of each
party's views of the termination rights of each party and limitations on
Aspect's rights to pursue alternative acquisition transactions during the
pendency of the merger.
At various times during the week of March 5, 2000, Mr. Beecher informally
discussed the proposed transaction with i2's board of directors.
On March 7, 2000, Aspect's board, together with the senior management of
Aspect and representatives of Cooley Godward and Credit Suisse First Boston,
held an extensive discussion regarding the relative merits and risks of the
potential merger, including the valuation and volatility risks relating to i2's
stock and the likely timing of, and risks which could delay or prevent, closing
the transaction. Following the discussion, the Aspect board authorized Aspect's
entry into an exclusivity agreement with i2, to expire on March 12, 2000, during
which period Aspect would not be permitted to negotiate with, or provide
information to, any other party regarding a business combination transaction.
Representatives of both i2 and Aspect conducted their business, legal,
accounting and financial due diligence investigations between March 7, 2000 and
March 11, 2000. During this period, senior management of both companies held
numerous discussions regarding various business, financial, operational and
technical issues involved in combining the companies.
Also, from March 7 until March 11, 2000, representatives of i2 and Aspect,
together with their legal and financial advisors, held numerous meetings to
discuss and negotiate the terms and conditions of the merger agreement and
related agreements. On March 8, 2000, Brobeck, Phleger & Harrison delivered a
draft merger agreement to Cooley Godward. Throughout this period, significant
negotiations were focused on termination rights and limitations on Aspect's
right to pursue alternative acquisition transactions during the pendency of the
merger.
On March 10, 2000, Aspect's board members held a conference call during
which representatives of Cooley Godward and Credit Suisse First Boston reviewed
and discussed with Aspect's board the material terms of the draft merger
agreement and representatives of Credit Suisse First Boston made a presentation
to Aspect's board regarding the financial analyses Credit Suisse First Boston
had performed regarding i2, Aspect and the merger.
The i2 board held a special meeting on March 11, 2000. i2's management and
legal and financial advisors reported on the results of their due diligence
investigations of Aspect. Brobeck, Phleger & Harrison outlined the directors'
legal duties and responsibilities in connection with considering the merger and
reviewed the principal terms of the merger agreement and related agreements and
the results of its legal due diligence. The i2 board then discussed the
accounting treatment of the proposed merger. Goldman Sachs presented the
financial analyses that it performed with respect to the proposed merger.
Goldman Sachs then rendered its oral opinion to the i2 board, subsequently
confirmed in writing on March 12, 2000 to the effect that, based on the
assumptions made, matters considered and limits of such review, as set forth in
its opinion, the exchange ratio in the merger was fair from a financial point of
view to i2.
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<PAGE> 46
Following these presentations, i2's board engaged in a full discussion of
the terms of the proposed merger, including the strategic benefits of the
combination, the terms and conditions of the proposed merger agreement and the
analyses and opinion of Goldman Sachs. Following the discussion, the i2 board
unanimously approved the merger agreement and related agreements, and the
issuance of i2 common stock in the merger. The i2 board determined to recommend
to the i2 stockholders approval of the issuance of shares of i2 common stock in
the merger.
On March 12, 2000, Aspect's board of directors held a special meeting.
Aspect's legal counsel reviewed the principal terms of the merger agreement and
the related agreements. Aspect's management and financial advisors reported on
the results of their separate due diligence reviews of i2. Representatives of
Credit Suisse First Boston then rendered an oral opinion, subsequently confirmed
by delivery of a written opinion dated March 12, 2000, as to the fairness, from
a financial point of view, to the holders of Aspect common stock of the exchange
ratio provided for in the merger agreement. Following a discussion, Aspect's
board unanimously approved the final terms of the merger agreement and related
agreements and determined to recommend that the Aspect stockholders adopt the
merger agreement.
The merger agreement and related transaction documents were signed by the
parties early in the afternoon of March 12, 2000. i2 and Aspect jointly
announced the merger on the morning of March 13, 2000.
REASONS FOR THE MERGER; RECOMMENDATIONS OF BOARDS OF DIRECTORS
i2's Reasons for the Merger
The i2 board unanimously approved the merger agreement and determined to
recommend that i2 stockholders approve the issuance of i2 common stock in the
merger. The decision by i2's board was based on several potential benefits of
the merger that it believes will contribute to the future success of the
combined company. These potential benefits include:
- expanding i2's product offerings, with particular benefits expected from
integrating Aspect's eDesign, eSource and eOperator software products
with i2's Product Lifecycle Management and supply chain management
solutions and enriching i2's TradeMatrix decision-making capabilities
with Aspect's eMarket catalog content and content services;
- expanding i2's services offering, by adding Aspect's process consulting
and data and implementation services and other resources to aggressively
expand into new e-marketplaces;
- enhancing i2's brand, by accelerating the pace of value creation for i2's
customers with a more expansive and integrated product and service
offering;
- deepening i2's technology expertise, by integrating Aspect's
decision-support algorithms and technology;
- possible appreciation of Aspect's investments in its InfiniteSupply
business and equity investments in other technology companies; these
opportunities also could be enhanced by combining or partnering with
existing and planned i2 marketplace service offerings;
- increasing i2's recurring revenue opportunities by adding Aspect's
subscription-based revenue sources for content;
- adding to i2's global sales presence with Aspect's international sales
force;
- adding to i2's global design presence with Aspect's development center in
India; and
- potential cost savings, through consolidation of redundant facilities.
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<PAGE> 47
i2's board reviewed a number of factors in evaluating the merger,
including, but not limited to, the following:
- historical information concerning i2's and Aspect's respective
businesses, financial performance and condition, operations, technology
and management;
- i2's management's view of the financial condition, results of operations,
businesses and future prospects of i2 and Aspect before and after giving
effect to the merger and the i2 board's determination of the merger's
effect on stockholder value;
- current financial market conditions and historical market prices,
volatility and trading information;
- the determination of Aspect senior management personnel to enter into new
employment and non-competition agreements;
- the consideration Aspect stockholders will receive in the merger in light
of comparable merger transactions;
- the opinion of Goldman Sachs that, as of the date of its opinion, and
subject to the assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, the exchange ratio
in the merger is fair from a financial point of view to i2;
- the reports of Brobeck, Phleger & Harrison on the terms of the merger
agreement and related agreements;
- the belief that the terms of the merger agreement and related agreements
are reasonable;
- the anticipated impact of the merger on i2's customers and employees; and
- the results of the due diligence investigation as to Aspect conducted by
i2's management, Goldman Sachs and Brobeck, Phleger & Harrison.
The i2 board also identified and considered a number of potentially
negative factors in its deliberations concerning the merger, including the
following:
- the risk that the potential benefits and synergies of the merger may not
be realized;
- the possibility that the merger may not be consummated, even if approved
by i2's and Aspect's stockholders;
- the risk that another company might make a more favorable offer for
Aspect, potentially increasing the price paid by i2 if i2 was ultimately
successful in its bid to acquire Aspect or otherwise causing i2 to expend
resources in pursuing the merger, especially given the delay between the
execution of the merger agreement and the completion of the merger;
- the potential loss of revenues and business opportunities for i2 as a
result of confusion in the marketplace for i2's and Aspect's products
following the announcement of the merger, and the possible exploitation
of such confusion by i2's and Aspect's competitors;
- the negative impact on i2's earnings as a result of accounting charges to
amortize the intangible assets purchased in the merger, and uncertainty
of the perception of the reduced earnings in the financial community,
including among investors and stockholders;
- the risk of management and employee disruption associated with merging
two large organizations, including the risk that despite the efforts of
the combined company, key technical, sales and management personnel might
not remain employed by the combined company, especially given the
competition for quality personnel in the industry, particularly in
Aspect's geographical location; and
- other applicable risks described in this joint proxy statement/prospectus
under "Risk Factors."
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<PAGE> 48
Recommendation of i2's Board of Directors
i2's board concluded that certain of these risks were unlikely to occur,
while others could be avoided or mitigated by the combined company, and that, on
balance, the merger's potential benefits to i2 and its stockholders outweighed
the potential risks. The discussion of the information and factors considered by
i2's board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the merger, i2's board did not
find it practicable to, and did not, quantify or otherwise assign relative
weight to the specific factors considered in reaching its determination.
FOR THE REASONS DISCUSSED ABOVE, i2'S BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS APPROVAL OF THE
ISSUANCE OF SHARES OF i2 COMMON STOCK AS CONTEMPLATED BY THE MERGER AGREEMENT.
Aspect's Reasons for the Merger
The Aspect board of directors believes that, despite Aspect's success to
date, increasing competition and industry consolidation would make it
increasingly important for Aspect to grow and gain critical mass in order to
compete with larger companies with substantially greater resources and broader,
integrated product offerings. Aspect's management has considered a number of
alternatives for enhancing its competitive position, including growing through
the acquisition of smaller companies that could extend Aspect's product
offerings and enhance the distribution of Aspect's products and services, and
merging with a larger company. In the industry environment referred to above,
the Aspect board of directors identified several potential benefits for the
Aspect stockholders, employees and customers that it believes would result from
the merger. These potential benefits include:
- providing Aspect stockholders with shares of i2 common stock in a
tax-free exchange at a premium over the market price for Aspect common
stock;
- the ability of the combined company to offer complementary product lines,
which presents the opportunity to increase the breadth of products
offered;
- the ability of the two companies to combine their technological resources
to develop new products with increased functionality and bring them to
market faster; and
- the availability to the combined company of greater resources for product
marketing and distribution.
In the course of its deliberations regarding the merger, the Aspect board
of directors reviewed with Aspect's management and outside advisors a number of
factors relevant to the merger, including the strategic overview and prospects
for Aspect. The Aspect board of directors also considered the following
potentially positive factors, among others, in connection with its review and
analysis of the merger. The Aspect board of directors' conclusions with respect
to each of these factors supported its determination that the merger is fair to,
and in the best interests of, Aspect's stockholders:
- historical information concerning i2's and Aspect's respective
businesses, financial performance and condition, operations, technology,
management and competitive position;
- current stock market conditions and historical market prices, volatility
and trading information with respect to i2 common stock and Aspect common
stock, which supported a favorable view of i2's stock market presence and
positive reputation with investors;
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to the
parties' respective obligations, are reasonable;
- the financial analysis and opinion of Credit Suisse First Boston dated
March 12, 2000 to the Aspect board of directors to the effect that, as of
that date and based on and subject to the matters
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<PAGE> 49
described in its opinion, the exchange ratio was fair, from a financial
point of view, to the holders of Aspect common stock;
- the impact of the merger on Aspect's customers and employees; and
- reports from management, legal advisors and financial advisors as to the
results of their due diligence investigation of i2.
The Aspect board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger. The potentially
negative factors considered by the Aspect board of directors included:
- the risk that because the exchange ratio will not be adjusted for changes
in the market price of either i2 common stock or Aspect common stock, the
per share value of the consideration to be received by Aspect
stockholders might be less than the price per share implied by the
exchange ratio immediately before the announcement of the merger due to
fluctuations in the market value of i2 common stock;
- the risk that the merger might not be completed in a timely manner or at
all;
- the potential negative impact of any customer or supplier confusion after
announcement of the proposed merger;
- the challenges relating to the integration of the two companies;
- the possibility of management and employee disruption associated with the
proposed merger and integrating the operations of the companies, and the
risk that, despite the efforts of the combined company, key management,
marketing, technical and administrative personnel of Aspect might not
continue with the combined company;
- certain terms of the merger agreement and related agreements that
prohibit Aspect and its representatives from soliciting third party bids
and from accepting, approving or recommending unsolicited third party
bids except in very limited circumstances, which terms would reduce the
likelihood that a third party would make a bid for Aspect;
- the fact that the execution of voting agreements by the executive
officers and directors of Aspect might reduce the likelihood that a third
party would make a bid for Aspect;
- the fact that the combined company will have a significant stockholder
who can exercise significant influence over the combined company, which
may affect the attractiveness of the combined company as a hostile
takeover target;
- the risks relating to i2's business and how they would affect the
operations of the combined company; and
- the other risks described above under "Risk Factors."
Recommendation of Aspect's Board of Directors
The foregoing discussion of information and factors considered by the
Aspect board of directors is not intended to be exhaustive but is believed to
include all material factors considered by the Aspect board of directors. In
view of the wide variety of factors considered by the Aspect board of directors,
the Aspect board of directors did not find it practicable to quantify or
otherwise assign relative weight to the specific factors considered. In
addition, the Aspect board did not reach any specific conclusion on each factor
considered, or any aspect of any particular factor, but conducted an overall
analysis of these factors. Individual members of the Aspect board may have given
different weight to different factors. However, after taking into account all of
the factors set forth above, the Aspect board of directors unanimously agreed
that the merger is fair to, and in the best interests of, Aspect's stockholders
and that Aspect should proceed with the merger.
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FOR THE REASONS DISCUSSED ABOVE, ASPECT'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND HAS UNANIMOUSLY DETERMINED THAT
THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, ASPECT AND ITS STOCKHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT ASPECT STOCKHOLDERS VOTE FOR ADOPTION OF THE
MERGER AGREEMENT.
In considering the recommendation of Aspect's board with respect to the
merger agreement, Aspect stockholders should be aware that certain directors and
officers of Aspect have interests in the merger that are different from, or are
in addition to, the interests of Aspect stockholders generally. Please see "The
Merger -- Interests of Certain Persons in the Merger."
OPINIONS OF FINANCIAL ADVISORS
Opinion of i2's Financial Advisor
The discussion of the opinion of Goldman, Sachs & Co., i2's financial
advisor, and the supporting share information HAVE BEEN ADJUSTED to reflect the
stock dividend distributed by Aspect on March 13, 2000.
On March 11, 2000, Goldman Sachs delivered its oral opinion, subsequently
confirmed in writing, to i2's board of directors that, as of such date, the
exchange ratio of 1.10 (0.55 on a post stock dividend basis) shares of i2's
common stock to be exchanged for each share of Aspect's common stock pursuant to
the merger, is fair from a financial point of view to i2. The full text of the
written opinion of Goldman Sachs, dated March 12, 2000, which sets forth, among
other things, assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached to this joint proxy
statement/prospectus as Appendix D and is incorporated herein by reference.
HOLDERS OF i2 COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. GOLDMAN SACHS' OPINION IS DIRECTED TO i2'S BOARD OF DIRECTORS AND
ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO PURSUANT TO THE MERGER
AGREEMENT FROM A FINANCIAL POINT OF VIEW TO i2 AS OF THE DATE OF THE OPINION,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE
WITH RESPECT TO THE ISSUANCE OF i2 COMMON STOCK IN THE MERGER. THE SUMMARY OF
THE GOLDMAN SACHS OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE GOLDMAN SACHS OPINION.
In connection with rendering the opinion, Goldman Sachs reviewed, among
other things:
- the merger agreement;
- the Annual Reports on Form 10-K for the three years ended December 31,
1998 for both i2 and Aspect;
- certain interim reports to stockholders and Quarterly Reports on Form
10-Q for both i2 and Aspect;
- certain other communications from i2 and Aspect to their respective
stockholders; and
- certain analyses of cost savings and operating synergies projected by the
management of i2 to result from the transaction contemplated by the
merger agreement.
Goldman Sachs also held discussions with members of the senior management
of i2 and Aspect regarding their assessment of the strategic rationale for, and
the potential benefits of, the transaction contemplated by the merger agreement,
the past and current business operations, financial condition and future
prospects of their respective companies, and certain analysts' reports and
estimates with respect to the companies' future financial performance. In
addition, Goldman Sachs:
- reviewed the reported price and trading activity for i2 common stock and
Aspect common stock, which like many software and Internet-related stocks
have been and are likely to continue to be subject to significant
short-term price and trading volatility;
- compared financial and stock market information for i2 and Aspect with
similar information for selected companies the securities of which are
publicly traded; and
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- reviewed the financial terms of recent business combinations in the
software and Internet industries specifically and in other industries
generally and performed such other studies and analyses as Goldman Sachs
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with, or reviewed by, Goldman Sachs
and assumed the accuracy and completeness of such information for purposes of
rendering its opinion. In that regard, Goldman Sachs was informed that i2 and
Aspect do not regularly prepare detailed financial projections. Accordingly, i2
instructed Goldman Sachs to rely on the analysts' reports and estimates for
purposes of rendering its opinion. In addition, Goldman Sachs did not make an
independent evaluation or appraisal of the assets and liabilities of i2 or
Aspect or any of their subsidiaries and was not furnished with any evaluation or
appraisal. Goldman Sachs' opinion is provided for the information and assistance
of the board of directors of i2 in connection with its consideration of the
transaction contemplated by the merger agreement and the opinion does not
constitute a recommendation as to how stockholders should vote with respect to
the merger. The following is a summary of the material financial analyses used
by Goldman Sachs in connection with providing its opinion to i2's board of
directors on March 11, 2000. THE FOLLOWING SUMMARIES OF FINANCIAL ANALYSES
INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. YOU SHOULD READ THESE TABLES
TOGETHER WITH THE TEXT OF EACH SUMMARY.
Historical Exchange Ratio Analysis. Goldman Sachs calculated the ratio of
the historical exchange ratios of i2 common stock to Aspect common stock based
on the closing prices of i2 common stock and Aspect common stock for certain
periods ended March 9, 2000. The results are shown in the following table:
<TABLE>
<CAPTION>
EXCHANGE RATIO PREMIUM
AVERAGE REPRESENTED BY AN
PERIOD EXCHANGE RATIO EXCHANGE RATIO OF 0.55
- ------ -------------- ----------------------
<S> <C> <C>
(Current as of March 9, 2000)..................... 0.38x 45%
1 year ended March 9, 2000........................ 0.43x 28%
6 months ended March 9, 2000...................... 0.41x 34%
3 months ended March 9, 2000...................... 0.38x 45%
1 month ended March 9, 2000....................... 0.42x 31%
10 days ended March 9, 2000....................... 0.44x 25%
5 days ended March 9, 2000........................ 0.45x 22%
</TABLE>
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Contribution Analysis. Goldman Sachs calculated the respective percentage
contribution by i2 and Aspect to the combined company assuming i2's calendar
year 2000 and 2001 estimated revenue, calendar year 2000 and 2001 estimated
gross profit, calendar year 2000 and 2001 estimated operating income and
calendar year 2000 and 2001 estimated net income using certain analysts' reports
and estimates with respect to the companies' future financial performance. The
contribution analysis did not take into account any synergies that may result
from the merger. Goldman Sachs compared this contribution analysis with the pro
forma ownership of the combined company immediately following the merger,
assuming a 0.55 exchange ratio, 201.1 million fully diluted shares of common
stock that were held by i2 stockholders and 81.6 million fully diluted shares of
common stock that were held by Aspect stockholders prior to the merger in order
to determine the percentages of the combined company that will be owned
immediately following completion of the merger by stockholders of Aspect and i2,
respectively. For i2, the 201.1 million fully diluted shares represent the sum
of 156.8 million shares outstanding, 39.7 million shares for which outstanding
options may be exercised and 4.6 million shares into which convertible debt may
be converted. The results of such analysis are summarized below:
<TABLE>
<CAPTION>
% CONTRIBUTION
---------------
I2 ASPECT
----- -------
<S> <C> <C> <C>
Estimated Revenue........................................... 2000 84.4% 15.6%
2001 83.1% 16.9%
Estimated Gross Profit...................................... 2000 83.0% 17.0%
2001 81.4% 18.6%
Estimated Operating Income.................................. 2000 80.8% 19.2%
2001 77.0% 23.0%
Estimated Net Income........................................ 2000 76.5% 23.5%
2001 71.7% 28.3%
</TABLE>
<TABLE>
<CAPTION>
EXCHANGE
RATIO I2 ASPECT
-------- ---- ------
<S> <C> <C> <C>
Pro Forma Ownership (as of March 9, 2000)................... 0.55 81.7% 18.3%
</TABLE>
Pro Forma Merger Analysis. Goldman Sachs performed a pro forma merger
analysis, using certain analysts' estimates for i2 and Aspect approved by the
managements of i2 and Aspect, respectively, for the use of Goldman Sachs. The
implied equity consideration and implied aggregate consideration are presented
on a fully diluted basis. The estimated cash earnings per share excludes
synergies, goodwill and one time charges. Such analysis is summarized in the
table below:
<TABLE>
<S> <C>
Exchange Ratio............................................ 0.55x
Implied Price Per Aspect Share (as of March 9, 2000)...... $121.48
Premium to Market Price (as of March 9, 2000)............. 44.84%
Implied Equity Consideration (in millions)................ $ 9,918
Implied Aggregate Consideration (in millions)............. $ 9,536
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ACCRETION/(DILUTION)
(COMBINED AT AN EXCHANGE
COMPANY) RATIO OF 0.55
--------- --------------------
<S> <C> <C> <C>
Estimated Pro Forma Revenue Per Share
Accretion/(Dilution)............................ 2000 $3.81 (3.0)%
2001 $5.19 (1.5)%
Estimated Pro Forma Operating Income Per Share
Accretion/(Dilution)............................ 2000 $0.50 1.3%
2001 $0.74 6.3%
Estimated Cash Earnings Per Share
Accretion/(Dilution)............................ 2000 $0.36 7.0%
2001 $0.52 14.1%
</TABLE>
42
<PAGE> 53
This pro forma merger analysis also calculated the estimated pro forma
synergies that the combined company would need to realize for i2 stockholders to
remain revenue per share neutral, assuming an exchange ratio of 0.55. For
calendar year 2000, such synergies would have to be $28.4 million and for 2001,
$19.3 million.
Comparison of Selected Public Market Companies. Goldman Sachs compiled and
reviewed selected financial information and calculated certain ratios and public
market multiples for the publicly traded companies in the following four groups:
(i) Supply Chain Management; (ii) Enterprise Resource Planning; (iii) Database;
and (iv) B2B Commerce/Internet Infrastructure. These companies are listed below:
(i) Supply Chain Management:
- Manhattan Associates
- Manugistics
- i2
- Aspect
(ii) Enterprise Resource Planning:
- Baan
- JDA Software
- JD Edwards
- PeopleSoft
- SAP
(iii) Database:
- Informix
- Oracle
- Sybase
(iv) B2B Commerce/Internet Infrastructure:
- Active Software
- Agile Software
- Ariba
- BEA Systems
- Broadvision
- Commerce One
- PCorder.com
- TIBCO
- Vignette
- Vitria Technology
43
<PAGE> 54
The multiples and ratios were calculated using the closing price for the
common stock of each of the selected companies on March 9, 2000 and were based
on published equity research and most recent publicly available information. The
results of such analysis are summarized in the table below:
<TABLE>
<CAPTION>
ESTIMATED 5-YEAR
CALENDAR YEAR 2000 EARNINGS PER SHARE
REVENUE MULTIPLES GROWTH RATE
------------------ ------------------
<S> <C> <C>
(i) Supply Chain Management
Mean.......................................... 29.4x 36.3%
Median........................................ 27.0x 35.0%
Range......................................... 7.8x-55.9x 30.0%-45.0%
(ii) Enterprise Resource Planning
Mean.......................................... 5.7x 24.5%
Median........................................ 4.4x 22.5%
Range......................................... 1.4x-15.5x 20.0%-35.0%
(iii) Database
Mean.......................................... 9.8x 16.7%
Median........................................ 4.3x 15.0%
Range......................................... 2.8x-22.4x 10.0%-25.0%
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED 5-YEAR
REVENUE GROWTH RATE
-------------------
<S> <C> <C>
(iv) B2B Commerce/Internet Infrastructure
Mean.......................................... 149.7x 53.4%
Median........................................ 147.0x 50.0%
Range......................................... 8.2x-256.9x 45.0%-70.0%
</TABLE>
Comparison of Private Market Transactions. Goldman Sachs analyzed certain
information relating to the proposed transaction in relation to certain publicly
available information for 80 transactions in the software and Internet
industries. The following table presents the range of premiums over the market
(based on recent stock prices prior to the announcement) and the premium over
the acquired party's 52-week high prior to the announcement:
<TABLE>
<CAPTION>
COMPARABLE TRANSACTIONS RANGE
-----------------------------
<S> <C>
Premium over the market
Software Industry......................................... (2.7)%-196.2%
Internet Industry......................................... (17.8)%-132.4%
Premium over 52-week high
Software Industry......................................... (50.0)%-54.1%
Internet Industry......................................... (82.0)%-51.7%
</TABLE>
Other Considerations. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, may create an incomplete
view of the processes underlying Goldman Sachs' opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of all such
analyses. No company or transaction used in the above analyses as a comparison
is directly comparable to i2 or Aspect or the merger. The analyses were prepared
solely for purposes of Goldman Sachs providing its opinion to i2's board of
directors as to the fairness to i2 from a financial point of view of the
exchange ratio and do not purport to be appraisals or necessarily reflect the
prices at which the business or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors,
44
<PAGE> 55
none of i2, Aspect, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast. As described above,
Goldman Sachs' opinion to i2's board of directors was one of many factors taken
into consideration by i2's board of directors in making its determination to
approve the merger agreement. The foregoing summary describes material analyses
used by Goldman Sachs in connection with providing its opinion to i2's board of
directors on March 11, 2000, but does not purport to be a complete description
of the analysis performed by Goldman Sachs in connection with such opinion and
is qualified by reference to the written opinion of Goldman Sachs set forth in
Appendix D. Goldman Sachs, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. i2 selected
Goldman Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the merger.
Goldman Sachs is familiar with i2 having provided certain investment
banking services to i2 from time to time, including having acted as lead
managing underwriter of a $300,000,000 offering of 5.250% Convertible Notes Due
2006 in December 1999, having acted as a lead managing underwriter of an
offering of 3,000,000 i2 shares in December 1997 and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the merger agreement. Goldman Sachs provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions in and hold
securities, including derivative securities, of i2 or Aspect for its own account
and for the accounts of customers.
Pursuant to a letter agreement dated March 6, 2000, i2 engaged Goldman
Sachs to act as its financial advisor in connection with a potential transaction
involving Aspect. Under the terms of the agreement, Goldman Sachs will receive a
customary fee, all of which is contingent on the closing of the merger. i2 has
also agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorney's fees and disbursements plus any sales, use or
similar taxes, and to indemnify Goldman Sachs against certain liabilities,
including, to the extent permitted, liabilities under federal securities laws.
Opinion of Aspect's Financial Advisor
Credit Suisse First Boston has acted as Aspect's exclusive financial
advisor in connection with the merger. Aspect selected Credit Suisse First
Boston based on Credit Suisse First Boston's experience, expertise and
reputation. Credit Suisse First Boston is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
In connection with Credit Suisse First Boston's engagement, Aspect
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to the holders of Aspect common stock of the exchange
ratio provided for in the merger. On March 12, 2000, at a meeting of the Aspect
board of directors held to evaluate the merger, Credit Suisse First Boston
rendered to the Aspect board of directors an oral opinion, which opinion was
confirmed by delivery of a written opinion dated March 12, 2000, to the effect
that, as of that date and based on and subject to the matters described in its
opinion, the exchange ratio was fair, from a financial point of view, to the
holders of Aspect common stock.
The full text of Credit Suisse First Boston's written opinion, dated March
12, 2000, to the Aspect board of directors, which sets forth, among other
things, the procedures followed, assumptions made, matters considered and
limitations on the review undertaken, is attached to this joint proxy
statement/prospectus as Appendix E and is incorporated into this joint proxy
statement/prospectus by reference. Holders of Aspect common stock are urged to,
and should, read this opinion carefully and in its entirety. Credit Suisse First
Boston's opinion is addressed to the Aspect board of directors and relates only
to the fairness of the exchange ratio from a financial point of view, does not
address any other aspect of the proposed merger or any related transaction and
does not constitute a recommendation to any
45
<PAGE> 56
stockholder as to any matter relating to the merger. The summary of Credit
Suisse First Boston's opinion in this document is qualified in its entirety by
reference to the full text of the opinion.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and related documents, as well as publicly available business and
financial information relating to Aspect and i2. Credit Suisse First Boston also
reviewed other information relating to Aspect and i2, including financial
forecasts, that was provided to or discussed with Credit Suisse First Boston by
Aspect and i2. Credit Suisse First Boston also met with the managements of
Aspect and i2 to discuss the businesses and prospects of Aspect and i2. Credit
Suisse First Boston considered financial and stock market data of Aspect and i2,
and compared those data with similar data for other publicly held companies in
businesses similar to those of Aspect and i2. Credit Suisse First Boston
considered, to the extent publicly available, the financial terms of other
business combinations and other transactions which have recently been announced.
Credit Suisse First Boston also considered other information, financial studies,
analyses and investigations and financial, economic and market criteria which it
deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the foregoing
information and relied on the information being complete and accurate in all
material respects. Credit Suisse First Boston reviewed and discussed with the
managements of Aspect and i2 publicly available financial forecasts relating to
Aspect and i2 and was advised, and assumed, that the forecasts represented
reasonable estimates and judgments as to the future financial performance of
Aspect and i2. Credit Suisse First Boston also assumed, with Aspect's consent,
that the merger would be treated as a tax-free reorganization for federal income
tax purposes. In addition, Credit Suisse First Boston was not requested to make,
and did not make, an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of Aspect or i2, nor was Credit Suisse
First Boston furnished with any evaluations or appraisals.
Credit Suisse First Boston's opinion is necessarily based on information
available to it and financial, economic, market and other conditions as they
existed and could be evaluated on the date of the Credit Suisse First Boston
opinion. Credit Suisse First Boston did not express any opinion as to what the
value of i2 common stock actually would be when issued to Aspect's stockholders
in the merger or the prices at which i2 common stock would trade following the
merger. In connection with its engagement, Credit Suisse First Boston was not
requested to, and did not, solicit third party indications of interest in the
possible acquisition of all or any part of Aspect. Although Credit Suisse First
Boston evaluated the exchange ratio in the merger from a financial point of
view, Credit Suisse First Boston was not requested to, and did not, recommend
the specific consideration payable in the merger, which consideration was
determined between Aspect and i2. No other limitations were imposed on Credit
Suisse First Boston with respect to the investigations made or procedures
followed in rendering its opinion.
In preparing its opinion to the Aspect board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Credit Suisse First Boston made qualitative judgments
as to the significance and relevance of each analysis and factor that it
considered. Accordingly, Credit Suisse First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Aspect and
i2. No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to Aspect or i2 or the proposed merger,
and an evaluation of the
46
<PAGE> 57
results of those analyses is not entirely mathematical. Rather, the analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in Credit Suisse First Boston's analyses
and the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by the analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Credit Suisse First
Boston's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the Aspect board of directors in its evaluation of
the proposed merger and should not be viewed as determinative of the views of
the Aspect board of directors or management with respect to the merger or the
exchange ratio.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion and
reviewed with the Aspect board of directors at a meeting of the Aspect board of
directors held on March 10, 2000. The share information and the discussion
thereof in the summary have been adjusted to reflect the two-for-one stock split
of Aspect common stock in the form of a dividend distributed on March 13, 2000.
THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR
FORMAT. IN ORDER TO FULLY UNDERSTAND CREDIT SUISSE FIRST BOSTON'S FINANCIAL
ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
CONSIDERING THE DATA SET FORTH IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL
NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND
ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE
VIEW OF CREDIT SUISSE FIRST BOSTON'S FINANCIAL ANALYSES.
Historical Stock Price Analysis Credit Suisse First Boston analyzed the
prices at which Aspect common stock traded over the period from January 1, 1999
through March 9, 2000. Credit Suisse First Boston noted that the high closing
price for Aspect common stock in the period observed was $91.75 on March 6,
2000, and the low closing price for Aspect common stock in the period observed
was $3.28 on April 13, 1999.
Credit Suisse First Boston also analyzed the prices at which i2 common
stock traded over the period from January 1, 1999 through March 9, 2000. Credit
Suisse First Boston noted that the high closing price for i2 common stock in the
period observed was $220.88 on March 9, 2000, and the low closing price for i2
common stock in the period observed was $10.25 on April 7, 1999.
47
<PAGE> 58
Peer Group Comparison Credit Suisse First Boston compared financial,
operating and stock market data of Aspect and i2 to corresponding data of the
following 25 publicly traded companies in the supply chain management,
business-to-business market maker and e-business applications business
categories:
<TABLE>
<CAPTION>
SUPPLY CHAIN BUSINESS-TO-BUSINESS E-BUSINESS
MANAGEMENT COMPANIES MARKET MAKER COMPANIES APPLICATIONS COMPANIES
-------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C>
- - i2 Technologies, Inc. - Ariba, Inc. - Agile Software Corporation
- - Manhattan Associates, Inc. - Commerce One, Inc. - Art Technology Group, Inc.
- - Manugistics Group, Inc. - FreeMarkets, Inc. - Aspect Development, Inc.
- - Oracle Corporation - Internet Capital Group, - Broadbase Software, Inc.
Inc.
- - SAP AG - PurchasePro.com, Inc. - BroadVision, Inc.
- VerticalNet, Inc - Calico Commerce, Inc.
- E.piphany, Inc.
- Exchange Applications, Inc.
- FirePond, Inc.
- Interwoven, Inc.
- Kana Communications, Inc.
- OnDisplay, Inc.
- VERITAS Software
Corporation
- Vignette Corporation
</TABLE>
Credit Suisse First Boston compared stock prices as multiples of estimated
calendar years 2000 and 2001 earnings per share and aggregate values, calculated
as equity market value plus net debt, as multiples of estimated calendar years
2000 and 2001 revenues. All multiples were based on closing stock prices on
March 9, 2000. Estimated financial data for the selected companies, Aspect and
i2 were based on securities research analysts' estimates. This analysis
indicated the following implied median multiples for the groups of companies, as
compared to the implied multiples for Aspect and i2 and the multiples implied by
the merger:
<TABLE>
<CAPTION>
EARNINGS
REVENUE MULTIPLES MULTIPLES
------------------ -------------
2000 2001 2000 2001
-------- ------- ----- -----
<S> <C> <C> <C> <C>
Supply Chain Management Companies..................... 14.5x 13.9x 151.9x 135.1x
Business-to-Business Market Maker Companies........... 184.5x 75.9x NM NM
e-Business Applications Companies..................... 81.8x 47.4x 318.5x 245.4x
i2 -- stand-alone..................................... 56.3x 41.5x 620.6x 440.6x
Aspect -- stand-alone................................. 45.7x 30.5x 301.7x 222.2x
Aspect -- merger...................................... 67.0x 44.7x 437.0x 321.8x
</TABLE>
Comparative Stock Price Performance Credit Suisse First Boston also
compared the recent stock price performance of each of Aspect and i2 with
indexes comprised of the selected companies in each of the supply chain
management, business-to-business market maker and e-business applications
business categories and with the NASDAQ composite index over the period from
January 1, 1999 through March 9, 2000. The results of this analysis were as
follows:
<TABLE>
<CAPTION>
INCREASE IN MARKET
PRICE PER SHARE FROM
COMPANY OR INDEX 1/1/99 TO 3/9/00
- ---------------- --------------------
<S> <C>
Supply Chain Management Index..................... 234%
Business-to-Business Market Makers Index.......... 2,122%
eBusiness Applications Index...................... 1,214%
NASDAQ Composite Index............................ 129%
i2................................................ 1,417%
Aspect............................................ 309%
</TABLE>
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<PAGE> 59
Contribution Analysis Credit Suisse First Boston analyzed the relative
contributions of Aspect and i2 to the revenue, gross profit, operating income
and net income of the combined company for calendar year 1999 and estimated
calendar years 2000 and 2001, based on securities research analysts' estimates.
Credit Suisse First Boston then analyzed the Aspect stockholders' pro forma
ownership of the combined company implied by Aspect's relative contribution.
This analysis indicated the following:
<TABLE>
<CAPTION>
IMPLIED ASPECT STOCKHOLDER
PRO FORMA OWNERSHIP LEVEL
---------------------------------------------
ESTIMATED ESTIMATED
OPERATING METRIC CALENDAR 1999 CALENDAR 2000 CALENDAR 2001
- ---------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenue....................................... 14.2% 15.6% 17.0%
Gross Profit.................................. 15.7% 16.9% 18.2%
Operating Income.............................. 7.5% 19.1% 18.5%
Net Income.................................... 15.6% 24.3% 23.3%
</TABLE>
Credit Suisse First Boston noted that the pro forma fully diluted ownership
of the Aspect stockholders in the combined company implied by the exchange ratio
in the merger was 18.1%.
Exchange Ratio Analysis Credit Suisse First Boston reviewed the average of
the ratios of the closing price of Aspect common stock to the closing price of
i2 common stock over various periods ending March 9, 2000. Credit Suisse First
Boston then computed the premium (discount) represented by the exchange ratio in
the merger to the average of the ratios over the various periods covered. Credit
Suisse First Boston also compared the ratio of the closing price of Aspect
common stock to the closing price of i2 common stock as of March 9, 2000,
referred to as the current market exchange ratio, to the average of the ratios
over the various periods covered. Credit Suisse First Boston then computed the
pro forma fully diluted ownership of the Aspect stockholders in the combined
company implied by these ratios. This analysis indicated the following:
<TABLE>
<CAPTION>
IMPLIED
ASPECT PREMIUM (DISCOUNT) PREMIUM (DISCOUNT)
AVERAGE STOCKHOLDER REPRESENTED BY THE REPRESENTED BY THE
EXCHANGE FULLY CURRENT MARKET EXCHANGE RATIO
RATIO DILUTED EXCHANGE RATIO IN THE MERGER
PERIOD PRIOR TO OVER OWNERSHIP OVER AVERAGE OVER AVERAGE
MARCH 9, 2000 PERIOD PERCENTAGE EXCHANGE RATIOS EXCHANGE RATIOS
- --------------- -------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Current market....................... 0.380x 13.1% 0.0% 44.8%
10 trading days...................... 0.447x 15.1% (15.0)% 23.1%
20 trading days...................... 0.417x 14.2% (8.9)% 32.0%
30 trading days...................... 0.398x 13.7% (4.6)% 38.2%
45 trading days...................... 0.390x 13.4% (2.6)% 41.0%
60 trading days...................... 0.375x 12.9% 1.4% 46.9%
90 trading days...................... 0.431x 14.6% (11.9)% 27.6%
180 trading days..................... 0.482x 16.1% (21.1)% 14.3%
Since January 1, 1999................ 0.572x 18.6% (33.6)% (3.8)%
</TABLE>
Credit Suisse First Boston noted that the pro forma fully diluted ownership of
the Aspect stockholders in the combined company implied by the exchange ratio in
the merger was 18.1%.
49
<PAGE> 60
Precedent Transactions Analysis Credit Suisse First Boston analyzed the
publicly available financial terms of the following 11 publicly announced
transactions involving companies in the software industry, as well as 166
stock-for-stock transactions since July 24, 1987 across a wide range of
industries:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- - BMC Software, Inc. ........................... Boole & Babbage, Inc.
- - Computer Associates International, Inc. ...... Sterling Software, Inc.
- - Digital Insight Corporation................... nFront, Inc.
- - Kana Communications, Inc. .................... Silknet Software, Inc.
- - Microsoft Corporation......................... Visio Corporation
- - Nortel Networks Corporation................... Clarify Inc.
- - PeopleSoft, Inc. ............................. The Vantive Corporation
- - Security First Technologies Corporation....... Edify Corporation
- - Tumbleweed Communications Corp. .............. Worldtalk Communications Corporation
- - VeriSign, Inc. ............................... Network Solutions, Inc.
- - Wind River Systems, Inc. ..................... Integrated Systems, Inc.
</TABLE>
For each group of transactions, the following table presents the median
premium of the exchange ratio in each transaction to the ratio of the stock
prices for the acquirors and targets in the transactions one trading day prior
to the announcement of the transaction, and, on average, over various other
periods prior to the announcement of the transaction:
<TABLE>
<CAPTION>
MEDIAN EXCHANGE
RATIO PREMIUM
------------------------------
PERIOD PRIOR TO 166 PRECEDENT
ANNOUNCEMENT OF SELECTED STOCK-FOR-STOCK
TRANSACTION TRANSACTIONS TRANSACTIONS
- --------------- ------------ ---------------
<S> <C> <C>
One trading day............................................. 47.5% 27.8%
10 trading days average..................................... 57.8% 32.7%
30 trading days average..................................... 45.7% 34.1%
60 trading days average..................................... 44.1% 33.0%
90 trading days average..................................... 35.5% 28.5%
One year average............................................ 22.5% 19.1%
Average of above periods.................................... 42.2% 29.2%
</TABLE>
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the merger, Credit Suisse
First Boston made judgements and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Aspect and i2, such as
the impact of competition on the businesses of Aspect and i2 and the industry
generally, industry growth and the absence of any material adverse change in the
financial condition and prospects of Aspect, i2 or the industry or in the
financial markets in general. Mathematical analysis, such as determining the
average or median, is not in itself a meaningful method of using comparable
transaction data.
50
<PAGE> 61
Transaction Multiples Analysis Credit Suisse First Boston reviewed the
implied aggregate transaction value based on the closing price for i2 common
stock as of March 9, 2000, and based on the exchange ratio in the merger as a
multiple of calendar year 1999 and estimated calendar years 2000 and 2001
revenues for Aspect. This analysis indicated the following implied aggregate
transaction value, as compared to the aggregate value for Aspect and i2 on a
stand-alone basis, and the following implied transaction multiples for Aspect,
as compared to the trading multiples of Aspect and i2 on a stand-alone basis:
<TABLE>
<CAPTION>
AGGREGATE VALUE
AS MULTIPLES OF REVENUES
--------------------------------
AGGREGATE ESTIMATED ESTIMATED
VALUE CALENDAR CALENDAR CALENDAR
COMPANY (IN MILLIONS) 1999 2000 2001
- ------- ------------- -------- --------- ---------
<S> <C> <C> <C> <C>
i2 -- stand-alone........................... $43,518 76.2x 56.3x 41.5x
Aspect -- stand-alone....................... $ 6,569 69.0x 45.7x 30.5x
Aspect -- merger............................ $ 9,637 101.3x 67.0 44.7x
</TABLE>
Credit Suisse First Boston compared the results of this analysis to the
aggregate transaction values paid in eight selected precedent transactions in
the software industry as multiples of next twelve months revenues for the target
company. The results of this analysis are as follows:
<TABLE>
<CAPTION>
AGGREGATE NEXT TWELVE
TRANSACTION MONTHS
VALUE REVENUE
ACQUIROR/TARGET (IN MILLIONS) MULTIPLE
- --------------- ------------- -----------
<S> <C> <C>
America Online, Inc./Netscape Communications Corporation.... $3,800 5.1x
BMC Software, Inc./Boole & Babbage, Inc. ................... $ 974 4.0x
Cisco Systems, Inc./GeoTel Communications Corporation ...... $1,966 21.7x
Computer Associates International, Inc./PLATINUM technology
International, inc. ...................................... $3,475 2.9x
Computer Associates International, Inc./Sterling Software,
Inc. ..................................................... $3,454 3.0x
Kana Communications, Inc./Silknet Software, Inc. ........... $4,189 97.2x
Nortel Networks Corporation/Clarify Inc. ................... $2,043 6.5x
SBC Communications Inc./Sterling Commerce, Inc. ............ $3,567 5.4x
</TABLE>
Pro Forma Impact Analysis Credit Suisse First Boston analyzed the potential
pro forma effects of the merger on, among other things, the estimated revenues
per share and estimated cash earnings per share for Aspect and i2 for the third
and fourth quarters of calendar year 2000 and for calendar year 2001. The
estimated cash earnings per share excludes goodwill, potential synergies and
potential one-time charges. This analysis was performed based on securities
research analysts' estimates. This analysis indicated the following accretion
(dilution) to Aspect's and i2's estimated revenues per share and estimated cash
earnings per share:
<TABLE>
<CAPTION>
ACCRETION (DILUTION) TO ASPECT AND
i2 REVENUES PER SHARE AND EARNINGS
PER SHARE FOR VARIOUS PERIODS
------------------------------------
CALENDAR 2000 CALENDAR 2001
------------------- --------------
3RD 4TH
QUARTER QUARTER
-------- --------
<S> <C> <C> <C>
i2:
Revenues per Share................................... (2.9)% (3.0)% (1.3)%
Cash Earnings per Share.............................. 9.1% 5.8% 6.7%
ASPECT:
Revenues per Share................................... 15.4% 15.9% 6.3%
Cash Earnings per Share.............................. (27.0)% (19.5)% (22.1)%
</TABLE>
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<PAGE> 62
Illustrative Future Trading Analysis Credit Suisse First Boston reviewed
the potential pro forma effects of the merger on, among other things, the
aggregate value of the combined company as a multiple of calendar year 1999 and
estimated calendar years 2000 and 2001 revenues for the combined company using
the closing stock price for i2 as of March 9, 2000. Credit Suisse First Boston
compared the results of this analysis with the aggregate values of each of
Aspect and i2 on a stand-alone basis and of the four software companies listed
below as multiples of calendar year 1999 and estimated calendar years 2000 and
2001 revenues. This analysis was performed based on securities research
analysts' estimates. The results of this analysis are as follows:
<TABLE>
<CAPTION>
AGGREGATE VALUE
AS MULTIPLES OF REVENUES
---------------------------------------------
ESTIMATED ESTIMATED
COMPANY CALENDAR 1999 CALENDAR 2000 CALENDAR 2001
- ------- ------------- ------------- -------------
<S> <C> <C> <C>
Ariba, Inc. .................................. 599.6x 256.1x 152.9x
Commerce One, Inc. ........................... 585.5x 152.0x 75.9x
Oracle Corporation............................ 27.2x 22.6x 20.9x
VerticalNet, Inc. ............................ 923.9x 102.1x 57.6x
i2 -- pro forma............................... 79.8x 58.0x 42.1x
i2 -- stand-alone............................. 76.2x 56.3x 41.5x
Aspect -- stand-alone......................... 69.0x 45.7x 30.5x
</TABLE>
Credit Suisse First Boston also reviewed the range of current and one-year
forward prices for Aspect common stock implied by a range of multiples from
35.0x to 60.0x, including the current revenue multiples for Aspect and i2 common
stock, of calendar year 2000 revenues both on a stand-alone basis and assuming
the merger is completed. This analysis was performed based on securities
research analysts' estimates. The results of this analysis are as follows:
<TABLE>
<CAPTION>
IMPLIED PRICE PER SHARE
FOR ASPECT COMMON STOCK
--------------------------------
ONE-YEAR
CURRENT FORWARD
PRICES PRICES
-------------- ---------------
<S> <C> <C>
Aspect -- stand-alone............................... $64.49-$109.87 $ 96.25-$164.32
Aspect -- pro forma................................. $73.91-$125.65 $101.35-$172.69
</TABLE>
Aspect has agreed to pay Credit Suisse First Boston a transaction fee of
$20.0 million for its financial advisory services related to the merger, $17.0
million of which will be paid upon completion of the merger. Credit Suisse First
Boston also received a $3.0 million fee upon delivery of its opinion, which will
be credited against the $20.0 million transaction fee if the merger is
completed. Aspect also has agreed to reimburse Credit Suisse First Boston for
its out-of-pocket expenses, including fees and expenses of legal counsel and any
other advisor retained by Credit Suisse First Boston, and to indemnify Credit
Suisse First Boston and related parties against liabilities, including
liabilities under the federal securities laws, arising out of its engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to i2 unrelated to the proposed merger, for which services
Credit Suisse First Boston and its affiliates have received compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of both Aspect and i2 for their
own accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in those securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Aspect board, Aspect stockholders
should be aware that certain officers and directors of Aspect have interests in
the merger that differ from, or are in addition to, those of Aspect
stockholders. The Aspect board was aware of these potential conflicts and
considered them.
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<PAGE> 63
Stock Option Acceleration. As of April 14, 2000, the following nine Aspect
directors and executive officers held options to purchase a total of 8,232,972
shares of Aspect common stock, at exercise prices ranging from $1.63 to $15.31
per share, including a total of 4,729,339 unvested options: James Althoff,
Douglas Castek, David Dury, Robert Evans, Dale Hopkins, David Horne, Peter Ryan,
Donald Tomkinson and Romesh Wadhwani. Assuming the merger occurs on June 30,
2000, unvested options to purchase 708,293 shares of Aspect common stock, at
exercise prices ranging from $3.47 to $13.06 per share, held by these directors
and executive officers, with the exception of Messrs. Evans and Wadhwani, will
automatically vest in connection with the merger. In addition, an aggregate of
2,839,380 options held by Messrs. Castek, Dury, Evans, Hopkins and Wadhwani
might accelerate under specified circumstances if the executive officer is
terminated without cause or constructively terminated within certain periods
following completion of the merger.
The acceleration of the vesting of options upon or following the merger for
Messrs. Althoff, Castek, Dury, Evans, Hopkins, Horne, Ryan, Tomkinson and
Wadhwani may result in "excess parachute payments" as defined in Section 280G of
the Internal Revenue Code. Excess parachute payments are not deductible under
the Internal Revenue Code in accordance with Section 280G. As a result, neither
Aspect, or the surviving corporation in the merger, or the consolidated i2
reporting group would be entitled to a tax deduction for the amounts determined
to be excess parachute payments. The amount of the lost deduction would depend
upon the number of option shares being accelerated and the value of those shares
at the time of completion of the merger. If the acceleration of vesting of
options is determined to be "excess parachute payments" and assuming the merger
is completed on May 31, 2000 and the price of the stock underlying the
accelerated options is $100.00 per share, the amount of the lost deduction is
estimated to be $70.0 million.
Employment Agreements. i2 has entered into employment agreements with
Messrs. Wadhwani and Evans. See "The Merger Agreement and Related
Agreements -- Related Agreements."
i2 Board Representation. i2 has agreed to expand its board and to appoint
Romesh T. Wadhwani, the Chairman of the Board and Chief Executive Officer of
Aspect, as the Vice Chairman of i2's board, with an initial term expiring at
i2's annual stockholders' meeting to be held in 2003.
Indemnification and Insurance. The merger agreement provides that, from and
after the effective time, i2 will, and i2 will cause Aspect to, indemnify each
person who is or was a director or officer of Aspect or any of its subsidiaries
at or at any time prior to the effective time of the merger against losses
incurred as a result of actions or omissions (or alleged actions or omissions)
occurring prior to the effective time of the merger. In addition, the merger
agreement provides that for a period of six years after the effective time, i2
will maintain directors' and officers' liability insurance covering persons who
are covered by Aspect's directors' and officers' insurance policy. See "The
Merger Agreement and Related Agreements -- Director and Officer Indemnification
and Insurance."
APPLICABLE WAITING PERIODS AND REGULATORY APPROVALS
The merger is subject to certain filing requirements under U.S. antitrust
laws. We have made the required filings with the Department of Justice and the
Federal Trade Commission. We are not, however, permitted to complete the merger
until the applicable waiting period has expired or terminated. We expect the
applicable waiting period to expire at 11:59 p.m. (EST) on May 11, 2000. The
Department of Justice and the Federal Trade Commission, as well as a state
antitrust authority or private person, may challenge the merger at any time
before or after it is completed.
Neither Aspect nor i2 is aware of any other material governmental or
regulatory approval required for completion of the merger, other than compliance
with applicable corporate law of Delaware.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion describes the material federal income tax
consequences relevant to the exchange of shares of Aspect common stock for i2
common stock pursuant to the merger that are
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<PAGE> 64
generally applicable to holders of Aspect common stock. Brobeck, Phleger &
Harrison LLP, legal counsel to i2, and Cooley Godward LLP, counsel to Aspect,
are of the opinion that the following discussion accurately describes such
federal income tax consequences. This discussion is based on currently existing
provisions of the Internal Revenue Code, existing and proposed treasury
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to Aspect stockholders as
described herein.
Aspect stockholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular Aspect
stockholders in light of their particular circumstances, such as stockholders
who:
- are dealers in securities;
- are subject to the alternative minimum tax provisions of the Internal
Revenue Code;
- are foreign persons;
- do not hold their Aspect common stock as capital assets;
- acquired their shares in connection with stock option or stock purchase
plans or in other compensatory transactions; or
- acquired their shares as part of an integrated investment such as a
hedge, straddle or other risk reduction transaction.
In addition, the following discussion does not address the tax consequences
of the merger under foreign, state or local tax laws, the tax consequences of
transactions effectuated prior or subsequent to, or concurrently with, the
merger (whether or not any such transactions are undertaken in connection with
the merger), including any transaction in which shares of Aspect common stock
are acquired or shares of i2 common stock are disposed of, or the tax
consequences of the assumption by i2 of Aspect stock options or the tax
consequences of the receipt of rights to acquire i2 common stock. ACCORDINGLY,
ASPECT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
The merger is intended to constitute a reorganization within the meaning of
the Internal Revenue Code. Subject to the limitations and qualifications
referred to herein, assuming the merger constitutes a reorganization, the merger
will generally result in the following federal income tax consequences to Aspect
stockholders:
- No gain or loss will be recognized by holders of Aspect common stock
solely upon their receipt of i2 common stock in exchange for Aspect
common stock in the merger (except to the extent of cash received in lieu
of a fractional share of i2 common stock).
- The aggregate tax basis of the i2 common stock received by Aspect
stockholders in the merger (including any tax basis attributable to
fractional shares deemed to be disposed of) will be the same as the
aggregate tax basis of the Aspect common stock surrendered in exchange
therefor.
- The holding period of the i2 common stock received by each Aspect
stockholder in the merger will include the period for which the Aspect
common stock surrendered in exchange therefor was considered to be held.
- Cash payments received by holders of Aspect common stock in lieu of a
fractional share will be treated as if such fractional share of i2 common
stock had been issued in the merger and then redeemed by i2. An Aspect
stockholder receiving such cash will recognize gain or loss, upon such
payment, measured by the difference, if any, between the amount of cash
received and the basis in such fractional share.
The parties are not requesting and will not request a ruling from the
Internal Revenue Service as to the tax consequences of the merger. The
consummation of the merger is conditioned on the receipt by
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<PAGE> 65
Aspect of an opinion from Cooley Godward LLP to the effect that the merger will
constitute a reorganization within the meaning of the Internal Revenue Code.
Aspect stockholders should be aware that the tax opinion does not bind the
Internal Revenue Service and the Internal Revenue Service is therefore not
precluded from successfully asserting a contrary opinion. The tax opinion will
be subject to certain assumptions and qualifications, including but not limited
to the truth and accuracy of certain representations made by i2 and Aspect.
A successful IRS challenge to the reorganization status of the merger would
result in Aspect stockholders recognizing taxable gain or loss with respect to
each share of Aspect common stock surrendered equal to the difference between
each stockholder's basis in such share and the fair market value, as of the
effective time of the merger, of the i2 common stock received in exchange
therefor. In such event, a stockholder's aggregate basis in the i2 common stock
so received would equal its fair market value as of the date of completion of
the merger, and the stockholder's holding period for such stock would begin the
day after the merger.
There are other tax-related issues that you should be aware of such as:
- Reporting Requirements. Each Aspect stockholder that receives i2 common
stock in the merger will be required to file a statement with his or her
federal income tax return providing his or her basis in the Aspect stock
surrendered and the fair market value of the i2 common stock and any cash
received in the merger, and to retain permanent records of these facts
relating to the merger.
- Backup Withholding. Unless an exemption applies under applicable law and
regulations, the exchange agent is required to withhold, and will
withhold, 31% of any cash payments to an Aspect stockholder in the merger
unless the stockholder provides the appropriate form as described below.
Each Aspect stockholder should complete and sign the Substitute Form W-9
that will be included as part of the letter of transmittal to be sent to
each Aspect stockholder after completion of the merger, so as to provide
the information, including the stockholder's taxpayer identification
number, and certification necessary to avoid backup withholding.
NO APPRAISAL RIGHTS
Stockholders of Aspect and i2 are not entitled to exercise dissenters' or
appraisal rights as a result of the merger or to demand cash payment for their
shares under Delaware law.
DELISTING AND DEREGISTRATION OF ASPECT'S COMMON STOCK FOLLOWING THE MERGER
If the merger is completed, Aspect's common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934.
LISTING OF i2 COMMON STOCK TO BE ISSUED IN THE MERGER
It is a condition to the completion of the merger that the shares of i2
common stock to be issued in the merger and the shares of i2 common stock to be
reserved for issuance in connection with the assumption of outstanding Aspect
stock options shall have been approved for quotation on the Nasdaq National
Market, or shall be exempt from the quotation requirements under then applicable
laws, regulations and Nasdaq National Market rules.
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<PAGE> 66
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF ASPECT
The shares of i2 common stock to be issued in connection with the merger
will be registered under the Securities Act of 1933 and will be freely
transferable under the Securities Act, except for shares of i2 common stock
issued to any person who is deemed to be an affiliate of Aspect under the
Securities Act. Persons who may be deemed to be affiliates include individuals
or entities that control, are controlled by or are under common control of
Aspect and may include some of the officers, directors or principal stockholders
of Aspect. Affiliates may not sell their shares of i2 common stock acquired in
connection with the merger except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- another applicable exemption under the Securities Act.
i2's registration statement on Form S-4, of which this joint proxy
statement/prospectus forms a part, does not cover the resale of shares of i2
common stock to be received by Aspect affiliates in the merger.
OPERATIONS FOLLOWING THE MERGER
Following the merger, Aspect will operate as a wholly owned subsidiary of
i2. Upon completion of the merger, the sole member of Aspect's board will be
. i2 has agreed to expand its board and to appoint Romesh T.
Wadhwani, the Chairman of the Board and Chief Executive Officer of Aspect, as
the Vice Chairman of i2's board with an initial term expiring at i2's annual
stockholders' meeting to be held in 2003. The stockholders of Aspect will become
stockholders of i2, and their rights as stockholders will be governed by i2's
Restated Certificate of Incorporation, i2's Bylaws and the laws of the State of
Delaware.
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<PAGE> 67
THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this joint proxy
statement/prospectus and incorporated herein by reference. We urge you to read
the merger agreement in its entirety for a more complete description of the
merger. In the event of any discrepancy between the terms of the merger
agreement or other agreements and the following summary, the merger agreement
and other agreements will control.
THE MERGER
Aspect will merge with Hoya Merger Corp., a wholly owned subsidiary of i2,
following:
- the adoption of the merger agreement by the Aspect stockholders;
- the approval of the issuance of i2 common stock in the merger by the i2
stockholders; and
- the satisfaction or waiver of the other conditions to the merger
described below.
Aspect will be the surviving corporation and become a wholly owned
subsidiary of i2 following the merger.
EFFECTIVE TIME
At the closing of the merger, the parties will cause the merger to become
effective by filing a certificate of merger with the Secretary of State of the
State of Delaware. i2 and Aspect are working toward completing the merger as
soon as possible and hope to complete the merger by 2000. Because the
merger is subject to expiration or termination of a waiting period under U.S.
antitrust laws, however, we cannot predict the exact timing of the completion of
the merger.
DIRECTORS AND OFFICERS OF ASPECT AFTER THE MERGER
The directors and officers of Hoya Merger Corp. will become the new
directors and officers, respectively, of Aspect at the effective time.
CONVERSION OF ASPECT SHARES IN THE MERGER
At the effective time, each outstanding share of Aspect common stock will
automatically be converted into 0.55 of a share of i2 common stock. The number
of shares of i2 common stock issuable in the merger will be proportionately
adjusted as appropriate for any stock split, stock dividend or similar event
with respect to Aspect common stock or i2 common stock effected between the date
of this joint proxy statement/prospectus and the completion of the merger. The
100% stock dividend distributed by Aspect on March 13, 2000 did not affect the
exchange ratio of 0.55 of a share of i2 common stock for each share of Aspect
common stock.
NO FRACTIONAL SHARES
No fractional shares of i2 common stock will be issued in connection with
the merger. Instead, Aspect stockholders will receive an amount of cash, in lieu
of a fraction of a share of i2 common stock, equal to the product of such
fraction multiplied by the average of the last reported sales prices for a share
of i2 common stock on the Nasdaq National Market on each of the ten trading days
immediately preceding the date of the effective time of the merger.
ASPECT STOCK OPTION AND STOCK INCENTIVE PLANS
At the effective time of the merger, each outstanding option to purchase
shares of Aspect common stock issued under Aspect's stock option plans will be
assumed by i2 regardless of whether the options are exercisable. Each Aspect
stock option assumed by i2 will continue to have the same terms, and be subject
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<PAGE> 68
to the same conditions, that were applicable to the option immediately prior to
the effective time, except that:
- each Aspect stock option will be exercisable for shares of i2 common
stock, and the number of shares of i2 common stock issuable upon exercise
of any given option will be determined by multiplying 0.55 by the number
of shares of Aspect common stock underlying such option, rounded down to
the nearest whole number; and
- the per share exercise price of any given option will be determined by
dividing the exercise price of the option immediately prior to the
effective time by 0.55, rounded up to the nearest whole cent.
The parties intend for the Aspect stock options assumed by i2 to qualify as
incentive stock options to the extent the stock options qualified as incentive
stock options prior to the effective time of the merger.
ASPECT EMPLOYEE STOCK PURCHASE PLAN
At the effective time of the merger, i2 will assume the Aspect Employee
Stock Purchase Plan and all purchase rights held by participating Aspect
employees. i2 will continue the assumed plan and the related offering and
purchase periods (for the benefit of all Aspect employees as of the completion
of the merger who have waived purchase rights on any purchase date after
February 15, 2001); except that such assumed purchase rights will pertain to i2
common stock and will be adjusted based upon the exchange ratio.
THE EXCHANGE AGENT
As of the effective time of the merger, i2 is required to deposit with a
bank or trust company certificates representing the shares of i2 common stock to
be exchanged for shares of Aspect common stock and cash to pay for fractional
shares and any dividends or distributions that holders of Aspect common stock
may be entitled to receive under the merger agreement.
EXCHANGE OF ASPECT STOCK CERTIFICATES FOR i2 STOCK CERTIFICATES
Promptly after the effective time, the exchange agent will mail to Aspect
stockholders a letter of transmittal and instructions for surrendering Aspect
stock certificates in exchange for i2 stock certificates and cash in lieu of
fractional shares. ASPECT STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS REFERRED TO ABOVE.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
Aspect stockholders are not entitled to receive any dividends or other
distributions on i2 common stock with a record date after the merger is
completed until they have surrendered their Aspect stock certificates in
exchange for i2 stock certificates. No cash payment in lieu of fractional shares
will be made to the holder of unsurrendered Aspect stock certificates.
If there is any dividend or other distribution on i2 common stock with a
record date after the completion of the merger, former Aspect stockholders will
receive, only following surrender of their Aspect stock certificates, the
dividend or other distribution payable with respect to the shares of i2 common
stock issued in exchange for their Aspect common stock.
REPRESENTATIONS AND WARRANTIES
i2 and Aspect each made a number of representations and warranties in the
merger agreement about their authority to enter into the merger agreement and to
complete the other transactions contemplated by the merger agreement and about
aspects of their business, financial condition, structure and other facts
pertinent to the merger.
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<PAGE> 69
Aspect made representations about the following topics:
- Aspect's organization, qualification to do business and good standing;
- Aspect's capitalization;
- the absence of undisclosed liabilities;
- Aspect's corporate power to enter into and its authorization of the
merger agreement and the transactions contemplated by the merger
agreement;
- the effect of the merger agreement and the merger on obligations of
Aspect;
- consents and approvals required to be obtained by Aspect in connection
with the merger agreement and the transactions contemplated by the merger
agreement;
- possession of and compliance with permits required to conduct Aspect's
business;
- Aspect's filings and reports with the Securities and Exchange Commission;
- Aspect's financial statements;
- the absence of any material adverse effect and other changes in Aspect's
business since December 31, 1999;
- Aspect's tax returns, tax liabilities and tax obligations;
- Aspect's real property leases;
- intellectual property used or owned by Aspect and the effect of the Year
2000 on Aspect's business;
- Aspect's material contracts and obligations;
- litigation involving Aspect;
- environmental laws that apply to Aspect;
- Aspect's employee benefit plans;
- Aspect's compliance with applicable laws, rules and regulations of
governmental entities;
- the treatment of the merger as a tax-free reorganization;
- matters relating to Aspect's employees;
- Aspect's insurance coverage;
- the absence of discussions or negotiations regarding alternative
transactions to the merger;
- Aspect's affiliates and transactions with its affiliates;
- the sufficiency and accuracy of information provided by Aspect for
inclusion in this joint proxy statement/prospectus;
- the existence of any payments due as a result of the merger;
- the opinion of Aspect's financial advisor concerning the exchange ratio
in the merger;
- the inapplicability of state anti-takeover statutes to the merger;
- the Aspect stockholder vote required to approve the merger;
- Aspect's brokers' and finders' fees in connection with the merger;
- restrictions on Aspect's business; and
- the execution of voting agreements by certain stockholders of Aspect.
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<PAGE> 70
i2 and Hoya Merger Corp. made representations about the following topics:
- i2's and Hoya Merger Corp.'s organization, qualification to do business
and good standing;
- i2's capitalization;
- appropriate authorization of the issuance of i2 common stock in the
merger;
- i2's and Hoya Merger Corp.'s corporate power to enter into and their
authorization of the merger agreement and the transactions contemplated
by the merger agreement;
- the effect of the merger agreement and the merger on obligations of i2;
- consents and approvals required to be obtained by i2 and Hoya Merger
Corp. in connection with the merger agreement and transactions
contemplated by the merger agreement;
- i2's filings and reports with the Securities and Exchange Commission;
- i2's financial statements;
- the absence of undisclosed liabilities;
- the absence of any material adverse effect and other changes in i2's
business since December 31, 1999;
- i2's tax returns, tax liabilities and tax obligations;
- i2's material contracts and obligations;
- litigation involving i2;
- environmental laws that apply to i2;
- i2's employee benefit plans;
- i2's compliance with applicable laws, rules and regulations of
governmental entities;
- the treatment of the merger as a tax-free reorganization;
- the sufficiency and accuracy of information provided by i2 and included
in this joint proxy statement/prospectus;
- the opinion of i2's financial advisor;
- the i2 stockholder vote required to approve the issuance of i2 common
stock in the merger;
- i2's brokers' and finders' fees in connection with the merger;
- the execution of voting agreements by certain stockholders of i2;
- intellectual property used or owned by i2 and the effect of the Year 2000
on i2's business;
- i2's ownership of Aspect common stock;
- the inapplicability of state anti-takeover statutes to the merger; and
- the existence of any agreements restricting i2's conduct of its business.
The representations and warranties in the merger agreement are lengthy and
detailed and not easily summarized. We urge stockholders to read carefully the
articles in the merger agreement entitled "Representations and Warranties of
Company" and "Representations and Warranties of Parent and Merger Sub."
As it is used in the merger agreement, "material adverse effect" means any
change, effect, event, occurrence, state of facts or development that is
materially adverse to the business, financial condition or results of operations
of Aspect or i2; except that none of the following shall be considered to
constitute a
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<PAGE> 71
material adverse effect and none of the following shall be taken into account in
determining whether there has been, or will be, a material adverse effect:
- any change in the market price or trading volume of Aspect's or i2's
stock after the date of the merger agreement;
- any failure by Aspect or i2 to meet internal projections or forecasts or
published revenue or earnings predictions for any period ending (or for
which revenues or earnings are released) on or after the date of the
merger agreement; or
- any adverse change, effect, event, occurrence, state of facts or
development:
- to the extent attributable to the announcement or pendency of the merger
(including any cancellations of or delays in customer orders, any
reduction in sales, any disruption in supplier, distributor, partner or
similar relationships or any loss of employees);
- that is attributable to conditions affecting the industries in which
Aspect or i2 participates, the U.S. economy as a whole or foreign
economies in any locations where Aspect or i2 has material operations or
sales;
- that is attributable or relates to (1) out-of-pocket fees and expenses
(including legal, accounting, investment banking and other fees and
expenses) incurred in connection with the merger and related
transactions, or (2) the payment of any amounts due to, or the provision
of any other benefits (including benefits relating to acceleration of
stock options) to any officers or employees under employment contracts,
non-competition agreements, employee benefit plans, severance
arrangements or other arrangements in existence as of the date of the
merger agreement;
- that results from or relates to compliance with the terms of, or the
taking of any action required by, the merger agreement;
- that arises from or relates to any change in accounting requirements or
principles or any change in applicable laws, rules or regulations or the
interpretation thereof; or
- that arises from or relates to actions required to be taken under
applicable laws, rules, regulations, contracts or agreements.
ASPECT'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
Aspect has agreed that, until the completion of the merger or termination
of the merger agreement, unless i2 consents in writing, Aspect and its
subsidiaries will conduct their businesses in the ordinary course of business in
substantially the same manner as previously conducted and will use reasonable
efforts:
- to keep available the services of their present officers and key
employees; and
- to preserve their relationships with customers, suppliers, distributors
and other persons with which they have business dealings in order to
preserve substantially intact their business organization.
Aspect has also agreed that, until the completion of the merger or
termination of the merger agreement, unless i2 consents in writing, Aspect and
its subsidiaries will conduct their business in compliance with specific
restrictions, including that they will not permit:
- the modification or acceleration of any stock options or authorization of
cash payments in exchange for stock options, except as required by
existing agreements or stock option plans;
- the declaration or payment of dividends or other distributions on their
capital stock, except by Aspect's subsidiaries to Aspect or other
subsidiaries;
- any split, combination or reclassification of any of their capital stock;
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- the issuance or authorization of the issuance of any other securities in
respect of in lieu of or in substitution for shares of their capital
stock;
- the purchase or acquisition, directly or indirectly, of any shares of
their capital stock, except in certain instances;
- the transfer or license to any person or entity, or the extension,
amendment or modification in any material respect, of rights to Aspect's
intellectual property rights other than on a non-exclusive basis in the
ordinary course of business consistent with past practices;
- the issuance, delivery or sale of shares of Aspect capital stock or
securities convertible into Aspect capital stock, except for limited
issuances of securities in connection with grants and exercises of stock
options and issuances under Aspect's employee stock purchase plan;
- the acquisition of substantial equity interests in other entities;
- the disposition of any material properties or assets other than in the
ordinary course of business, or the entering into of any arrangement
involving the exclusive licensing of Aspect's name or system outside the
ordinary course of business or inconsistent with past practices;
- the increase of compensation payable to officers or employees, except for
increases in compensation of employees in accordance with past practices;
- the granting of any severance arrangements or entering into of any
agreement providing benefits upon a change of control that would be
triggered by the merger;
- the adoption, entering into or amendment in a material respect of any
plan, agreement, policy or arrangement for the benefit of any director,
officer or employee, other than, with respect to employees who are not
officers, in the ordinary course of business;
- the modification of Aspect's Certificate of Incorporation or Bylaws;
- the entering into of, or amendment in a material respect of, any OEM
agreement or any other agreements pursuant to which any third party is
granted exclusive rights relating to Aspect's products;
- the amendment or premature termination of any material contract,
agreement or license, except in the ordinary course of business;
- the waiver or release of any material right or claim, except in the
ordinary course of business;
- the initiation of any material litigation or arbitration;
- the incurrence of any material indebtedness in excess of $5,000,000 for
borrowed money, other than in the ordinary course of business;
- the making of capital expenditures, other than those that have been
budgeted for 2000 as disclosed to i2 and that do not exceed, individually
or in the aggregate, a specified amount for Aspect and its subsidiaries;
- the making of material tax elections, settlements or compromises;
- the payment, discharge, settlement or satisfaction of any material
disputed claims, liabilities, obligations or litigation, other than in
the ordinary course of business;
- the amendment or proposed amendment of the Aspect stockholder rights plan
in any manner that would impede the consummation of the merger or would
otherwise be adverse to i2, with certain exceptions; and
- the agreement in writing or otherwise to do any of the above.
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i2'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
i2 has agreed that, until the completion of the merger or termination of
the merger agreement, unless Aspect consents in writing, i2 and its subsidiaries
will conduct their businesses in the ordinary course of business in
substantially the same manner as previously conducted and will use reasonable
efforts:
- to keep available the services of their present officers and key
employees; and
- to preserve their relationships with customers, suppliers, distributors
and other persons with which they have business dealings in order to
preserve substantially intact their business organization.
i2 has also agreed that, until the completion of the merger or the
termination of the merger agreement, unless Aspect consents in writing, i2 and
its subsidiaries will conduct their business in compliance with specific
restrictions, including that they will not permit:
- the declaration or payment of dividends or any other distributions on
their capital stock;
- any split, combination or reclassification of their capital stock;
- the issuance or authorization of the issuance of any other securities in
lieu of their capital stock;
- the purchase or acquisition, directly or indirectly, of any shares of
their capital stock, except in certain instances;
- the sale, lease, license or other disposition of a material amount of
properties or assets, other than in the ordinary course of business;
- the transfer or license to any person or entity, or extension, amendment
or modification in any material respect, of rights to i2's intellectual
property rights, other than on a non-exclusive basis in the ordinary
course of business consistent with past practices;
- the engaging in any action or entering into any transaction, or
permitting of any action to be taken, that could reasonably be expected
to delay the consummation of, or otherwise adversely affect, any of the
transactions contemplated by the merger agreement; or
- the agreement in writing or otherwise to take any of the actions
described above.
Each of Aspect and i2 has also agreed:
- to confer with the other on a regular and frequent basis regarding the
general status of on-going operations;
- to provide the other with copies of all filings made with any
governmental agency in connection with the merger; and
- to notify the other promptly of certain events and changes, including
with respect to the representations, warranties and covenants of the
parties contained in the merger agreement.
The agreements related to the conduct of i2's and Aspect's respective
businesses contained in the merger agreement are complicated and not easily
summarized. We urge stockholders to carefully read the article in the merger
agreement entitled "Conduct of Business."
NO SOLICITATION OF TRANSACTIONS
Until the merger is completed or the merger agreement is terminated, Aspect
has agreed not to take any of the following actions, directly or indirectly:
- solicit, initiate, knowingly encourage or induce the making, submission
or announcement of any takeover proposal regarding Aspect;
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- participate in any discussions or negotiations with any person regarding,
or furnish to any person any information with respect to, or take any
other action that would reasonably be expected to facilitate any inquiry
or proposal that constitutes or would reasonably be expected to lead to,
such a takeover proposal;
- authorize, approve or recommend any such takeover proposal; or
- enter into any letter of intent or similar document or any contract,
agreement or commitment accepting or providing for any such takeover
proposal.
A "takeover proposal" means any offer or proposal for the following, except
one made by i2 or any affiliate of i2:
- a merger or other business combination involving Aspect after which the
stockholders of Aspect immediately prior to such merger or business
combination would own less than 80% of the voting securities of the
surviving company in such merger or business combination and would own
less than 80% of the voting securities of the parent of such surviving
company; or
- the acquisition by a person or group of 20% or more of the outstanding
shares of capital stock of Aspect; or
- the acquisition of all or substantially all of the assets of Aspect.
The Aspect board is not prohibited, however, from taking and disclosing to
Aspect's stockholders a position with respect to a tender or exchange offer
pursuant to Rules 14d-9 and 14e-2 under the Exchange Act not made in violation
of the merger agreement. Also, Aspect may furnish information or enter into
negotiations or discussions with any person in response to a takeover proposal
or, subject to certain restrictions, endorse and/or recommend, or,
simultaneously with a termination of the merger agreement, enter into an
agreement accepting or providing for, a takeover proposal that is superior to
the merger, if:
- the takeover proposal is not attributable to a material breach by Aspect
of the no solicitation provision contained in the merger agreement;
- the Aspect board concludes in good faith, after consulting with its
outside legal counsel, that failure to take such action would be
inconsistent with the fiduciary obligations of the Aspect board of
directors to the Aspect stockholders under applicable law;
- prior to furnishing any information to, or entering into discussions or
negotiations with, a third party, Aspect gives i2 written notice of the
identity of such party, the terms and conditions of the takeover proposal
and Aspect's intention to furnish information to, or enter into
discussions or negotiations with, such party;
- Aspect receives from such person an executed confidentiality agreement
which shall not in any way restrict Aspect from complying with its
disclosure obligations under the merger agreement and which contains
customary terms for such agreements; and
- at the same time Aspect furnishes any such information to such party,
Aspect furnishes such information to i2 (to the extent that such
information has not been previously furnished by Aspect to i2).
Aspect has also agreed to immediately cease and cause to be terminated any
and all existing discussions, negotiations, exchanges of information and other
activities with respect to any takeover proposal pending as of the date of the
merger agreement, whether conducted by Aspect or its agents and representatives.
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DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
The merger agreement provides that:
- after the effective time of the merger, i2 will, and i2 will cause Aspect
or the surviving corporation to, indemnify each person who is or was a
director or officer of Aspect or any of its subsidiaries at or at any
time prior to the effective time against any losses incurred in
connection with any claim, action, suit, proceeding or investigation
pertaining to any action or omission or alleged action or omission in his
or her capacity as a director, officer, employee, principal stockholder,
fiduciary or agent of Aspect or any of its subsidiaries or benefit plans;
- after the effective time of the merger, i2 will cause Aspect or the
surviving corporation to fulfill the obligations of Aspect pursuant to
any indemnification agreements between Aspect and any of the indemnified
parties referred to above in effect immediately prior to the effective
time; and
- for six years after the completion of the merger, i2 will maintain
directors' and officers' liability insurance with coverage and terms at
least as favorable to the directors and officers as the Aspect directors'
and officers' liability insurance policy in effect on the date of the
merger agreement.
i2 is not required to pay annual premiums in excess of $525,000 for such
insurance.
CONDITIONS TO THE MERGER
i2's and Aspect's respective obligations to complete the merger and the
related transactions are subject to the satisfaction or waiver of each of the
following conditions before completion of the merger:
- the merger agreement must be adopted by a majority of the outstanding
shares of Aspect common stock and the i2 share issuance must be approved
by a majority of the i2 shares present or represented by proxy and voting
at the i2 stockholders' meeting;
- any waiting period under U.S. antitrust laws must have expired or been
terminated;
- all governmental authorizations, consents, orders and approvals legally
required to consummate the merger must have been obtained from all
governmental entities, other than those, the absence of which (1) would
not reasonably be expected to have a material adverse effect, and (2)
would not prohibit or render unlawful the consummation of the merger
under U.S. law or under any law providing for criminal penalties against
any director or officer of Aspect or i2;
- the registration statement relating to the issuance of shares of i2
common stock as contemplated by the merger agreement must be declared
effective by the SEC;
- no order, writ, injunction or decree exists that makes the merger illegal
or otherwise prohibits completion of the merger under U.S. law or under
any law providing for criminal penalties against any director or officer
of Aspect or i2; and
- the shares of i2 common stock to be issued in connection with the merger
must be approved for quotation on the Nasdaq National Market.
i2's and Hoya Merger Corp.'s obligations to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- Aspect's representations and warranties must be true and correct as of
the completion of the merger, except for changes contemplated by the
merger agreement and except where failure to be true and correct,
individually or in the aggregate, has not had and will not, solely with
the passage of time, imminently result in a material adverse effect on
Aspect or, in certain instances, on the cost of the merger to i2;
- Aspect must have performed in all material respects all of its
obligations in the merger agreement;
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- i2 shall have received a certificate signed by the chief executive
officer and chief financial officer of Aspect to the effect that the two
conditions above have been satisfied;
- the employment and non-competition agreements between i2 and Mr. Wadhwani
and Mr. Evans must be in full force and effect; and
- neither Mr. Wadhwani nor Mr. Evans will have ceased employment with
Aspect or given notice to the board of directors of i2 or the board of
directors of Aspect of an intention to do so after the effective time of
the merger.
Aspect's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- i2's representations and warranties must be true and correct as of the
completion of the merger, except for changes contemplated by the merger
agreement and except where failure to be true and correct, individually
or in the aggregate, has not had and will not, solely with the passage of
time, imminently result in a material adverse effect on i2;
- i2 must have performed in all material respects all of its obligations in
the merger agreement; and
- Aspect shall have received a certificate signed by the chief executive
officer and chief financial officer of i2 to the effect that the two
conditions above have been satisfied; and
- Aspect must have received the opinion of its counsel, Cooley Godward LLP,
to the effect that the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated under certain circumstances at any
time before the completion of the merger, as summarized below:
- the merger agreement may be terminated by our mutual consent; or
- the merger agreement may be terminated by either of us if the conditions
to completion of the merger would not be satisfied because of either (A)
a breach of an obligation or agreement in the merger agreement by the
other party or (B) a breach of a representation or warranty of the other
party in the merger agreement, and the breaching party does not cure the
breach within 20 business days of receipt of notice of the breach, except
that the right to terminate shall not exist for either party if that
party is then in material breach of the merger agreement.
In addition, the merger agreement may be terminated by either of us under
any of the following circumstances:
- if the merger is not completed, without the fault of the terminating
party, by September 15, 2000, unless complete governmental approval of
the merger has not been obtained by September 15, 2000, but complete
government approval is reasonably likely to be obtained, in which case
either of us may extend the termination date by up to 90 days;
- if a final court order prohibiting the merger is issued and is not
appealable;
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- if the i2 stockholders do not approve the issuance of i2 common stock at
the i2 special meeting, or any adjournment or postponement of the i2
special meeting, except that i2 may not terminate under this provision if
the failure to gain approval is due to a material breach of the merger
agreement by i2; or
- if the Aspect stockholders do not adopt the merger agreement at the
Aspect special meeting, or any adjournment or postponement of the Aspect
special meeting, except that Aspect may not terminate under this
provision if the failure to adopt the merger agreement is due to a
material breach of the merger agreement by Aspect.
Furthermore, the merger agreement may be terminated by i2 if any of the
following occur:
- Aspect's board withdraws or modifies in a manner adverse to i2 its
recommendation as to the merger agreement or recommends or endorses a
takeover proposal from another party, or resolves to do so; or
- Aspect actively and directly solicits, initiates, encourages or induces
the making of a takeover proposal from a party other than i2 and in so
doing, Aspect is willfully and materially breaching the nonsolicitation
provisions contained in the merger agreement, which are discussed in more
detail in "-- No Solicitation of Transactions" on page 63, except that i2
may not terminate the merger agreement under this provision if more than
ten days have passed since any of i2's executive officers and directors
first obtained confirmation of such breach by Aspect or if i2 is in
material breach of the merger agreement at such time.
Aspect may terminate the merger agreement in response to a superior
takeover proposal which was not solicited by Aspect in violation of the merger
agreement, but no termination shall be effective until after:
- 72 hours following i2's receipt of written notice advising i2 that
Aspect's board is prepared to accept such superior takeover proposal,
which notice specifies the material terms and conditions of the superior
takeover proposal and identifies the person making the superior takeover
proposal; and
- the payment of any applicable termination fee, as described below under
"-- Payment of Fees and Expenses."
PAYMENT OF FEES AND EXPENSES
Whether or not the merger is consummated, all expenses incurred in
connection with the merger agreement and the merger will be paid by the party
incurring the expenses.
Aspect has agreed to pay i2 a cash termination fee of either $15 million or
$225 million as follows:
- in the event that the merger agreement is terminated by i2 (A) because
Aspect's board withdraws or modifies its recommendation in favor of the
merger in a manner adverse to i2 or recommends or endorses a takeover
proposal from another party, or (B) because Aspect has willfully and
materially breached the merger agreement by actively and directly
soliciting takeover proposals, then Aspect shall pay to i2 the sum of
$225 million within five business days after termination of the merger
agreement by i2;
- in the event that the merger agreement is terminated by Aspect upon
receipt of a superior takeover proposal, then Aspect shall pay i2 the sum
of $225 million upon termination of the merger agreement by Aspect;
- in the event that (A) an offer for a takeover transaction by a third
party (other than i2 or its affiliates) becomes known publicly or becomes
known to Aspect stockholders generally prior to the date on which a vote
of Aspect stockholders on the proposal to adopt the merger agreement is
taken, and (B) such offer has not been definitively withdrawn at least
seven days prior to the vote of Aspect stockholders on the merger
agreement, and (C) prior to the time of such vote, no
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material adverse effect on i2 has occurred nor will imminently occur, and
(D) the merger agreement is validly terminated by i2 for lack of Aspect
stockholder approval or by Aspect for the same reason, then Aspect shall
pay to i2 the sum of $15 million upon termination of the merger agreement
by Aspect or within five business days after termination of the merger
agreement by i2;
- in the event that (A) an offer for a takeover transaction by a third
party (other than i2 or its affiliates) becomes known publicly or becomes
known to Aspect stockholders generally, and (B) the merger agreement is
validly terminated by Aspect due to failure to be consummated by
September 15, 2000 (or by any later date to which the termination
deadline is extended), and (C) the offer referred to above under "(A)" is
pending at the time the merger agreement is so terminated by Aspect, and
(D) the failure of the merger to occur on or before September 15, 2000
(or by any later date to which the termination deadline is extended) is
not attributable to a material breach of the merger agreement by i2 or to
any challenge to, or any investigation or review of, the merger by any
governmental entity, and (E) prior to such termination by Aspect, no
material adverse effect on i2 has occurred nor will imminently occur, and
(F) prior to such termination by Aspect the Aspect, stockholders' meeting
shall not have been held and no vote of Aspect stockholders shall have
been taken on the proposal to adopt the merger agreement, then Aspect
shall pay to i2 the sum of $15 million upon such termination of the
merger agreement by Aspect; and
- in the event that (X) all of the conditions referred to in either of the
two immediately preceding paragraphs shall have been satisfied, and (Y)
on or before the 180th day following termination of the merger agreement,
Aspect enters into and publicly announces a letter of intent or
preliminary agreement or enters into a definitive acquisition agreement
with a third party (other than i2 or its affiliates) providing for the
consummation of a takeover transaction, or a tender or exchange offer is
commenced or announced that would reasonably be expected to result in a
takeover transaction, and (Z) on or before the first anniversary of the
termination of the merger agreement, a takeover transaction is
consummated, then Aspect shall pay to i2 the sum of $210 million upon
such consummation.
For purposes of the discussion above regarding termination fees under the
merger agreement, a "takeover transaction" means:
- a merger or other business combination involving Aspect and a third party
(other than i2 or its affiliates) after which the stockholders of Aspect
immediately prior to such merger or business combination would own 60% or
less of the voting power or equity securities of the surviving
corporation in such merger or business combination and would own 60% or
less of the voting power or equity securities of the parent of the
surviving corporation in such merger or business combination;
- the acquisition by a third party (other than i2 or its affiliates), in
one transaction or a series of related transactions, of 40% or more of
the outstanding shares of capital stock of Aspect; or
- the acquisition by a third party (other than i2 or its affiliates), in
one transaction or a series of related transactions, of all or
substantially all of the assets of Aspect.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
The merger agreement may be amended by the parties at any time before or
after approval of the matters presented in connection with the merger by the
stockholders of i2 or of Aspect, but, after any such approval, no amendment
shall be effective which by law requires further approval by such stockholders
without such further approval.
Either i2 or Aspect may, in writing, extend the other's time for the
performance of any of the obligations or other acts under the merger agreement,
waive any inaccuracies in the other's representations
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and warranties and waive compliance by the other with any of the agreements or
conditions contained in the merger agreement.
RELATED AGREEMENTS
i2 Voting Agreements
In connection with the merger, certain stockholders of i2, including Mr.
Sidhu, Sandeep R. Tungare, Gregory A. Brady, William M. Beecher, Hiten D. Varia,
Reagan Lancaster, Thomas J. Meredith and Harvey B. Cash have entered into voting
agreements with Aspect and irrevocable proxies to Aspect. The terms of the
voting agreements and irrevocable proxies with Aspect provide that the
stockholders will vote all outstanding shares of common stock beneficially owned
by them, or any new shares of stock they may acquire, (A) in favor of approval
of the issuance of shares of i2 common stock pursuant to the merger agreement
and in favor of any proposal or action which would, or could reasonably be
expected to, facilitate the merger, (B) against any liquidation or winding up of
i2, and (C) against any other proposal or action which would, or could
reasonably be expected to, impede, frustrate, prevent, prohibit, delay or
discourage the merger. The stockholders of i2 who are parties to the voting
agreements and irrevocable proxies retained the right to vote their shares of i2
common stock on all matters other than those identified in the voting
agreements. As of April 14, 2000, the record date for the i2 stockholders'
meeting, the i2 stockholders who entered into the voting agreements with Aspect
collectively held approximately 66,853,872 outstanding shares of i2 common stock
(including shares issuable upon the exercise of options that are currently
exercisable or that will be exercisable within 60 days of such date) which
represented approximately 42% of the outstanding shares of i2 common stock.
However, Aspect has agreed in principal to permit each signatory to these voting
agreements to engage in net exercises of options and to sell a small percentage
of the signatory's holdings of i2 shares in an amount not inconsistent with past
sales. None of the stockholders who are parties to the voting agreements with
Aspect was paid additional consideration in connection with such voting
agreements.
Aspect Voting Agreements
In connection with the merger, certain stockholders of Aspect, including
Mr. Wadhwani, Mr. Evans, Steven Goldby, Dennis Sisco, David Dury, David Horne,
Peter Ryan, Donald Tomkinson, James Althoff and Douglas Castek have entered into
voting agreements with i2 and irrevocable proxies to i2. The terms of the voting
agreements and irrevocable proxies with i2 provide that the stockholders will
vote all shares of Aspect common stock beneficially owned by them, or any new
shares of Aspect stock they may acquire, (A) in favor of adoption of the merger
agreement and any proposal or action which would, or could reasonably be
expected to, facilitate the merger, (B) against approval of any proposal made in
opposition to or competition with consummation of the merger and the merger
agreement, (C) against a takeover proposal with any party other than i2 or an
affiliate of i2 as contemplated by the merger agreement, (D) against any
liquidation or winding up of Aspect, and (E) against any other proposal or
action which would, or could reasonably be expected to, impede, frustrate,
prevent, prohibit or discourage the merger. The Aspect stockholders who are
parties to the voting agreements and irrevocable proxies retained the right to
vote their shares of Aspect common stock on all matters other than those
identified in the voting agreements. As of , 2000, the record date
for the Aspect stockholders' meeting, the Aspect stockholders who entered into
the voting agreements with i2 collectively held approximately outstanding
shares of Aspect common stock which represented approximately % of the
outstanding Aspect common stock. However, i2 has agreed in principal to permit
each signatory to these voting agreements to engage in net exercises of options
and to sell a small percentage of the signatory's holdings of Aspect shares in
an amount not inconsistent with past sales. None of the stockholders who are
parties to the voting agreements with i2 was paid additional consideration in
connection with such voting agreements.
Employment and Non-Compete Agreements
Concurrently with the execution of the merger agreement, i2 entered into
employment agreements with Messrs. Wadhwani and Evans. Under the terms of the
employment agreements, Messrs. Wadhwani
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and Evans agreed to remain with i2 for a period of three years (in the case of
Mr. Wadhwani) and 14 months (in the case of Mr. Evans) from the closing of the
merger unless i2 terminates them or they resign earlier.
If Mr. Wadhwani's employment is terminated (A) by i2 without "Cause," (B)
by Mr. Wadhwani's resignation during the 90 days following (1) his loss of his
title or duties as Vice Chairman; (2) a change in his regular place of work to a
location more than 40 miles from the Silicon Valley; or (3) a reduction in his
cash compensation, equity compensation or benefits below the amounts provided to
comparable executive officers of i2 not remedied within 30 days after receipt of
written notice from Mr. Wadhwani of his intent to resign and the reasons for his
resignation or (C) due to death or disability, Mr. Wadhwani or his estate will
be entitled to receive a severance payment equaling four months of his base
salary then in effect and Mr. Wadhwani will be entitled to accelerated vesting
of 100% of his unvested Aspect options. If Mr. Evans' employment is terminated
by i2 without "Cause," Mr. Evans will be entitled to receive salary continuation
payments for four months at his base salary then in effect. Also, if Mr. Evans'
employment is terminated for any reason, Mr. Evans will be entitled to
accelerated vesting of 50% of his unvested Aspect options as of the date of the
termination.
"Cause," as used in the employment agreements, means termination based on:
- the employee's commission of any crime constituting a felony or any other
offense involving fraud;
- willful malfeasance or gross misconduct by the employee which discredits
or damages i2;
- any material breach of employee's obligations under the non-competition
and non-interference provisions of the employment agreement or under i2's
Confidentiality, Proprietary Information and Inventions Agreement,
provided that employee fails to cure the material breach within 60 days
after receipt of written notice from i2 identifying the material breach;
and
- any material breach by the employee of the employment agreement, provided
that employee fails to cure the material breach within 60 days after
receipt of written notice from i2 identifying the material breach.
The employment agreements also include non-competition provisions. These
provisions require each employee:
- during the time the employee is employed by i2, not to engage in any
employment, business or activity that is in any way competitive with i2,
nor assist any other person or organization in competing with i2 or in
preparing to engage in competition with i2;
- for a period equal to the greater of two years from the closing of the
merger or one year from the date that the employee's employment with i2
is terminated for any reason, not to directly or indirectly engage in the
same business as Aspect or i2 in any state of the United States
(including California), or in any country where i2 or Aspect engage in
business, or propose to engage in business, on the date of the
termination of the employee's employment with i2;
- during the time the employee is employed by i2 and for one year from the
date such employment is terminated for any reason, not to solicit the
employment services of any former employee of i2 or any subsidiary of i2
whose employment has been voluntarily terminated for less than six
months;
- during the time the employee is employed by i2 and for one year from the
date such employment is terminated for any reason, not to solicit any
customers or known potential customers of i2 with the purpose of
obtaining such person as an employee or customer for a business
competitive with i2's business; and
- during employment with i2 and any period during which the employee
receives any severance payment, not to undertake planning for or
organization of any business competitive with i2, or conspire with
agents, employees, consultants or other representatives of i2 for the
purpose of organizing any such competitive business.
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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On March 12, 2000, i2 entered into a definitive agreement to acquire Aspect
in a transaction to be accounted for as a purchase. Under the agreement, i2 will
acquire all of the outstanding capital stock of Aspect and will assume all
outstanding stock options of Aspect in exchange for approximately 44.9 million
shares of i2 common stock and stock options valued at approximately $8.5
billion, including acquisition expenses.
Also on March 12, 2000, i2 entered into a definitive agreement to acquire
SupplyBase in a transaction to be accounted for as a purchase. Under the
agreement, i2 will acquire all of the outstanding capital stock of SupplyBase
and will assume all outstanding stock options of SupplyBase in exchange for
approximately 1.9 million shares of i2 common stock and stock options valued at
approximately $356.0 million, including acquisition expenses.
On March 27, 2000, i2 purchased from IBM various software assets,
cross-patent rights and software licenses with an aggregate value of
approximately $234.0 million in exchange for approximately 1.3 million shares of
i2 common stock. As part of the IBM asset purchase agreement, i2 has agreed to
issue additional shares to IBM if IBM achieves certain performance measures
related to a marketing agreement. i2 has determined that issuance of such shares
is not a component of the asset purchase price and will be expensed in future
periods as earned by IBM.
The following unaudited pro forma combined financial statements of i2 give
effect to i2's proposed mergers with Aspect and SupplyBase, and to i2's
acquisition of the IBM assets all accounted for under the purchase method of
accounting. This information is based on preliminary valuations of the fair
market value of assets and liabilities acquired and the estimated useful lives
of intangible assets acquired in the respective transactions and are subject to
change pending finalization of these valuations. On January 17, 2000, Aspect
entered into a definitive agreement to acquire TACTech in a transaction to be
accounted for as a purchase. Financial information for Aspect is presented on a
pro forma basis to give effect to Aspect's agreement to merge with TACTech.
The unaudited pro forma combined balance sheet of i2 assumes that i2's
proposed mergers with Aspect and SupplyBase, and i2's acquisition of the IBM
assets all took place on December 31, 1999, and combines i2's historical
consolidated balance sheet with Aspect's pro forma balance sheet and
SupplyBase's historical consolidated balance sheet as of December 31, 1999,
before pro forma adjustments. The unaudited pro forma combined statement of
operations assumes that i2's proposed mergers with Aspect and SupplyBase, and
i2's acquisition of the IBM assets took place as of January 1, 1999 and combine
i2's historical consolidated statement of operations data for the year ended
December 31, 1999 with Aspect's pro forma combined statement of operations and
SupplyBase's historical consolidated statement of operations data for the year
ended December 31, 1999, before pro forma adjustments.
The unaudited pro forma combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have been realized had the acquired assets or companies been
operated as a single entity during the period presented. The pro forma
adjustments are based on estimates, available information and various
assumptions and may be revised as additional information becomes available. Note
also that the completion of i2's proposed merger with SupplyBase and the merger
of Aspect and TACTech are not conditions to the proposed merger of i2 and
Aspect. The unaudited pro forma combined financial statements as of and for the
year ended December 31, 1999 should be read in conjunction with the other
financial statements and notes thereto included elsewhere or incorporated by
reference in this joint proxy statement/prospectus.
i2 estimates that it will incur direct transaction costs of approximately
$40.0 million in connection with its proposed mergers with Aspect and
SupplyBase, which will be capitalized as part of the purchase price in such
transactions and amortized over three years. The transaction costs consist of
fees for investment bankers, attorneys, accountants, financial printing costs
and other related charges. i2 cannot assure you that it will not incur
additional charges in subsequent quarters to reflect costs associated with the
proposed mergers.
71
<PAGE> 82
i2 TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENTS
--------------------- ASPECT INCL. PRO FORMA
I2 SUPPLYBASE & TACTECH IBM ASSETS COMBINED
-------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $454,585 $ 2,642 $ 29,292 $ (890)(d) $ 485,629
Short-term investments.................... 124,806 -- 47,332 -- 172,138
Accounts receivable, net.................. 157,586 82 29,654 -- 187,322
Prepaids and other current assets......... 10,607 83 9,909 -- 20,599
Deferred income taxes..................... 15,868 -- 6,100 -- 21,968
-------- ------- -------- ---------- ----------
Total currents assets....................... 763,452 2,807 122,287 (890) 887,656
Furniture and equipment, net................ 50,483 485 12,576 -- 63,544
Other assets................................ -- -- 2,917 -- 2,917
Goodwill and intangible assets.............. 47,614 -- 13,885 8,808,241(a) 8,996,215
86,475(e)
40,000(b)
-------- ------- -------- ---------- ----------
Total assets....................... $861,549 $ 3,292 $151,665 $8,933,826 $9,950,332
======== ======= ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 20,039 $ 218 $ 3,638 $ -- $ 23,895
Accrued liabilities....................... 40,803 328 9,391 40,000(b) 90,522
Accrued compensation and related
expenses................................ 40,443 -- 7,391 -- 47,834
Short-term debt........................... -- 295 670 (880)(d) 85
Deferred revenue.......................... 72,617 488 14,265 -- 87,370
Income taxes payable...................... 4,511 -- 3,961 -- 8,472
-------- ------- -------- ---------- ----------
Total current liabilities.......... 178,413 1,329 39,316 39,120 258,178
Deferred income taxes....................... 968 -- -- 86,475(e) 87,443
Long-term debt.............................. 350,000 177 -- (10)(d) 350,167
-------- ------- -------- ---------- ----------
Total liabilities........................... 529,381 1,506 39,316 125,585 695,788
-------- ------- -------- ---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock........................... -- 8,373 -- (8,373)(a) --
Common stock.............................. 39 3 30 (25)(a) 47
Additional paid-in capital................ 297,879 2,579 112,856 (115,435)(a) 9,309,647
9,011,768(a)
Accumulated other comprehensive income
(loss).................................. (4,126) 124 (124)(a) (4,126)
Retained earnings (deficit)............... 38,376 (9,169) (661) 9,830(a) (51,024)
(89,400)(a,c)
-------- ------- -------- ---------- ----------
Total stockholders' equity......... 332,168 1,786 112,349 8,808,241 9,254,544
-------- ------- -------- ---------- ----------
Total liabilities and stockholders'
equity........................... $861,549 $ 3,292 $151,665 $8,933,826 $9,950,332
======== ======= ======== ========== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
72
<PAGE> 83
i2 TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENTS
--------------------- ASPECT INCL. PRO FORMA
I2 SUPPLYBASE & TACTECH IBM ASSETS COMBINED
-------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses................. $352,597 $ 47 $ 57,334 $ -- $ 409,978
Services.......................... 147,893 200 18,191 8,246(g) 174,530
Maintenance....................... 70,620 26 24,514 (8,246)(g) 86,914
-------- ------- -------- ----------- -----------
Total revenues............ 571,110 273 100,039 -- 671,422
Costs and expenses:
Cost of software licenses......... 17,981 18 1,152 -- 19,151
Cost of services and
maintenance.................... 125,934 98 14,398 -- 140,430
Sales and marketing............... 194,752 2,784 46,173 (491)(i) 243,218
Research and development.......... 132,278 1,951 21,060 (401)(i) 154,888
General and administrative........ 53,188 3,764 13,201 (631)(i) 69,522
Amortization of goodwill and
intangible assets.............. -- -- 2,777 2,936,163(f) 2,967,765
28,825(h)
In-process research and
development and
acquisition-related expenses... 6,552 -- -- -- 6,552
-------- ------- -------- ----------- -----------
Total costs and
expenses................ 530,685 8,615 98,761 2,963,465 3,601,526
-------- ------- -------- ----------- -----------
Operating income.................... 40,425 (8,342) 1,278 (2,963,465) (2,930,104)
Other income, net................... 7,642 151 6,182 -- 13,975
-------- ------- -------- ----------- -----------
Income (loss) before income taxes... 48,067 (8,191) 7,460 (2,963,465) (2,916,129)
Provision (benefit) for income
taxes............................. 24,552 -- 2,306 (47,263)(h) (20,405)
-------- ------- -------- ----------- -----------
Net income (loss)................... $ 23,515 $(8,191) $ 5,154 $(2,916,202) $(2,895,724)
======== ======= ======== =========== ===========
Net income (loss) per share......... $ 0.16 $ (15.50)
======== ======= ======== =========== ===========
Net income (loss) per share,
assuming dilution................. $ 0.14 $ (15.50)
======== ======= ======== =========== ===========
Weighted average common shares
outstanding....................... 150,419 186,804
Weighted average common shares
outstanding, assuming dilution.... 167,839 186,804
Comprehensive income:
Net income........................ $ 23,515 $(8,191) $ 5,154 $(2,916,202) $(2,895,724)
Net foreign currency translation
adjustments, and stock
accretion...................... (3,293) (6) 112 -- (3,187)
-------- ------- -------- ----------- -----------
Total comprehensive
income.................. $ 20,222 $(8,197) $ 5,266 $(2,916,202) $(2,898,911)
======== ======= ======== =========== ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
73
<PAGE> 84
i2 TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The total purchase price of the IBM assets and acquisitions of Aspect and
SupplyBase reflect the issuance of approximately 48.1 million shares of i2
common stock and stock options. The total purchase price was determined as
follows (in thousands):
<TABLE>
<CAPTION>
IBM ASSETS SUPPLYBASE ASPECT TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Number of shares of i2 common stock
and options issued.................. 1,296 1,870 44,903 48,069
Value of shares of i2 common stock and
options issued...................... $ 233,703 $353,813 $8,424,260 $9,011,776
Other direct acquisition expenses..... 2,000 38,000 40,000
---------- -------- ---------- ----------
$ 233,703 $355,813 $8,462,260 $9,051,776
========== ======== ========== ==========
</TABLE>
The estimated fair value of the common stock to be issued is based on the
average closing price of i2's stock on the three days prior and subsequent to
the day the transactions were announced. The estimated fair value of the options
to be issued is based on the Black-Scholes model using the following
assumptions:
<TABLE>
<S> <C>
Expected lives.............................................. 1-5 years
Expected volatility......................................... 84%
Risk free interest rate..................................... 5.6%
Expected dividend rate...................................... 0%
</TABLE>
The total purchase price of the acquisitions has been allocated to acquired
assets based on preliminary estimates of their fair value. The combined purchase
price of approximately $9.1 billion net of book values of the companies has been
assigned to the assets acquired as follows (in thousands):
<TABLE>
<CAPTION>
IBM ASSETS SUPPLYBASE ASPECT TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net assets assumed..................... $ -- $ 1,786 $ 112,349 $ 114,135
Acquired in-process research and
development.......................... -- 6,400 83,000 89,400
Acquired developed technology.......... 18,200 2,700 79,000 99,900
Content database....................... -- 11,700 84,000 95,700
Installed customer base................ -- -- 42,000 42,000
Assembled workforce.................... -- 1,200 10,000 11,200
Cross patent rights and software
license.............................. 215,503 -- -- 215,503
Goodwill............................... -- 332,027 8,051,911 8,599,441
-------- -------- ---------- ----------
$233,703 $355,813 $8,462,260 $9,051,776
======== ======== ========== ==========
</TABLE>
These unaudited pro forma financial statements have been prepared assuming
that the Aspect and SupplyBase acquisitions will be consummated prior to the
effective date of FASB Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation -- an Interpretation of APB Opinion
No. 25," which is July 1, 2000.
Under FASB Interpretation No. 44, unvested stock options granted by i2 in
exchange for unvested stock options held by Aspect and SupplyBase employees and
requiring service by such employees subsequent to the consummation date would
result in an allocation of purchase price to unearned compensation which would
be amortized as a non cash compensation cost over the remaining future vesting
period. The amount allocated to unearned compensation would be based on i2's
stock price at the consummation date, the stock option exercise price and the
remaining future vesting period in relation to the total vesting period.
74
<PAGE> 85
In the event the transaction is consummated on or after July 1, 2000, FASB
Interpretation No. 44 would be effective and could have an impact on the pro
forma financial statements presented. The Pro Forma Balance Sheet would include
unearned compensation and goodwill and other intangibles would be reduced. In
addition, the Pro Forma Statement of Operations would include a non-cash
compensation cost and a lower amount for amortization of goodwill and intangible
assets.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect (1) the allocation of the purchase price to intangible
assets, (2) to record the common stock and additional paid-in-capital from the
IBM asset purchase and the common stock and options issued in the SupplyBase and
Aspect acquisitions, and (3) to reflect the elimination of the acquired
companies' stockholders' equity.
(b) To reflect the other direct expenses incurred as a result of the
acquisition.
(c) i2 expects to allocate approximately $89.4 million of the purchase
price to in-process research and development, which will be expensed upon
consummation of the merger as it has not reached technological feasibility and,
in the opinion of management, has no alternative future use. This amount has not
been reflected in the accompanying pro forma combined statement of operations as
it is a non-recurring charge, but has been reflected as an adjustment to
accumulated deficit in the accompanying pro forma balance sheet.
(d) To reflect the payoff of the lines-of-credit of SupplyBase and Aspect
after acquisition.
(e) To reflect the goodwill and deferred tax liabilities related to the
$230.6 million of non-deductible intangible assets, excluding goodwill, acquired
in the Aspect and SupplyBase acquisitions listed in the table above based on an
effective rate tax rate of 37.5%.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(f) To reflect the approximately $2.9 billion amortization of intangible
assets. The intangible assets will be amortized ratably over the estimated lives
of the assets, ranging from two to five years. The assets are to be amortized as
follows:
<TABLE>
<CAPTION>
LIFE IBM ASSETS SUPPLYBASE ASPECT TOTAL
---- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Acquired developed technology... 2-3 $ 6,067 $ 1,350 $ 39,500 $ 46,917
Content database................ 3 -- 3,900 28,000 31,900
Installed customer base......... 3 -- -- 14,000 14,000
Assembled workforce............. 2 -- 600 5,000 5,600
Cross patent rights and software
license....................... 5 43,100 -- 43,100
Goodwill........................ 3 -- 110,676 2,683,970 2,794,646
------- -------- ---------- ----------
$49,167 $116,526 $2,770,470 $2,936,163
======= ======== ========== ==========
</TABLE>
(g) To reclassify subscription and content revenues from maintenance to
services in order to conform with i2's presentation.
(h) To reflect the amortization of the deferred tax liabilities recorded
for non deductible intangible assets acquired in the SupplyBase and Aspect
acquisitions and record the tax benefits of tax deductible intangible
amortization from the IBM asset acquisition. To reflect the tax benefit of tax
deductible intangibles acquired in the IBM asset transaction.
(i) To reflect the reversal of stock compensation charges for SupplyBase
stock options granted below fair market value.
75
<PAGE> 86
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
ASPECT DEVELOPMENT, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ASPECT TACTECH ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 28,872 $ 420 $ -- $ 29,292
Short-term investments...................... 47,332 -- 47,332
Accounts receivable......................... 28,709 945 -- 29,654
Prepaids and other current assets........... 15,884 125 -- 16,009
-------- ------ ------- --------
Total current assets................... 120,797 1,490 -- 122,287
Furniture and equipment, net..................... 12,342 234 -- 12,576
Other assets..................................... 2,765 152 -- 2,917
Goodwill and intangible assets................... -- -- 13,885(A) 13,885
-------- ------ ------- --------
Total assets........................... $135,904 $1,876 $13,885 $151,665
======== ====== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 3,221 $ 417 $ -- $ 3,638
Accrued liabilities............................ 9,191 -- 200(B) 9,391
Accrued compensation and related expenses...... 7,266 125 -- 7,391
Short-term debt................................ -- 670 -- 670
Deferred revenue............................... 13,584 681 -- 14,265
Income taxes payable........................... 3,863 98 -- 3,961
-------- ------ ------- --------
Total current liabilities.............. 37,125 1,991 200 39,316
Stockholders' equity:
Common stock................................... 96,929 559 15,441(B) 112,929
Accumulated other comprehensive income
(loss)...................................... 124 -- -- 124
Retained earnings.............................. 1,726 (674) (1,756)(B) (704)
-------- ------ ------- --------
Total stockholders' equity............. 98,779 (115) 13,685 112,349
-------- ------ ------- --------
Total liabilities and stockholders'
equity............................... $135,904 $1,876 $13,885 $151,665
======== ====== ======= ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
76
<PAGE> 87
ASPECT DEVELOPMENT, INC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ASPECT TACTECH ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Software licenses................................. $52,440 $4,894 $ -- $ 57,334
Services.......................................... 18,191 -- -- 18,191
Maintenance....................................... 24,514 -- -- 24,514
------- ------ ------- --------
Total revenues............................ 95,145 4,894 -- 100,039
Costs and expenses:
Cost of software licenses......................... 1,152 -- -- 1,152
Cost of services and maintenance.................. 14,398 -- -- 14,398
Sales and marketing............................... 44,625 1,548 -- 46,173
Research and development.......................... 20,061 999 -- 21,060
General and administrative........................ 11,136 2,065 -- 13,201
Amortization of goodwill.......................... -- -- 2,777 2,777
------- ------ ------- --------
Total costs and expenses.................. 91,372 4,612 2,777 98,761
------- ------ ------- --------
Operating income.................................... 3,773 282 (2,777) 1,278
Other income, net................................... 6,238 (56) -- 6,182
------- ------ ------- --------
Income before income taxes.......................... 10,011 226 (2,777) 7,460
Provision for income taxes.......................... 2,212 94 -- 2,306
------- ------ ------- --------
Net income (loss)................................... $ 7,799 $ 132 $(2,777) $ 5,154
======= ====== ======= ========
Net income (loss) per share......................... $ 0.13 $ 0.22 $ -- $ 0.09
======= ====== ======= ========
Net income (loss) per share, assuming dilution...... $ 0.12 $ 0.21 $ -- $ 0.08
======= ====== ======= ========
Weighted average common shares outstanding.......... 58,726 599 59,122
Weighted average common shares outstanding, assuming
dilution.......................................... 66,180 625 66,616
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
77
<PAGE> 88
ASPECT DEVELOPMENT, INC
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The total purchase price of TACTech reflects the issuance of approximately
396,000 shares of Aspect common stock and the assumption of options to purchase
approximately 54,000 shares of Aspect common stock. The total purchase price was
determined as follows (in thousands):
<TABLE>
<S> <C>
Value of Aspect common stock and options.................... $16,000
Other direct acquisition expenses........................... 200
-------
$16,200
=======
</TABLE>
The valuation of the Aspect common stock is based on its weighted average
closing price three days prior to and three days following the announcement of
the acquisition. The valuation of options to purchase Aspect common stock is
based upon the Black-Scholes valuation model.
The total purchase price of the TACTech acquisition has been allocated to
acquired assets based on estimates of their fair values. The purchase price of
approximately $16.2 million has been assigned to the assets acquired as follows
(in thousands):
<TABLE>
<S> <C>
Tangible net liabilities assumed............................ $ (115)
Acquired in-process research and development................ 2,430
Goodwill.................................................... 13,885
-------
$16,200
=======
</TABLE>
Aspect expects to allocate approximately $2.4 million of the purchase price
to TACTech's in-process research and development, which will be expensed upon
completion of the merger as it has not reached technological feasibility and, in
the opinion of management, has no alternative future use. The estimated amount
is subject to adjustment based upon completion of third-party appraisals. This
amount has not been reflected in the accompanying pro forma combined statement
of operations as it is a non-recurring charge, but has been reflected as an
adjustment to accumulated deficit in the accompanying pro forma balance sheet.
The adjustments to the pro forma combined balance sheet as of December 31,
1999 are as follows:
(A) To reflect goodwill and other intangibles of approximately $14.0
million resulting from the acquisition of TACTech.
(B) To reflect the purchase price paid as follows: issuance of
Aspect's common stock and options valued at approximately $16.0 million and
acquisition-related expenses of approximately $200,000.
The adjustment to the pro forma combined statement of operations for the
year ended December 31, 1999 assumes the acquisition occurred as of January 1,
1999 and reflects the amortization of approximately $14.0 million of estimated
goodwill and other intangibles resulting from the acquisition. The intangible
assets will be amortized ratably over an estimated useful life of five years.
78
<PAGE> 89
COMPARISON OF RIGHTS OF HOLDERS OF
ASPECT COMMON STOCK AND
i2 COMMON STOCK
This section of the joint proxy statement/prospectus describes certain
differences between the rights of holders of Aspect common stock and i2 common
stock. While we believe that the description covers the material differences
between the two, this summary may not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents we refer to for a more complete understanding of the differences
between being a stockholder of Aspect and being a stockholder of i2.
The rights of the stockholders of Aspect are governed by Aspect's
Certificate of Incorporation and Aspect's Bylaws. After completion of the
merger, Aspect stockholders will become stockholders of i2 and their rights will
be governed by i2's Restated Certificate of Incorporation, as amended, and i2's
Amended and Restated Bylaws. Both companies are incorporated under the laws of
the State of Delaware and, accordingly, Aspect stockholders' rights will
continue to be governed by the Delaware General Corporation Law after completion
of the merger.
CLASSIFIED BOARD OF DIRECTORS
Delaware law provides that a corporation's board of directors may be
divided into various classes with staggered terms of office. i2's board of
directors is divided into three classes, as nearly equal in size as possible,
with one class being elected annually for a three-year term. i2 directors are
elected for a term of three years and until their successors are elected and
qualified.
Aspect's board of directors is not divided into classes. Accordingly, all
of Aspect's directors are elected at the annual meeting of the stockholders and
hold office until the next annual meeting and until their successors are elected
and qualified.
NUMBER OF DIRECTORS
Presently, the i2 Bylaws provide that the authorized number of directors of
i2 is fixed at four. i2's board has amended the i2 Bylaws to provide for a board
of five directors, effective upon the completion of the merger. Aspect's bylaws
provide that the number of directors would initially be four and could be
adjusted from time to time by stockholder vote. Currently, Aspect's board
consists of four directors.
REMOVAL OF DIRECTORS
i2 directors, or the entire i2 board, may be removed, at any time, for
cause by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of i2 entitled to vote at an election of directors.
Aspect directors, or the entire Aspect board, may be removed, at any time,
with or without cause, by the affirmative vote of the holders of a majority of
the shares then entitled to vote on the election of directors.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
The i2 Bylaws provide that vacancies occurring on the i2 board of directors
for any reason may be filled by vote of a majority of the remaining members of
the i2 board of directors, although less than a quorum, at a meeting of the i2
board of directors, or by a plurality of votes cast at a meeting of
stockholders. A person so elected by the i2 board of directors to fill a vacancy
shall hold office until the expiration of the term of office of the director
whom such person has replaced.
Aspect's Bylaws provide that vacancies occurring on the Aspect board of
directors may be filled only by the majority vote of the outstanding Aspect
shares, except that vacancies caused by the removal of an Aspect director may be
filled by a majority of the directors then in office, although less than a
quorum, or
79
<PAGE> 90
by the vote of the holders of a plurality of the shares entitled to vote at a
special meeting of the stockholders properly called for this purpose. Directors
so chosen shall hold office until the next annual meeting of stockholders.
ABILITY TO CALL SPECIAL MEETINGS
Special meetings of i2 stockholders may be called by its
- board of directors,
- Chairman of the Board,
- Chief Executive Officer, or
- President.
Stockholders of i2 do not have the ability to call a special meeting of
i2's stockholders.
Special meetings of Aspect stockholders may be called by
- its President,
- its Chairman of the Board,
- a majority of the directors in office, or
- stockholders holding 10% of the shares of stock entitled to vote at such
special meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
At an annual meeting of the stockholders of i2, only such business will be
conducted as has been properly brought before the meeting. To be properly
brought before an annual meeting of stockholders of i2, business must be:
- specified in i2's notice of meeting;
- otherwise properly brought before the meeting by or at the direction of
the board of directors; or
- otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must comply with applicable law and give timely
notice in writing to the Secretary of i2. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of i2 not later than the close of business on the 120th day nor earlier than the
close of business on the 150th day prior to the first anniversary of the proxy
statement delivered to stockholders in connection with the preceding year's
annual meeting. However, if either (A) the date of the annual meeting is more
than 30 days before or more than 60 days after this anniversary date or (B) 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
delivered not earlier than the close of business on the 90th day prior to the
annual meeting and not later than the close of business on the later of the 60th
day prior to the annual meeting or the close of business on the 10th day
following the day on which public announcement of the date of the meeting is
first made by i2.
A stockholder's notice to the Secretary must set forth:
- 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;
- a representation that the stockholder is a holder of record of stock of
i2 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;
80
<PAGE> 91
- 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;
- 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
i2's board of directors; and
- if applicable, the consent of each nominee to serve as director of i2 if
so elected.
At an annual or special meeting of Aspect stockholders, the only business
that may be conducted is that which has been properly brought before the
meeting. To be properly brought before an annual or special meeting of Aspect
stockholders, business must be:
- specified in the notice of meeting, or any supplement, given by or at the
direction of Aspect's board;
- properly brought before the meeting by or at the direction of the Aspect
board; or
- properly brought before an annual meeting by a stockholder and if the
notice of a special meeting provides for business to be brought before
the meeting of stockholders, the stockholder must have given timely
notice to the secretary of Aspect.
For business to be properly brought before a meeting by a stockholder, the
stockholder must have given timely notice in writing to the Secretary of Aspect.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal offices of Aspect no later than 90 days before the anticipated
date of the next annual meeting, and in the case of a special meeting, ten days
prior to the date of the special meeting.
A stockholder's notice to the Secretary of Aspect must set forth:
- a brief description of the business the stockholder desires to bring
before the meeting and the reasons for conducting this business at the
meeting;
- the name and address, as they appear on Aspect's records, of the
stockholder who is proposing such business;
- the class and number of shares of Aspect stock that the stockholder
beneficially owns; and
- any material interest of the stockholder in the business proposed.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Under Delaware law, a certificate of incorporation of a Delaware
corporation may be amended by approval of the board of directors of the
corporation and the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote for the amendment, unless a higher vote is
required by the corporation's certificate of incorporation.
In most matters, the affirmative vote of the holders of shares of stock
representing a majority of the votes cast is required to amend i2's certificate
of incorporation. i2's certificate of incorporation provides that the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of capital stock of i2 entitled to vote, are required to alter, change, amend,
repeal or adopt any provision of i2's certificate of incorporation inconsistent
with the provisions of i2's certificate of incorporation that deal with the
following:
- matters relating to the board of directors, including the number of
members, board classification, vacancies and removal;
81
<PAGE> 92
- the manner in which stockholder action may be effected;
- cumulative voting rights; and
- amendments to i2's certificate of incorporation,
unless such amendment shall be approved by a majority of the directors of i2 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 i2's
outstanding capital stock.
Amendment to Aspect's certificate of incorporation requires the affirmative
vote of a majority of the holders of the outstanding shares entitled to vote for
the amendment.
AMENDMENT OF BYLAWS
Under Delaware law, stockholders entitled to vote have the power to adopt,
amend or repeal bylaws. In addition, a corporation may, in its certificate of
incorporation, confer this power upon the board of directors. The stockholders
always have the power to adopt, amend or repeal bylaws, even though the board
may also be delegated this power.
The i2 Bylaws may be altered, amended or repealed, or new bylaws may be
adopted, by the board of directors or the stockholders entitled to vote at a
meeting of the stockholders called for that purpose. In addition, the
affirmative vote of at least two-thirds of the combined voting power of all of
the outstanding shares of i2 entitled to vote shall be required to alter, amend
or repeal provisions of i2's Bylaws regarding stockholder voting, action by
stockholder consent and amendment of the Bylaws, unless such amendment shall be
approved by a majority of the directors of i2 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 i2's outstanding capital stock.
Aspect's Bylaws may be adopted, amended or repealed, or new bylaws may be
adopted, by the affirmative vote of either a majority of the outstanding capital
stock entitled to vote or a majority of the total number of authorized directors
then in office.
82
<PAGE> 93
EXPERTS
The consolidated balance sheets of i2 as of December 31, 1999 and 1998 and
the consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1999, incorporated
by reference in this joint proxy statement/prospectus, have been incorporated
herein in reliance on the report of Arthur Andersen LLP, Dallas, Texas,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Aspect as of December 31, 1999 and
1998, incorporated by reference in this joint proxy statement/prospectus, have
been incorporated herein in reliance on the report of Arthur Andersen LLP, San
Jose, California, independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The consolidated financial statements of Aspect for the year ended December
31, 1997, incorporated by reference in this joint proxy statement/prospectus,
have been incorporated herein in reliance on the report of Ernst & Young LLP,
San Jose, California, independent auditors, given on the authority of that firm
as experts in accounting and auditing.
The consolidated financial statements of Transition Analysis Component
Technology, Inc. at June 30, 1999 and 1998, and for each of the two years in the
period ended June 30, 1999, appearing in this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, White Plains, New York,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
The Financial Statements of Supply Base, Inc. as of December 31, 1999 and
for each of the years in the three-year period ended December 31, 1999, have
been included herein in reliance upon the report of KPMG LLP, San Francisco,
California, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the shares of i2 common stock offered by this joint proxy
statement/prospectus and certain federal income tax consequences of the merger
will be passed upon for i2 by Brobeck, Phleger & Harrison LLP, Austin, Texas.
Partners of Brobeck, Phleger & Harrison LLP own an aggregate of approximately
shares of i2 common stock. Certain legal matters with respect to federal
income tax consequences in connection with the merger will be passed upon for
Aspect by Cooley Godward LLP, Palo Alto, California.
WHERE YOU CAN FIND MORE INFORMATION
i2 and Aspect file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. Stockholders
may read and copy any reports, statements or other information filed by i2 or
Aspect at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. i2's and Aspect's filings with the
SEC are also available to the public from commercial document-retrieval services
and at the Web site maintained by the SEC at http://www.sec.gov.
i2 has filed a registration statement with the SEC to register the i2
common stock to be issued to Aspect stockholders in the merger. This joint proxy
statement/prospectus is a part of that registration statement and constitutes a
proxy statement and prospectus of i2 in addition to being a proxy statement of
Aspect for use at its special meeting.
As allowed by the SEC's rules, this joint proxy statement/prospectus does
not contain all of the information relating to i2 and Aspect included in the
registration statement or the exhibits to the
83
<PAGE> 94
registration statement. Some of the important business and financial information
relating to i2 and Aspect that may be important in deciding how to vote is not
included in this joint proxy statement/prospectus, but rather is "incorporated
by reference" to documents that have been previously filed by i2 and Aspect with
the SEC. The information incorporated by reference is deemed to be a part of
this joint proxy statement/ prospectus, except for any information superseded by
information contained directly in this joint proxy statement/prospectus. See
"Incorporation of Certain Documents by Reference."
i2 has supplied all information contained or incorporated by reference in
this joint proxy statement/ prospectus relating to i2, and Aspect has supplied
all information contained or incorporated by reference in this joint proxy
statement/prospectus relating to Aspect. Neither i2 nor Aspect shall have any
responsibility relating to the accuracy or completeness of information relating
to the other.
Stockholders can obtain any of the documents incorporated by reference
through i2, Aspect or the SEC. Documents incorporated by reference are available
from i2 or Aspect without charge, excluding all exhibits. Stockholders may
obtain documents incorporated by reference in this joint proxy statement/
prospectus by requesting them orally or in writing to the following addresses or
by telephone:
<TABLE>
<S> <C>
i2 Technologies, Inc. Aspect Development, Inc.
Investor Relations Investor Relations
One i2 Place 1395 Charleston Road
11701 Luna Road Mountain View, California 94042
Dallas, Texas 75234 (650) 428-2700
(469) 357-1000
</TABLE>
If you would like to request documents, please do so by , 2000
in order to receive them before the i2 special meeting and by , 2000
in order to receive them before the Aspect special meeting.
i2 STOCKHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON
THE ISSUANCE OF i2 COMMON STOCK AS CONTEMPLATED BY THE MERGER AGREEMENT. ASPECT
STOCKHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER
AGREEMENT. NEITHER i2 nor Aspect has authorized anyone to provide information
that is different from what is contained in this joint proxy
statement/prospectus. This joint proxy statement/prospectus is dated
, 2000. Stockholders should not assume that the information
contained in this joint proxy statement/prospectus is accurate as of any other
date, and neither the mailing of this joint proxy statement/prospectus to
stockholders nor the issuance of i2 COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this joint
proxy statement/prospectus, and later information filed with the Securities and
Exchange Commission will update and supersede this information. This joint proxy
statement/prospectus incorporates by reference the documents set forth below
that i2 and Aspect have previously filed with the Securities and Exchange
Commission. The documents contain important information about i2 and Aspect and
their finances.
We incorporate by reference i2's:
- Definitive proxy statement for its 1999 annual meeting of stockholders;
- Annual report on Form 10-K for the year ended December 31, 1999;
- Current reports on Form 8-K filed January 21, 2000, March 14, 2000 (as
amended by Form 8-K/A filed March 17, 2000) and April 10, 2000; and
84
<PAGE> 95
- The description of i2 common stock contained in i2's registration
statement on Form 8-A (File No. 0-28030) filed on March 20, 1996
registering the i2 common stock under Section 12(g) of the Securities
Exchange Act of 1934.
In addition, all of i2's filings with the Securities and Exchange
Commission after the date of this joint proxy statement/prospectus under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 shall be deemed
to be incorporated by reference until the merger becomes effective.
We also incorporate by reference Aspect's:
- Definitive proxy statement for its 1999 annual meeting of stockholders;
- Annual report on Form 10-K for the year ended December 31, 1999;
- Current reports on Form 8-K dated December 31, 1999 and March 17, 2000;
and
- The description of Aspect common stock contained in Aspect's Registration
Statement on Form SB-2 (File No. 333-3840-LA) filed on April 19, 1996
registering the Aspect common stock under Section 12(g) of the Securities
Exchange Act of 1934.
In addition, all of Aspect's filings with the Securities and Exchange
Commission after the date of this joint proxy statement/prospectus under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 shall be deemed
to be incorporated by reference until the merger becomes effective.
Any statement contained in this joint proxy statement/prospectus or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this joint proxy
statement/prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this joint proxy statement/prospectus.
85
<PAGE> 96
INDEX TO FINANCIAL STATEMENTS
SUPPLYBASE, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Stockholders' Deficit for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-14
Audited Consolidated Financial Statements
Consolidated Balance Sheets................................. F-15
Consolidated Statements of Operations....................... F-16
Consolidated Statements of Stockholders' Equity
(Deficiency).............................................. F-17
Consolidated Statements of Cash Flows....................... F-18
Notes to Consolidated Financial Statements.................. F-19
</TABLE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed consolidated balance sheets
(unaudited) -- December 31, 1999 and June 30, 1999........ F-27
Condensed consolidated statements of operations
(unaudited) -- three months ended December 31, 1999 and
1998...................................................... F-28
Condensed consolidated statements of operations
(unaudited) -- six months ended December 31, 1999 and
1998...................................................... F-29
Condensed consolidated statements of cash flows
(unaudited) -- six months ended December 31, 1999 and
1998...................................................... F-30
Notes to condensed consolidated financial statements
(unaudited) -- December 31, 1999.......................... F-31
</TABLE>
F-1
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SupplyBase, Inc.:
We have audited the accompanying balance sheets of SupplyBase, Inc. (the
Company) as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' deficit, and cash flows for the years ended December
31, 1997, 1998 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company, as of December
31, 1998 and 1999, and the results of its operations and its cash flows for the
years ended December 31, 1997, 1998 and 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has incurred net losses and negative operating
cash flows since inception that raise substantial doubt about its ability to
continue as a going concern. Continuation of the Company as a going concern is
dependent upon management's ability to obtain additional financing. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
[KPMG LLP]
San Francisco, California
March 24, 2000
F-2
<PAGE> 98
SUPPLYBASE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 676,778 $ 2,642,021
Accounts receivable, net of reserves of $0 and $47,494 as
of December 31, 1998 and 1999, respectively............ 86,082 81,586
Other current assets...................................... -- 82,213
---------- -----------
Total current assets.............................. 762,860 2,805,820
Property and equipment, net................................. 64,400 484,905
Other assets................................................ 25 1,029
---------- -----------
$ 827,285 $ 3,291,754
========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 64,478 $ 217,900
Accrued liabilities....................................... 42,704 328,089
Deferred revenue.......................................... 106,958 487,625
Line of credit and capital lease payable.................. 221,032 295,462
---------- -----------
Total current liabilities......................... 435,172 1,329,076
---------- -----------
Long-term liabilities....................................... -- 176,979
Commitments
Series B redeemable preferred stock, $0.001 par value,
3,076,461 shares authorized, 2,963,830 shares issued and
outstanding in 1998 and 1999; $4,875,500 liquidation
preference................................................ 1,377,347 1,380,398
Series C redeemable preferred stock, $0.001 par value,
5,500,000 shares authorized, 4,676,667 shares issued and
outstanding in 1999; $24,552,501 liquidation preference... -- 6,988,196
Stockholders' deficit:
Series A preferred stock, $0.001 par value, 4,289,496
shares authorized, 4,289,496 shares issued and
outstanding in 1998 and 1999; $3,217,122 liquidation
preference............................................. 4,289 4,289
Common stock, $0.001 par value, 10,000,000 shares
authorized, 1,861,562 and 3,145,829 shares issued and
outstanding in 1998 and 1999, respectively............. 1,861 3,145
Additional paid-in capital (capital deficit).............. (19,373) 16,240,934
Deferred stock-based compensation......................... -- (13,662,097)
Accumulated deficit....................................... (972,011) (9,169,166)
---------- -----------
Total stockholders' deficit....................... (985,234) (6,582,895)
---------- -----------
$ 827,285 $ 3,291,754
========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 99
SUPPLYBASE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
--------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................... $ 75,883 $ 172,188 $ 273,413
Cost of revenues....................................... 16,611 47,478 115,748
--------- ----------- -----------
Gross margin........................................... 59,272 124,710 157,665
Operating expenses:
Research and development............................. 91,279 328,784 1,951,674
Sales and marketing.................................. 168,134 223,738 2,783,773
General and administrative........................... 249,206 619,308 3,763,917
--------- ----------- -----------
Total operating expenses..................... 508,619 1,171,830 8,499,364
--------- ----------- -----------
Loss from operations......................... (449,347) (1,047,120) (8,341,699)
Other (expense) income, net............................ (9,455) 6,109 150,804
--------- ----------- -----------
Net loss..................................... (458,802) (1,041,011) (8,190,895)
Accretion on redeemable preferred stock................ -- -- (6,260)
--------- ----------- -----------
Net loss applicable to common stockholders... $(458,802) $(1,041,011) $(8,197,155)
========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 100
SUPPLYBASE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
ADDITIONAL
SERIES A PREFERRED PAID-IN
MEMBER UNITS STOCK COMMON STOCK CAPITAL DEFERRED
---------------------- ------------------ ------------------ (CAPITAL STOCK-BASED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT) COMPENSATION
---------- --------- --------- ------ --------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of member units..... 1,072,374 $ 304,642 -- $ -- -- $ -- -- --
Net loss..................... -- -- -- -- -- -- -- --
---------- --------- --------- ------ --------- ------ ---------- -----------
Balances as of December 31,
1997....................... 1,072,374 304,642 -- -- -- -- -- --
Conversion of member units to
Series A preferred stock... (1,072,374) (304,642) 4,289,496 4,289 -- -- 300,353 --
Transfer of accumulated
deficit to additional
paid-in capital in
connection with termination
of S corporation status.... -- -- -- -- -- -- (527,802) --
Issuance of common stock to
founders in exchange for
services and accrued
payroll obligations........ -- -- -- -- 448,498 448 155,311 --
Issuance of common stock in
exchange for services...... -- -- -- -- 457,854 458 5,955 --
Exercise of stock options.... -- -- -- -- 955,300 955 46,810 --
Net loss..................... -- -- -- -- -- -- -- --
---------- --------- --------- ------ --------- ------ ---------- -----------
Balances as of December 31,
1998....................... -- -- 4,289,496 4,289 1,861,652 1,861 (19,373) --
Exercise of stock options.... -- -- -- -- 1,248,910 1,249 116,406 --
Issuance of common stock in
exchange for services...... -- -- -- -- 70,267 70 1,690,871 (731,250)
Repurchase of common stock... -- -- -- (35,000) (35) (1,715) --
Deferred stock-based
compensation............... -- -- -- -- -- -- 14,454,745 (14,454,745)
Amortization of deferred
stock-based compensation... -- -- -- -- -- -- -- 1,523,898
Net loss..................... -- -- -- -- -- -- -- --
Accretion on redeemable
preferred stock............ -- -- -- -- -- -- -- --
---------- --------- --------- ------ --------- ------ ---------- -----------
Balances as of December 31,
1999....................... -- $ -- 4,289,496 $4,289 3,145,829 $3,145 16,240,934 (13,662,097)
========== ========= ========= ====== ========= ====== ========== ===========
<CAPTION>
TOTAL
STOCK-
ACCUMULATED HOLDERS'
DEFICIT DEFICIT
----------- ----------
<S> <C> <C>
Issuance of member units..... -- 304,642
Net loss..................... (458,802) (458,802)
---------- ----------
Balances as of December 31,
1997....................... (458,802) (154,160)
Conversion of member units to
Series A preferred stock... -- --
Transfer of accumulated
deficit to additional
paid-in capital in
connection with termination
of S corporation status.... 527,802 --
Issuance of common stock to
founders in exchange for
services and accrued
payroll obligations........ -- 155,759
Issuance of common stock in
exchange for services...... -- 6,413
Exercise of stock options.... -- 47,765
Net loss..................... (1,041,011) (1,041,011)
---------- ----------
Balances as of December 31,
1998....................... (972,011) (985,234)
Exercise of stock options.... -- 117,655
Issuance of common stock in
exchange for services...... -- 959,691
Repurchase of common stock... -- (1,750)
Deferred stock-based
compensation............... -- --
Amortization of deferred
stock-based compensation... -- 1,523,898
Net loss..................... (8,190,895) (8,190,895)
Accretion on redeemable
preferred stock............ (6,260) (6,260)
---------- ----------
Balances as of December 31,
1999....................... (9,169,166) (6,582,895)
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 101
SUPPLYBASE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................. $(458,802) $(1,041,011) $(8,190,895)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization..................... 3,068 18,126 80,621
Amortization of deferred stock-based
compensation.................................... -- -- 1,523,898
Common stock issued in exchange for services...... -- 10,898 959,691
Changes in operating assets and liabilities:
Accounts receivable, net........................ (26,813) (59,269) 4,496
Prepaid expenses................................ (405) 405 (82,213)
Other assets.................................... (2,000) 1,975 (1,004)
Accounts payable and accrued liabilities........ 180,614 77,842 438,807
Deferred revenue................................ 39,930 67,028 380,667
--------- ----------- -----------
Net cash used in operating activities........ (264,408) (924,006) (4,885,932)
--------- ----------- -----------
Cash flows used in investing activities -- acquisition
of property and equipment............................ (12,963) (72,631) (204,433)
--------- ----------- -----------
Cash flows from financing activities:
Notes payable........................................ -- 221,032 209,836
Payments of note payable............................. -- -- (221,032)
Repayment of capital leases.......................... -- -- (34,088)
Proceeds from issuance of members' capital........... 304,642 -- --
Proceeds from issuance of preferred stock............ -- 1,377,347 6,984,987
Proceeds from issuance of common stock............... -- 47,765 117,655
Repurchases of common stock.......................... -- -- (1,750)
--------- ----------- -----------
Net cash provided by financing activities.... 304,642 1,646,144 7,055,608
--------- ----------- -----------
Net increase in cash and cash equivalents.............. 27,271 649,507 1,965,243
Cash and cash equivalents at beginning of period....... -- 27,271 676,778
--------- ----------- -----------
Cash and cash equivalents at end of period............. $ 27,271 $ 676,778 $ 2,642,021
========= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest............................... $ -- $ 3,830 $ 33,288
========= =========== ===========
Non-cash investing and financing activities:
Conversion of member units to series A preferred
stock............................................. $ -- $ 304,642 $ --
========= =========== ===========
Forgiveness of payroll liability to founders......... $ -- $ 151,274 $ --
========= =========== ===========
Assets acquired under capital leases................. $ -- $ -- $ 296,693
========= =========== ===========
Deferred stock-based compensation.................... $ -- $ -- $15,185,995
========= =========== ===========
Accretion on redeemable preferred stock.............. $ -- $ -- $ 6,260
========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 102
SUPPLYBASE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The Company
The Company was established as a limited liability company (LLC) in June
1996 and changed its ownership structure to a C-corporation in March 1998.
The Company was formed to address industry inefficiencies with
identifying, qualifying and communicating with industrial suppliers
worldwide. The Company develops high-end, interactive database products,
services, and supply chain management tools for corporations and the
industrial supplier communities that serve them. The Company leverages the
Internet and established distribution channels to deliver information and
tools worldwide to purchasing, engineering, design, and sourcing
professionals.
(b) Basis of Presentation
The Company has incurred net losses and negative operating cash flows
since inception that raise substantial doubt about its ability to continue
as a going concern. The accompanying financial statements have been
prepared contemplating the Company continuing in existence as a going
concern. Continuation of the Company as a going concern is dependent on
management's ability to obtain additional financing.
(c) Cash Equivalents
All highly liquid financial instruments with remaining maturities of three
months or less at the date of acquisition are considered cash equivalents.
Cash equivalents are recorded at cost.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated
useful lives of the respective assets, generally three to five years.
Leasehold improvements and assets recorded under capital leases are
amortized on a straight-line basis over the lesser of the related asset's
estimated useful life or the remaining lease term.
(e) Accounting for Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets held and used is measured
by a comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the lower of
their carrying amount or fair value less cost to sell. To date, the
Company has made no adjustments to the carrying value of its long-lived
assets.
(f) Income Taxes
From inception to March 1998, the Company elected to be treated as a
partnership. Accordingly, no provision for income taxes has been
recognized in the accompanying financial statements through that date, as
the net loss generated from the Company's operations through that date
were "passed through" to the Company's then interest holders.
F-7
<PAGE> 103
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Since March 1998, income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(g) Revenue Recognition
Software license and database access fees are recognized over the economic
life of the product technology as estimated by management, generally two
years. Maintenance fees are recognized ratably over the term of the
contract, generally one year. Revenues for web site directory development,
for which payments are expected to be collectible, are recognized upon
completion of the development. Revenues for advertising subscriptions are
recognized ratably over the advertisement term, generally one year.
(h) Concentration of Credit Risk
Financial instruments potentially exposing the Company to a concentration
of credit risk principally consist of cash and cash equivalents and
accounts receivable. Cash and cash equivalents consist of deposits with a
major commercial bank and major commercial money market funds. The Company
has not experienced any losses from write-offs of bad debt. One customer
accounts for 44% and 33% of total accounts receivable as of December 31,
1998 and 1999, respectively. A second customer accounts for 17% and 23% of
total accounts receivable as of December 31, 1998 and 1999, respectively.
A third customer accounts for 25% of total accounts receivable on December
31, 1999. There were no receivables from this customer in December 31,
1998.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998 and 1999 consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Computer, office equipment and software..................... $58,902 312,080
Furniture and fixtures...................................... 26,692 209,251
Leasehold improvements...................................... -- 65,389
------- -------
85,594 586,720
Less accumulated depreciation and amortization.............. 21,194 101,815
------- -------
$64,400 484,905
======= =======
</TABLE>
F-8
<PAGE> 104
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, the Company has assets on lease totaling $292,357 and
the related accumulated amortization is $99,610.
(3) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes a restricted cash balance of $133,800 as
of December 31, 1999. The cash is restricted by the bank which has issued a
letter of credit to the lessor of the office premises. The lessor can
revoke the letter of credit in the event of a default in rent, and the
restriction lapses in July 2000.
(4) COMMITMENTS
(a) Short-Term Borrowings
In July 1998, the Company entered into a line of credit agreement with
a bank for $400,000. Borrowings under the line of credit carry interest
at prime rate plus 0.5% (8.5% as of December 31, 1999). During 1999,
the line of credit was revised to $1,471,032. As of December 31, 1998
and 1999, the Company had $221,032 and $209,836 outstanding against the
line of credit. The weighted-average interest rate for the period the
loan was outstanding was 9.25%. Outstanding balances are collateralized
primarily with equipment and accounts receivable and are repayable in
equal monthly installments by February 2001.
(b) Lease Obligations
The Company leases its facilities under a noncancelable operating lease
and has acquired computers and other equipment through capital leases.
In June 1999, the Company entered into a noncancelable operating lease
for its facilities that extends through 2004. Future minimum lease
payments for both operating and capital leases as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
---------- --------
<S> <C> <C>
Year ending December 31,
2000...................................................... $ 416,725 $107,014
2001...................................................... 416,325 110,410
2002...................................................... 422,273 71,745
2003...................................................... 428,220 3,396
2004...................................................... 214,110 --
---------- --------
$1,897,653 292,565
==========
Less amount representing interest (3.1%).................... (29,960)
--------
Present value of minimum lease payments..................... 262,605
Less amounts due within one year............................ 95,936
--------
$166,669
========
</TABLE>
Rent expense for the years ended December 31, 1998 and 1999 was
approximately $37,000 and $292,000, respectively.
(5) MEMBERS' CAPITAL
In March 1998, the Company changed its legal form from a limited liability
corporation (LLC) to a C corporation. Thereupon, the holders of membership
interests in the former LLC exchanged those interests for 4,289,496 shares
of Series A preferred stock in the newly created C corporation.
F-9
<PAGE> 105
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) STOCKHOLDERS' DEFICIT
(a) Preferred Stock
As of December 31, 1999, preferred stock consisted of the following:
<TABLE>
<CAPTION>
SHARES ISSUED
SHARES AND
AUTHORIZED OUTSTANDING
---------- -------------
<S> <C> <C>
Series A............................................ 4,289,496 4,289,496
Series B............................................ 3,076,461 2,963,830
Series C............................................ 5,500,000 4,676,667
---------- ----------
12,865,957 11,929,993
========== ==========
</TABLE>
The rights, preferences, and privileges of the holders of preferred stock
are as follows:
- The Company shall be obligated to redeem Series B and Series C
preferred stock at the original price of issuance at any time after
March 19, 2004, at the option of the holders of 65% or more of the
Series B and C preferred stockholders voting together as a single
class or in the event that any other capital stock of the Company is
to be redeemed for any reason.
- The holders of Series B and C preferred stock are entitled to
noncumulative dividends in preference to common stock and Series A, if
and when declared by the Board of Directors, of $0.047 and $0.015 per
share, respectively. Holders of Series A are entitled to dividend in
preference to common stock at $0.075 per share after the Series B and
C shares dividend has been paid.
- Shares of preferred stock are convertible to common stock at any time
at the rate of one share of common stock for each share of preferred
stock. The preferred stock automatically converts to common stock upon
the closing of an underwritten public offering of the Company's common
stock.
- Shares of Series B and C preferred stock have a liquidation preference
of $0.47 and $1.50 per share, respectively, plus any declared and
unpaid dividends. Upon the distribution as required above, the
remaining assets of the Company would be distributed among the holders
of Series A, B, C and common stock pro rata based on the number of
shares of $0.25 common stock held by each (assuming full conversion)
until holders of Series B and C have received an aggregate of $1.645
and $5.25, respectively. The holders of Series A and common stock
would receive the remainder of the assets on a pro rata basis.
- The preferred stock votes equally with shares of common stock on an
"as if converted" basis.
No dividends have been declared or paid on the preferred stock or common
stock since inception of the Company.
(b) Common Stock
In 1998, the Company issued 448,498 shares of restricted common stock
to its founders in exchange for past services valued as $155,759. As of
the issuance date, 33% of the shares were not subject to repurchase.
The remaining shares will be released from the repurchase option
ratably over 48 months. As of December 31, 1999, the Company has the
right to repurchase 181,548 shares of common stock at a
weighted-average price of $0.25 per share.
F-10
<PAGE> 106
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company issued 70,267 shares of common stock to consultants in
exchange for certain services received by the Company in 1999. The
Company has recorded compensation expense for these shares based on the
fair value of the shares at the date of issuance. In total,
approximately $1.7 million was recorded as compensation expenses
related to the issuance of these shares.
(c) Stock Option Plan
As of December 31, 1999, a total of 5,000,788 shares of common stock were
authorized for issuance under the 1998 (3,287,499 shares) and 1999
(1,713,289 shares) Stock Option Plans (the Plans). Options may be granted
at an exercise price not less than 100% of the fair market value at the
grant date, as determined by the Board of Directors, for incentive stock
options, and 85% of fair market value at the grant date for nonqualified
stock options. All options are granted at the discretion of the Company's
Board of Directors and have a term no greater than 10 years from the date
of grant. Options issued generally vest 25% one year after the vesting
commencement date and ratably over the following 36 months.
A summary of stock option activity is as of follows:
<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE
- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares under options outstanding at
beginning of year....................... -- $ -- 563,910 $0.05
Granted................................... 1,519,210 0.05 1,912,700 0.15
Exercised................................. 955,300 0.05 1,248,910 0.10
Canceled.................................. -- -- 322,000 0.15
--------- ----- --------- -----
Shares under options outstanding at end
of year.............................. 563,910 0.05 905,700 0.15
========= =========
Options vested at end of year............. -- 90,030
========= =========
Weighted-average fair value of options
granted during the year at fair value... $0.06 $0.06
===== =====
Weighted-average fair value of options
granted during the year at below fair
value................................... $ -- $6.63
===== =====
</TABLE>
The following table summarizes information about stock options outstanding
as of December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING
- -----------------------------------
WEIGHTED-
AVERAGE
REMAINING
EXERCISE NUMBER CONTRACTUAL NUMBER
PRICE OUTSTANDING LIFE VESTED
- -------- ----------- ----------- --------
<S> <C> <C> <C>
$0.15 905,700 9.66 90,030
</TABLE>
As of December 31, 1999, the Company has the right to repurchase 1,638,168
shares of common stock related to the early exercise of options at a
weighted-average exercise price of $0.07 per share. The Company uses the
intrinsic value method to account for the Plans. Accordingly, compensation
cost has been recognized for its stock options in the accompanying
financial statements if, on the date of grant, the estimated fair value of
the underlying common stock exceeded the exercise price
F-11
<PAGE> 107
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the stock options at the date of grant. In connection with options
granted in fiscal year 1999, the Company has recorded deferred stock-based
compensation of $14.5 million, representing the difference between the
exercise price and the estimated fair value of the Company's common stock
at the date of grant. The amount is being amortized on a straight-line
basis over the vesting period of the individual options. Amortization of
deferred stock-based compensation of approximately $1.5 million was
recognized during 1999.
Had compensation cost for the Company's stock-based compensation plans
been determined consistent with the fair value approach set forth in
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, the Company's net loss for the years ended
December 31, 1997, 1998 and 1999 would not have differed materially.
The fair value of options granted during the years ended December 31,
1997, 1998 and 1999, is estimated on the date of grant using the minimum
value method with the following weighted-average assumptions: no dividend
yield, 0% volatility, risk-free interest rates ranging from 5.6% to 6.5%
and an expected life of 5 years.
(7) INCOME TAXES
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets as of December 31, 1999, is presented
below:
<TABLE>
<S> <C>
Deferred tax assets:
Accrued expenses.......................................... $ 37,641
Start-up and organization costs capitalized for tax....... 1,176
Net operating loss compensation........................... 2,497,136
Stock option compensation................................. 216,828
Tax credits............................................... 186,791
Federal depreciation less than book....................... 3,423
-----------
Gross deferred tax assets......................... 2,942,995
Valuation allowance....................................... (2,942,995)
-----------
Net deferred tax assets........................... $ --
===========
</TABLE>
Deferred tax assets as of December 31, 1999, consisted primarily of net
operating loss carryforwards of $6,269,000 for deferred tax purposes. The
gross deferred tax asset are fully offset by a valuation allowance.
Federal and California tax law impose substantial restrictions on the
utilization of net operating loss carryforwards in the event of an
"ownership change" for tax purposes, as defined in Section 382 of the
Internal Revenue Code. The Company has not yet determined if an ownership
change has occurred. If such an ownership change has occurred, utilization
of the net operating loss carryforwards will be subject to an annual
limitation in future years.
(8) RELATED PARTY TRANSACTIONS
During 1999, the Company rendered services to Flextronics International
which held 531,915 shares of Preferred Series B and 255,013 shares of
Preferred Series C stock of the Company. The sales during the year ended
December 31, 1999 aggregated to $98,000 and the Company had a receivable
from Flextronics International on December 31, 1999 of $30,000.
F-12
<PAGE> 108
SUPPLYBASE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) EMPLOYEE BENEFIT PLANS
The Company has an employee savings and retirement plan under Section
401(k) of the Internal Revenue Code for its eligible employees (the Benefit
Plan). The Benefit Plan is available to all domestic employees who meet
minimum age and service requirements, and provides employees with tax
deferred salary deductions and alternative investment options. Employees
may contribute up to 20% of their salary, subject to certain limitations.
The Benefit Plan allows for contributions by the Company at the discretion
of the Company's Board of Directors. The Company has not contributed to the
Benefit Plan since its inception. The participants' contribution in 1999
was $131,151.
(10) SUBSEQUENT EVENT
The Company has signed a definitive merger agreement with i2 Technologies,
Inc. (i2) on March 12, 2000, whereby i2 will acquire SupplyBase for
1,875,000 shares of i2 common stock. The merger is expected to be completed
by April 30, 2000 and will be accounted for as a purchase transaction by
i2.
F-13
<PAGE> 109
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Directors of
Transition Analysis Component Technology, Inc.
We have audited the accompanying consolidated balance sheets of Transition
Analysis Component Technology, Inc. ("TACTech") as of June 30, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TACTech as of
June 30, 1999 and 1998, and the consolidated results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
White Plains, New York
September 24, 1999
F-14
<PAGE> 110
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 212,188 $ 120,204
Accounts receivable, less allowance of $40,000 in 1999 and
$20,000
in 1998................................................ 960,086 754,442
Prepaid expenses and other current assets................. 60,560 63,593
Deferred tax asset........................................ 98,000 --
---------- ----------
Total current assets.............................. 1,330,834 938,239
Furniture and equipment..................................... 758,341 669,056
Less: accumulated depreciation.............................. 497,423 407,031
---------- ----------
260,918 262,025
Other assets:
Security deposits......................................... 83,379 81,723
Software development costs-net............................ 47,106 59,946
Excess of costs over fair value of net assets acquired,
net of accumulated amortization of $10,323............ 45,983 51,614
---------- ----------
Total assets...................................... $1,768,220 $1,393,547
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses..................... $ 315,890 $ 411,225
Accrued compensation expense.............................. 373,384 332,257
Accrued income taxes...................................... 98,000 --
Deferred income........................................... 531,080 300,683
Revolving line of credit.................................. 570,000 --
---------- ----------
Total current liabilities......................... 1,888,354 1,044,165
Long-term obligation -- revolving line of credit............ -- 620,000
Contingencies (Note 10)
Stockholders' equity (deficiency):
Common stock (par value $.01 per share); Authorized
5,000,000 as of June 30, 1999 and June 30, 1998; issued
598,734 as of June 30, 1999 and June 30, 1998.......... 5,987 5,987
Additional paid-in capital................................ 552,779 552,779
Accumulated deficit....................................... (678,900) (829,384)
---------- ----------
Total stockholders' equity (deficiency)........... (120,134) (270,618)
---------- ----------
Total liabilities and stockholders' equity
(deficiency).................................... $1,768,220 $1,393,547
========== ==========
</TABLE>
See accompanying notes.
F-15
<PAGE> 111
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues.................................................... $4,512,274 $3,482,788
Selling, general and administrative expenses................ 4,189,512 4,087,410
Depreciation of equipment................................... 90,391 73,303
Amortization of software development costs and acquisition
costs..................................................... 18,471 15,392
Interest expense............................................ 63,416 41,683
---------- ----------
Income (loss) before income taxes........................... 150,484 (735,000)
Provision for income taxes.................................. -- --
---------- ----------
Net income (loss)........................................... $ 150,484 $ (735,000)
========== ==========
Net income (loss) per common share -- basic................. $ 0.25 $ (1.25)
========== ==========
Net income (loss) per common share -- diluted............... $ 0.24 $ (1.25)
========== ==========
Average number of outstanding shares -- basic............... 598,734 586,106
========== ==========
Average number of outstanding shares -- diluted............. 621,434 586,106
========== ==========
</TABLE>
See accompanying notes.
F-16
<PAGE> 112
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED EQUITY
STOCK CAPITAL DEFICIT (DEFICIENCY)
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1997 prior to
distribution.................................. $ 152 $ 554,571 $ (94,384) $ 460,339
Stock split..................................... 5,386 (5,386) --
Costs in connection with the distribution of
stock......................................... (108,218) (108,218)
Balance at June 30, 1997........................ 5,538 440,967 (94,384) 352,121
Shares issued in RAC acquisition (Note 1)....... 449 111,812 112,261
Net loss........................................ (735,000) (735,000)
------ --------- --------- ---------
Balance at June 30, 1998........................ 5,987 552,779 (829,384) (270,618)
Net income...................................... 150,484 150,484
------ --------- --------- ---------
Balance at June 30, 1999........................ $5,987 $ 552,779 $(678,900) $(120,134)
====== ========= ========= =========
</TABLE>
See accompanying notes.
F-17
<PAGE> 113
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating activities
Net income (loss)......................................... $ 150,484 $(735,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 90,392 73,303
Amortization........................................... 18,471 15,392
Provision for losses in accounts receivable............ 20,000 15,000
Deferred taxes......................................... (98,000) --
Changes in operating assets and liabilities:
Accounts receivable.................................. (225,644) (261,711)
Prepaid expenses and other current assets............ 3,033 (52,893)
Accounts payable and accrued expenses................ (95,335) 227,102
Accrued compensation................................. 41,127 233,951
Accrued income taxes................................. 98,000 --
Accrued income tax due former parent company......... -- (169,815)
Deferred income...................................... 230,397 220,778
Security deposits.................................... (1,656) (80,357)
--------- ---------
Net cash provided by (used in) operating
activities...................................... 231,269 (514,250)
Investing activities
Cost related to RAC acquisition, net of cash received..... -- 11,448
Purchases of equipment.................................... (89,285) (119,176)
Additions to software development......................... -- (10,726)
--------- ---------
Net cash used in investing activities............. (89,285) (118,454)
--------- ---------
Financing activities
Proceeds from line of credit.............................. 225,000 620,000
Reduction of borrowings................................... (275,000) --
--------- ---------
Net cash provided by (used in) financing
activities...................................... (50,000) 620,000
--------- ---------
Net increase (decrease) in cash............................. 91,984 (12,704)
Cash at beginning of year................................... 120,204 132,908
--------- ---------
Cash at end of year......................................... $ 212,188 $ 120,204
========= =========
</TABLE>
See accompanying notes.
F-18
<PAGE> 114
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Prior to June 30, 1997, Transition Analysis Component Technology, Inc.
("TACTech" or the "Company") was a 90% owned subsidiary of Zing Technologies,
Inc. ("Zing"), the Company's former parent, and the remaining 10% was owned by
one officer of the Company. TACTech is located in Yorba Linda, California.
The Company filed a registration statement on Form SB-1, which became
effective June 30, 1997, for the purpose of distributing the Common Stock of the
Company which was owned by Zing to the shareholders of Zing (the
"Distribution"). In connection with the Distribution, the Common Stock
authorized and outstanding was split on approximately a 36.436-for-one basis.
Also, in connection with the Distribution, intercompany advances (excluding
income taxes) as of the effective date of the Distribution were converted to
equity and, accordingly, were included within additional paid-in capital.
As of the date of the Distribution, the Company engaged certain employees
of Zing (with the permission of Zing) on a part-time basis to render to the
Company the following services for a cost not to exceed $100,000 per year
including: to advise in the development of the Company's business plan, to
advise the Company with respect to and to negotiate agreements on the Company's
behalf, to coordinate communications with the Company's stockholders, to advise
the Company with respect to and to negotiate acquisitions and financing, to
prepare and file the Company's tax returns and reports required by applicable
securities laws and rules of applicable stock exchanges, to review and supervise
the Company's accounting department and systems from time to time and suggest
revisions and changes thereto, and to perform such further services as such
employees may agree.
ACQUISITION OF RESEARCH ANALYSIS CORP.
On September 22, 1997, TACTech acquired the net assets of Research Analysis
Corp. ("RAC"), consisting primarily of search and report software pursuant to a
merger (the "Merger") of TACTech's newly formed and wholly owned subsidiary,
with and into RAC. Upon consummation of the Merger, RAC, as the surviving
corporation, became a wholly owned subsidiary of the Company. Pursuant to the
Merger, the sole shareholders of RAC exchanged all their shares in RAC common
stock for 44,904 unregistered shares of common stock in the Company. The cost of
the acquisition, including the shares given, was approximately $193,000. As a
result of this transaction, the Company recorded approximately $56,000 of costs
in excess of fair value of net assets acquired, which is being amortized over 10
years. The RAC acquisition was accounted for pursuant to the purchase method of
accounting and is effective as of September 1, 1997.
The purchased net assets of RAC were allocated as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 45,400
Accounts receivable, net.................................... 88,400
Furniture and equipment..................................... 26,000
Other assets................................................ 61,300
Excess of costs over fair value of net assets acquired...... 56,300
Accounts payable and accrued expenses....................... (84,400)
--------
$193,000
========
</TABLE>
F-19
<PAGE> 115
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma information has been prepared assuming
that this acquisition had taken place at the beginning of the fiscal year 1998
after giving effect to pro forma adjustments for compensation accruals and
income taxes. The number of shares used in the computations of net loss per
common share is 598,734.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1998
-------------
<S> <C>
Revenue..................................................... $3,565,855
Net (loss) income........................................... $ (775,000)
Net (loss) income per common share -- basic and diluted..... $ (1.29)
</TABLE>
GENERAL BUSINESS DESCRIPTION
TACTech is a semiconductor information service provider which licenses
proprietary computer software tools combined with electronic semiconductor
availability libraries and data bases that are utilized by various segments of
the Department of Defense, the defense/aerospace industry, and industrial users
of high reliability semiconductors and manufacturers and distributors of high
reliability and military grade semiconductors. The Company operates as one
business segment.
RAC principally derived revenues from consulting services and
customer-specific projects under cost plus fixed fee contracts with the
Department of Defense and government contractors related specifically to
training services, engineering support and logistics support. These contractual
services deal with issues of reliability, maintainability, failure analyses,
reliability predictions, circuit card redesign, provisioning and weapons system
file data extraction. Since the acquisition of RAC by TACTech, RAC has continued
to refine (and commenced marketing) "TACTRAC" developed to adapt RAC's component
analysis technology, used in connection with RAC's consulting services, to
TACTech's component data base technology.
REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK
Revenue from the Company's basic library subscription service is recognized
monthly. Revenue from the enhanced TACTRAC Health Model is recognized as
follows: Fees for the installation and delivery of the database information and
workstation software into a customer server are recognized upon completion of
the installation and are non-refundable. Fees for additional concurrent user
stations are similarly recognized upon installation. Revenue from one customer
was 10% of total revenue for 1999. Revenues from no one customer exceeded 10% of
total revenue for 1998. U.S. government agencies accounted for approximately 16%
of revenues for 1999. Sales to foreign customers, primarily located in Europe,
accounted for approximately 15% of revenue for 1999.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost and is depreciated using the
straight-line method over five years.
SOFTWARE DEVELOPMENT COSTS
The Company begins capitalizing software development costs only after
establishing commercial and technical viability. Software development costs are
amortized using the straight line method over the remaining estimated economic
life of the product, generally five years. Accumulated amortization of software
development costs was $23,540 and $10,700 at June 30, 1999 and 1998,
respectively.
F-20
<PAGE> 116
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Advertising costs are charged to expense in the year incurred and totaled
$96,600 and $8,500 for the years ended June 30, 1999 and 1998, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INFORMATION
The carrying amounts of cash, accounts receivable, accounts payable and
accrued expenses reasonably approximate fair value due to the short maturity of
these items. The carrying value of the Company's borrowings under its revolving
line of credit, approximates fair value, as the obligation bears interest at a
floating rate.
NET INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted-average number of common shares outstanding during the period.
The diluted income (loss) per share computation includes the dilutive effect, if
any, of shares which would be issuable upon the exercise of outstanding stock
options, reduced by the number of shares assumed to be purchased by the Company
from the resulting proceeds at the average market price during the period.
IMPAIRMENTS
The Company records impairment losses on long-lived assets when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amount of those assets. There have been no such impairment losses through June
30, 1999.
STOCK-BASED COMPENSATION
The Company applies the recognition and measurement provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
in reporting for stock options.
2. AGREEMENTS
In April 1993, TACTech entered into a three-year exclusive licensing
agreement with a distributor of electronic components at an annual rate of
$108,000 and this agreement was amended in May 1993 with an expiration date of
June 1998 and the annual rate was increased to $200,000 effective July 1995. As
of July 1, 1998, the annual rate was increased to $230,000 and the term extended
one year to June 30, 1999. The agreement was extended effective July 1, 1999 to
December 31, 2000 at the same rate of $230,000. TACTech has agreed that during
the term of this agreement it would not grant or authorize any other party
access to its data bases or services if such party were in the business of
distributing electronic component parts.
F-21
<PAGE> 117
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES
Through the date of the Distribution, the Company filed a consolidated
federal tax return with its former parent, Zing. Income taxes were computed on a
separate company basis pursuant to the liability method. As a result of the
Distribution, the Company will file its own separate tax returns for fiscal
years 1999 and 1998.
The Company records income taxes under the liability method of accounting.
Deferred taxes are provided for temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and amounts
used for income tax purposes. Deferred tax assets and liabilities are recorded
at the rates expected to be in effect when the temporary differences reverse.
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
---------------
1999 1998
-------- ----
<S> <C> <C>
Current
Federal................................................... $ 77,000 $--
State..................................................... 21,000 --
-------- ---
98,000
-------- ---
Deferred
Federal................................................... (77,000) --
State..................................................... (21,000) --
-------- ---
(98,000) --
-------- ---
$ -- $--
======== ===
</TABLE>
Significant components of the Company's deferred taxes are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------
1999 1998
------ ------
(000'S OMITTED)
<S> <C> <C>
Net operating losses........................................ $ -- $ 91
Deferred revenue............................................ 210 119
Accruals not currently deductible........................... 122 99
Allowance for doubtful accounts............................. 16 8
----- -----
Deferred tax asset.......................................... 348 317
Valuation allowance......................................... (250) (317)
----- -----
Net deferred tax asset...................................... $ 98 $ --
===== =====
</TABLE>
F-22
<PAGE> 118
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of the differences between the tax provision and the
amounts computed by applying the statutory Federal income tax rate to pre-tax
income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1999 1998
-------- ---------
(000'S OMITTED)
<S> <C> <C>
U.S. Federal statutory income tax........................... $ 51.1 $(249.9)
State taxes, net of federal benefit......................... 9.5 (41.6)
Adjustment to valuation allowance........................... (67.0) 283.3
Other....................................................... 6.4 8.2
------ -------
$ -- $ --
====== =======
</TABLE>
During the year ended June 30, 1999, the Company made no income tax
payments. During the year ended June 30, 1998, income tax payments amounted to
$28,000.
4. EMPLOYEE BENEFIT PLANS
In fiscal year 1998, the Company adopted a deferred compensation plan
("Plan") for all employees, which is qualified under Section 401(k) of the
Internal Revenue Code under which the Company's eligible employees are entitled
to participate. Under the Plan, contributions to be made by the Company are at
the discretion of the Board of Directors of the Company. The Company contributed
$9,000 and $4,100 in fiscal years 1999 and 1998, respectively.
5. LEASES
In fiscal year 1997, TACTech rented facilities in Yorba Linda, California
on a month-to-month basis.
The Company leased a new facility of approximately 11,500 square feet in
Yorba Linda commencing on October 1, 1997 for a period of five years. Pursuant
to the new non-cancelable lease, the Company is allocated a portion of the
property's common area maintenance which cannot exceed 106% of the previous
years' common area maintenance charge. The lease is collateralized by a security
deposit of $80,000 which is repayable at the rate of $15,823 annually following
each anniversary of the lease commencement until the lease expires. In addition
to the Yorba Linda facilities, the Company by virtue of its acquisition of RAC,
assumed a lease for office space in San Diego. This lease has a three year term
ending April 30, 1999 and provides for additional rent based on the tenant's
share of operating expenses in excess of a base year. The Company exercised its
option and extended the lease for a two year period ending May 1, 2001 at an
average annual rate of $26,712 per annum. Aggregated rent expense was $127,000
for the fiscal year ended June 30, 1999, as compared to $102,000 in the fiscal
year ended June 30, 1998. Aggregate future minimum lease payments on the
existing leases at June 30, 1999 are approximately as follows: 2000 -- $113,000;
2001 -- $114,000; 2002 -- $96,000 and 2003 -- $24,000.
6. REVOLVING LINE OF CREDIT
On August 28, 1997, the Company entered into a $1,500,000 revolving line of
credit facility, with an interest rate equal to the bank's prime rate (7.75% at
June 30, 1999). As amended on September 24, 1999, the facility has an expiration
date of July 1, 2000 and is guaranteed by Zing. The Company has agreed not to
incur any indebtedness under the facility on July 1, 2000 without Zing's
consent. Proceeds from the loan are to be used for working capital and equipment
acquisitions. Upon expiration of the facility, the Company may be required to
make other financing arrangements which, if required, management believes would
be available. All the company's personal property collateralizes the borrowings
under the facility. The unused portion bears a 1/2% annual commitment fee. The
Company made interest
F-23
<PAGE> 119
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
payments relating to the credit facility of approximately $63,000 and $28,000
for the fiscal years 1999 and 1998, respectively. At July 30, 1999 the balance
outstanding under the revolving line of credit was $720,000.
7. STOCKHOLDERS' EQUITY
The Company's Board of Directors adopted and the Company's stockholders
approved the Transition Analysis Component Technology, Inc. 1997 Stock Option
Plan (the "1997 Plan"). Under the 1997 Plan, options to purchase up to 60,000
shares of Company common stock are available for grant from time to time to key
employees of and consultants to the Company. On November 3, 1997, 26,200 options
were granted at an exercise price of $4.00. In accordance with a vesting plan,
8,800 options became exercisable immediately, 1,800 options are exercisable in
one year and 15,600 options are exercisable ratably over the next three years.
On April 28, 1999, 9,600 additional options were granted at an exercise price of
$5.75. These options are exercisable at the rate of 33 1/3% per annum on each
anniversary date. Options granted under the 1997 Plan expire ten years after
issuance. The weighted average remaining contractual life of these options is
8.67 years. No options were exercised as of June 30, 1999.
In addition to the Company's 1997 Plan, two key employees of RAC were
granted, pursuant to employment contracts, 44,904 stock options exercisable over
a three year period at the rate of 14,968 options per year. The per share
exercise price of these Options is $3 ("$3 Options"). The right to exercise
these options is subject to incremental vesting as (and if) the Company achieves
certain targeted sales goals. Upon the occurrence of an event or transaction, as
defined in the agreement, except for options that did not previously vest as a
result of the failure to achieve a targeted sales goal, any remaining unvested
options become immediately vested. These options expire five years after
issuance. The weighted average remaining contractual life of these options is
3.3 years. At June 30, 1999, 14,968 of these options were exercisable.
Under the provisions of SFAS No. 123, the Company is required to disclose
the fair value, as defined, of options granted to employees and the related
compensation expense. The fair value of the stock options granted was estimated
at the date of grant using a Black-Scholes option pricing model. The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. In
management's opinion, because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate. The existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The fair value
of the options granted during the years ended June 30, 1999 and 1998 was
determined using the following assumptions; risk-free interest rates of
5.73%-1999, 6.00%-1998; dividend yields of 0%, volatility factors of the
expected market price of the Company's common stock of .913 for 1999 grants and
.683 and 5.239 for 1998 grants, for the $3 and $4 options, respectively, and a
weighted-average expected life of the options of 3 years for the $3 options and
10 years for 1997 Plan options. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options' 3
year vesting period. The estimated weighted-average fair value per option is
F-24
<PAGE> 120
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $1.11 for the $3 options and $5.12 and $4.61 for 1997 Plan grants
made in 1999 and 1998, respectively. The aggregate pro forma effect on the
Company's operations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
1999 1998
-------- ---------
<S> <C> <C>
As reported:
Net income (loss)......................................... $150,484 $(735,000)
Per share:
Basic.................................................. $ 0.25 $ (1.25)
Diluted................................................ $ 0.24 $ (1.25)
Pro forma:
Net income (loss)......................................... $118,393 $(787,483)
Per share:
Basic.................................................. $ 0.20 $ (1.34)
Diluted................................................ $ 0.19 $ (1.34)
</TABLE>
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
1999 1998
-------- ---------
<S> <C> <C>
Numerator
Numerator for basic and diluted earnings per
share-income/(loss) available to common stockholders... $150,484 $(735,000)
======== =========
Denominator
Denominator for basic earnings per share-weighted average
shares................................................. 598,734 586,106
Effect of dilutive options................................ 22,700
-------- ---------
Denominator for diluted earnings per share-adjusted
weighted average shares and assumed conversions........ 621,434 586,106
======== =========
Basic....................................................... $ 0.25 $ (1.25)
======== =========
Diluted..................................................... $ 0.24 $ (1.25)
======== =========
</TABLE>
9. RELATED PARTIES
In 1997 and prior years, the Company was allocated a portion of the former
parent company's corporate administration expenses which amounted to $100,000 in
fiscal 1997. As of July 1, 1997, the administrative charge was eliminated and in
lieu thereof by agreement, certain employees of Zing, the former parent were
placed on the Company's payroll for an amount not to exceed $100,000. These
amounts are included in selling general and administrative expenses.
The President and Chief Executive Officer of the Company (also an officer
of Zing) has an employment agreement expiring on June 30, 2000, entitling him to
a salary of $80,000 per annum. There is no contractual entitlement to any bonus.
The Executive Vice President and General Manager (who is a significant
shareholder of the Company) has an employment agreement that expired on May 1,
1999, entitling him to a base salary of $120,000 per annum plus five percent
(5%) of the Company's collected revenues, except that one half percent is shared
with other employees and two and a quarter percent is shared with other sales
personnel on certain accounts.
F-25
<PAGE> 121
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to the RAC Acquisition, the two selling shareholders received
three year employment agreements. Each employment agreement provides for an
annual base salary and certain employee benefits up to an aggregate of $200,000,
and incentive bonus up to $100,000 annually, measured by the Company achieving
certain targeted sales goals.
10. CONTINGENCIES
Pursuant to an indemnification agreement entered into between the Company
and Zing in connection with the distribution by Zing of its TACTech shares of
Common Stock to Zing's stockholders (the "Distribution"), the Company agreed to
indemnify and save harmless Zing and its directors, officers, employees, agents
and/or affiliates for any claims incurred or suffered, directly or indirectly,
by them resulting from or attributable to, among other things, the operation of
the Company or the Distribution. Although the Company is not aware of any
pending or threatened material liability for which it anticipates becoming
obligated to make payments in connection with its obligations to indemnify Zing,
there can be no assurance that such indemnification obligations could not arise
or that such indemnification obligations would not be material to the Company.
Under the Indemnification Agreement, Zing is required to indemnify the Company
in certain circumstances, which obligation may counterbalance the
indemnification obligations owed by the Company to Zing.
F-26
<PAGE> 122
TRANSITION ANALYSIS COMPONENTS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1999 1999
----------- -------
(000'S OMITTED EXCEPT
SHARE DATA)
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 420 $ 212
Accounts receivable, less allowances of $40 and $40,
respectively........................................... 945 960
Prepaid expenses and other current assets................. 27 61
Deferred tax asset........................................ 98 98
------ ------
Total current assets.............................. 1,490 1,331
Furniture and equipment..................................... 779 758
Less accumulated depreciation and amortization.............. 545 497
------ ------
Other assets
Security deposits......................................... 68 83
Software development costs -- net......................... 41 47
Excess of cost over fair value of net assets acquired,
net.................................................... 43 46
------ ------
Total assets...................................... $1,876 $1,768
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 417 $ 316
Accrued compensation expense.............................. 125 373
Accrued income taxes...................................... 98 98
Deferred income........................................... 681 531
Revolving line of credit.................................. 670 570
------ ------
Total current liabilities......................... 1,991 1,888
Stockholders' equity (deficiency)
Common stock, par value $.01 per share; authorized
5,000,000 shares; issued 598,734 shares as of December
31, 1999 and June 30, 1999............................. 6 6
Additional paid-in capital................................ 553 553
Accumulated deficit....................................... (674) (679)
Total stockholders' equity (deficiency)........... (115) (120)
------ ------
Total liabilities and stockholders' equity........ $1,876 $1,768
====== ======
</TABLE>
Note: The condensed consolidated balance sheet at June 30, 1999 has been derived
from the audited consolidated financial statements at that date.
See Notes to Condensed Consolidated Financial Statements (Unaudited).
F-27
<PAGE> 123
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(000'S OMITTED, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues.................................................... $ 1,285 $ 1,203
Selling, general and administrative expenses................ 1,119 1,070
Depreciation of equipment................................... 24 21
Amortization of software development costs and acquisition
costs..................................................... 5 5
Interest expense............................................ 15 17
-------- --------
Income before income taxes.................................. 122 90
Provision for income taxes.................................. 94 --
-------- --------
Net income.................................................. $ 28 $ 90
======== ========
Net income per common share -- basic........................ $ .05 $ .15
======== ========
Net income per common share -- diluted...................... $ .04 $ .15
======== ========
Average number of outstanding shares -- basic............... 598,734 598,734
======== ========
Average number of outstanding shares -- diluted............. 638,144 619,141
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
F-28
<PAGE> 124
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
(000'S OMITTED, EXCEPT
SHARE DATA)
<S> <C> <C>
Revenues.................................................... $ 2,509 $ 2,127
Selling, general and administrative expenses................ 2,323 2,019
Depreciation of equipment................................... 48 41
Amortization of software development costs and acquisition
costs..................................................... 9 10
Interest expense............................................ 30 35
-------- --------
Income before income taxes.................................. 99 22
Provision for income taxes.................................. 94 --
-------- --------
Net income.................................................. $ 5 $ 22
======== ========
Net income per common share -- basic........................ $ .01 $ .04
======== ========
Net income per common share -- diluted...................... $ .01 $ .04
======== ========
Average number of outstanding shares -- basic............... 598,734 598,734
======== ========
Average number of outstanding shares -- diluted............. 638,922 617,373
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
F-29
<PAGE> 125
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
---------------
1999 1998
------ ------
(000'S OMITTED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 5 $ 22
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 57 51
Changes in operating assets and liabilities:
Accounts receivable.................................. 15 (91)
Prepaid expenses and other current assets............ 34 38
Accounts payable and accrued expenses................ (147) (134)
Deferred income...................................... 150 161
Rent security deposits............................... 15 --
----- -----
Net cash provided by operating activities......... 129 47
----- -----
INVESTING ACTIVITIES
Purchase of equipment..................................... (21) (27)
----- -----
Net cash used in investing activities............. (21) (27)
----- -----
FINANCING ACTIVITIES
Proceeds from lines of credit............................. 100 225
----- -----
Net cash provided by financing activities......... 100 225
----- -----
Net increase in cash........................................ 208 245
Cash at beginning of period................................. 212 120
----- -----
Cash at end of period....................................... $ 420 $ 365
===== =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements (Unaudited).
F-30
<PAGE> 126
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended December 31, 1999 are not necessarily indicative of the results that may
be expected for the year ending June 30, 2000.
NOTE B -- ORGANIZATION
ACQUISITION OF RESEARCH ANALYSIS CORP.
On September 22, 1997, Transition Analysis Component Technology, Inc.
("TACTech" or the "Company") acquired the net assets of Research Analysis Corp.
("RAC") pursuant to a merger (the "Merger") of RAC, a California corporation
formed for this purpose and wholly owned by the Company, with and into RAC. Upon
consummation of the Merger, RAC, as the surviving corporation, became a wholly
owned subsidiary of the Company. The RAC acquisition was accounted for pursuant
to the purchase method of accounting and is effective as of September 1, 1997.
NOTE C -- COMMON STOCK PURCHASE RIGHTS
During October 1999, the Company filed a Registration Statement for the
purpose of distributing common stock purchase rights to all shareholders. The
rights would have enabled the Company to raise up to $2,500,000 in additional
capital. This rights offering was canceled by Notice to the Securities and
Exchange Commission during the month of January 2000.
F-31
<PAGE> 127
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE D -- EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations and other related disclosures:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(000'S OMITTED, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
NUMERATOR
Numerator for basic and diluted earnings
per share -- income (loss) available to
common stockholders...................... $ 28 $ 90 $ 5 $ 22
======== ======== ======== ========
DENOMINATOR
Denominator for basic earnings per share --
weighted average shares.................. 598,734 598,734 598,734 598,734
Effect of dilutive securities:
Options.................................. 39,410 20,407 40,188 18,639
-------- -------- -------- --------
Denominator for diluted earnings per
share -- adjusted weighted average shares
and assumed conversions.................. 638,144 619,141 638,922 617,373
======== ======== ======== ========
Basic earnings per share -- and assumed
conversions.............................. $ .05 $ .15 $ .01 $ .04
======== ======== ======== ========
Diluted earnings per share................. $ .04 $ .15 $ .01 $ .04
======== ======== ======== ========
</TABLE>
NOTE E -- SUBSEQUENT EVENT
On January 17, 2000 the Company entered into an agreement to merge with a
subsidiary of Aspect Development Inc. ("Aspect") upon satisfaction of certain
conditions, including the approval of the Company's shareholders. In
consideration, TACTech shareholders are to receive shares of Aspect based on an
agreed upon exchange ratio as stipulated. All options to purchase TACTech stock
are to be converted into options to purchase the stock of Aspect.
F-32
<PAGE> 128
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
MARCH 12, 2000
BY AND AMONG
i2 TECHNOLOGIES, INC.,
HOYA MERGER CORP.
AND
ASPECT DEVELOPMENT, INC.
A-1
<PAGE> 129
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. THE MERGER....................................... A-6
Section 1.01 Effective Time Of The Merger................ A-6
Section 1.02 Closing..................................... A-7
Section 1.03 Effects Of The Merger....................... A-7
Section 1.04 Directors And Officers...................... A-7
ARTICLE II. CONVERSION OF SECURITIES........................ A-7
Section 2.01 Conversion Of Capital Stock................. A-7
Section 2.02 Exchange Of Certificates.................... A-8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY...... A-10
Section 3.01 Organization Of Company..................... A-10
Section 3.02 Company Capital Structure................... A-11
Section 3.03 Authority; No Conflict; Required Filings And
Consents.................................... A-12
Section 3.04 SEC Filings; Financial Statements........... A-13
Section 3.05 No Undisclosed Liabilities.................. A-13
Section 3.06 Absence Of Certain Changes Or Events........ A-13
Section 3.07 Taxes....................................... A-14
Section 3.08 Properties.................................. A-14
Section 3.09 Intellectual Property....................... A-14
Section 3.10 Agreements, Contracts And Commitments....... A-15
Section 3.11 Litigation.................................. A-15
Section 3.12 Environmental Matters....................... A-16
Section 3.13 Employee Benefit Plans...................... A-16
Section 3.14 Compliance With Laws........................ A-17
Section 3.15 Tax Matters................................. A-17
Section 3.16 Labor Matters............................... A-17
Section 3.17 Insurance................................... A-17
Section 3.18 No Existing Discussions..................... A-17
Section 3.19 Interested Party Transactions............... A-17
Section 3.20 Registration Statement; Joint Proxy
Statement/Prospectus........................ A-18
Section 3.21 Payments Resulting From Merger.............. A-18
Section 3.22 Opinion Of Financial Advisor................ A-18
Section 3.23 Section 203 Of The DGCL Not Applicable;
Company Rights Plan......................... A-18
Section 3.24 Voting Requirements......................... A-19
Section 3.25 Brokers..................................... A-19
Section 3.26 Certain Contracts........................... A-19
Section 3.27 Company Voting Agreements................... A-19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB..................................... A-19
Section 4.01 Organization Of Parent And Merger Sub....... A-19
Section 4.02 Parent Capital Structure.................... A-19
Section 4.03 Authority; No Conflict; Required Filings And
Consents.................................... A-20
Section 4.04 SEC Filings; Financial Statements........... A-21
Section 4.05 No Undisclosed Liabilities.................. A-22
Section 4.06 Absence Of Certain Changes Or Events........ A-22
Section 4.07 Taxes....................................... A-22
Section 4.08 Agreements, Contracts And Commitments....... A-22
Section 4.09 Litigation.................................. A-22
Section 4.10 Environmental Matters....................... A-22
Section 4.11 Employee Benefit Plans...................... A-23
Section 4.12 Compliance With Laws........................ A-23
Section 4.13 Tax Matters................................. A-23
Section 4.14 Registration Statement; Joint Proxy
Statement/Prospectus........................ A-23
Section 4.15 Opinion Of Financial Advisor................ A-24
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
Section 4.16 Voting Requirements......................... A-24
Section 4.17 Brokers..................................... A-24
Section 4.18 Parent Voting Agreements.................... A-24
Section 4.19 Intellectual Property....................... A-24
Section 4.20 No Ownership Of Company Stock............... A-24
Section 4.21 Section 203 Of The DGCL Not Applicable...... A-25
Section 4.22 Certain Contracts........................... A-25
ARTICLE V. CONDUCT OF BUSINESS.............................. A-25
Section 5.01 Covenants Of Company........................ A-25
Section 5.02 Covenants Of Parent......................... A-27
Section 5.03 Cooperation................................. A-28
Section 5.04 Advice Of Changes........................... A-28
ARTICLE VI. ADDITIONAL AGREEMENTS........................... A-28
Section 6.01 Joint Proxy Statement/Prospectus;
Registration Statement...................... A-28
Section 6.02 No Solicitation By Company.................. A-29
Section 6.03 Nasdaq Quotation............................ A-31
Section 6.04 Access To Information....................... A-31
Section 6.05 Stockholders Meetings....................... A-31
Section 6.06 Legal Conditions To Merger.................. A-33
Section 6.07 Public Disclosure........................... A-34
Section 6.08 Tax-Free Reorganization..................... A-34
Section 6.09 Stock Plans................................. A-34
Section 6.10 Affiliate Agreements........................ A-36
Section 6.11 Indemnification............................. A-37
Section 6.12 Benefit Plans............................... A-38
Section 6.13 Registration Statement; Joint Proxy
Statement/Prospectus........................ A-39
ARTICLE VII. CONDITIONS TO MERGER........................... A-39
Section 7.01 Conditions To Each Party's Obligation To
Effect The Merger........................... A-39
Section 7.02 Additional Conditions To Obligations Of
Parent And Merger Sub....................... A-40
Section 7.03 Additional Conditions To Obligation Of
Company..................................... A-40
Section 7.04 Frustration Of Closing Conditions........... A-41
ARTICLE VIII. TERMINATION AND AMENDMENT..................... A-41
Section 8.01 Termination................................. A-41
Section 8.02 Effect Of Termination....................... A-42
Section 8.03 Expenses And Termination Fees............... A-43
Section 8.04 Amendment................................... A-44
Section 8.05 Extension; Waiver........................... A-44
ARTICLE IX. MISCELLANEOUS................................... A-44
Section 9.01 Nonsurvival Of Representations, Warranties,
Covenants And Agreements.................... A-44
Section 9.02 Notices..................................... A-44
Section 9.03 Definitions................................. A-45
Section 9.04 Interpretation.............................. A-46
Section 9.05 Counterparts................................ A-47
Section 9.06 Entire Agreement; No Third Party
Beneficiaries............................... A-47
Section 9.07 Governing Law; Forum; Waiver Of Jury
Trial....................................... A-47
Section 9.08 Assignment.................................. A-47
Section 9.09 Attorneys' Fees............................. A-47
Section 9.10 Specific Performance........................ A-48
EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Parent Voting Agreement
</TABLE>
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS-REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Agreement................................................... Preamble
Bankruptcy and Equity Exception............................. Section 3.03(a)
Certificate of Merger....................................... Section 1.01
Closing..................................................... Section 1.02
Closing Date................................................ Section 1.02
Company Balance Sheet....................................... Section 3.04(b)
Company Certificates........................................ Section 2.02(b)
Company Common Stock........................................ Section 2.01(b)
Company Disclosure Schedule................................. Article III
Company Employee Plans...................................... Section 3.13(a)
Company ESPP................................................ Section 3.02(c)
Company Intellectual Property Rights........................ Section 3.09(a)
Company Insiders............................................ Section 6.09(c)
Company Material Adverse Effect............................. Section 9.03(a)
Company Material Contracts.................................. Section 3.10
Company Preferred Stock..................................... Section 3.02(a)
Company Rights Plan......................................... Section 3.23(b)
Company SEC Reports......................................... Section 3.04(a)
Company Stock Plans......................................... Section 3.02(a)
Company Stock Option........................................ Section 6.09(a)
Company Stockholder Approval................................ Section 3.24
Company Voting Agreements................................... Preamble
Company Stockholders Meeting................................ Section 3.20
Company Superior Offer...................................... Section 6.05(b)
Company Takeover Proposal................................... Section 6.02(d)
Confidentiality Agreement................................... Section 9.01
Current Premium............................................. Section 6.11(b)
DGCL........................................................ Section 1.01
Effective Time.............................................. Section 1.01
Environmental Law........................................... Section 3.12(b)
ERISA....................................................... Section 3.13(a)
ERISA Affiliate............................................. Section 3.13(a)
Exchange Act................................................ Section 3.03(c)
Exchange Agent.............................................. Section 2.02(a)
Exchange Fund............................................... Section 2.02(a)
Exchange Ratio.............................................. Section 2.01(c)
GAAP........................................................ Section 3.04(b)
Governmental Entity......................................... Section 3.03(c)
Hazardous Substance......................................... Section 3.12(c)
HSR Act..................................................... Section 3.03(c)
Indemnified Party........................................... Section 6.12(a)
Internal Revenue Code....................................... Preamble
IRS......................................................... Section 3.07(b)
Joint Proxy Statement/Prospectus............................ Section 3.20
Material Lease.............................................. Section 3.08
Merger...................................................... Preamble
Merger Consideration........................................ Section 2.01(c)
Merger Sub.................................................. Preamble
NASD........................................................ Section 4.16
</TABLE>
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<TABLE>
<CAPTION>
CROSS-REFERENCE
TERMS IN AGREEMENT
- ----- ---------------
<S> <C>
Order....................................................... Section 6.06(b)
Parent Balance Sheet........................................ Section 4.04(b)
Parent Common Stock......................................... Section 2.01(b)
Parent Disclosure Schedule.................................. Article IV
Parent Employee Plans....................................... Section 6.12(d)
Parent ESPP................................................. Section 6.12(c)
Parent Intellectual Property Rights......................... Section 4.19(a)
Parent Material Adverse Effect.............................. Section 9.03(b)
Parent Material Contracts................................... Section 4.08
Parent Preferred Stock...................................... Section 4.02(a)
Parent SEC Reports.......................................... Section 4.04(a)
Parent Stock Plans.......................................... Section 4.02(a)
Parent Voting Agreements.................................... Preamble
Parent Stockholders Meeting................................. Section 3.20
Parent Voting Proposal...................................... Section 4.03(a)
Registration Statement...................................... Section 3.20
Representatives............................................. Section 6.02(a)
Repurchase Options.......................................... Section 6.09(a)
Rule 145.................................................... Section 6.10
SEC......................................................... Section 3.03(c)
Securities Act.............................................. Section 3.04(a)
Specified Company Takeover Transaction...................... Section 8.03(f)
Subsidiary.................................................. Section 3.01
Surviving Corporation....................................... Section 1.03
Tax......................................................... Section 3.07(a)
Tax Return.................................................. Section 3.07(a)
Taxable..................................................... Section 3.07(a)
Taxes....................................................... Section 3.07(a)
Tax Authority............................................... Section 3.07(a)
Third Party Agreements...................................... Section 3.09(e)
Treasury Regulations........................................ Preamble
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of March
12, 2000, by and among i2 Technologies, Inc., a Delaware corporation ("Parent"),
Hoya Merger Corp., a Delaware corporation and a direct wholly owned subsidiary
of Parent ("Merger Sub"), and Aspect Development, Inc., a Delaware corporation
("Company").
WHEREAS, the Boards of Directors of Parent and Company deem it advisable
and in the best interests of each corporation and their respective stockholders
that Parent and Company combine in order to advance the long-term business
interests of Parent and Company;
WHEREAS, the combination of Parent and Company shall be effected by the
terms of this Agreement through a merger in which Company will become a wholly
owned subsidiary of Parent and the stockholders of Company will become
stockholders of Parent (the "Merger");
WHEREAS, the respective Boards of Directors of Parent and Company have each
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, the respective business strategies and
goals of Parent and Company;
WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to the willingness of Parent and Merger Sub to
enter into this Agreement, Parent and certain stockholders of Company are
entering into agreements (the "Company Voting Agreements") pursuant to which
such stockholders are agreeing to vote to adopt this Agreement and to take
certain other actions in furtherance of the Merger;
WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to the willingness of Company to enter into
this Agreement, Company and certain stockholders of Parent are entering into
agreements (the "Parent Voting Agreements") pursuant to which such stockholders
are agreeing to vote to approve the issuance of stock by Parent in the Merger
pursuant to this Agreement and to take certain other actions in furtherance of
the Merger;
WHEREAS, for federal income tax purposes, it is intended that (a) the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
the rules and regulations promulgated thereunder (the "Treasury Regulations"),
(b) this Agreement constitutes a "plan of reorganization" within the meaning of
Section 1.368-2(g) of the Treasury Regulations, and (c) Parent, Merger Sub and
Company will each be a party to such reorganization within the meaning of
Section 368(b) of the Internal Revenue Code; and
WHEREAS, Parent, Merger Sub and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 Effective Time Of The Merger. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") in such
form as is required by the relevant provisions of the Delaware General
Corporation Law (the "DGCL") shall be duly prepared, executed and acknowledged
by Company and thereafter delivered to the Secretary of State of the State of
Delaware for filing, as provided in the DGCL, as early as practicable on the
Closing Date (as defined in Section 1.02). The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware (the "Effective Time").
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Section 1.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., local time, on a date to be specified by Parent and Company
(the "Closing Date"), which shall be no later than the second business day after
satisfaction (or waiver) of the latest to be satisfied (or to be waived) of the
conditions set forth in Section 7.01, Section 7.02 (other than the delivery of
the officers' certificate referred to therein) and Section 7.03 (other than the
delivery of the officers' certificate referred to therein), at the offices of
Brobeck, Phleger & Harrison LLP, Palo Alto California, unless another date,
place or time is agreed to in writing by Parent and Company.
Section 1.03 Effects Of The Merger. At the Effective Time, (i) the
separate existence of Merger Sub shall cease and Merger Sub shall be merged with
and into Company (Company following the Merger is sometimes referred to below as
the "Surviving Corporation"), (ii) the Certificate of Incorporation of Company
shall be amended to amend and restate Article Fourth of such Certificate of
Incorporation so as to read in its entirety as follows: "The total number of
shares of all classes of stock which the Corporation shall have authority to
issue is 1,000 shares, all of which shall consist of Common Stock, par value
$.001 per share," and, as so amended, such Certificate of Incorporation shall be
the Certificate of Incorporation of the Surviving Corporation, and (iii) the
Bylaws of Merger Sub as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation (it being understood that such Bylaws
shall contain indemnification provisions at least as favorable to the officers
and directors of Company as the indemnification provisions contained in
Company's Bylaws as of the date of this Agreement).
Section 1.04 Directors And Officers.
(a) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the initial directors and officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
(b) Parent shall take such action as may be required so that, upon the
Effective Time, Romesh Wadhwani shall become a Class III director of
Parent.
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.01 Conversion Of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company capital stock or capital stock of Merger Sub:
(a) Capital Stock Of Merger Sub. Each issued and outstanding share of
the capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value $.001 per
share, of the Surviving Corporation.
(b) Cancellation Of Treasury Stock And Parent-Owned Stock. All shares
of Common Stock, par value $.001 per share, of Company ("Company Common
Stock") owned by Company as treasury stock and any shares of Company Common
Stock owned by Parent, Merger Sub or any other wholly owned Subsidiary (as
defined in Section 3.01) of Parent shall be cancelled and retired and shall
cease to exist and no stock of Parent or other consideration shall be
delivered in exchange therefor. Any shares of Common Stock, par value
$.00025 per share, of Parent ("Parent Common Stock") owned by Company shall
be unaffected by the Merger.
(c) Exchange Ratio For Company Common Stock. Subject to Section 2.02,
each issued and outstanding share of Company Common Stock (excluding shares
to be cancelled in accordance with Section 2.01(b) but including all shares
issued pursuant to the 100% stock dividend to be distributed by Company on
or about March 13, 2000) shall be converted into fifty-five hundredths
(.55) of a duly authorized, validly issued, fully paid and nonassessable
share (the "Exchange Ratio") of Parent Common Stock (the "Merger
Consideration"). As of the Effective Time, all such shares of Company
Common Stock, as so converted, shall no longer be outstanding and shall
automatically be cancelled
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and retired and shall cease to exist, and each holder of a certificate
which, immediately prior to the Effective Time, represented shares of
Company Common Stock (a "Company Certificate") shall cease to have any
rights with respect thereto, except the right to receive a certificate or
certificates representing the number of fully paid and nonassessable shares
of Parent Common Stock into which such holder's shares of Company Common
Stock were converted at the Effective Time and any cash payable pursuant to
Section 2.02(e) in lieu of any fractional share of Parent Common Stock and
distributions deliverable pursuant to Section 2.02(c), without interest,
upon the surrender of such Company Certificate in accordance with Section
2.02. In the event Parent or Company changes (or establishes a record date
for changing) the number or classes of shares of Parent Common Stock or
Company Common Stock, as the case may be, issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend,
recapitalization, subdivision, reclassification, reverse stock split,
combination, exchange of shares or similar transaction with respect to the
outstanding Parent Common Stock or Company Common Stock and the record date
therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately and equitably adjusted to reflect such stock split, stock
dividend, recapitalization, subdivision, reclassification, reverse stock
split, combination, exchange of shares or similar transaction; provided,
however, that no adjustment to the Exchange Ratio shall be made in
connection with the 100% stock dividend to be distributed by Company on or
about March 13, 2000.
Section 2.02 Exchange Of Certificates. The procedures for exchanging
Company Certificates are as follows:
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with a bank or trust company designated by Parent and Company (the
"Exchange Agent"), for the benefit of the former holders of shares of
Company Common Stock, for exchange in accordance with this Section 2.02,
through the Exchange Agent, (i) certificates representing the shares of
Parent Common Stock (such shares of Parent Common Stock, together with any
distributions with respect thereto deliverable by virtue of Section
2.02(c), being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.01 in exchange for Company Certificates and (ii)
sufficient funds to permit payment of cash in lieu of fractional shares
pursuant to Section 2.02(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each
holder of record of a Company Certificate or Company Certificates whose
shares of Company Common Stock were converted pursuant to Section 2.01 into
the Merger Consideration (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to Company
Certificates shall pass, only upon delivery of such Company Certificates to
the Exchange Agent and shall be in such customary form and have such other
provisions as Parent and Company may reasonably specify) and (ii)
instructions for effecting the surrender of such Company Certificates in
exchange for a certificate or certificates representing the Merger
Consideration (plus cash in lieu of any fractional share of Parent Common
Stock and distributions deliverable as provided in Section 2.02(e)). Upon
surrender of a Company Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, (1) the holder of
such Company Certificate shall receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock into which
such holder's shares of Company Common Stock were converted at the
Effective Time, certain dividends or other distributions in accordance with
Section 2.02(c), and cash in lieu of any fractional share of Parent Common
Stock in accordance with Section 2.02(e), and (2) the Company Certificate
so surrendered shall immediately be cancelled. In the event of a transfer
of ownership of Company Common Stock which is not registered in the
transfer records of Company, a certificate representing the proper number
of shares of Parent Common Stock may be issued to a transferee if the
Company Certificate representing such Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section
2.02, each Company Certificate shall be deemed at any time after the
Effective Time to represent only the ownership of
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the number of whole shares of Parent Common Stock into which the shares of
Company Common Stock previously represented by such Company Certificate
have been converted pursuant to Section 2.01 and the right to receive upon
such surrender the Merger Consideration and cash in lieu of any fractional
share of Parent Common Stock and distributions deliverable as contemplated
by this Section 2.02(e) and the right to receive certificates representing
whole shares of Parent Common Stock.
(c) Distributions With Respect To Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Company Certificate
with respect to the shares of Parent Common Stock represented thereby and
no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.02(e), and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock
shall be paid by Parent to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the holder of record of such Company
Certificate shall surrender such Company Certificate. Subject to the effect
of applicable escheat and unclaimed property laws, following surrender of
any such Company Certificate, there shall be paid to the record holder of
such Company Certificate, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section
2.02(e) and the amount of dividends or other distributions with a record
date after the Effective Time previously paid or payable with respect to
the whole shares of Parent Common Stock into which the shares of Company
Common Stock previously represented by such Company Certificate were
converted, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to the surrender of such Company Certificate and a payment
date subsequent to the surrender of such Company Certificate payable with
respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights In Company Common Stock. The shares
(and the certificates representing shares) of Parent Common Stock issued in
exchange for shares of Company Common Stock in accordance with the terms
hereof (and any cash paid pursuant to Section 2.02(c) or Section 2.02(e))
shall be deemed to have been issued and paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock, subject, however,
to the Surviving Corporation's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time which
may have been declared or made by Company on or with respect to such shares
of Company Common Stock in accordance with the terms of this Agreement (to
the extent permitted under Section 5.01) prior to the date hereof and which
remain unpaid at the Effective Time, and from and after the Effective Time
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Company Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled
and exchanged as provided in this Section 2.02.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Company Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock converted pursuant
to the Merger who would otherwise have been entitled to receive a fraction
of a share of Parent Common Stock (after taking into account all Company
Certificates representing shares of Company Common Stock owned by or
registered in the name of such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Parent Common Stock multiplied by the average of the last reported sales
prices of Parent Common Stock, as reported on the Nasdaq National Market,
on each of the ten (10) trading days immediately preceding the date of the
Effective Time.
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(f) Termination Of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Certificates for one
hundred eighty (180) days after the Effective Time shall be delivered to
Parent, upon demand, and any holders of Company Certificates who have not
previously complied with this Section 2.02 shall thereafter look only to
Parent for certificates representing Parent Common Stock, any cash in lieu
of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(g) No Liability. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock or Parent Common
Stock, as the case may be, for any shares of Company Common Stock or Parent
Common Stock (or cash in lieu of any fractional share or dividends or
distributions with respect thereto) properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) Withholding Rights. Each of Parent and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as Parent or the Surviving Corporation is
required to deduct and withhold with respect to the making of such payment
under the Internal Revenue Code or any provision of state, local or foreign
tax law. To the extent that amounts are properly so withheld by the
Surviving Corporation or Parent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent,
as the case may be.
(i) Lost Company Certificates. If any Company Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person or entity claiming such Company Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person
or entity of a bond in such reasonable amount as Parent may direct as
indemnity against any claim that may be made against it with respect to the
alleged loss, theft or destruction of such Company Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Company Certificate a certificate or certificates representing the shares
of Parent Common Stock into which the shares of Company Common Stock
represented by such Company Certificate were converted pursuant to Section
2.01, any cash in lieu of any fractional share, and any unpaid dividends or
other distributions on the shares of Parent Common Stock deliverable in
respect thereof pursuant to this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub that the
statements contained in this Article III are true and correct except as set
forth herein, in the Company SEC Reports (as defined in Section 3.04) filed
since January 1, 1999, and in the disclosure schedule delivered by Company to
Parent on the date of this Agreement (the "Company Disclosure Schedule"). The
Company Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered sections contained in this Article III and the disclosure in any
paragraph shall qualify other sections in this Article III only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other sections.
Section 3.01 Organization Of Company. Each of Company and its Subsidiaries
(as defined below) is a corporation duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize the concept of good
standing) under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its property
and to carry on its business as now being conducted and as proposed to be
conducted, and is duly qualified to do business and is in good standing (with
respect to jurisdictions which recognize the concept of good standing) as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Company Material
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Adverse Effect, as defined in Section 9.03(a). Neither Company nor any
Subsidiary of Company directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by Company or any of its Subsidiaries and
comprising less than five percent (5%) of the outstanding stock of such company.
Each and every Subsidiary of Company and its place of incorporation or
organization is listed in Section 3.01 of the Company Disclosure Schedule. As
used in this Agreement, the word "Subsidiary" or "Subsidiaries" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party and/or
by any one or more of its Subsidiaries.
Section 3.02 Company Capital Structure.
(a) The authorized capital stock of Company consists of 100,000,000
shares of Common Stock, $.001 par value, and 2,000,000 shares of Preferred
Stock, $.001 par value, ("Company Preferred Stock"). As of March 9, 2000
(without giving effect to the 100% stock dividend to be distributed by
Company on or about March 13, 2000), (i) 30,599,129 shares of Company
Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable and (ii) no shares of Company Common Stock
were held in the treasury of Company or by its Subsidiaries. The Company
Disclosure Schedule sets forth the number of shares of Company Common Stock
reserved for future issuance pursuant to stock options granted and
outstanding as of March 9, 2000 (without giving effect to the 100% stock
dividend to be distributed by Company on or about March 13, 2000) and the
plans under which such options were granted (collectively, the "Company
Stock Plans"). No material change in such capitalization has occurred
between March 9, 2000 and the date of this Agreement, except as a result of
the exercise of stock options. As of the date of this Agreement, none of
the shares of Company Preferred Stock is issued and outstanding. All shares
of Company Common Stock subject to issuance as specified above are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued,
fully paid and nonassessable. There are no obligations, contingent or
otherwise, of Company or its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock
of any Subsidiary or to loan funds to or make any material investment (in
the form of a loan, capital contribution or otherwise) in any Subsidiary or
any other entity other than (i) guarantees of bank obligations of its
Subsidiaries entered into in the ordinary course of business, and (ii)
repurchase rights of Company under the Company Stock Plans, or under any
stock option agreements pursuant to which options were granted under such
plans. All of the outstanding shares of capital stock of Company's
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares
in the case of foreign Subsidiaries) are owned by Company or another
Subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations on Company's voting rights, charges or
other encumbrances of any nature other than security interests, liens,
claims, pledges, agreements, limitations, charges or other encumbrances
that (A) relate to any taxes or other governmental charges or levies that
are not yet due and payable, (B) relate to, were created, arose or exist in
connection with any legal proceeding that is being contested in good faith,
or (C) individually or in the aggregate would not materially interfere with
the ability of Company and each of its Subsidiaries to conduct their
business as currently conducted.
(b) Except as set forth in this Section 3.02 or as reserved for future
grants of options under the Company Stock Plans, as of March 9, 2000, (i)
there were no equity securities of any class of Company or its
Subsidiaries, or securities exchangeable into or exercisable for such
equity securities,
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issued, reserved for issuance or outstanding, and (ii) there were no
options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which Company or any of its Subsidiaries was
a party or by which it was bound obligating Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Company or any of its
Subsidiaries or obligating Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no voting
trusts, proxies or other voting agreements or understandings with respect
to the shares of capital stock of Company to which Company is a party. The
terms of the Company Stock Plans and the agreements evidencing the
outstanding options thereunder will permit the assumption of such options
by Parent in the manner contemplated in Section 6.09, without the approval
or consent of the holders of such options, the Company stockholders or any
other party.
(c) The current "Offering Periods" (as defined under the Company 1996
Employee Stock Purchase Plan (the "Company ESPP")) in effect as of the date
of this Agreement began on August 16, 1998, February 16, 1999, August 16,
1999 and February 16, 2000, and will end on August 15, 2000, February 15,
2001, August 15, 2001 and February 15, 2002, respectively. Except for the
purchase rights granted under the Company ESPP on August 16, 1998, February
16, 1999, August 16, 1999, and February 16, 2000 to the current
participants in the Offering Periods that commenced on those dates, there
are no other purchase rights or options outstanding as of the date of this
Agreement under the Company ESPP.
Section 3.03 Authority; No Conflict; Required Filings And Consents.
(a) Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by Company of this Agreement and the
consummation of the transactions contemplated by this Agreement by Company
have been duly authorized by all necessary corporate action on the part of
Company, subject only to the adoption of this Agreement by Company
stockholders under the DGCL. This Agreement has been duly executed and
delivered by Company and, assuming the due authorization, execution and
delivery of this Agreement by Parent and Merger Sub, constitutes the valid
and binding obligation of Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity (the "Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement by Company do not,
and assuming that this Agreement is duly adopted by Company's stockholders
and that the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in Section 3.03(c) are duly obtained
and made, the consummation by Company of the transactions contemplated by
this Agreement will not, (i) conflict with, or result in any violation or
breach of, any provision of the Certificate of Incorporation or Bylaws of
Company, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or
loss of any material benefit) under, or require a consent or waiver under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or obligation to
which Company or any of its Subsidiaries is a party or by which any of them
or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Company
or any of its Subsidiaries or any of its or their properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission
or other governmental authority or instrumentality ("Governmental Entity")
is required to be obtained or made by or with respect to Company or any of
its Subsidiaries prior to the Effective Time in connection with the
execution and delivery by Company of this Agreement or the consummation by
Company of the transactions contemplated hereby, except
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for (i) the filing of a pre-merger notification and report form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) the filing of the Joint Proxy
Statement/ Prospectus (as defined in Section 3.20) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under applicable state securities laws and the laws of
any foreign country.
Section 3.04 SEC Filings; Financial Statements.
(a) Company has filed and made available to Parent all forms, reports
and documents required to be filed by Company with the SEC (collectively,
the "Company SEC Reports"). The Company SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this Agreement,
then as of and on the date so amended or superseded) contain any untrue
statement of a material fact or omit to state a material fact required to
be stated in such Company SEC Reports or necessary in order to make the
statements in such Company SEC Reports, in the light of the circumstances
under which they were made, not misleading. Company's Subsidiaries are not
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Company SEC Reports complied as
to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto. The consolidated financial
statements contained in the Company SEC Reports and the Company Balance
Sheet (as defined below) were prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly presented the consolidated
financial position of Company and its Subsidiaries as of the dates and the
consolidated results of operations and cash flows of Company and its
Subsidiaries for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
The unaudited consolidated balance sheet of Company and its Subsidiaries as
of December 31, 1999 (the "Company Balance Sheet") has been delivered to
Parent.
Section 3.05 No Undisclosed Liabilities. Except for liabilities referred
to in the Company Balance Sheet and normal or recurring liabilities incurred
since December 31, 1999 in the ordinary course of business consistent with past
practices, Company and its Subsidiaries do not have any liabilities (either
accrued, contingent or otherwise) required to be reflected or disclosed in
financial statements prepared in accordance with GAAP, which individually or in
the aggregate has had or will, solely with the passage of time, imminently
result in a Company Material Adverse Effect.
Section 3.06 Absence Of Certain Changes Or Events. Since the date of the
Company Balance Sheet, Company and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (a) any Company Material
Adverse Effect or any event which, individually or in the aggregate, will,
solely with the passage of time, imminently result in a Company Material Adverse
Effect; (b) any damage, destruction or loss (whether or not covered by
insurance) with respect to Company or any of its Subsidiaries having a Company
Material Adverse Effect; (c) any material change by Company in its accounting
methods, principles or practices to which Parent has not previously consented in
writing; (d) any revaluation by Company of any of its assets; or (e) any other
action or event that occurred between the date of the Company Balance Sheet and
the date of this Agreement that would have required the consent of Parent
pursuant to Section 5.01 had such action or event occurred after the date of
this Agreement and that, individually or in the aggregate, has had or will,
solely with the passage of time, imminently result in a Company Material Adverse
Effect.
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Section 3.07 Taxes.
(a) For purposes of this Agreement, the following terms have the
following meanings: (i) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (A) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Entity (a
"Tax Authority") responsible for the imposition of any such tax (domestic
or foreign), (B) any liability for the payment of any amounts of the type
described in clause "(A)" as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period, and (C) any
liability for the payment of any amounts of the type described in clause
"(A)" or "(B)" as a result of being a transferee of or successor to any
person or as a result of any express or implied obligation to indemnify any
other person; and (ii) "Tax Return" means any return, statement, report or
form (including estimated tax returns and reports, withholding tax returns
and reports and information reports and returns) required to be filed with
respect to Taxes.
(b) Company and each of its Subsidiaries have (i) properly completed
and timely filed all federal, state, local and foreign Tax Returns required
to be filed by them prior to the date of this Agreement (taking into
account extensions), (ii) paid or accrued all Taxes due and payable for
Taxable periods (or portions thereof) through the date of the Company
Balance Sheet and (iii) no Tax liabilities accruing after the date of the
Company Balance Sheet other than liabilities arising from the ordinary
course of business. Neither the Internal Revenue Service (the "IRS") nor
any other Taxing Authority has asserted any claim for taxes, or to the
knowledge of Company and its Subsidiaries, is threatening to assert any
claims for Taxes. Company and each of its Subsidiaries have withheld or
collected and paid over to the appropriate Tax Authorities (or are properly
holding for such payment) all Taxes required by law to be withheld or
collected. Neither Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Internal Revenue Code. There are no liens for
Taxes upon the assets of Company or its Subsidiaries (other than liens for
Taxes that are not yet due). Neither Company nor any of its Subsidiaries is
a party to any Tax sharing or Tax allocation agreement with an unaffiliated
party, nor does Company or any of its Subsidiaries have any liability or
potential liability to another party under any such agreement. Neither
Company nor any of its Subsidiaries has ever been a member of a
consolidated, combined or unitary group of which Company was not the
ultimate parent corporation.
(c) There is no agreement, contract or arrangement to which Company is
a party that would reasonably be expected, individually or collectively, as
a result of the Merger, this Agreement and subsequent events, to result in
the payment of any amount that would not be deductible by reason of Section
280G of the Internal Revenue Code.
Section 3.08 Properties. Neither Company nor any of its Subsidiaries owns
any real property. Neither Company nor any of its Subsidiaries is in default in
any material respect under any lease of material real property to which it is a
party ("Material Lease"). Copies of all Material Leases have been made available
by Company to Parent.
Section 3.09 Intellectual Property.
(a) Company and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, Internet domain names and mask works, any
applications for and registrations of such patents, trademarks, trade
names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know how, computer software
programs or applications and tangible or intangible proprietary information
or material that are necessary to conduct the business of Company and its
Subsidiaries as currently conducted by Company and its Subsidiaries (the
"Company Intellectual Property Rights").
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(b) Neither Company nor any of its Subsidiaries is, or will be as a
result of the execution and delivery of this Agreement by Company or the
performance of Company's obligations under this Agreement, in breach of (i)
any material license, sublicense or other agreement relating to the Company
Intellectual Property Rights or (ii) any material license, sublicense or
other agreement pursuant to which Company or any of its Subsidiaries is
authorized to use any third party patents, trademarks or copyrights,
including software, which are incorporated in or form a part of any product
of Company or any of its Subsidiaries that is material to the business of
Company and its Subsidiaries, taking Company and its Subsidiaries together
as a whole.
(c) (i) All patents, copyrights, registered trademarks and registered
service marks which are held by Company or any of its Subsidiaries, and
which are material to the business of Company and its Subsidiaries, taking
Company and its Subsidiaries together as a whole, are valid and subsisting;
(ii) since January 1, 1997 Company has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or
other proprietary right of any third party; and (iii) the manufacturing,
marketing, licensing or sale of Company's products does not infringe any
patent, trademark, service mark or copyright, trade secret or other
proprietary right of any third party.
(d) Company has taken all actions necessary and appropriate to assure
that there shall be no material adverse change in the delivery of Company's
products and services by reason of the advent of the year 2000, and
warrants that all of its products (including products currently under
development) will, without interruption or manual intervention, continue to
consistently, predictably and accurately record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans
of time including) January 1, 2000, and will consistently, predictably and
accurately calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as such products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates.
(e) Neither Company nor any of its Subsidiaries is a party to any
agreement ("Third Party Agreement") in which another party to such Third
Party Agreement has, or will have, as a result of the execution and
delivery of this Agreement by Company or the performance of Company's
obligations under this Agreement, the right to terminate such Third Party
Agreement or the right to obtain the Company's source code under such Third
Party Agreement.
Section 3.10 Agreements, Contracts And Commitments. Neither Company nor
any of its Subsidiaries is in breach of, or has since January 1, 1997 received
in writing any claim or notice that it has breached, in any material respect,
any material term or condition of any material agreement, contract or commitment
to which it is a party or by which any of its assets and properties are bound
("Company Material Contracts"). Each Company Material Contract that has not
expired by its terms or otherwise been terminated is in full force and effect
and is not subject to any material default thereunder of which Company is aware
by any party obligated to Company or any of its Subsidiaries pursuant to such
Company Material Contract.
Section 3.11 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Company or any of its Subsidiaries pending
or as to which Company or any of its Subsidiaries has received any written
notice of assertion, which, individually or in the aggregate seeks a material
amount of damages or other relief material to the business or assets of Company
and its Subsidiaries (taking Company and its Subsidiaries together as a whole)
or which could reasonably be expected to materially impair or delay the ability
of Company to consummate the transactions contemplated by this Agreement. To the
knowledge of Company and its Subsidiaries, there is no claim, action, suit,
proceeding or investigation described in Section 6.11 pending as of the date of
this Agreement. No officer or director has provided notice to Company of the
existence of any claim with respect to any such claim, action, suit, proceeding
or investigation.
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Section 3.12 Environmental Matters.
(a) (i) Company and its Subsidiaries have complied with all applicable
Environmental Laws (as defined in Section 3.12(b)); (ii) the properties
currently owned or operated by Company and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined in Section 3.12(c));
(iii) the properties formerly owned or operated by Company or any of its
Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership or operation by Company or its Subsidiaries; (iv)
neither Company nor any of its Subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property;
(v) neither Company nor any of its Subsidiaries has caused or contributed
to any release or threat of release of any Hazardous Substance in violation
of any Environmental Law; (vi) neither Company nor any of its Subsidiaries
has received in writing from any Governmental Entity any notice, demand,
letter, claim or request for information alleging that Company or any of
its Subsidiaries may be in violation of or liable under any Environmental
Law; (vii) neither Company nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental
Entity (other than those of general applicability), or is subject to any
indemnity or other agreement with any third party relating in either case
to liability under any Environmental Law for release of Hazardous
Substances; and (viii) to the knowledge of Company, there are no
circumstances or conditions involving Company or any of its Subsidiaries
that will, solely with the passage of time, imminently result in a Company
Material Adverse Effect pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal,
state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (i)
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (ii) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance, or (iii) noise,
odor, wetlands, pollution or contamination.
(c) As used herein, the term "Hazardous Substance" means: (i) any
substance that is listed, classified or regulated pursuant to any
Environmental Law, (ii) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon, or (iii) any
other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
Section 3.13 Employee Benefit Plans.
(a) Company has listed in Section 3.13 of the Company Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) in
effect as of, or under which benefits may be payable on or after, the date
of this Agreement, and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
employee benefit plans in effect as of, or under which benefits may be
payable on or after, the date of this Agreement, and all unexpired
severance agreements in effect as of the date of this Agreement, written or
otherwise, in each case for the benefit of, or relating to, any current or
former employee of Company or any trade or business (whether or not
incorporated) which is a member of a controlled group with, or which is
under common control with Company (an "ERISA Affiliate") within the meaning
of Section 414 of the Internal Revenue Code, or any Subsidiary of Company
(together, the "Company Employee Plans").
(b) With respect to each Company Employee Plan, Company has made
available to Parent a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Company Employee Plan,
(iii) each trust agreement and group annuity contract, if any, relating to
such Company Employee Plan, and (iv) the most recent actuarial report or
valuation relating to such Company Employee Plan, if such Company Employee
Plan is subject to Title IV of ERISA.
(c) With respect to the Company Employee Plans, individually and in
the aggregate, Company is not subject to any material unsatisfied liability
(i) for violation of ERISA, the Internal Revenue
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Code or any other applicable law, (ii) for an excise or other penalty tax
or penalty under any such law, or (iii) under Title IV of ERISA and, to the
knowledge of Company, no event has occurred and there exists no condition
or set of circumstances which constitutes a basis for any such liability.
(d) With respect to the Company Employee Plans, individually and in
the aggregate, there are no material funded benefit obligations for which
required contributions have not been made or properly accrued and there are
no material unfunded benefit obligations which have not been accounted for
by reserves, or otherwise properly footnoted in accordance with GAAP, on
the financial statements of Company.
(e) Neither Company nor any of its Subsidiaries is a party to any oral
or written (i) agreement with any officer or other key employee of Company
or any of its Subsidiaries, the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of the Merger,
(ii) agreement with any officer of Company or any of its Subsidiaries
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof and for the payment of
compensation in excess of two hundred fifty thousand dollars ($250,000) per
year, or (iii) agreement or plan relating to employees or directors of
Company or any of its Subsidiaries, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement.
Section 3.14 Compliance With Laws. Company and each of its Subsidiaries is
in substantial compliance with each, is not in violation in any material respect
of any, and has not received any written notices of violation with respect to
any, federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, which by
its terms could reasonably be expected to subject Company and its Subsidiaries
to material financial or other penalties or criminal liability.
Section 3.15 Tax Matters. To the knowledge of Company after good faith
consultation with its independent accountants, neither Company nor any of its
Affiliates has taken or agreed to take any action which would prevent the Merger
from constituting a transaction qualifying as a reorganization under Section
368(a) of the Internal Revenue Code.
Section 3.16 Labor Matters. Neither Company nor any of its Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization,
nor, as of the date hereof, is Company or any of its Subsidiaries the subject of
any material proceeding asserting that Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel Company or any of its
Subsidiaries to bargain with any labor union or labor organization nor, as of
the date of this Agreement, is there pending or, to the knowledge of Company,
threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving Company or any of its Subsidiaries.
Section 3.17 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Company or any of its Subsidiaries are with
reputable insurance carriers, and copies or a summary of such policies have been
made available to Parent.
Section 3.18 No Existing Discussions. As of the date hereof, Company is
not engaged, directly or indirectly, in any discussions or negotiations with any
party (other than Parent) with respect to a Company Takeover Proposal (as
defined in Section 6.02(d)).
Section 3.19 Interested Party Transactions. Except in connection with the
Merger, no event has occurred that would be required to be reported currently by
Company as a Certain Relationship or Related Transaction pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
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Section 3.20 Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by Company for inclusion in the registration statement of
Parent on Form S-4 pursuant to which shares of Parent Common Stock issued in the
Merger will be registered with the SEC (the "Registration Statement") shall not,
at the time the Registration Statement is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the circumstances
under with they were made, not misleading. The information supplied by Company
for inclusion in the joint proxy statement/prospectus (the "Joint Proxy
Statement/Prospectus") to be sent to the stockholders of Company in connection
with the special meeting of Company stockholders to consider this Agreement (the
"Company Stockholders Meeting") and to the stockholders of Parent in connection
with the special meeting of Parent stockholders to consider the issuance of
Parent Common Stock in connection with the Merger (the "Parent Stockholders
Meeting") shall not, on the date the Joint Proxy Statement/Prospectus is first
mailed to stockholders of Parent and Company, or at the time of the Company
Stockholders Meeting, or at the time of the Parent Stockholders Meeting (if one
is held) contain any statement which, at such time and in light of the
circumstances under which it was made, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements made in the Joint Proxy Statement/Prospectus not false or
misleading or omit to state any material fact necessary to correct any statement
made by Company in any earlier communication by Company with respect to the
solicitation of proxies for the Company Stockholders Meeting which has become
false or misleading. Notwithstanding the foregoing, Company makes no
representation or warranty with respect to any information supplied or to be
supplied by Parent or Merger Sub which is or will be contained in any of the
foregoing documents.
Section 3.21 Payments Resulting From Merger. The consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further facts or acts) result
in any (i) payment (whether of severance pay or otherwise) becoming due from
Company or any of its Subsidiaries to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement pursuant to any management, employment, deferred compensation,
severance (including any payment, right or benefit resulting from a change in
control), bonus or other contract for personal services with any officer,
director or employee or any plan agreement or understanding similar to any of
the foregoing, or (ii) benefit under any Company benefit plan being established
or becoming accelerated, vested or payable.
Section 3.22 Opinion Of Financial Advisor. The financial advisor of
Company, Credit Suisse First Boston Corporation, has delivered to Company an
opinion (based on the assumptions and subject to the qualifications set forth
therein) dated the date of this Agreement to the effect that the Exchange Ratio
is fair to the holders of Company Common Stock from a financial point of view.
Section 3.23 Section 203 Of The DGCL Not Applicable; Company Rights Plan.
(a) Assuming that the Board of Directors of Parent duly approved this
Agreement and the Merger (or duly approved the Parent Voting Agreements and
the transactions contemplated thereby) prior to the execution of the Parent
Voting Agreements, the restrictions on "business combinations" contained in
Section 203 of the DGCL will not be applicable to the Merger. No other
"fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation is applicable to the Merger or the
other transactions contemplated by this Agreement as a result of any action
taken by Company.
(b) The execution, delivery and performance of this Agreement and the
consummation of the Merger will not cause any change, effect or result
under the Company's Restated Rights Agreement dated as of October 10, 1998
(as amended on March 12, 2000) or any other stockholder rights plan which
is or will as of the Effective Time be in effect (a "Company Rights Plan")
which would impede the consummation of the Merger or which is otherwise
adverse to the interests of Parent.
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Section 3.24 Voting Requirements. The affirmative vote at the Company
Stockholders Meeting of the holders of a majority of the voting power of all
outstanding shares of Company Common Stock as of the record date for persons and
entities entitled to notice of, and to vote at, the Company Stockholders Meeting
(the "Company Stockholder Approval") is the only vote of the holders of any
class or series of Company's capital stock necessary to adopt this Agreement.
Section 3.25 Brokers. No broker, investment banker, financial advisor or
other person, other than Credit Suisse First Boston Corporation, the fees and
expenses of which will be paid by Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Company. Company has furnished to Parent true and
complete copies of all agreements under which any such fees or expenses are
payable to Credit Suisse First Boston Corporation and all indemnification and
other agreements related to the engagement of Credit Suisse First Boston
Corporation by Company.
Section 3.26 Certain Contracts. Neither Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or any
other similar agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, all or any material
portion of the business of Company and its Subsidiaries (taking Company and its
Subsidiaries together as a whole) is conducted.
Section 3.27 Company Voting Agreements. Certain stockholders of Company
have executed and delivered to Parent Company Voting Agreements, substantially
in the form of Exhibit A hereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company that the statements
contained in this Article IV are true and correct, except as set forth herein,
in the Parent SEC Reports (as defined in Section 4.04) filed since January 1,
1999, and in the disclosure schedule delivered by Parent to Company on the date
of this Agreement (the "Parent Disclosure Schedule"). The Parent Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered sections
contained in this Article IV and the disclosure in any paragraph shall qualify
other sections in this Article IV only to the extent that it is reasonably
apparent from a reading of such document that it also qualifies or applies to
such other sections.
Section 4.01 Organization Of Parent And Merger Sub. Each of Parent and
Merger Sub and Parent's other Subsidiaries is a corporation duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize the concept of good standing) under the laws of the jurisdiction of
its incorporation, has all requisite corporate power and authority to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed to be conducted, and is duly qualified to do business and is in good
standing (with respect to jurisdictions which recognize the concept of good
standing) as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Parent Material Adverse Effect, as defined in
Section 9.03(b). Neither Parent nor any of its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
Parent or any of its Subsidiaries and comprising less than five percent (5%) of
the outstanding stock of such company.
Section 4.02 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of 500,000,000
shares of Common Stock, $.00025 par value, and 5,000,000 shares of
Preferred Stock, $.001 par value ("Parent Preferred Stock"). As of March 3,
2000, (i) 156,835,002 shares of Parent Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
and (ii) no shares of Parent
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Common Stock were held in the treasury of Parent or by Subsidiaries of
Parent. The Parent Disclosure Schedule sets forth the number of shares of
Parent Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of March 10, 2000 under Parent stock option and
stock purchase plans (collectively, the "Parent Stock Plans"). No material
change in such capitalization has occurred between December 31, 1999 and
the date of this Agreement, except as a result of the exercise of stock
options. As of the date of this Agreement, no Parent Preferred Stock is
issued and outstanding. All shares of Parent Common Stock subject to
issuance as specified above are duly authorized and, upon issuance on the
terms and conditions specified in the instruments pursuant to which they
are issuable, shall be validly issued, fully paid and nonassessable. There
are no obligations, contingent or otherwise, of Parent to repurchase,
redeem or otherwise acquire any shares of Parent Common Stock or the
capital stock of any of its Subsidiaries or to loan funds to or make any
material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than (i)
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business, and (ii) repurchase rights of Parent under the Parent
Stock Plans, or under any stock option agreements pursuant to which options
were granted under these plans. All of the outstanding shares of capital
stock of each of Parent's Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable and all such shares other than directors'
qualifying shares in the case of foreign Subsidiaries) are owned by Parent
or another Subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Parent's voting rights, charges
or other encumbrances of any nature other than security interests, liens,
claims, pledges, agreements, limitations, charges or other encumbrances
that (A) relate to any taxes or other governmental charges or levies that
are not yet due and payable, (B) relate to, were created, arose or exist in
connection with any legal proceeding that is being contested in good faith,
or (C) individually or in the aggregate would not materially interfere with
the ability of Parent and each of its Subsidiaries to conduct their
business as currently conducted.
(b) Except as set forth in this Section 4.02 or as reserved for future
grants of options under the Parent Stock Plans as of March 10, 2000, (i)
there were no equity securities of any class of Parent or any of its
Subsidiaries, or any securities exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding, and (ii)
there were no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Parent was a party or
by which it was bound obligating Parent to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock of
Parent or obligating Parent to grant, extend, or enter into any such
option, warrant, equity security, call, right, commitment or agreement.
There are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of Parent and to
which Parent is a party.
(c) The shares of Parent Common Stock to be issued in connection with
the Merger (including shares of Parent Common Stock to be issued upon
exercise of Company Stock Options assumed by Parent pursuant to this
Agreement) have been authorized by all necessary corporate action and, when
issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and not subject to preemptive rights.
Section 4.03 Authority; No Conflict; Required Filings And Consents.
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Parent of
this Agreement and, assuming that the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
Section 4.03(c) are duly obtained and made, the consummation of the
transactions contemplated by this Agreement by Parent and Merger Sub have
been duly authorized by all necessary corporate action on the part of each
of Parent and Merger Sub (including the adoption of this Agreement by
Parent as the sole stockholder of Merger Sub), subject only to the approval
of the issuance of Parent Common Stock in the Merger (the "Parent Voting
Proposal") by Parent stockholders. This Agreement has been duly executed
and delivered by each of
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Parent and Merger Sub and, assuming the due authorization, execution, and
delivery of this Agreement by Company, constitutes the valid and binding
obligation of each of Parent and Merger Sub, enforceable in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of, any provision of the Certificate of
Incorporation or Bylaws of Parent or the Certificate of Incorporation or
Bylaws of Merger Sub, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Parent or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of its or their
properties or assets.
(c) No material consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required to be obtained or made by or with respect to Parent or any of its
Subsidiaries prior to the Effective Time in connection with the execution
and delivery by Parent and Merger Sub of this Agreement or the consummation
by Parent and Merger Sub of the transactions contemplated hereby, except
for (i) the filing of a pre-merger notification and report form under the
HSR Act, (ii) the filing of the Registration Statement with the SEC in
accordance with the Securities Act, (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (iv) the
filing of the Joint Proxy Statement/Prospectus with the SEC in accordance
with the Exchange Act, and (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable state securities laws and the laws of any foreign country.
Section 4.04 SEC Filings; Financial Statements.
(a) Parent has filed and made available to Company all forms, reports
and documents required to be filed by Parent with the SEC (collectively,
the "Parent SEC Reports"). The Parent SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then as of and on the date so amended or
superseded) contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Parent SEC Reports or
necessary in order to make the statements in such Parent SEC Reports, in
the light of the circumstances under which they were made, not misleading.
Parent's Subsidiaries are not required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Parent SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto. The consolidated financial
statements contained in the Parent SEC Reports and the Parent Balance Sheet
(as defined below) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
presented the consolidated financial position of Parent and its
Subsidiaries as of the dates and the consolidated results of operations and
cash flows of Parent and its Subsidiaries for the periods indicated, except
that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited consolidated balance sheet
of Parent and its Subsidiaries as of December 31, 1999 (the "Parent Balance
Sheet") has been delivered to Company.
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Section 4.05 No Undisclosed Liabilities. Except for liabilities referred
to in the Parent Balance Sheet and normal or recurring liabilities incurred
since December 31, 1999 in the ordinary course of business consistent with past
practices, Parent and its Subsidiaries do not have any liabilities (either
accrued, contingent or otherwise (required to be reflected or disclosed in
financial statements in accordance with GAAP), and whether due or to become due,
which individually or in the aggregate, has had or will, solely with the passage
of time, imminently result in a Parent Material Adverse Effect.
Section 4.06 Absence Of Certain Changes Or Events. Since the date of the
Parent Balance Sheet, Parent and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any Parent Material
Adverse Effect or any event that will, solely with the passage of time,
imminently result in a Parent Material Adverse Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to Parent
or any of its Subsidiaries having a Parent Material Adverse Effect; (iii) any
material change by Parent in its accounting methods, principles or practices to
which Company has not previously consented in writing; (iv) any revaluation by
Parent of any of its assets; or (v) any other action or event that occurred
between the date of the Parent Balance Sheet and the date of this Agreement that
would have required the consent of Company pursuant to Section 5.02 had such
action or event occurred after the date of this Agreement and that, individually
or in the aggregate, has had or will, solely with the passage of time,
imminently result in a Parent Material Adverse Effect.
Section 4.07 Taxes. Parent and each of its Subsidiaries have (i) properly
completed and timely filed all federal, state, local and foreign tax returns and
reports required to be filed by them prior to the date of this Agreement (taking
into account extensions), (ii) paid or accrued all Taxes due and payable for
Taxable periods (or portions thereof) through the date of the Parent Balance
Sheet, and (iii) no Tax liabilities accruing after the date of the Parent
Balance Sheet other than liabilities arising in the ordinary course of business.
Neither the IRS nor any other Tax Authority has asserted any claim for Taxes, or
to the knowledge of Parent and its Subsidiaries, is threatening to assert any
claims for Taxes. Parent and each of its Subsidiaries have withheld or collected
and paid over to the appropriate Tax Authorities (or are properly holding for
such payment) all Taxes required by law to be withheld or collected. Neither
Parent nor any of its Subsidiaries has made an election under Section 341(f) of
the Internal Revenue Code. There are no liens for Taxes upon the assets of
Parent or any of its Subsidiaries (other than liens for Taxes that are not yet
due). Neither Parent nor any of its Subsidiaries is a party to any Tax sharing
or Tax allocation agreement with an unaffiliated party, nor does Parent or any
of its Subsidiaries have any liability or potential liability to another party
under any such agreement. Neither Parent nor any of its Subsidiaries has ever
been a member of a consolidated, combined or unitary group of which Parent was
not the ultimate parent corporation.
Section 4.08 Agreements, Contracts And Commitments. Neither Parent nor any
of its Subsidiaries has breached, or received in writing any claim or notice
that it has breached, in any material respect, any material term or condition of
any material agreement, contract or commitment to which it is a party or by
which any of its assets or properties are bound ("Parent Material Contracts").
Each Parent Material Contract that has not expired by its terms is in full force
and effect and is not subject to any material default thereunder of which Parent
is aware by any party obligated to Parent or any of its Subsidiaries pursuant to
such Parent Material Contract.
Section 4.09 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Parent or any of its Subsidiaries pending
or as to which Parent or any of its Subsidiaries has received any written notice
of assertion, which, individually or in the aggregate, seeks a material amount
of damages or other relief material to the business or assets of Parent and its
Subsidiaries taken as a whole or which could reasonably be expected to
materially impair or delay the ability of Parent to consummate the transactions
contemplated by this Agreement.
Section 4.10 Environmental Matters. Parent and its Subsidiaries have
complied in all material respects with all applicable Environmental Laws. The
properties currently owned or operated by Parent and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
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contaminated with any Hazardous Substances. The properties formerly owned or
operated by Parent or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by Parent or
its Subsidiaries. Neither Parent nor any of its Subsidiaries is subject to
material liability for any Hazardous Substance disposal or contamination on any
third party property. Neither Parent nor any of its Subsidiaries has caused or
contributed to any release or threat of release of any Hazardous Substance in
violation of any Environmental Law. Neither Parent nor any of its Subsidiaries
has received in writing from any Governmental Entity any notice, demand, letter,
claim or request for information alleging that Parent or any of its Subsidiaries
may be in violation of or liable under any Environmental Law. Neither Parent nor
any of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity (other than those of general
applicability), or is subject to any indemnity or other agreement with any third
party, relating in either case to liability under any Environmental Law for
release of Hazardous Substances. To the knowledge of Parent, there are no
circumstances or conditions involving Parent or any of its Subsidiaries that
will, solely with the passage of time, imminently result in a Parent Material
Adverse Effect pursuant to any Environmental Law.
Section 4.11 Employee Benefit Plans. With respect to the Parent Employee
Plans (as defined in Section 6.12(d)), individually and in the aggregate, Parent
is not subject to any material unsatisfied liability for (i) violation of ERISA,
the Internal Revenue Code or any other applicable law, (ii) for an excise or
other penalty tax or penalty under any such law, or (iii) under Title IV of
ERISA and, to the knowledge of Parent, no event has occurred and there exists no
set of circumstances which could reasonably be expected to result in any such
liability. With respect to the Parent Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with GAAP, on the financial statements of Parent.
Section 4.12 Compliance With Laws. Parent and each of its Subsidiaries is
in substantial compliance with, is not in violation in any material respect of
and has not received any written notice of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business which by its
terms could reasonably be expected to subject Parent and its Subsidiaries to
material financial or other penalties or criminal liability.
Section 4.13 Tax Matters. To the knowledge of Parent after good faith
consultation with its independent accountants, neither Parent nor any of its
Affiliates has taken or agreed to take any action which would prevent the Merger
from constituting a transaction qualifying as a reorganization under Section
368(a) of the Internal Revenue Code.
Section 4.14 Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by Parent for inclusion in the Registration Statement shall
not contain, at the time the Registration Statement is declared effective by the
SEC, any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the circumstances
under with they were made, not misleading. The information supplied by Parent
for inclusion in the Joint Proxy Statement/Prospectus to be sent to the
stockholders of Company in connection with the Company Stockholders Meeting and
to the stockholders of Parent in connection with the Parent Stockholders Meeting
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
stockholders of Parent and Company, at the time of the Company Stockholders
Meeting, or at the time of the Parent Stockholders Meeting (if one is held)
contain any statement which, at such time and in light of the circumstances
under which it was made, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made in the Joint Proxy Statement/Prospectus not false or misleading
or omit to state any material fact necessary to correct any statement made by
Parent in any earlier communication by Parent with respect to the solicitation
of proxies for the Parent Stockholders Meeting or the Company Stockholders
Meeting which has become false or misleading. Notwithstanding the foregoing,
Parent makes
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no representation or warranty with respect to any information supplied or to be
supplied by Company which is or will be contained in any of the foregoing
documents.
Section 4.15 Opinion Of Financial Advisor. The financial advisor of
Parent, Goldman, Sachs & Co., has delivered to Parent an opinion (based on the
assumptions and subject to the qualifications set forth therein) dated the date
of this Agreement to the effect that the Exchange Ratio is fair to Parent from a
financial point of view.
Section 4.16 Voting Requirements. No vote of the holders of shares of
Parent Common Stock or any other class or series of capital stock of Parent is
necessary to approve the Merger or the issuance of Parent Common Stock in
connection therewith other than the approval of the Parent Voting Proposal. The
Parent stockholder vote required to approve the Parent Voting Proposal is that
vote prescribed by applicable Nasdaq Stock Market voting requirements
promulgated by the National Association of Securities Dealers (the "NASD").
Section 4.17 Brokers. No broker, investment banker, financial advisor or
other person, other than Goldman, Sachs & Co., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
Section 4.18 Parent Voting Agreements. Certain stockholders of Parent have
executed and delivered to Company Parent Voting Agreements, substantially in the
form of Exhibit B hereto.
Section 4.19 Intellectual Property.
(a) Parent and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, Internet domain names, and mask works,
any applications for and registrations of such patents, trademarks, trade
names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know how, computer software
programs or applications and tangible or intangible proprietary information
or material that are necessary to conduct the business of Parent and its
Subsidiaries as currently conducted by Parent and its Subsidiaries (the
"Parent Intellectual Property Rights").
(b) Neither Parent nor any of its Subsidiaries is, or will be as a
result of the execution and delivery of this Agreement of the performance
of its obligations under this Agreement, in breach of any material license,
sublicense or other agreement relating to the Parent Intellectual Property
Rights or any material license, sublicense or other agreement pursuant to
which Parent or any of its Subsidiaries is authorized to use any third
party patents, trademarks or copyrights, including software, which are
incorporated in or form a part of any product of Parent or any of its
Subsidiaries that is material to the business of Parent and its
Subsidiaries, taking Parent and its Subsidiaries together as a whole.
(c) (i) All patents, copyrights, registered trademarks and registered
service marks which are held by Parent or any of its Subsidiaries, and
which are material to the business of Parent and its Subsidiaries, taking
Parent and its Subsidiaries together as a whole, are valid and subsisting;
(ii) since January 1, 1997 Parent has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or
other proprietary right of any third party where such proceeding would have
a Parent Material Adverse Effect; and (iii) the manufacturing, marketing,
licensing or sale of Parent's products does not infringe any patent,
trademark, service mark, copyright, trade secret or other proprietary right
of any third party.
Section 4.20 No Ownership Of Company Stock. Neither Parent nor any of its
Subsidiaries owns, beneficially or of record, any shares of Company Common Stock
as of the date of this Agreement.
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Section 4.21 Section 203 Of The DGCL Not Applicable. Assuming that the
Board of Directors of Company duly approved this Agreement and the Merger (or
duly approved the Company Voting Agreements and the transactions contemplated
thereby) prior to the execution of the Company Voting Agreements, the
restrictions on "business combinations" contained in Section 203 of the DGCL
will not be applicable to the Merger. No other "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
is applicable to the Merger or the other transactions contemplated by this
Agreement as a result of any action taken by Parent.
Section 4.22 Certain Contracts. Neither Parent nor any of its Subsidiaries
is a party to or bound by any non-competition agreement or any other similar
agreement or obligation which purports to limit in any material respect the
manner in which, or the localities in which, all or any material portion of the
business of Parent and its Subsidiaries, taking Parent and its Subsidiaries
together as a whole, is conducted.
ARTICLE V.
CONDUCT OF BUSINESS
Section 5.01 Covenants Of Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Company agrees, as to itself and its Subsidiaries, except
to the extent that Parent shall otherwise consent in writing (which consent
shall not be unreasonably withheld or delayed), and except as required by this
Agreement or as set forth in Section 5.01 of the Company Disclosure Schedule, to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted, to pay its debts and taxes when due
(subject to good faith disputes over such debts or taxes), to pay or perform its
other obligations when due (subject to good faith disputes over such
obligations), and, to the extent consistent with such business, use all
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, and others having business dealings with it,
except in each case where the failure to do so would not have a Company Material
Adverse Effect. Except as required by this Agreement or as set forth in Section
5.01 of the Company Disclosure Schedule, Company shall not (and shall not permit
its Subsidiaries to), without the written consent of Parent (which consent shall
not be unreasonably withheld or delayed):
(a) accelerate, amend or change the period of exercisability of
options or restricted stock granted under any employee stock plan of
Company or any of its Subsidiaries or authorize cash payments in exchange
for any options granted under any of such plans except as required by the
terms of such plans or any related agreements in effect as of the date of
this Agreement;
(b) other than distributions from a Subsidiary of Company to Company,
and except for the issuance of shares pursuant to the 100% stock dividend
to be distributed by Company on or about March 13, 2000, declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock (other than dividends on
Company Common Stock payable solely in shares of Company Common Stock), or
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to Company or any of its Subsidiaries;
(c) transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property Rights other than on a non-exclusive basis in the
ordinary course of business consistent with past practices;
(d) issue, deliver or sell, or authorize the issuance, delivery or
sale of, any shares of its capital stock or securities convertible into
shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating
it to issue any
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such shares or other convertible securities, other than (i) the grant of
options to purchase up to six million (6,000,000) shares (net of
cancellations and giving effect to the 100% stock dividend to be
distributed by Company on or about March 13, 2000), in the aggregate
consistent with past practices to existing or newly hired employees (which
options will not be entitled to accelerated vesting as a result of the
Merger), or (ii) the issuance of shares of Company Common Stock pursuant to
the exercise of options outstanding on the date of this Agreement or
granted in accordance with this Agreement, (iii) the issuance of shares of
Company Common Stock to participants in the Company ESPP in accordance with
the terms thereof, (iv) the issuance of rights pursuant to the Company
Rights Plan in connection with the issuance of shares of Company Common
Stock, and (v) the issuance of shares pursuant to the 100% stock dividend
to be distributed by Company on or about March 13, 2000;
(e) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets other than inventory and other
assets in the ordinary course of business;
(f) sell, lease, license or otherwise dispose of a material property
or asset or a material amount of properties or assets, except for
transactions in the ordinary course of business, or enter into any
agreement, option or other arrangements (including any joint venture)
involving the exclusive licensing of Company's name or system outside of
the ordinary course of business or inconsistent with past practice;
(g) (i) increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in
compensation of employees (other than officers) in accordance with past
practices, (ii) grant any additional severance or termination pay to, or
enter into any employment or severance agreements with, any employee or
officer, (iii) enter into any collective bargaining agreement (other than
as required by law or extensions to existing agreements in the ordinary
course of business), (iv) establish, adopt, enter into or amend in any
material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, other
than, with respect to employees who are not officers, in the ordinary
course of business, or (v) take any action (other than action required or
contemplated by this Agreement) that causes (or which together with the
consummation of the Merger will cause) the acceleration of any options;
(h) amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(i) enter into or amend in any material respect any OEM agreement or
any other agreements pursuant to which any third party is granted exclusive
marketing, manufacturing or other rights with respect to any material
Company product, process or technology;
(j) amend or prematurely terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;
(k) waive or release any material right or claim, except in the
ordinary course of business;
(l) initiate any material litigation or arbitration proceeding;
(m) incur any indebtedness in excess of five million dollars
($5,000,000) for borrowed money other than in the ordinary course of
business;
(n) make or agree to make any new capital expenditure or expenditures,
or enter into any agreement or agreements providing for capital
expenditures which, individually, are in excess of one million dollars
($1,000,000) or, in the aggregate, are in excess of ten million dollars
($10,000,000) (except that Company and its Subsidiaries may make capital
expenditures in the amounts contemplated by the budget previously delivered
by Company to Parent);
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(o) make any material Tax election or settle or compromise any
material Tax liability;
(p) pay, discharge, settle or satisfy any material disputed claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course of
business;
(q) amend or propose to amend the Company Rights Plan in any manner
which would impede the consummation of the Merger or which is otherwise
adverse to the interests of Parent, other than any amendment in connection
with a termination of this Agreement pursuant to Section 8.01(h); or
(r) agree in writing or otherwise to take any of the actions described
in Section 5.01(a) through Section 5.01(q).
Notwithstanding anything to the contrary in this Section 5.01, if Company makes
a request in writing to Parent (delivered in accordance with Section 9.02)
seeking Parent's consent to any equity-based customer transaction or other
business partnership or alliance that would otherwise be prohibited by this
Section 5.01, and describing the material terms of such proposed transaction,
partnership, or alliance, Parent shall respond to such request within ten (10)
days after such request is deemed given pursuant to Section 9.02. If Parent does
not object in writing to such request within ten (10) days after such request is
deemed given pursuant to Section 9.02, Parent shall be deemed to have consented
to such request, on the terms substantially as described in such request.
Section 5.02 Covenants Of Parent. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Parent agrees, as to itself and its Subsidiaries, except
to the extent that Company shall otherwise consent in writing (which consent
shall not be unreasonably withheld or delayed) and except as required by this
Agreement or as set forth in Section 5.02 of the Parent Disclosure Schedule, to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted (it being acknowledged that the
foregoing shall not limit the ability of Parent to make or pursue corporate
acquisitions that will not violate any of the restrictions set forth in clause
(d) of this Section 5.02 or in clause (e) of this Section 5.02 as it relates to
clause (d) of this Section 5.02), to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due subject to good faith disputes over such obligations, and,
to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve substantially intact its
present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, and others having business dealings with it and except
in each case where the failure to do so would not have a Parent Material Adverse
Effect. Except as required by this Agreement or as set forth in Section 5.02 of
the Parent Disclosure Schedule, Parent shall not (and shall not permit any of
its Subsidiaries to), without the written consent of Company (which consent
shall not be unreasonably withheld or delayed):
(a) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to Parent or any of its Subsidiaries;
(b) sell, lease, license or otherwise dispose of a material property
or asset or a material amount of properties or assets, except for
transactions in the ordinary course of business;
(c) transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Parent
Intellectual Property Rights other than on a non-exclusive basis in the
ordinary course of business consistent with past practices;
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(d) engage in any action or enter into any transaction or permit any
action to be taken or transaction to be entered into that could reasonably
be expected to delay the consummation of, or otherwise adversely affect,
any of the transactions contemplated by this Agreement; or
(e) agree in writing or otherwise to take any of the actions described
in Section 5.02(a) through Section 5.02(d).
Section 5.03 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Parent and Company shall
confer on a regular and frequent basis with one or more Representatives (as
defined in Section 6.02(a)) of the other party to report on the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger, the Company Voting Agreements, the
Parent Voting Agreements, and the transactions contemplated hereby and thereby.
Section 5.04 Advice Of Changes. Each of Company and Parent shall promptly
advise the other party orally and in writing to the extent it has knowledge of
(i) any representation or warranty made by it (or, in the case of Parent, made
by it or Merger Sub) contained in this Agreement becoming untrue or incorrect in
any respect where the failure of such representation or warranty to be true and
correct, individually or in the aggregate, has had or is reasonably likely
imminently to have a Company Material Adverse Effect or a Parent Material
Adverse Effect, as the case may be, (ii) the failure by it (or, in the case of
Parent, by it or Merger Sub) to comply in any material respect with or satisfy
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it (or in the case of Parent, by it or Merger Sub) under this
Agreement, and (iii) any change or event relating to it having, or which is
reasonably likely imminently to have, a Company Material Adverse Effect (in the
case of Company) or a Parent Material Adverse Effect (in the case of Parent or
Merger Sub) or which will likely render it impossible for one or more of the
conditions set forth in Article VII to be satisfied; provided, however, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 Joint Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as reasonably practicable after the execution of this
Agreement, Company and Parent will prepare, and file with the SEC, the
Joint Proxy Statement/Prospectus, and Parent will prepare and file with the
SEC the Registration Statement, in which the Joint Proxy Statement/
Prospectus will be included as a prospectus. Each of Parent and Company
shall provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable
judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Joint Proxy Statement/Prospectus and the
Registration Statement, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Joint Proxy Statement/Prospectus and the
Registration Statement. Each of Company and Parent will respond to any
comments of the SEC, and will use its commercially reasonable efforts to
have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing, and Company and Parent will
cause the Joint Proxy Statement/Prospectus to be mailed to their respective
stockholders at the earliest practicable time after the Registration
Statement is declared effective by the SEC. As promptly as practicable
after the date of this Agreement, each of Company and Parent will prepare
and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other federal, foreign or Blue Sky or
related securities laws or NASD or National Market System rules,
regulations or bylaws in order to consummate the Merger and the
transactions contemplated by this Agreement. Each of Company and Parent
will notify the other promptly upon the receipt of any
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comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Registration Statement or the
Joint Proxy Statement/Prospectus and will supply the other with copies of
all correspondence between such party or any of its Representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Registration Statement, the Joint Proxy Statement/Prospectus or the Merger.
Each of Company and Parent will cause all documents that it is responsible
for filing with the SEC under this Section 6.01 to comply in all material
respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Notwithstanding any other provision of
this Agreement, nothing herein shall require Parent to qualify to do
business in any jurisdiction in which it is not now so qualified or to file
a general consent to service of process under any applicable state
securities laws in connection with the issuance of Parent Common Stock in
the Merger.
(b) If eligible, Parent shall use commercially reasonable efforts (i)
to obtain an exemption from compliance with applicable Nasdaq Stock Market
stockholder voting requirements promulgated by the NASD in connection with
the Merger, or (ii) otherwise to make arrangements such that Parent need
not solicit the vote or hold a meeting of its stockholders in connection
with the Merger or the issuance of shares of Parent Common Stock pursuant
thereto. If Parent obtains such an exemption or otherwise makes such
arrangements, all references to "Joint Proxy Statement/Prospectus" in this
Agreement shall be deemed to be changed to "Proxy Statement/Prospectus" and
all other appropriate changes shall be deemed to be made to this Agreement
to reflect the fact that a meeting of Parent's stockholders is not
required.
Section 6.02 No Solicitation By Company.
(a) Until the earlier of the Effective Time or a valid termination of
this Agreement pursuant to Article VIII, Company will not, and will not
authorize, direct or knowingly permit any of its officers, directors,
employees, affiliates, investment bankers, attorneys, accountants or other
agents, advisors or representatives (collectively, "Representatives") to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or
induce the making, submission or announcement of any Company Takeover
Proposal (as defined below), (ii) participate in any discussions or
negotiations with any person regarding, or furnish to any person any
information with respect to, or take any other action that would reasonably
be expected to facilitate any inquiry or proposal that constitutes or would
reasonably be expected to lead to, any Company Takeover Proposal, (iii)
authorize, approve or recommend any Company Takeover Proposal, or (iv)
enter into any letter of intent or similar document or any contract,
agreement or commitment accepting or providing for any Company Takeover
Proposal; provided, however, that nothing in this Section 6.02 or elsewhere
in this Agreement or in the Confidentiality Agreement (as defined in
Section 9.01) shall prohibit Company's Board of Directors from complying
with Rules 14d-9 and 14e-2 under the Exchange Act with regard to a tender
or exchange offer not made in violation of this Section 6.02; and provided,
further, that nothing in this Section 6.02 or elsewhere in this Agreement
or in the Confidentiality Agreement shall prohibit Company, before the
adoption of this Agreement by the stockholders of Company, from furnishing
information regarding Company or entering into negotiations or discussions
with, any person in response to a Company Takeover Proposal made, submitted
or announced by such person (and not withdrawn) or, subject to the
provisions of Section 6.05, endorsing and/or recommending, or,
simultaneously with a termination of this Agreement pursuant to Section
8.01(h), entering into an agreement accepting or providing for, a Company
Superior Offer (as defined in Section 6.05(b)), and any such actions
enumerated in this proviso shall not be considered a breach of this
Agreement if and to the extent that each of the following conditions is
satisfied: (1) such Company Takeover Proposal is not attributable to a
material breach by Company of this Section 6.02(a) or Section 6.05; (2) the
Board of Directors of Company concludes in good faith, after consultation
with its outside legal counsel, that failure to take such action would be
inconsistent with the fiduciary obligations of the Board of Directors of
Company to Company stockholders under applicable law; (3) prior to
furnishing any such information to, or entering into discussions or
negotiations with, such person, Company gives Parent written notice of the
identity of such person, the terms and conditions of such Company Takeover
Proposal and Company's
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intention to furnish information to, or enter into discussions or
negotiations with, such person; (4) Company receives from such person an
executed confidentiality agreement which shall not in any way restrict
Company from complying with its disclosure obligations under this Agreement
and which shall contain customary limitations on the use and disclosure of
all nonpublic written and oral information furnished to such person by or
on behalf of Company and other terms no less favorable to Company than
those set forth in the Confidentiality Agreement; and (5) contemporaneously
with furnishing any such information to such person, Company furnishes such
information to Parent (to the extent that such information has not been
previously furnished by Company to Parent).
(b) Company and its Representatives shall immediately cease and cause
to be terminated any and all existing discussions, negotiations, exchanges
of information and other activities with respect to any Company Takeover
Proposal pending as of the date of this Agreement. Promptly following the
execution and delivery of this Agreement, Company shall (i) inform each of
its directors and officers and financial, legal, accounting and other
advisors retained or involved in the transactions contemplated by this
Agreement of the obligations undertaken in this Section 6.02 and in the
Confidentiality Agreement and (ii) request each person that has heretofore
executed a confidentiality or non-disclosure agreement in connection with
its consideration of acquiring Company or any of its Subsidiaries to return
to Company or otherwise dispose of all confidential information furnished
to such person by or on behalf of Company or any of its Subsidiaries during
the one-year period prior to the date of this Agreement in connection with
such person's consideration of acquiring or engaging in a merger or other
business combination transaction with Company or any of its Subsidiaries.
Company shall immediately notify Parent if any proposals or offers
constituting a Company Takeover Proposal are received by, any non-public
information in connection with any Company Takeover Proposal is requested
from, or any discussions or negotiations with respect to a Company Takeover
Proposal are sought to be initiated or continued with, Company's officers
or directors or other individuals involved on behalf of Company in the
negotiation of the transactions contemplated by this Agreement, or, to the
knowledge of the foregoing persons, any of Company's other Representatives,
indicating, in connection with such notice, the name of the person making
the inquiry, proposal or offer and the material terms and conditions of any
such proposals or offers. Thereafter (i) Company shall provide Parent with
a true and complete copy of such Company Takeover Proposal or communication
(if it is in writing) and (ii) Company shall otherwise keep Parent
informed, on a current basis, with respect to the status and terms of any
such proposal or offer and the status of any such negotiations or
discussions.
(c) Company and Parent agree that irreparable damage would occur in
the event that the provisions of this Section 6.02 are not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed by the parties hereto that Parent shall be entitled to
seek an injunction or injunctions to prevent breaches of this Section 6.02
and to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction, this being in addition
to any other remedy to which the parties may be entitled at law or in
equity.
(d) For purposes of this Agreement, "Company Takeover Proposal" means
any offer or proposal (other than an offer or proposal by Parent or an
affiliate of Parent) for (i) a merger or other business combination
involving Company after which the stockholders of Company immediately prior
to such merger or business combination would own less than eighty percent
(80%) of the voting securities of the surviving company in such merger or
business combination and would own less than eighty percent (80%) of the
voting securities of the parent of the surviving company in such merger or
business combination, or (ii) the acquisition by a person or "group" as
defined under Section 13(d) of the Exchange Act (other than an acquisition
by Parent or an affiliate of Parent) of twenty percent (20%) or more of the
outstanding shares of capital stock of Company, or (iii) the acquisition
(other than an acquisition by Parent or an affiliate of Parent) of all or
substantially all of the assets of Company.
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Section 6.03 Nasdaq Quotation. Each of Company and Parent agrees to use
all requisite commercially reasonable efforts to continue the quotation of
Company Common Stock and Parent Common Stock, respectively, on the Nasdaq
National Market, during the term of this Agreement so that appraisal rights will
not be available to stockholders of Company under Section 262 of the DGCL.
Parent shall use all requisite commercially reasonable efforts to cause the
shares of Parent Common Stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of issuance,
prior to the Closing Date, to the extent such approval is then required under
applicable law, SEC regulations and Nasdaq National Market rules.
Section 6.04 Access To Information. From and after the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, upon reasonable
notice and subject to (a) contractual confidentiality obligations and the
requirements of applicable antitrust and other laws, rules and regulations, and
(b) other reasonable restrictions to minimize interference with or disruption of
the other's business and operations, Company and Parent shall each (and shall
cause each of their respective Subsidiaries to) afford to the officers,
employees, accountants, counsel and other Representatives of the other, access,
during normal business hours, to all its properties, books, contracts,
commitments and records, including all Tax Returns and all work papers and other
documentation relating to Taxes, and, during such period, each of Company and
Parent shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other (x) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (y) all other existing
information concerning its business, properties and personnel as such other
party may reasonably request. Unless otherwise required by law, the parties will
hold any such information which is nonpublic in confidence in accordance with
the Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.04 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
Section 6.05 Stockholders Meetings.
(a) Subject in each case to applicable laws, rules and regulations:
(i) Company will take all action reasonably necessary in accordance with
the DGCL and its Certificate of Incorporation and Bylaws and applicable
Nasdaq Stock Market rules to cause the Company Stockholders Meeting to be
held for the purpose of voting upon the adoption of this Agreement, and to
cause a vote of the Company's stockholders on the adoption of this
Agreement to be taken, in each case as promptly as practicable after the
date hereof, and (ii) subject further to the provisions of Section 6.01(b),
Parent will take all action reasonably necessary in accordance with the
DGCL and its Certificate of Incorporation and Bylaws and applicable Nasdaq
Stock Market rules to cause the Parent Stockholders Meeting to be held for
the purpose of voting upon the Parent Voting Proposal, and to cause a vote
of Parent's stockholders on the Parent Voting Proposal to be taken, in each
case as promptly as practicable after the date hereof. Unless otherwise
mutually agreed by Parent and Company, Parent and Company shall coordinate
and cooperate with respect to the timing of such meetings and shall use
their commercially reasonable efforts to hold such meetings at the same
time and on the same day and as promptly as practicable after the date
hereof. Parent and, subject to Company's rights under Section 8.01(h),
Company shall solicit from their respective stockholders proxies in favor
of the adoption of this Agreement (in the case of Company stockholders) and
approval of the Parent Voting Proposal (in the case of Parent
stockholders), and will take all other action necessary or advisable to
secure the vote or consent of their respective stockholders required under
NASD rules and the DGCL, as applicable; provided, however, that neither
Company nor Parent shall be required to take any action that its respective
Board of Directors determines in good faith after consultation with outside
legal counsel would be inconsistent with its fiduciary duties to its
stockholders under applicable law. Notwithstanding anything to the contrary
contained in this Agreement, Company may adjourn or postpone the Company
Stockholders Meeting, and Parent may adjourn or postpone the Parent
Stockholders Meeting, to the extent that (x) such adjournment or
postponement is necessary to ensure that any necessary supplement or
amendment to the Joint Proxy Statement/Prospectus is
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provided to such party's stockholders in advance of the applicable vote or
(y) additional time is reasonably required to solicit proxies in favor of
the approvals required by Section 7.01(a) or (z) as of the time for which
such stockholders meeting is originally scheduled (as set forth in the
Joint Proxy Statement/Prospectus) there are insufficient shares represented
(either in person or by proxy) to constitute a quorum necessary to conduct
the business of such stockholders meeting. Company shall ensure that the
Company Stockholders Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by Company in connection with the
Company Stockholders Meeting are solicited, and Parent shall ensure that
Parent Stockholders Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by Parent in connection with the
Parent Stockholders Meeting are solicited, in compliance with the DGCL,
applicable charter documents, Nasdaq Stock Market rules and all other
applicable legal requirements.
(b) (i) The Board of Directors of Company has recommended that
Company's stockholders vote in favor of the adoption of this Agreement at
the Company Stockholders Meeting; (ii) the Joint Proxy Statement/Prospectus
shall include a statement to the effect that the Board of Directors of
Company has recommended that Company stockholders vote in favor of the
adoption of this Agreement at the Company Stockholders Meeting; and (iii)
neither the Board of Directors of Company nor any committee thereof shall
withdraw, amend or modify, or resolve to withdraw, amend or modify, in a
manner adverse to Parent, the recommendation of the Board of Directors of
Company that Company stockholders vote in favor of the adoption of this
Agreement; provided, however, that nothing in this Agreement or in the
Confidentiality Agreement shall prevent the Board of Directors of Company
from omitting such recommendation from the Joint Proxy Statement/Prospectus
or from withholding, withdrawing, amending or modifying such recommendation
if: (A) a Company Superior Offer is made and is not withdrawn, (B) such
Company Superior Offer is not attributable to a breach by Company in any
material respect of any of the restrictions set forth in Section 6.02, (C)
forty-eight (48) hours elapse following delivery by Company to Parent of
written notice advising Parent that the Board of Directors of Company
intends to withhold, withdraw, amend or modify such recommendation, and (D)
the Board of Directors of Company concludes in good faith, after
consultation with its outside legal counsel, that inclusion of such
recommendation, or the failure to withhold, withdraw, amend or modify such
recommendation, would be inconsistent with the fiduciary duties of the
Board of Directors of Company to Company stockholders under applicable law.
For purposes of this Agreement, "Company Superior Offer" shall mean a bona
fide written offer made by a third party to consummate any of the following
transactions: (x) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Company pursuant to which the stockholders of Company immediately preceding
such transaction hold less than fifty percent (50%) of the equity interest
in the surviving, resulting or acquiring entity of such transaction; (y) a
sale or other disposition by Company of assets (excluding inventory and
used equipment sold in the ordinary course of business) representing a
majority of Company's assets; or (z) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by
Company), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing fifty percent (50%) or
more of the voting power of the then outstanding shares of capital stock of
Company, in each case on terms that, in the good faith judgment of the
Board of Directors of Company (after consultation with an investment bank
of nationally recognized reputation) are more favorable (in a manner that,
in the totality of such terms, is not immaterial) to Company stockholders
than the Merger (after taking into account all relevant factors, including
any conditions to the Company Superior Offer, the timing of the
consummation of the transaction pursuant to the Company Superior Offer, the
risk of nonconsummation thereof and the need for any required governmental
or other consents, filings and approvals); provided, however, that an offer
shall only be a Company Superior Offer if any financing required to
consummate the transaction contemplated by such offer is committed or is
otherwise reasonably likely, in the good faith judgment of Company's Board
of Directors, to be obtained on a timely basis.
(c) (i) The Board of Directors of Parent has recommended that Parent
stockholders vote in favor of the Parent Voting Proposal at the Parent
Stockholders Meeting; (ii) the Joint Proxy
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Statement/Prospectus shall include a statement to the effect that the Board
of Directors of Parent has recommended that Parent stockholders vote in
favor of the Parent Voting Proposal at the Parent Stockholders Meeting; and
(iii) neither the Board of Directors of Parent nor any committee thereof
shall withdraw, amend or modify, or resolve to withdraw, amend or modify,
in a manner adverse to Company, the recommendation of the Board of
Directors of Parent that Parent stockholders vote in favor of the Parent
Voting Proposal. Parent, as the sole stockholder of Merger Sub, will vote
its shares of Merger Sub voting stock in favor of adoption of this
Agreement.
(d) Subject to the right of Company to terminate this Agreement
pursuant to Section 8.01(h), nothing contained in Section 6.05 shall limit
Company's obligation to call, give notice of, convene and hold the Company
Stockholders Meeting (regardless of whether the recommendation of the Board
of Directors of Company shall have been withdrawn, amended or modified and
regardless of whether any Company Takeover Proposal has been commenced,
disclosed, or announced). Nothing contained in this Agreement or in the
Confidentiality Agreement shall operate to preclude Company or any officer
or director of Company from complying with all disclosure obligations it or
he may have under any applicable federal or state law.
Section 6.06 Legal Conditions To Merger.
(a) Company and Parent shall each use all requisite commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary and proper under
applicable law to consummate and make effective the transactions
contemplated hereby as promptly as practicable, (ii) obtain from any
Governmental Entity or any other third party any consents, licenses,
permits, waivers, approvals, authorizations, or orders required to be
obtained by Company or Parent or any of their Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby including the Merger,
and (iii) as promptly as practicable, make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder, and (C)
any other applicable law. Company and Parent shall cooperate with each
other in connection with the making of all such filings, including
providing copies of all such filings to the non-filing party and its
advisors prior to filing and, if requested, shall accept all reasonable
additions, deletions or changes suggested in connection therewith. Company
and Parent shall use commercially reasonable efforts to furnish to each
other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law (including
all information required to be included in the Joint Proxy
Statement/Prospectus and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) Parent and Company shall, and shall cause each of their respective
Subsidiaries to, cooperate and use their respective commercially reasonable
efforts to obtain any government clearances required for the transactions
contemplated by this Agreement (including through compliance with the HSR
Act and any applicable foreign governmental reporting requirements), to
respond to any government requests for information, and to contest and
resist any action, including any legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement, including by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action.
The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or
any other federal, state or foreign antitrust or fair trade law. Subject to
the requirements of applicable law, Parent shall be entitled to direct any
proceedings or negotiations
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with any Governmental Entity relating to any such analyses, appearances,
presentations, memoranda, briefs, arguments, opinions or proposals,
provided that Parent shall afford Company a reasonable opportunity to
participate therein. Notwithstanding anything to the contrary in this
Section 6.06, neither Parent nor Company nor any of their respective
Subsidiaries shall be required to sell or otherwise dispose of, or hold
separate (through the establishment of a trust or otherwise), any assets or
categories of assets, or businesses of Parent, Company or any of their
affiliates, or to withdraw from doing business in a particular jurisdiction
or to take any other action that would, in any case, reasonably be expected
to have a Parent Material Adverse Effect or a Company Material Adverse
Effect.
(c) Each of Company and Parent shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, commercially reasonable efforts
to obtain any third party consents related to or required in connection
with the Merger that are (i) necessary to consummate the transactions
contemplated hereby, (ii) disclosed or required to be disclosed in the
Company Disclosure Schedule or the Parent Disclosure Schedule, as the case
may be, or (iii) required to prevent a Company Material Adverse Effect or a
Parent Material Adverse Effect from occurring.
Section 6.07 Public Disclosure. Parent and Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law.
Section 6.08 Tax-Free Reorganization. At or prior to the filing of the
Registration Statement, Company and Parent shall execute and deliver to Cooley
Godward LLP and Brobeck, Phleger & Harrison LLP tax representation letters in
customary form. To the extent requested by Parent or Company, Parent, Merger Sub
and Company shall each confirm to Cooley Godward LLP and to Brobeck, Phleger &
Harrison LLP the accuracy and completeness as of the Effective Time of the tax
representation letters delivered pursuant to the immediately preceding sentence.
Parent and Company shall each use all requisite commercially reasonable efforts
to cause the Merger to be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Following delivery of the tax
representation letters pursuant to the first sentence of this Section 6.08, each
of Parent and Company shall use all requisite commercially reasonable efforts to
cause Brobeck, Phleger & Harrison LLP and Cooley Godward LLP, respectively, to
deliver to it a tax opinion satisfying the requirements of Item 601 of
Regulation S-K promulgated under the Securities Act. In rendering such opinions,
each of such counsel shall be entitled to rely on the tax representation letters
referred to in this Section 6.08.
Section 6.09 Stock Plans.
(a) Company has provided Parent with a true and complete list as of
March 9, 2000 of all holders of outstanding options under the Company Stock
Plans, including the number of shares of Company Common Stock subject to
each such option, the exercise or vesting schedule, the exercise price and
term of each such option (in each case, without giving effect to the 100%
stock dividend being distributed by Company on or about March 13, 2000. On
the Closing Date, Company shall deliver to Parent an updated list current
as of such Closing Date. At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (a "Company Stock Option") under
the Company Stock Plans, whether vested or unvested, shall be assumed and
shall constitute an option to acquire, on the same terms and conditions as
were applicable under such Company Stock Option, the same number of shares
of Parent Common Stock as the holder of such Company Stock Option would
have been entitled to receive pursuant to the Merger had such holder
exercised such option (including any unvested portion thereof) in full
(disregarding any limitation on exercisability thereof) immediately prior
to the Effective Time (rounded downward to the nearest whole number), at a
price per share (rounded upward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of Company Common Stock purchasable
pursuant to such Company Stock Option immediately prior to the Effective
Time divided by (z) the number of full shares of Parent
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Common Stock deemed purchasable pursuant to such Company Stock Option in
accordance with the foregoing. All outstanding rights of Company that it
may hold immediately prior to the Effective Time to repurchase unvested
shares of Company Common Stock issued or issuable under any of the Company
Stock Plans (the "Repurchase Options") shall be assigned to Parent and
shall thereafter be exercisable by Parent upon the same terms and
conditions in effect immediately prior to the Effective Time, except that
the shares purchasable pursuant to the Repurchase Options and the purchase
price per shall be adjusted to reflect the Exchange Ratio.
(b) Except as otherwise provided in the Company Stock Plans, the
documents governing the outstanding Company Stock Options under the Company
Stock Plans, and offer letters and other agreements affecting such Company
Stock Options, the Merger shall not result in the termination or
acceleration of any outstanding Company Stock Options under the Company
Stock Plans that are so assumed by Parent. It is the intention of the
parties that the Company Stock Options so assumed by Parent qualify
following the Effective Time as incentive stock options as defined in
Section 422 of the Internal Revenue Code to the extent such Company Stock
Options qualified as incentive stock options prior to the Effective Time.
As promptly as reasonably practicable and in any event within thirty (30)
business days after receipt of all option documentation it requires
relating to the outstanding Company Stock Options, Parent will issue to
each person who, immediately prior to the Effective Time, is a holder of an
outstanding Company Stock Option under the Company Stock Plans that is to
be assumed by Parent hereunder, a document evidencing the foregoing
assumption of such Company Stock Option by Parent.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under Company Stock Options assumed in accordance with this Section 6.09.
As promptly as reasonably practicable and in any event within fifteen (15)
business days after receipt of all option documentation it requires
relating to the outstanding Company Stock Options, Parent shall file a
registration statement on Form S-8 (or any successor form) covering shares
of Parent Common Stock issuable pursuant to such Company Stock Options
assumed by Parent provided that such Company Stock Options qualify for
registration on such Form S-8 (or any such successor form). Company shall
cooperate with and assist Parent in the preparation of such registration
statements.
(d) The Board of Directors of Company shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of the Company Stock Plans and the instruments evidencing
the Company Stock Options, to provide for the conversion of the Company
Stock Options into options to acquire Parent Common Stock in accordance
with this Section 6.09, and to provide that no consent of the holders of
the Company Stock Options is required in connection with such conversion.
(e) Assuming that the Company delivers to Parent the Section 16
Information (as defined below) in a timely fashion, the Board of Directors
of Parent, or a committee of two or more "non-employee directors" (as such
term is defined for purposes of Rule 16b-3 under the Exchange Act) thereof,
shall adopt resolutions prior to the Effective Time providing that, and
shall take other appropriate action such that, the deemed grant to Company
Insiders (as defined below) of options to purchase Parent Common Stock
under the Company Stock Options (as converted into options to acquire
Parent Common Stock pursuant to this Section 6.09), and the receipt by
Company Insiders of Parent Common Stock in exchange for Company Common
Stock pursuant to the Merger, are intended to be exempt from liability
pursuant to Section 16(b) of the Exchange Act. Such resolutions shall
comply with the approval conditions of Rule 16b-3 under the Exchange Act
for purposes of such Section 16(b) exemption, including specifying the name
of each Company Insider, the number of equity securities to be acquired or
disposed of by each Company Insider, the material terms of any derivative
securities, and that the approval is intended to make the receipt of such
securities exempt pursuant to Rule 16b-3(d) under the Exchange Act.
"Section 16 Information" shall mean the names of the Company Insiders, the
number of shares of Company Common Stock held by each Company Insider and
expected to be exchanged for Parent Common Stock in the Merger and the
number and a
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description of Company Stock Options held by each Company Insider and
expected to be converted into options to acquire Parent Common Stock in
connection with the Merger. "Company Insiders" shall mean those officers
and directors of Company who will be subject to the reporting requirements
of Section 16(b) of the Exchange Act with respect to Parent and whose names
are included in the Section 16 Information.
(f) At the Effective Time, Parent shall assume, with respect to each
Company employee who agrees to waive the exercise of any Purchase Right (as
defined in the Company ESPP) on any Purchase Date (as defined in the
Company ESPP) after February 15, 2001, the Company ESPP and all Purchase
Rights held by employees of Company or any of its Subsidiaries who are
participating in the Company ESPP, and Parent shall continue the assumed
Company ESPP and the related offering and purchase periods thereunder (for
the benefit of all persons who are employees of Company or any of its
Subsidiaries as of the Closing and who have waived any Purchase Rights on
any Purchase Date after February 15, 2001); provided, however, that: (i)
each such assumed Purchase Right shall pertain to Parent Common Stock; (ii)
the "Per Offering Share Limit" set forth in Section 8.1 of the Company ESPP
shall be equal to the product of (A) five thousand (5,000) (without giving
effect to the 100% stock dividend to be distributed by Company on or about
March 13, 2000) multiplied by (B) the Exchange Ratio, rounded down to the
nearest whole share; (iii) the maximum number of shares of Parent Common
Stock issuable under the Company ESPP set forth in Section 4.1 of the
Company ESPP shall be equal to the product of (A) three hundred thousand
(300,000) (without giving effect to the 100% stock dividend to be
distributed by Company on or about March 13, 2000) multiplied by (B) the
Exchange Ratio, rounded down to the nearest whole share, and (iv) the fair
market value per share of Company Common Stock at the beginning of each
Offering Period in effect at the Effective Time shall be equal to the fair
market value per share of Company Common Stock at the beginning of such
Offering Period divided by the Exchange Ratio, rounded up to the nearest
whole cent. On the Closing Date, Company shall deliver to Parent a list of
all holders of Purchase Rights who have consented to the waiver of all
Purchase Rights on any Purchase Date after February 15, 2001 and the
percentage of compensation to be deducted for each such holder. As promptly
as reasonably practicable and in any event within fifteen (15) business
days after receipt of all Company ESPP documentation it requires relating
to outstanding assumed Purchase Rights, Parent shall file with the SEC a
registration statement on Form S-8 relating to the shares of Parent Common
Stock issuable pursuant to Purchase Rights exercised under the assumed
Company ESPP.
(g) Company shall take, or cause to be taken, all action necessary to
provide that no additional Offering Periods under the Company ESPP shall
commence after the date of this Agreement, other than the Offering Period
beginning on August 16, 2000, if applicable.
(h) Within five (5) business days following the date of this
Agreement, Company shall make available to Parent a list of all persons who
Company reasonably believes (i) are, with respect to Company and as of the
date of this Agreement, "disqualified individuals" (within the meaning of
Section 280G of the Internal Revenue Code and the regulations promulgated
thereunder), and (ii) will be receiving payments or benefits (including
acceleration of options) in connection with the Merger including any
payments or benefits as a result of termination of service following the
Merger. Within five (5) business days prior to the Closing Date, Company
shall revise such list to reflect any additional information that Company
reasonably believes would impact the determination of persons who (A) are,
with respect to Company, such "disqualified individuals," and (B) will be
receiving payments or benefits (including acceleration of options) in
connection with the Merger including any payments or benefits as a result
of termination of service following the Merger.
Section 6.10 Affiliate Agreements. Promptly after the execution of this
Agreement, Company will provide Parent with a list of those persons who are, in
Company's reasonable judgment, "affiliates" of Company, within the meaning of
Rule 145 (each such person who is an "affiliate" of Company within the meaning
of Rule 145 is referred to as an "Affiliate") promulgated under the Securities
Act ("Rule 145"). Company shall provide Parent such information and documents as
Parent shall reasonably request for
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purposes of reviewing such list and shall notify Parent in writing regarding any
change in the identity of its Affiliates prior to the Closing Date. Company
shall use commercially reasonable efforts to cause each of its Affiliates to
promptly deliver an executed affiliate agreement, in form and substance
reasonably satisfactory to Parent and Company.
Section 6.11 Indemnification.
(a) From and after the Effective Time, (i) Parent will, and Parent
will cause the Surviving Corporation to, indemnify and hold harmless each
person who is or was a director or officer of Company or any of its
Subsidiaries at or at any time prior to the Effective Time (an "Indemnified
Party") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission (or alleged action
or omission) in his or her capacity as a director, officer, employee,
principal stockholder, fiduciary or agent of Company or any of its
Subsidiaries or benefit plans whether asserted or claimed prior to, at or
after the Effective Time and (ii) Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and any of the
Indemnified Parties in effect immediately prior the Effective Time (and
Parent and the Surviving Corporation shall also advance expenses as
incurred to the fullest extent permitted under applicable law, provided
that the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification).
(b) For a period of six (6) years after the Effective Time, Parent
shall cause the Surviving Corporation to maintain (to the extent available
in the market) in effect a directors' and officers' liability insurance
policy covering those persons who currently or in the future are covered by
Company's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to Parent) with coverage in amount and
scope at least as favorable as the coverage currently planned by Company
and described on Schedule 6.11(b); provided, however, that in no event
shall Parent or the Surviving Corporation be required to expend for any
given year for such coverage in excess of one hundred fifty percent (150%)
of the annual premium quoted to Company for such coverage as disclosed by
Company to Parent on Schedule 6.11(b) (the "Current Premium"); and if the
annual premium for such coverage would at any time exceed one hundred fifty
percent (150%) of the Current Premium, then the Surviving Corporation shall
maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to one hundred fifty percent (150%) of
the Current Premium.
(c) Without limiting any of the rights of any of the Indemnified
Parties set forth in the other provisions of this Section 6.11, for a
period of six years after the Effective Time, to the extent there is any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time) against or involving any Indemnified Party that
arises out of or pertains to any action or omission (or alleged action or
omission) in his or her capacity as a director, officer, employee,
principal stockholder, fiduciary or agent of Company or any of its
Subsidiaries or benefit plans occurring prior to the Effective Time, such
Indemnified Party shall be entitled to be represented by counsel and
following the Effective Time (i) any counsel retained by the Indemnified
Parties shall be reasonably satisfactory to the Surviving Corporation and
Parent, (ii) the Surviving Corporation and Parent shall pay as incurred the
reasonable fees and expenses of such counsel, promptly after statements
therefor are received, and (iii) the Surviving Corporation and Parent will
cooperate in the defense of any such matter; provided, however, that
neither the Surviving Corporation nor Parent shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld, conditioned or delayed); and provided, further,
that, in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification
in respect to any such claim or claims shall continue until the final
disposition of any and all such claims. The Indemnified Parties as a group
may retain only one law firm to represent them with respect to any single
action unless such law firm determines that there is, under applicable
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standards of professional conduct, a material risk of conflict on any
significant issue between the positions of any two or more Indemnified
Parties.
(d) Parent and the Surviving Corporation jointly and severally agree
to pay all expenses, including reasonable attorneys' fees, that may be
incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 6.11 to the extent that such
Indemnified Party is determined to be entitled to indemnification under
this Section 6.11.
(e) The provisions of this Section 6.11 are intended to be in addition
to the rights otherwise available to the Indemnified Parties by law,
charter, statute, bylaw or agreement, and shall operate for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, and their
heirs, representatives, successors and assigns.
Section 6.12 Benefit Plans.
(a) Parent agrees that, during the period commencing at the Effective
Time and continuing for a reasonable period thereafter, the employees of
Company and its Subsidiaries will continue to be provided with benefits
under employee benefit plans (other than stock option or other plans
involving the potential issuance of securities) which on average are
substantially as favorable in the aggregate as those currently provided by
Company and its Subsidiaries to such employees (except with respect to the
401(k) plan as provided below).
(b) Unless Parent consents otherwise in writing, Company shall take
all action necessary to terminate, or cause to be terminated, before the
Effective Time, any Company Employee Plan that is a 401(k) plan or other
defined contribution retirement plan. Parent shall permit the rollover of
the accounts of participants in the Company 401(k) plans to the Parent
401(k) plan (including outstanding loans of those participants who became
employees of Parent or any of its Subsidiaries, or who remain employees of
the Surviving Corporation or any of its Subsidiaries).
(c) Upon the termination of the Company welfare plans, Parent shall
include Company employees in Parent's welfare plans (within the meaning of
Section 3(1) of ERISA) and fringe benefit plans on the same basis and terms
as similarly situated Parent employees currently participate. All welfare
benefit plans of Parent or the Surviving Corporation in which employees of
Company or any of its Subsidiaries participate after the Effective Time
shall (i) recognize expenses and claims that were incurred by such
employees in the year in which the Effective Time occurs toward applicable
co-payments, out of pocket maximums and deductibles, and (ii) provide
coverage for preexisting health conditions to the extent covered under the
applicable plans or programs of Company or any of its Subsidiaries as of
the Effective Time. In addition, for eligibility purposes (including
waiting period and evidence of insurability), under plans of the Surviving
Corporation or Parent, service by an employee for Company or any of its
Subsidiaries and any predecessor prior to the Effective Time shall be taken
into account to the same extent as service for Parent; provided, however,
that nothing herein shall require the inclusion of any such employee in any
such plan prior to the Effective Time, and provided further, that in
determining the amount of vacation pay owed to any such employee from and
after the Effective Time under the applicable terms of the vacation pay
plan of the Surviving Corporation or Parent (which terms need not be
comparable to the terms of the vacation plan or policy of Company or any of
its Subsidiaries and any predecessor, corporation or entity), credit shall
be given for such employee's service for Company or any of its Subsidiaries
and any predecessor, corporation or entity prior to the Effective Time.
Without limiting the effect of Section 6.09(f), employees of Company or any
of its Subsidiaries and any predecessor corporation or entity as of the
Effective Time shall be permitted to participate in Parent's Employee Stock
Purchase Plan (the "Parent ESPP") commencing on the first enrollment date
following the Effective Time, subject to compliance with the eligibility
provisions of such plan (with employees receiving credit, for purposes of
such eligibility provisions, for service with Company or any of its
subsidiaries and any predecessor corporation or entity.
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(d) With respect to each benefit plan, program, practice, policy or
arrangement maintained by Parent (the "Parent Employee Plans") in which
employees of Company or its Subsidiaries subsequently participate, Parent
will recognize such employee's cumulative prior service to Company and its
Subsidiaries (and any predecessor corporation or entity) for purposes of
determining eligibility to participate in and for the vesting of benefits
under such Parent Employee Plans to the same extent as service for Parent;
provided, that such recognition shall not be for the purpose of determining
retirement benefits and accrual. Notwithstanding the foregoing, for a
period of no less than one year after the Effective Time, Parent shall
provide severance and termination benefits (other than acceleration of
option vesting) to employees of Company and its Subsidiaries that are no
less favorable than those provided by Company or its Subsidiaries to such
Company employees as of the date hereof.
Section 6.13 Registration Statement; Joint Proxy Statement/Prospectus. If
at any time prior to the Effective Time any event relating to Company or any of
its Affiliates, officers or directors should be discovered by Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Company shall promptly
inform Parent. If at any time prior to the Effective Time any event relating to
Parent or any of its Affiliates, officers or directors should be discovered by
Parent which should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement/Prospectus, Parent shall promptly
inform Company.
ARTICLE VII.
CONDITIONS TO MERGER
Section 7.01 Conditions To Each Party's Obligation To Effect The
Merger. The respective obligations of each party to this Agreement to effect the
Merger are subject to the satisfaction of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by
the Company Stockholder Vote, and, if the exemption or arrangements
described in Section 6.01(b) shall not have been obtained or made, the
Parent Voting Proposal shall have been approved by the vote prescribed by
applicable Nasdaq Stock Market stockholder voting requirements promulgated
by the NASD.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Approvals. Other than the filing provided for by Section 1.01, all
authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
Governmental Entity required to be obtained or made or to have expired
prior to the Effective Time shall have been obtained or made or shall have
expired, other than those, the absence of which (i) would not reasonably be
expected to have a Parent Material Adverse Effect or a Company Material
Adverse Effect and (ii) would not prohibit or render unlawful the
consummation of the Merger under U.S. law or under any law providing for
criminal penalties against any director or officer of Company or Parent.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(e) No Legal Impediment. No Governmental Entity or federal, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Order, statute, rule or regulation
which is in effect and which has the effect of making the Merger unlawful
or otherwise prohibiting consummation of the Merger under U.S. law or under
any law providing for criminal penalties against any director or officer of
Company or Parent.
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(f) Nasdaq. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for quotation on the Nasdaq National
Market, or shall be exempt from such quotation requirement under then
applicable laws and regulations and Nasdaq National Market rules.
Section 7.02 Additional Conditions To Obligations Of Parent And Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are subject
to the satisfaction of each of the following conditions, any of which may be
waived in writing exclusively by Parent and Merger Sub:
(a) Representations And Warranties. The representations and warranties
of Company set forth in this Agreement shall be true and correct as of the
Closing Date as though made on and as of the Closing Date or, in the case
of representations and warranties of Company which speak as of an earlier
date, shall have been true and correct as of such earlier date, except in
each case (i) for changes contemplated by this Agreement and (ii) where the
failure to be true and correct, individually or in the aggregate, has not
had and will not, solely with the passage of time, imminently result in a
Company Material Adverse Effect or (in the case of the representations and
warranties in Section 3.02(a) and Section 3.02(b) and Section 3.21) a
material adverse effect on the cost of the Merger to Parent.
(b) Performance Of Obligations Of Company. Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Certificate. Parent shall have received a certificate signed on
behalf of Company by the chief executive officer and the chief financial
officer of Company to the effect that the conditions set forth in Section
7.02(a) and Section 7.02(b) are satisfied.
(d) Employee Retention. The two Company employees listed in Schedule
7.02(f) shall have entered into employment and noncompetition agreements
with Parent providing for such employees to be employed by Parent (or to
continue to be employed by the Surviving Corporation) after the Effective
Time; both such employment agreements shall be in full force and effect;
and neither of such employees shall have ceased employment with Company or
given notice to the Board of Directors of Parent or the Board of Directors
of Company of his intention to cease employment with Parent or Company
after the Effective Time.
Section 7.03 Additional Conditions To Obligation Of Company. The
obligation of Company to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by Company:
(a) Representations And Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing
Date, or, in the case of representations and warranties of Parent or Merger
Sub which speak as of an earlier date, shall have been true and correct as
of such earlier date, except in each case (i) for changes contemplated by
this Agreement and (ii) where the failure to be true and correct,
individually or in the aggregate, has not had and will not, solely with the
passage of time, imminently result in a Parent Material Adverse Effect.
(b) Performance Of Obligations Of Parent And Merger Sub. Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date.
(c) Certificate. Company shall have received a certificate signed on
behalf of Parent by the chief executive officer and the chief financial
officer of Parent to the effect that the conditions set forth in Section
7.03(a) and Section 7.03(b) are satisfied.
(d) Registration Statement Tax Opinion. Company shall have received an
appropriate written tax opinion from Cooley Godward LLP, counsel to
Company, for filing as an exhibit to the Registration Statement.
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(e) Closing Tax Opinion. Company shall have received the opinion of
Cooley Godward LLP, counsel to Company, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code for federal income tax purposes.
Section 7.04 Frustration Of Closing Conditions. Neither Parent, Merger Sub
nor Company may rely on the failure of any condition set forth in Section 7.01,
7.02 or 7.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to take any action required by this Agreement.
ARTICLE VIII.
TERMINATION AND AMENDMENT
Section 8.01 Termination. At any time prior to the Effective Time, whether
before or after the receipt of stockholder approvals, this Agreement may be
terminated:
(a) by mutual consent duly authorized by the Boards of Directors of
Parent and Company;
(b) by either Parent or Company, if the Closing shall not have
occurred on or before September 15, 2000 (provided, however, that (i) the
right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose action or failure to act has been the cause
of, or resulted in, the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a material breach of
this Agreement, and (ii) if (A) on September 15, 2000 the condition to
closing set forth in Section 7.01(b) or Section 7.01(c) has not been
satisfied or waived or the Closing cannot otherwise occur due to any action
taken or threatened to be taken or any failure to act by a Governmental
Entity or federal, state or foreign court of competent jurisdiction, and
(B) there is a reasonable likelihood that the conditions to closing set
forth in Section 7.01(b) and Section 7.01(c) can be satisfied and the
Closing can otherwise occur notwithstanding any action taken or threatened
to be taken or any failure to act by a Governmental Entity or federal,
state or foreign court of competent jurisdiction, then either party may, in
its sole discretion, extend the date referred to in this paragraph by up to
90 days);
(c) by Parent, if (i) Company shall have breached any representation
or warranty in this Agreement, or shall breach any obligation or agreement
hereunder, in a manner that, if uncured, would cause any condition
precedent to the Closing set forth in Article VII not to be satisfied, and
such breach shall not have been cured within twenty (20) business days of
receipt by Company of written notice of such breach and a description of
the principal details of such breach; provided, however, that the right to
terminate this Agreement under this Section 8.01(c)(i) shall not be
available to Parent where Parent is at that time in material breach of this
Agreement; or (ii) the Board of Directors of Company shall have omitted its
recommendation in favor of adoption of this Agreement from the Joint Proxy
Statement/Prospectus or shall have withdrawn or modified its recommendation
in favor of adoption of this Agreement in a manner adverse to Parent or
recommended, endorsed, accepted or agreed to accept a Company Takeover
Proposal or resolved to do any of the foregoing;
(d) by Company, if Parent shall have breached any representation or
warranty this Agreement, or shall breach any obligation or agreement
hereunder, in a manner that, if uncured, would cause any condition
precedent to the Closing set forth in Article VII not to be satisfied, and
such breach shall not have been cured within twenty (20) business days
following receipt by Parent of written notice of such breach and a
description of the principal details of such breach; provided, however,
that the right to terminate this Agreement under this Section 8.01(d) shall
not be available to Company where Company is at that time in material
breach of this Agreement;
(e) by Parent if (i) any permanent injunction or other order of a
court or other competent authority preventing the consummation of the
Merger shall have become final and nonappealable, (ii) any required
approval of the stockholders of Company with respect to this Agreement or
the Merger shall not have been obtained by reason of the failure to obtain
the required vote upon a vote
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taken at a duly held meeting of Company stockholders (or at any adjournment
or postponement thereof permitted by Section 6.05(a)), or (iii) the
exemption described in Section 6.01(b) shall not have been obtained (or
shall be unavailable), the arrangements described in Section 6.01(b) shall
not have been made (or shall be unavailable), and the approval of the
Parent Voting Proposal shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a duly held
meeting of Parent stockholders (or at any adjournment or postponement
thereof permitted by Section 6.05(a)) (provided, however, that the right to
terminate this Agreement pursuant to this Section 8.01(e)(iii) shall not be
available to Parent if the failure to obtain such exemption, the failure to
make such arrangements and the failure to obtain such Parent stockholder
approval, is attributable to an action or omission by Parent in material
breach of this Agreement;
(f) by Company if (i) any permanent injunction or other order of a
court or other competent authority preventing the consummation of the
Merger shall have become final and nonappealable, (ii) any required
approval of the stockholders of Company with respect to this Agreement or
the Merger shall not have been obtained by reason of the failure to obtain
the required vote upon a vote taken at a duly held meeting of Company
stockholders (or at any adjournment or postponement thereof permitted by
Section 6.05(a)), or (iii) the exemption described in Section 6.01(b) shall
not have been obtained (or shall be unavailable), the arrangements
described in Section 6.01(b) shall not have been made (or shall be
unavailable) and the approval of the Parent Voting Proposal shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote taken at a duly held meeting of Parent stockholders (or at any
adjournment or postponement thereof permitted by Section 6.05(a))
(provided, however, that the right to terminate this Agreement pursuant to
this Section 8.01(f)(iii) shall not be available to Company if the failure
to obtain such Company stockholder approval is attributable to an action or
omission by Company in material breach of this Agreement);
(g) by Parent if (i) Company actively and directly solicits,
initiates, encourages or induces the making, submission or announcement of
any Company Takeover Proposal (whether or not any Company Takeover Proposal
in fact results therefrom), and (ii) such action on the part of Company
constitutes a willful and material breach by Company of Section 6.02(a)(i);
provided, however, that Parent shall not be permitted to terminate this
Agreement pursuant to this Section 8.01(g) if, in each instance, more than
ten (10) business days shall have elapsed since any of Parent's directors
or executive officers first obtained confirmation of such willful and
material breach by Company of Section 6.02(a)(i) or if Parent shall then be
in material breach of this Agreement; or
(h) by Company, in response to a Company Superior Offer which was not
solicited by Company in violation of this Agreement; provided, however,
that Company shall not be permitted to terminate this Agreement pursuant to
this Section 8.01(h) if such Company Superior Offer is attributable to a
violation by Company of its obligations under Sections 6.02 and 6.05; and
provided further, that no termination pursuant to this Section 8.01(h)
shall be effective until after (i) seventy-two (72) hours following
Parent's receipt of written notice advising Parent that the Board of
Directors of Company is prepared to accept a Company Superior Offer,
specifying the material terms and conditions of such Company Superior Offer
and identifying the person making such Company Superior Offer and (ii) the
payment of any applicable Termination Fee pursuant to Section 8.03.
Section 8.02 Effect Of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent or
Company or their respective officers, directors, securityholders or affiliates,
except as provided in Section 8.03 and except to the extent of a breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement involving fraud, intentional misrepresentation or
willful misconduct. The provisions of Section 8.03 and this Section 8.02 shall
remain in full force and effect and survive any termination of this Agreement.
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Section 8.03 Expenses And Termination Fees.
(a) Subject to Sections 8.03(b) through 8.03(g), whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement, any related agreements and documents and the transactions
contemplated hereby and thereby (including the fees and expenses of
advisers, accountants and legal counsel) shall be paid by the party
incurring such expense.
(b) In the event that this Agreement is terminated by Parent pursuant
to Section 8.01(c)(ii) or Section 8.01(g) or by Company pursuant to Section
8.01(h), then Company shall pay to Parent the sum of two hundred twenty
five million dollars ($225,000,000) upon termination of this Agreement by
Company pursuant to Section 8.01(h) or within five business days after
termination of this Agreement by Parent pursuant to Section 8.01(c)(ii) or
Section 8.01(g). The payment referred to in this Section 8.03(b) shall be
made by wire transfer of same-day funds to an account specified by Parent.
(c) In the event that (i) a bona fide offer by a third party (other
than Parent or an affiliate of Parent) for a Specified Company Takeover
Transaction (as defined below) becomes known publicly or becomes known to
Company stockholders generally prior to the date on which a vote of Company
stockholders on the proposal to adopt this Agreement is taken by the
Company stockholders, and (ii) such offer has not been definitively
withdrawn at least seven (7) days prior to the date on which a vote of
Company stockholders on the proposal to adopt this Agreement is taken by
the Company stockholders, and (iii) prior to the time that a vote of
Company stockholders on the proposal to adopt this Agreement is taken by
the Company stockholders, no Parent Material Adverse Effect has occurred
and no Parent Material Adverse Effect will, solely with the passage of
time, imminently occur, and (iv) this Agreement is validly terminated by
Parent pursuant to Section 8.01(e)(ii) or by Company pursuant to Section
8.01(f)(ii), then Company shall pay to Parent the sum of fifteen million
dollars ($15,000,000) upon termination of this Agreement by Company or
within five business days after termination of this Agreement by Parent.
The payment referred to in this Section 8.03(c) shall be made by wire
transfer of same-day funds to an account specified by Parent.
(d) In the event that (i) a bona fide offer by a third party (other
than Parent or an affiliate of Parent) for a Specified Company Takeover
Transaction becomes known publicly or becomes known to Company stockholders
generally, and (ii) this Agreement is validly terminated by Company
pursuant to Section 8.01(b), and (iii) the offer referred to in clause
"(i)" of this Section 8.03(d) is pending at the time this Agreement is
terminated by Company pursuant to Section 8.01(b), and (iv) the failure of
the Merger to occur on or before the date referred to in Section 8.01(b) is
not attributable to a material breach of this Agreement by Parent or to any
challenge to, or any investigation or review of, the Merger by any
Governmental Entity, and (v) prior to the termination of this Agreement by
Company pursuant to Section 8.01(b), no Parent Material Adverse Effect has
occurred and no Parent Material Adverse Effect will, solely with the
passage of time, imminently occur, and (vi) prior to the termination of
this Agreement by Company pursuant to Section 8.01(b) the Company
Stockholders Meeting shall not have been held and no vote of Company
stockholders shall have been taken on the proposal to adopt this Agreement,
then Company shall pay to Parent the sum of fifteen million dollars
($15,000,000) upon termination of this Agreement by Company pursuant to
Section 8.01(b). The payment referred to in this Section 8.03(d) shall be
made by wire transfer of same-day funds to an account specified by Parent.
(e) In the event that (x) all of the conditions referred to in clauses
"(i)," "(ii)," "(iii)" and "(iv)" of Section 8.03(c) or all of the
conditions referred to in clauses "(i)," "(ii)," "(iii)," "(iv)," "(v)" and
"(vi)" of Section 8.03(d) shall have been satisfied, and (y) on or before
the one hundred eightieth (180th) day following termination of this
Agreement, Company enters into and publicly announces a letter of intent or
preliminary agreement or enters into a definitive acquisition agreement
with a third party (other than Parent or an affiliate of Parent) providing
for the consummation of a Specified Company Takeover Transaction or a
tender or exchange offer is commenced or announced that would reasonably be
expected to result in a Specified Company Takeover Transaction, and (z) on
or before the first anniversary of the termination of this Agreement, a
Specified Company
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Takeover Transaction is consummated, then Company shall pay to Parent the
sum of two hundred ten million dollars ($210,000,000) upon such
consummation. The payment referred to in this Section 8.03(e) shall be made
by wire transfer of same-day funds to an account specified by Parent.
(f) For purposes of this Agreement, "Specified Company Takeover
Transaction" means (i) a merger or other business combination involving
Company and a third party (other than Parent or an affiliate of Parent)
after which the stockholders of Company immediately prior to such merger or
business combination would own sixty percent (60%) or less of the voting
power or equity securities of the surviving corporation in such merger or
business combination and would own sixty percent (60%) or less of the
voting power or equity securities of the parent of the surviving
corporation in such merger or business combination, (ii) the acquisition by
a third party (other than Parent or an affiliate of Parent), in one
transaction or a series of related transactions, of forty percent (40%) or
more of the outstanding shares of capital stock of Company, or (iii) the
acquisition by a third party (other than Parent or an affiliate of Parent),
in one transaction or a series of related transactions, of all or
substantially all of the assets of Company.
(g) Company acknowledges that the agreements contained in this Section
8.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into
this Agreement. Accordingly, if Company fails promptly to pay the amount
due pursuant to this Section 8.03 and, in order to obtain such payment,
Parent commences a suit which results in a judgment or settlement for the
fee set forth in this Section 8.03, Company shall pay to Parent its costs
and expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the fee
at the prime rate of Citibank, N.A. in effect on the date such payment was
required to be made.
Section 8.04 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Company or of Parent, but, after any such
approval, no amendment shall be effective which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by a written instrument signed on behalf of each of the parties
hereto.
Section 8.05 Extension; Waiver. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto or (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE IX.
MISCELLANEOUS
Section 9.01 Nonsurvival Of Representations, Warranties, Covenants And
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Section 1.04,
Section 2.01, Section 2.02, Section 6.08, Section 6.09, Section 6.11, Section
6.12, and Article IX. The Confidentiality Agreement between Parent and Company
dated as of March 2, 2000 (the "Confidentiality Agreement") shall survive the
execution and delivery of this Agreement.
Section 9.02 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) when delivered, if delivered
personally or (b) one business day after transmitted, if transmitted by a
nationally recognized express overnight courier service, (c) when telecopied, if
telecopied (and the receipt of such telecopy is confirmed), and (d) three
business days after mailing, if mailed by
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registered or certified mail (return receipt requested), to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Merger Sub, to:
i2 Technologies, Inc.
One i2 Place
11701 Luna Road
Dallas, TX 75234
Fax: (214) 860-6063
Attn.: Chief Executive Officer
with a copy to:
Rod J. Howard, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Fax: (650) 496-2777
and to:
Ron Skloss, Esq.
Brobeck, Phleger & Harrison LLP
301 Congress Avenue, Suite 1200
Austin, Texas 78701
Fax: (512) 477-5813
(b) if to Company, to:
Aspect Development, Inc.
1300 Charleston Road
Mountain View, CA 94043
Fax: (650) 693-3226
Attn.: Chief Executive Officer
with a copy to:
Richard Climan, Keith Flaum, and James Kitch, Esqs.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 849-7400
Section 9.03 Definitions. For purposes of this Agreement:
(a) "Company Material Adverse Effect" means any change, effect, event,
occurrence, state of facts or development that is materially adverse to the
business, financial condition or results of operations of Company and its
Subsidiaries, taking Company and its Subsidiaries together as a whole;
provided, however, that none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been
or will be, a Company Material Adverse Effect: (a) any change in the market
price or trading volume of Company's stock after the date hereof; (b) any
failure by Company to meet internal projections or forecasts or published
revenue or earnings predictions for any period ending (or for which
revenues or earnings are released) on or after the date of this Agreement;
(c) any adverse change, effect, event, occurrence, state of facts or
development to the extent
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attributable to the announcement or pendency of the Merger (including any
cancellations of or delays in customer orders, any reduction in sales, any
disruption in supplier, distributor, partner or similar relationships or
any loss of employees); (d) any adverse change, effect, event, occurrence,
state of facts or development attributable to conditions affecting the
industries in which Company participates, the U.S. economy as a whole or
foreign economies in any locations where Company or any of its Subsidiaries
has material operations or sales; (e) any adverse change, effect, event,
occurrence, state of facts or development attributable or relating to (i)
out-of-pocket fees and expenses (including legal, accounting, investment
banking and other fees and expenses) incurred in connection with the
transactions contemplated by this Agreement, or (ii) the payment of any
amounts due to, or the provision of any other benefits (including benefits
relating to acceleration of stock options) to, any officers or employees
under employment contracts, non-competition agreements, employee benefit
plans, severance arrangements or other arrangements in existence as of the
date of this Agreement; (f) any adverse change, effect, event, occurrence,
state of facts or development resulting from or relating to compliance with
the terms of, or the taking of any action required by, this Agreement; (g)
any adverse change, effect, event, occurrence, state of facts or
development arising from or relating to any change in accounting
requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof; or (h) any adverse change,
effect, event, occurrence, state of facts or development arising from or
relating to actions required to be taken under applicable laws, rules,
regulations, contracts or agreements.
(b) "Parent Material Adverse Effect" means any change, effect, event,
occurrence, state of facts or development that is, materially adverse to
the business, financial condition or results of operations of Parent and
its Subsidiaries, taking Parent and its Subsidiaries together as a whole;
provided, however, that none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been
or will be, a Parent Material Adverse Effect: (a) any change in the market
price or trading volume of Parent's stock after the date hereof; (b) any
failure by Parent to meet internal projections or forecasts or published
revenue or earnings predictions for any period ending (or for which
revenues or earnings are released) on or after the date of this Agreement;
(c) any adverse change, effect, event, occurrence, state of facts or
development to the extent attributable to the announcement or pendency of
the Merger (including any cancellations of or delays in customer orders,
any reduction in sales, any disruption in supplier, distributor, partner or
similar relationships or any loss of employees); (d) any adverse change,
effect, event, occurrence, state of facts or development attributable to
conditions affecting the industries in which Parent participates, the U.S.
economy as a whole or the foreign economies as a whole in any locations
where Parent or any of its Subsidiaries has material operations or sales;
(e) any adverse change, effect, event, occurrence, state of facts or
development attributable or relating to (i) out-of-pocket fees and expenses
(including legal, accounting, investment banking and other fees and
expenses) incurred in connection with the transactions contemplated by this
Agreement, or (ii) the payment of any amounts due to, and the provision of
any other benefits (including benefits relating to acceleration of stock
options) to any officers or employees under employment contracts,
non-competition agreements, employee benefit plans, severance arrangements
and other arrangements in existence as of the date of this Agreement; (f)
any adverse change, effect, event, occurrence, state of facts or
development arising from or relating to compliance with the terms of, or
the taking of any action required by, this Agreement; (g) any adverse
change, effect, event, occurrence, state of facts or development arising
from or relating to any change in accounting requirements or principles or
any change in applicable laws, rules or regulations or the interpretation
thereof; or (h) any adverse change, effect, event, occurrence, state of
facts or development arising from or relating to actions required to be
taken under applicable laws, rules, regulations, contracts or agreements.
Section 9.04 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
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meaning or interpretation of this Agreement. Whenever the word "include,"
"includes" or "including" is used in this Agreement it shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to March
12, 2000.
Section 9.05 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.06 Entire Agreement; No Third Party Beneficiaries. This
Agreement and the other documents and the instruments referred to herein (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among or between any of the parties with
respect to the subject matter hereof and thereof, and (b) except as provided in
Article II or Section 6.12 (indemnification) are not intended to confer upon any
person other than the parties hereto, the Company stockholders and the
Indemnified Parties any rights or remedies hereunder; provided, however, that
the Confidentiality Agreement shall remain in full force and effect until the
Effective Time. Each party hereto agrees that, except for the representations
and warranties contained in this Agreement and except for any representations
and warranties of such party contained in the Confidentiality Agreement and the
Company Voting Agreements or the Parent Voting Agreements, as the case may be,
neither Company nor Parent makes any representations or warranties, and each
hereby disclaims any representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
Representatives, with respect to the execution and delivery of this Agreement or
the transactions contemplated hereby, notwithstanding the delivery or disclosure
to the other or the other's Representatives of any documentation or other
information with respect to any one or more of the foregoing.
Section 9.07 Governing Law; Forum; Waiver Of Jury Trial. This Agreement
shall be governed and construed in accordance with the laws of the State of
Delaware, including matters relating to merger procedure, corporate governance
and fiduciary duty without regard to any applicable conflicts of law. Subject to
the provisions of Section 6.02(c), all actions, suits, proceedings, disputes or
controversies by any or between any of the parties hereto with respect to this
Agreement, the Merger or the transactions contemplated hereby shall be
determined in the Delaware Court of Chancery (to the extent it shall have
jurisdiction thereof) and otherwise in the U.S. District Court for the District
of Delaware (to the extent it shall have jurisdiction thereof) and otherwise in
the applicable state courts of the State of Delaware, and each party irrevocably
and unconditionally consents and submits to the jurisdiction of such courts for
any actions, suits or proceedings arising out of or relating to this Agreement,
the Merger and the transactions contemplated hereby.
THE PARTIES HERETO IRREVOCABLY WAIVE THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE MERGER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 9.09 Attorneys' Fees. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
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Section 9.10 Specific Performance. The parties to this Agreement agree
that, in the event of any breach or threatened breach by any party hereto of any
provision of this Agreement, the other parties shall be entitled (in addition to
any other remedy that may be available to them) to (i) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such provision and (ii) an injunction restraining such breach or threatened
breach. No person or entity shall be required to provide any bond or other
security in connection with any such decree, order or injunction or in
connection with any related action or proceeding.
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
<TABLE>
<S> <C>
i2 TECHNOLOGIES, INC. HOYA MERGER CORP.
By: /s/ SANJIV S. SIDHU By: /s/ SANJIV S. SIDHU
------------------------------------------------ ----------------------------------------------
Name: Sanjiv S. Sidhu Name: Sanjiv S. Sidhu
ASPECT DEVELOPMENT, INC.
By: /s/ ROMESH T. WADHWANI
----------------------------------------------
Name: Romesh T. Wadhwani
</TABLE>
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APPENDIX B
PARENT VOTING AGREEMENT
This PARENT VOTING AGREEMENT (this "Agreement") is made and entered into as
of March 12, 2000 between Aspect Development, Inc., a Delaware corporation
("Company"), and the undersigned stockholder ("Stockholder") of i2 Technologies,
Inc., a Delaware corporation ("Parent"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings set forth in the
Merger Agreement described below.
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Reorganization dated as of
March 12, 2000 by and among Parent, Hoya Merger Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"), and Company (such
agreement as it may be amended is hereinafter referred to as the "Merger
Agreement"), Parent has agreed to acquire the outstanding securities of Company
pursuant to a statutory merger of Merger Sub with and into Company (the
"Merger") in which outstanding shares of capital stock of Company will be
converted into shares of common stock of Parent as set forth in the Merger
Agreement (the "Transaction");
WHEREAS, in order to induce Company to enter into the Merger Agreement and
consummate the Transaction, Parent has agreed to use its commercially reasonable
efforts to cause each stockholder of Parent who is an officer or director of
Parent to execute and deliver to Company a Parent Voting Agreement upon the
terms set forth herein; and
WHEREAS, Stockholder is the registered and beneficial owner (within the
meaning of Rule 13d-3 of the Exchange Act) of capital stock of Parent (which
capital stock (i) includes the shares referred to on the signature page hereto
and (ii) is referred to herein as the "Shares").
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance.
(a) Stockholder represents and warrants to Company that (i)
Stockholder is the beneficial owner of the Shares; (ii) the Shares
constitute Stockholder's entire interest in the outstanding capital stock
and voting securities of Parent; (iii) the Shares are, and will be at all
times up until the Expiration Date, free and clear of any liens, claims,
options, charges or other encumbrances; and (iv) Stockholder's principal
residence or place of business is accurately set forth on the signature
page hereto.
(b) Stockholder agrees not to permit to be transferred (except as may
be specifically required by court order or by operation of law, in which
case the transferee shall agree to be bound hereby), sold, exchanged,
pledged or otherwise disposed of or encumbered any Shares or any New Shares
(as defined below), at any time prior to the Expiration Date. As used
herein, the term "Expiration Date" shall mean the earlier to occur of (i)
the Effective Time or (ii) termination of the Merger Agreement in
accordance with the terms thereof.
1.2 New Shares. Stockholder agrees that any shares of capital stock or
voting securities of Parent that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. Prior to the Expiration Date, at every
meeting of the stockholders of Parent at which any of the following matters is
considered or voted upon, and at every adjournment or postponement thereof, and
on every action or approval by written consent of the stockholders of Parent
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with respect to any of the following matters, Stockholder shall cause the Shares
and any New Shares to be voted (i) in favor of approval of the issuance of
shares of Parent Common Stock pursuant to the Merger Agreement and in favor of
any proposal or action which would, or could reasonably be expected to,
facilitate the Merger, (ii) against any liquidation or winding up of Parent, and
(iii) against any other proposal or action which would, or could reasonably be
expected to, impede, frustrate, prevent, prohibit, delay or discourage the
Merger. Prior to the Expiration Date, Stockholder, as the holder of voting stock
of Parent, shall be present, in person or by proxy, and Stockholder shall use
Stockholder's best efforts to cause each other holder of record of any Shares or
New Shares to be present, in person or by proxy, at all meetings of stockholders
of Parent at which any matter referred to in this Section 2 is to be acted upon,
so that all Shares and New Shares are counted for the purposes of determining
the presence of a quorum at such meetings. Notwithstanding the foregoing,
nothing in this Agreement shall limit or restrict Stockholder from (i) acting in
his capacity as a director or officer of Parent, to the extent applicable, it
being understood that this Agreement shall apply to Stockholder solely in his
capacity as a stockholder of Parent or (ii) voting in his sole discretion on any
matter other than those matters referred to in this Section 2.
3. Irrevocable Proxy. Stockholder hereby agrees to timely cause to be
delivered to Company one or more duly executed proxies in the form attached
hereto as Annex A (the "Proxy") by all record holders of all Shares and New
Shares, such Proxy to cover the voting of all Shares and all New Shares prior to
the Expiration Date. In the event that Stockholder is unable to cause any such
Proxy to be provided in a timely manner, Stockholder hereby grants (and shall
immediately cause any such record holders to grant) Company and such other
record holders a power of attorney to execute and deliver such Proxy for and on
behalf of Stockholder, such power of attorney, which being coupled with an
interest, shall survive any death, disability, bankruptcy, or any other
impediment of Stockholder and such other record holders. Upon the execution of
this Agreement by Stockholder, Stockholder hereby revokes or shall immediately
cause to be revoked any and all prior proxies or powers of attorney given by
Stockholder or any other person or entity with respect to voting of the Shares
on the matters referred to in Section 2 and agrees not to permit to be granted
any subsequent proxies or powers of attorney with respect to the voting of the
Shares or any New Shares on the matters referred to in Section 2 until after the
Expiration Date.
4. Representations, Warranties and Covenants of Stockholder. Stockholder
hereby represents, warrants and covenants to Company as follows:
(a) Stockholder has full power and legal capacity to execute and
deliver this Agreement and the Proxy and to perform its obligations
hereunder and thereunder. This Agreement and the Proxy have been duly and
validly executed and delivered by Stockholder and constitute the valid and
binding obligations of Stockholder, enforceable against Stockholder in
accordance with their terms, except as may be limited by (i) the effect of
bankruptcy, insolvency, conservatorship, arrangement, moratorium or other
laws affecting or relating to the rights of creditors generally, or (ii)
the rules governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law. The
execution and delivery of this Agreement and the Proxy by Stockholder does
not, and the performance of Stockholder's obligations hereunder and
thereunder will not, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or give to others any right to terminate, amend, accelerate or
cancel any right or obligation under, or result in the creation of any lien
or encumbrance on any Shares or New Shares pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Stockholder is a party or by
which Stockholder or the Shares or New Shares are or will be bound or
affected.
(b) Stockholder understands and agrees that if Stockholder or any
other record holder of any Shares or New Shares attempts to transfer, vote
or provide any other person with the authority to vote any of the Shares or
New Shares other than in compliance with this Agreement, Parent shall not,
and Stockholder hereby unconditionally and irrevocably instructs Parent to
not, permit any such transfer on its books and records, issue a new
certificate representing any of the Shares or New
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Shares or record such vote unless and until Stockholder shall have complied
with the terms of this Agreement.
5. Additional Documents. Stockholder hereby covenants and agrees to (a)
execute and deliver any additional documents (including correspondence addressed
to the NASD or other applicable Governmental Entity or regulatory body)
necessary or desirable, in the reasonable opinion of Company, to carry out the
purpose and intent of this Agreement and (b) to take such actions as Company may
request in good faith for the purpose of helping Parent to obtain an exemption
from compliance with applicable stockholder voting requirements of the NASD in
connection with the Merger, or otherwise to make arrangements such that Parent
need not solicit the vote or hold a meeting of its stockholders in connection
with the Merger or the issuance of shares of Parent Common Stock pursuant
thereto. Stockholder shall promptly inform Company of any communication received
by Stockholder from the NASD or other applicable Governmental Entity or
regulatory body relating to any of the matters referred to in this Section 5,
and Stockholder shall not communicate with the NASD or other applicable
Governmental Entity or regulatory body with respect to any of the matters
referred to in this Section 5 without Company's prior written consent.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Transaction under the
terms of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder may have provided, however, that Stockholder shall not be required
by this Section 6 to give any consent or waiver in his capacity as a director or
officer of Parent.
7. Termination. This Agreement and the Proxy delivered in connection
herewith and all obligations of Stockholder hereunder and thereunder shall
terminate and shall have no further force or effect as of the Expiration Date.
8. Confidentiality. Stockholder agrees (i) to hold any information
regarding this Agreement and the Transaction in strict confidence, and (ii) not
to divulge any such information to any third person, except to the extent any of
the same is hereafter publicly disclosed by Parent.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. This Agreement is
intended to bind Stockholder solely as a securityholder of Parent only with
respect to the specific matters set forth herein.
9.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Company will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Company upon any such violation, Company
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Company at law
or in equity and Stockholder hereby waives any and all defenses which could
exist in its favor in connection with such enforcement and waives any
requirement for the security or posting of any bond in connection with such
enforcement.
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9.5 Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given (a) when delivered, if
delivered by hand, (b) one business day after transmitted, if transmitted by a
nationally recognized overnight courier service, (c) when telecopied, if
telecopied (which is confirmed), or (d) three business days after mailing, if
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses:
(a) If to Stockholder, at the address set forth below Stockholder's
signature at the end hereof.
(b) if to Company, to:
Aspect Development, Inc.
1395 Charleston Road
Mountain View, CA 94043
Attention: Chief Executive Officer
Facsimile No: (650) 968-4334
Telephone No: (650) 428-2700
with a copy to:
Cooley Godward LLP
3175 Hanover Street
Palo Alto, California 94303
Attention: Richard Climan, Esq. and Keith Flaum, Esq.
Facsimile No.: (650) 849-7400
Telephone No.: (650) 843-5000
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
9.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
9.7 Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
9.8 Counterpart. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
9.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
B-4
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
<TABLE>
<S> <C>
ASPECT DEVELOPMENT, INC. STOCKHOLDER
By:
------------------------------------------------ -----------------------------------------------------
(Signature)
Name:
----------------------------------------------- -----------------------------------------------------
(Signature of Spouse)
Title:
--------------------------------------------------
-----------------------------------------------------
(Print Name of Stockholder)
-----------------------------------------------------
(Print Street Address)
-----------------------------------------------------
(Print City, State and Zip)
-----------------------------------------------------
(Print Telephone Number)
-----------------------------------------------------
(Social Security or Tax I.D. Number)
</TABLE>
Total Number of Shares of Parent Common Stock owned on the date hereof:
Common Stock:
-------------------
State of Residence:
-------------
B-5
<PAGE> 181
ANNEX A
IRREVOCABLE PROXY
TO VOTE STOCK OF
i2 TECHNOLOGIES, INC.
The undersigned stockholder of i2 Technologies, Inc., a Delaware
corporation ("Parent"), hereby irrevocably appoints the members of the Board of
Directors of Aspect Development, Inc., a Delaware corporation ("Company"), and
each of them, or any other designee of Company, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting (to the full extent that the
undersigned is entitled to do so) with respect to all of the shares of capital
stock of Parent that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of Parent issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Irrevocable Proxy. The Shares
beneficially owned by the undersigned stockholder of Parent as of the date of
this Irrevocable Proxy are listed on the final page of this Irrevocable Proxy.
Upon the undersigned's execution of this Irrevocable Proxy, any and all prior
proxies given by the undersigned with respect to the voting of any Shares on the
matters referred to in the third full paragraph of this Irrevocable Proxy are
hereby revoked and the undersigned agrees not to grant any subsequent proxies
with respect to such matters until after the Expiration Date (as defined below).
This Irrevocable Proxy is irrevocable, is coupled with an interest, and is
granted in consideration of Company entering into that certain Agreement and
Plan of Reorganization (the "Merger Agreement") by and among Parent, Hoya
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Company, which Merger Agreement provides for the
merger of Merger Sub with and into Company (the "Merger"). As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) such date and time
as the Merger shall become effective in accordance with the terms and provisions
of the Merger Agreement, and (ii) the date of termination of the Merger
Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting rights of the undersigned with respect to the Shares
(including, without limitation, the power to execute and deliver written
consents), at every annual, special or adjourned meeting of the stockholders of
Parent and in every written consent in lieu of such meeting (i) in favor of
approval of the issuance of shares of Parent common stock pursuant to the Merger
Agreement and in favor of any proposal or action which would, or could
reasonably be expected to, facilitate the Merger, (ii) against any liquidation
or winding up of Parent, and (iii) against any other proposal or action which
would, or could reasonably be expected to, impede, frustrate, prevent, prohibit,
delay or discourage the Merger.
The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter except as provided above. The undersigned stockholder
may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
If any term, provision, covenant or restriction of this Irrevocable Proxy
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Irrevocable Proxy shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
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This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable.
Dated: March , 2000
------------------------------------
(Signature of Stockholder)
------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
______ shares of Parent Common Stock
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
B-A-2
<PAGE> 183
APPENDIX C
COMPANY VOTING AGREEMENT
This COMPANY VOTING AGREEMENT (this "Agreement") is made and entered into
as of March 12, 2000 between i2 Technologies, Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of Aspect
Development, Inc., a Delaware corporation ("Company"). Capitalized terms used
and not otherwise defined herein shall have the respective meanings set forth in
the Merger Agreement described below.
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Reorganization dated as of
March 12, 2000 by and among Parent, Hoya Merger Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"), and Company (such
agreement as it may be amended is hereinafter referred to as the "Merger
Agreement"), Parent has agreed to acquire the outstanding securities of Company
pursuant to a statutory merger of Merger Sub with and into Company in which
outstanding shares of capital stock of Company will be converted into shares of
common stock of Parent as set forth in the Merger Agreement (the "Transaction");
WHEREAS, in order to induce Parent to enter into the Merger Agreement and
consummate the Transaction, Company has agreed to use its commercially
reasonable efforts to cause certain stockholders of Company who are officers or
directors of Company to execute and deliver to Parent a Voting Agreement upon
the terms set forth herein; and
WHEREAS, Stockholder is or may become the registered and beneficial owner
(within the meaning of Rule 13d-3 of the Exchange Act) of capital stock of
Company (the "Shares").
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1. Transfer and Encumbrance.
(a) Stockholder represents and warrants to Parent that (i) Stockholder
is the beneficial owner of the Shares; (ii) the Shares set forth on the
signature page hereto constitute Stockholder's entire interest in the
outstanding capital stock and voting securities of Company; (iii) the
Shares are, and will be at all times up until the Expiration Date, free and
clear of any liens, claims, options, charges or other encumbrances other
than repurchase rights in favor of Company; and (iv) Stockholder's
principal residence or place of business is accurately set forth on the
signature page hereto.
(b) Except upon the exercise of options to purchase Company Common
Stock, Stockholder agrees not to transfer (except as may be specifically
required by court order or by operation of law, in which case the
transferee shall agree to be bound hereby), sell, exchange, pledge or
otherwise dispose of or encumber any Shares or any New Shares (as defined
below), at any time prior to the Expiration Date. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) the Effective Time
or (ii) termination of the Merger Agreement in accordance with the terms
thereof.
1.2. New Shares. Stockholder agrees that any shares of capital stock or
voting securities of Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares and Take Certain Other Action.
(a) Prior to the Expiration Date, at every meeting of the stockholders
of Company at which any of the following matters is considered or voted
upon, and at every adjournment or postponement
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<PAGE> 184
thereof, and on every action or approval by written consent of the
stockholders of Company with respect to any of the following matters,
Stockholder shall vote, or, using Stockholder's best efforts, and to the
full extent legally permitted, cause the holder of record to vote the
Shares and any New Shares (except those Shares or New Shares which are not
voting securities):
i. in favor of adoption of the Merger Agreement and any proposal or
action which would, or could reasonably be expected to, facilitate the
Merger;
ii. against approval of any proposal made in opposition to or
competition with consummation of the Merger and the Merger Agreement;
iii. against any Company Takeover Proposal with any party other
than Parent or an affiliate of Parent as contemplated by the Merger
Agreement;
iv. against any liquidation or winding up of Company; and
v. against any other proposal or action which would, or could
reasonably be expected to, impede, frustrate, prevent, prohibit or
discourage the Merger (each of (b) through (e) collectively, an
"Opposing Proposal").
Prior to the Expiration Date, Stockholder, as the holder of voting stock of
Company, shall be present, in person or by proxy, or, using Stockholder's best
efforts and to the full extent legally permitted, attempt to cause the holder of
record to be present, in person or by proxy, at all meetings of stockholders of
Company at which any matter referred to in this Section 2(a) is to be voted upon
so that all Shares and New Shares are counted for the purposes of determining
the presence of a quorum at such meetings.
(b) Between the date of this Agreement and the Expiration Date,
Stockholder will not, and will not permit any entity under Stockholder's
control to, (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Rule 14A under the Exchange
Act) with respect to an Opposing Proposal, (ii) initiate a stockholders'
vote with respect to an Opposing Proposal or (iii) become a member of a
"group" (as such term is used in Section 13(d) of the Exchange Act) with
respect to any voting securities of Company with respect to an Opposing
Proposal.
(c) Notwithstanding the foregoing, nothing in this Agreement shall
limit or restrict Stockholder from (i) acting in his capacity as a director
or officer of Company, to the extent applicable, it being understood that
this Agreement shall apply to Stockholder solely in his capacity as a
stockholder of Company or (ii) voting in his sole discretion on any matter
other than those matters referred to in Section 2(a).
3. Irrevocable Proxy. Stockholder hereby agrees to timely deliver to Parent
a duly executed proxy in the form attached hereto as Annex A (the "Proxy"), such
Proxy to cover the issued and outstanding Shares and all issued and outstanding
New Shares in respect of which Stockholder is the record holder and is entitled
to vote at each meeting of the stockholders of Company (including, without
limitation, each written consent in lieu of a meeting) prior to the Expiration
Date. In the event that Stockholder is unable to provide any such Proxy in a
timely manner, Stockholder hereby grants Parent a power of attorney to execute
and deliver such Proxy for and on behalf of Stockholder, such power of attorney,
which being coupled with an interest, shall survive any death, disability,
bankruptcy, or any other such impediment of Stockholder. Upon the execution of
this Agreement by Stockholder, Stockholder hereby revokes any and all prior
proxies or powers of attorney given by Stockholder with respect to voting of the
Shares on the matters referred to in Section 2(a) and agrees not to grant any
subsequent proxies or powers of attorney with respect to the voting of the
Shares on the matters referred to in Section 2(a) until after the Expiration
Date.
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4. Representations, Warranties and Covenants of Stockholder. Stockholder
hereby represents, warrants and covenants to Parent as follows:
(a) Stockholder has full power and legal capacity to execute and
deliver this Agreement and to perform his obligations hereunder. This
Agreement has been duly and validly executed and delivered by Stockholder
and constitutes the valid and binding obligation of Stockholder,
enforceable against Stockholder in accordance with its terms, except as may
be limited by (i) the effect of bankruptcy, insolvency, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights
of creditors generally, or (ii) the rules governing the availability of
specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a
proceeding in equity or at law. The execution and delivery of this
Agreement by Stockholder does not, and the performance of Stockholder's
obligations hereunder will not, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any right to terminate, amend,
accelerate or cancel any right or obligation under, or result in the
creation of any lien or encumbrance on any Shares or New Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Stockholder is a party or by which Stockholder or the Shares or New Shares
are or will be bound or affected.
(b) Stockholder has read Section 6.02 of the Merger Agreement and
understands the Company's restrictions thereunder.
(c) Stockholder understands and agrees that if Stockholder attempts to
transfer, vote or provide any other person with the authority to vote any
of the Shares other than in compliance with this Agreement, Company shall
not, and Stockholder hereby unconditionally and irrevocably instructs
Company to not, permit any such transfer on its books and records, issue a
new certificate representing any of the Shares or record such vote unless
and until Stockholder shall have complied with the terms of this Agreement.
5. Additional Documents. Stockholder hereby covenants and agrees to execute
and deliver any additional documents necessary or desirable, in the reasonable
opinion of Parent, to carry out the purpose and intent of this Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Transaction under the
terms of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder may have provided, however, that Stockholder shall not be required
by this Section 6 to give any consent or waiver in his capacity as a director or
officer of Company.
7. Termination. This Agreement and the Proxy delivered in connection
herewith and all obligations of Stockholder hereunder and thereunder, shall
terminate and shall have no further force or effect as of the Expiration Date.
8. Miscellaneous.
8.1. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.2. Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. This Agreement is
intended to bind Stockholder solely as a securityholder of Company only with
respect to the specific matters set forth herein.
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<PAGE> 186
8.3. Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
8.4. Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity and Stockholder hereby waives any and all defenses which could
exist in its favor in connection with such enforcement and waives any
requirement for the security or posting of any bond in connection with such
enforcement.
8.5. Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given (a) when delivered, if
delivered by hand, (b) one business day after transmitted, if transmitted by a
nationally recognized overnight courier service, (c) when telecopied, if
telecopied (which is confirmed), or (d) three business days after mailing, if
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses:
(a) If to Stockholder, at the address set forth below Stockholder's
signature at the end hereof.
(b) if to Parent, to:
i2 Technologies, Inc.
11701 Luna Road
Dallas, Texas
Attention: Chief Executive Officer
Facsimile No.: (469) 357-1000
Telephone No.: (469) 357-3450
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Rod J. Howard, Esq.
Facsimile No.: (650) 496-2777
Telephone No.: (650) 812-2596
and to:
Brobeck, Phleger & Harrison LLP
301 Congress Avenue, Suite 1200
Austin, Texas 78701
Attention: Ron Skloss, Esq.
Facsimile No.: (512) 477-5813
Telephone No.: (512) 477-5495
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
8.6. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to the principles of conflicts or choice of law rules of any
jurisdiction.
8.7. Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
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8.8. Counterpart. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
8.9. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
<TABLE>
<S> <C>
i2 TECHNOLOGIES, INC. STOCKHOLDER
By:
------------------------------------------------ -----------------------------------------------------
(Signature)
Name:
----------------------------------------------- -----------------------------------------------------
(Signature of Spouse)
Title:
----------------------------------------------
-----------------------------------------------------
(Print Name of Stockholder)
-----------------------------------------------------
(Print Street Address)
-----------------------------------------------------
(Print City, State and Zip)
-----------------------------------------------------
(Print Telephone Number)
-----------------------------------------------------
(Social Security or Tax I.D. Number)
</TABLE>
Total Number of Shares of Company Common Stock owned on the date hereof:
Common Stock:
-----------------------------------------
State of Residence:
-----------------------------------
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<PAGE> 188
ANNEX A
IRREVOCABLE PROXY
TO VOTE STOCK OF
ASPECT DEVELOPMENT, INC.
The undersigned stockholder of Aspect Development, Inc., a Delaware
corporation ("Company"), hereby irrevocably appoints the members of the Board of
Directors of i2 Technologies, Inc., a Delaware corporation ("Parent"), and each
of them, or any other designee of Parent, as the sole and exclusive attorneys
and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting rights (to the full extent that
the undersigned is entitled to do so) with respect to all of the issued and
outstanding shares of capital stock of Company that now are owned of record by
the undersigned, (collectively, the "Shares") in accordance with the terms of
this Irrevocable Proxy. The Shares beneficially owned by the undersigned
stockholder of Company as of the date of this Irrevocable Proxy are listed on
the final page of this Irrevocable Proxy. Upon the undersigned's execution of
this Irrevocable Proxy, any and all prior proxies given by the undersigned with
respect to the voting of any Shares on the matters referred to in the third full
paragraph of this Irrevocable Proxy are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to such matters until
after the Expiration Date (as defined below).
This Irrevocable Proxy is irrevocable, is coupled with an interest, and is
granted in consideration of Parent entering into that certain Agreement and Plan
of Reorganization (the "Merger Agreement") by and among Parent, Hoya Merger
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and Company, which Merger Agreement provides for the merger of Merger Sub
with and into Company (the "Merger"). As used herein, the term "Expiration Date"
shall mean the earlier to occur of (i) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the Merger
Agreement, and (ii) the date of termination of the Merger Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting rights of the undersigned with respect to the Shares
(including, without limitation, the power to execute and deliver written
consents), at every annual, special or adjourned meeting of the stockholders of
Company and in every written consent in lieu of such meeting:
(a) in favor of adoption of the Merger Agreement and any proposal or
action which would, or could reasonably be expected to, facilitate the
Merger;
(b) against approval of any proposal made in opposition to or
competition with consummation of the Merger and the Merger Agreement;
(c) against any Company Takeover Proposal (as defined in the Merger
Agreement) with any party other than Parent or an affiliate of Parent as
contemplated by the Merger Agreement;
(d) against any liquidation or winding up of Company; and
(e) against any other proposal or action which would, or could
reasonably be expected to impede, frustrate, prevent, prohibit or
discourage the Merger.
The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter except as provided above. The undersigned stockholder
may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
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<PAGE> 189
This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable.
Dated: March , 2000
------------------------------------
(Signature of Stockholder)
------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
______ shares of Company Common
Stock
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
C-A-2
<PAGE> 190
APPENDIX D
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
March 12, 2000
Board of Directors
i2 Technologies, Inc.
11701 Luna Road
Dallas, TX 75234
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to i2 Technologies, Inc. ("i2") of the exchange ratio (the "Exchange
Ratio") of 1.10 (0.55 as adjusted for the Aspect Development, Inc. ("Aspect")
dividend to be paid on March 13, 2000) shares of common stock, par value
$0.00025 per share, of i2 ("i2 Shares") to be paid for each share of common
stock, par value $0.001 per share, of Aspect ("Aspect Shares"), pursuant to the
Agreement and Plan of Reorganization, dated as of March 12, 2000 among i2, Hoya
Merger Corp., a direct wholly-owned subsidiary of i2, and Aspect (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with i2 having provided certain investment banking services to i2 from
time to time, including having acted as a lead managing underwriter of an
offering of 3,000,000 i2 Shares in December 1997, having acted as lead managing
underwriter of a $300,000,000 offering of 5.250% Convertible Notes Due 2006 in
December 1999 and having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities of
i2 or Aspect for its own account and for the account of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports on Form 10-K for the three years ended December 31,
1998 for i2 and Aspect; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of i2 and Aspect; certain other communications from i2 and
Aspect to their respective stockholders; and certain analyses of cost savings
and operating synergies projected by the management of i2 to result from the
transaction contemplated by the Agreement. We also have held discussions with
members of the senior management of i2 and Aspect regarding their assessment of
the strategic rationale for, and the potential benefits of, the transaction
contemplated by the Agreement, the past and current business operations,
financial condition and future prospects of their respective companies, and
certain analysts' reports and estimates with respect to the companies' future
financial performance (the "Estimates"). In addition, we have reviewed the
reported price and trading activity for the i2 Shares and the Aspect Shares,
which like many software and Internet-related stocks have been and are likely to
continue to be subject to significant short term price and trading volatility,
compared certain financial and stock market information for i2 and Aspect with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the software and Internet industries specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
D-1
<PAGE> 191
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, you have informed us that i2 and Aspect do not regularly prepare
detailed financial projections. Accordingly, you have instructed us to rely on
the Estimates for purposes of rendering our opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of i2
or Aspect or any of their subsidiaries and we have not been furnished with any
such evaluation or appraisal. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Board of Directors
of i2 in connection with its consideration of the transaction contemplated by
the Agreement and such opinion does not constitute a recommendation as to how
any stockholder of i2 should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to i2.
Very truly yours,
D-2
<PAGE> 192
APPENDIX E
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
March 12, 2000
Board of Directors
Aspect Development, Inc.
1395 Charleston Road
Mountain View, California 94043
Members of the Board:
You have asked us to advise you with respect to the fairness, from a financial
point of view, to the holders of the common stock of Aspect Development, Inc.
("Aspect") of the Exchange Ratio (as defined below) set forth in the Agreement
and Plan of Reorganization, dated as of March 12, 2000 (the "Agreement"), by and
among i2 Technologies, Inc. ("i2"), Hoya Merger Corp., a wholly owned subsidiary
of i2 ("Merger Sub"), and Aspect. The Agreement provides for, among other
things, the merger of Merger Sub with and into Aspect (the "Merger") pursuant to
which each outstanding share of the common stock, par value $0.001 per share, of
Aspect ("Aspect Common Stock") will be converted into the right to receive 0.55
(the "Exchange Ratio") of a share of the common stock, par value $0.00025 per
share, of i2 ("i2 Common Stock").
In arriving at our opinion, we have reviewed the Agreement and certain related
documents, and certain publicly available business and financial information
relating to Aspect and i2. We have also reviewed certain other information
relating to Aspect and i2, including financial forecasts, provided to or
discussed with us by Aspect and i2, and have met with the managements of Aspect
and i2 to discuss the businesses and prospects of Aspect and i2. We have also
considered certain financial and stock market data of Aspect and i2, and we have
compared those data with similar data for other publicly held companies in
businesses we deemed similar to those of Aspect and i2, and we have considered,
to the extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. We have reviewed and
discussed with the managements of Aspect and i2 publicly available financial
forecasts relating to Aspect and i2 and have been advised and have assumed that
such forecasts represent reasonable estimates and judgments as to the future
financial performance of Aspect and i2. We also have assumed, with your consent,
that the Merger will be treated as a tax-free reorganization for federal income
tax purposes. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Aspect or i2, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily based upon financial,
economic, market and other conditions as they exist and can be evaluated on the
date hereof. We are not expressing any opinion as to what the value of i2 Common
Stock actually will be when issued to Aspect's stockholders pursuant to the
Merger or the prices at which such i2 Common Stock will trade subsequent to the
Merger. In connection with our engagement, we were not requested to, and did
not, solicit third party indications of interest in the possible acquisition of
all or any part of Aspect.
We have acted as financial advisor to Aspect in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We also will receive a fee for
rendering this opinion. In the past, we and our affiliates have provided
financial services to i2 unrelated to the proposed Merger, for which services we
have received compensation. In the ordinary course of business, we and our
affiliates may actively trade the debt and equity securities of both Aspect
E-1
<PAGE> 193
and i2 for our own and such affiliates' accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Board of Directors
Aspect Development, Inc.
March 12, 2000
Page 2
It is understood that this letter is for the information of the Board of
Directors of Aspect in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to any matter relating to the proposed Merger, and is not to
be quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to the
holders of Aspect Common Stock.
Very truly yours,
/s/ CREDIT SUISSE FIRST BOSTON CORPORATION
E-2
<PAGE> 194
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's certificate of incorporation provides that, except to the
extent prohibited by the Delaware General Corporation Law (the "DGCL"), the
Registrant's directors shall not be personally liable to the Registrant or its
stockholders for monetary damages for any breach of fiduciary duty as directors
of the Registrant. Under the DGCL, the directors have a fiduciary duty to the
Registrant which is eliminated by this provision of the certificate of
incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
the DGCL. This provision also does not affect the directors' responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws. The Registrant has obtained liability insurance for its
officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of the director: (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) arising under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's certificate of incorporation or
bylaws, any agreement, a vote of stockholders or otherwise. The Registrant's
certificate of incorporation eliminates the personal liability of directors to
the fullest extent permitted by the DGCL and provides that the Registrant shall
fully indemnify any person who was or is a party or is threatened to be made a
party to, any threatened, pending or completed action, suite or proceeding
(whether civil, criminal, administrative of investigative) by reason of the fact
that such person is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Registrant's certificate of incorporation. The
Registrant is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following is a list of Exhibits filed as part of the Registration
Statement or incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization dated as of March 12,
2000, by and among the Registrant, Hoya Merger Corp. and
Aspect Development, Inc. (attached as Appendix A to the
proxy statement/prospectus contained in this registration
statement).
</TABLE>
II-1
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1+ Registrant's Restated Certificate of Incorporation (filed as
Exhibit 3.1 to the Registrant's Form 10-Q for the quarterly
period ended September 30, 1999).
3.2+ Registrant's Amended and Restated Bylaws (filed as Exhibit
3.1 to the Registrant's Form 10-Q for the quarterly period
ended September 30, 1998).
4.1+ Specimen certificate representing shares of Common Stock
(filed as Exhibit 4.1 to the Registrant's registration
statement on Form S-1 (Reg. No. 333-1752)).
4.2+ Indenture, dated as of December 10, 1999, between the
Registrant and Chase Bank of Texas, National Association, as
trustee, including the form of note set forth in Section 2.2
thereof (filed as Exhibit 4.2 to the Registrant's
registration statement on Form S-3 (Reg. No. 333-31342)).
5.1 Opinion of Brobeck, Phleger & Harrison LLP regarding the
legality of the securities being issued.
8.1 Opinion of Cooley Godward LLP as to certain federal income
tax consequences of the merger.
8.2 Opinion of Brobeck, Phleger & Harrison LLP as to certain
federal income tax consequences of the merger.
23.1 Consents of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.2).
23.2 Consent of Cooley Godward LLP.
23.3 Consent of Arthur Andersen LLP with respect to the
Registrant's financial statements.
23.4 Consent of Arthur Andersen LLP with respect to Aspect's
financial statements.
23.5 Consent of Ernst & Young LLP with respect to Aspect's
financial statements.
23.6 Consent of Ernst & Young LLP with respect to TACTech's
financial statements.
23.7 Consent of KPMG LLP with respect to SupplyBase's financial
statements.
24.1 Power of Attorney, pursuant to which amendments to this
registration statement may be filed (included on the
signature page of this registration statement).
99.1 Form of i2 proxy card.
99.2 Form of Aspect proxy card.
99.3 Consent of Romesh T. Wadhwani to be named as a director in
the joint proxy statement/prospectus.
99.4 Consent of Goldman, Sachs & Co.
99.5 Consent of Credit Suisse First Boston Corporation.
</TABLE>
- ---------------
+ Incorporated by reference to the indicated filing.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in
II-2
<PAGE> 196
the aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(5) that, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form;
(6) that every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to this
Registration Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(7) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request; and
(8) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 20 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
II-3
<PAGE> 197
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in The City of Dallas,
State of Texas, on this 18th day of April, 2000.
i2 TECHNOLOGIES, INC.
By: /s/ WILLIAM M. BEECHER
----------------------------------
William M. Beecher
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of i2 Technologies, Inc.
("i2"), hereby severally constitute and appoint Sanjiv S. Sidhu and William M.
Beecher, and each of them individually, with full power of substitution and
resubstitution, our true and lawful attorneys, with full power to them and each
of them to sign for us, in our names and in the capacities indicated below, the
registration statement on Form S-4 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of i2, and to file or cause to be filed the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys, and each of them, full power and
authority to do and perform each and purposes as each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SANJIV S. SIDHU Chairman of the Board and Chief April 18, 2000
- ----------------------------------------------------- Executive Officer (principal
Sanjiv S. Sidhu executive officer)
/s/ WILLIAM M. BEECHER Executive Vice President and April 18, 2000
- ----------------------------------------------------- Chief Financial Officer
William M. Beecher (principal financial officer)
/s/ NANCY F. BRIGHAM Controller (principal April 18, 2000
- ----------------------------------------------------- accounting officer)
Nancy F. Brigham
/s/ HARVEY B. CASH Director April 18, 2000
- -----------------------------------------------------
Harvey B. Cash
/s/ THOMAS J. MEREDITH Director April 18, 2000
- -----------------------------------------------------
Thomas J. Meredith
/s/ SANDEEP R. TUNGARE Director April 18, 2000
- -----------------------------------------------------
Sandeep R. Tungare
</TABLE>
<PAGE> 199
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization dated as of March 12,
2000, by and among the Registrant, Hoya Merger Corp. and
Aspect Development, Inc. (attached as Appendix A to the
proxy statement/prospectus contained in this registration
statement).
3.1+ Registrant's Restated Certificate of Incorporation (filed as
Exhibit 3.1 to the Registrant's Form 10-Q for the quarterly
period ended September 30, 1999).
3.2+ Registrant's Amended and Restated Bylaws (filed as Exhibit
3.1 to the Registrant's Form 10-Q for the quarterly period
ended September 30, 1998).
4.1+ Specimen certificate representing shares of Common Stock
(filed as Exhibit 4.1 to the Registrant's registration
statement on Form S-1 (Reg. No. 333-1752)).
4.2+ Indenture, dated as of December 10, 1999, between the
Registrant and Chase Bank of Texas, National Association, as
trustee, including the form of note set forth in Section 2.2
thereof (filed as Exhibit 4.2 to the Registrant's
registration statement on Form S-3 (Reg. No. 333-31342)).
5.1 Opinion of Brobeck, Phleger & Harrison LLP regarding the
legality of the securities being issued.
8.1 Opinion of Cooley Godward LLP as to certain federal income
tax consequences of the merger.
8.2 Opinion of Brobeck, Phleger & Harrison LLP as to certain
federal income tax consequences of the merger.
23.1 Consents of Brobeck, Phleger & Harrison LLP (included in
Exhibits 5.1 and 8.2).
23.2 Consent of Cooley Godward LLP.
23.3 Consent of Arthur Andersen LLP with respect to the
Registrant's financial statements.
23.4 Consent of Arthur Andersen LLP with respect to Aspect's
financial statements.
23.5 Consent of Ernst & Young LLP with respect to Aspect's
financial statements.
23.6 Consent of Ernst & Young LLP with respect to TACTech's
financial statements.
23.7 Consent of KPMG LLP with respect to SupplyBase's financial
statements.
24.1 Power of Attorney, pursuant to which amendments to this
registration statement may be filed (included on the
signature page of this registration statement).
99.1 Form of i2 proxy card.
99.2 Form of Aspect proxy card.
99.3 Consent of Romesh T. Wadhwani to be named as a director in
the joint proxy statement/prospectus.
99.4 Consent of Goldman, Sachs & Co.
99.5 Consent of Credit Suisse First Boston Corporation.
</TABLE>
- ---------------
+ Incorporated by reference to the indicated filing.
<PAGE> 1
[BROBECK, PHLEGER & HARRISON LLP LETTERHEAD]
EXHIBIT 5.1
April 17, 2000
i2 Technologies, Inc.
One i2 Place
11701 Luna Road
Dallas, Texas 75234
Re: i2 Technologies, Inc. Registration Statement on
Form S-4 for 37,509,042 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to i2 Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the registration by the Company
of 37,509,042 shares of the Company's Common Stock (collectively, the "Shares"),
pursuant to the Company's Registration Statement on Form S-4 (the "Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of
Item 21 of Form S-4 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares and such other instruments, documents or other information as we deemed
necessary or appropriate in rendering our opinion. Based on such review, we are
of the opinion that the Shares have been duly authorized, and if, as and when
issued in accordance with the Registration Statement and the related joint proxy
statement/prospectus (as amended and supplemented through the date of issuance)
will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
<PAGE> 2
[BROBECK, PHLEGER & HARRISON LLP LETTERHEAD]
i2, Technologies, Inc. April 17, 2000
Page 2
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 8.1
[COOLEY GODWARD LLP LETTERHEAD]
April 17, 2000
Aspect Development, Inc.
1300 Charleston Road
Mountain View, CA 94043
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 7.03(e) of the
Agreement and Plan of Reorganization dated as of March 12, 2000 (the
"Reorganization Agreement") by and among i2 Technologies, Inc., a Delaware
corporation ("Parent"), Hoya Merger Corp., a Delaware corporation and wholly
owned subsidiary of Parent ("Merger Sub"), and Aspect Development, Inc., a
Delaware corporation (the "Company").
Except as otherwise provided, capitalized terms used but not defined herein
shall have the meanings set forth in the Reorganization Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
We have acted as counsel to the Company in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined, and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents (including all exhibits and
schedules attached thereto):
(a) the Reorganization Agreement;
(b) the Registration Statement on Form S-4 relating to the Merger;
(c) those certain tax representation letters delivered to us by Parent,
Merger Sub and the Company containing certain representations of Parent, Merger
Sub and the Company (the "Tax Representation Letters"); and
(d) such other instruments and documents related to the formation,
organization and operation of Parent, Merger Sub and the Company and related to
the consummation of the Merger and the other transactions contemplated by the
Reorganization Agreement as we have deemed necessary or appropriate.
<PAGE> 2
[COOLEY GODWARD LLP LETTERHEAD]
Page 2
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
(a) Original documents submitted to us (including signatures thereto) are
authentic, documents submitted to us as copies conform to the original
documents, and that all such documents have been (or will be by the Effective
Time) duly and validly executed and delivered where due execution and delivery
are a prerequisite to the effectiveness thereof;
(b) All representations, warranties and statements made or agreed to by
Parent, Merger Sub and the Company, their managements, employees, officers,
directors and shareholders in connection with the Merger, including, but not
limited to, those set forth in the Reorganization Agreement (including the
exhibits thereto) and the Tax Representation Letters are true and accurate at
all relevant times;
(c) All covenants contained in the Tax Representation Letters are performed
without waiver or breach of any material provision thereof;
(d) The Merger will be consummated in accordance with the terms of the
Reorganization Agreement without any waiver, breach, or amendment of any
covenant, condition or other provision thereof;
(e) The Merger will be reported by Parent and the Company on their
respective federal income tax returns in a manner consistent with the opinion
set forth below;
(f) Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification; and
(g) The opinion dated April 17, 2000 rendered by Brobeck, Phelger &
Harrison LLP to Parent pursuant to Section 6.08 of the Reorganization Agreement
has been delivered and has not been withdrawn.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that, for federal income tax purposes, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code.
This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Reorganization Agreement. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger or the other
transactions contemplated by the Reorganization Agreement except as specifically
set forth
<PAGE> 3
[COOLEY GODWARD LLP LETTERHEAD]
Page 3
herein, and this opinion may not be relied upon except with respect to the
consequences specifically discussed herein. No opinion is expressed as to the
federal income tax treatment that may be relevant to a particular investor in
light of personal circumstances or to certain types of investors subject to
special treatment under the federal income tax laws (for example, life insurance
companies, dealers in securities, taxpayers subject to the alternative minimum
tax, banks, tax-exempt organizations, non-United States persons, and
shareholders who acquired their shares of Company capital stock pursuant to the
exercise of options or otherwise as compensation or who hold their Company
capital stock as part of a straddle or risk reduction transaction).
No opinion is expressed as to any transaction other than the Merger as described
in the Reorganization Agreement, or as to any transaction whatsoever, including
the Merger, if all of the transactions described in the Reorganization Agreement
are not consummated in accordance with the terms of the Reorganization Agreement
and without waiver of any material provision thereof. To the extent that any of
the representations, warranties, statements and assumptions material to our
opinion and upon which we have relied are not accurate and complete in all
material respects at all relevant times, our opinion would be adversely affected
and should not be relied upon.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
any court of law, tribunal, administrative agency or other governmental body.
The conclusions are based on the Code, existing judicial decisions,
administrative regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes or interpretations would
not adversely affect the accuracy of the conclusions stated herein.
Nevertheless, by rendering this opinion, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion is being delivered pursuant to Section 7.03(e) of the
Reorganization Agreement. It is intended solely for your benefit and may not be
relied upon or utilized for any other purpose or
<PAGE> 4
[COOLEY GODWARD LLP LETTERHEAD]
Page 4
by any person and may not be made available to any other person without our
prior written consent.
Sincerely,
Cooley Godward LLP
/s/ WEBB B. MORROW III
Webb B. Morrow III
WBM:sgg
<PAGE> 1
[BROBECK, PHLEGER & HARRISON LLP LETTERHEAD]
EXHIBIT 8.2
April 17, 2000
i2 Technologies, Inc.
One i2 Place
11701 Luna Road
Dallas, Texas 75234
Ladies and Gentlemen:
This opinion is being delivered to you in connection with (i) the
Agreement and Plan of Reorganization (the "Agreement") dated as of March 12,
2000, between i2 Technologies, Inc., a Delaware corporation ("Parent"), Hoya
Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and Aspect Development, Inc., a Delaware corporation ("Target"),
and (ii) the preparation and filing with the Securities and Exchange Commission
of a Form S-4 Registration Statement relating to the Merger (the "Registration
Statement"). Pursuant to the Agreement, Merger Sub will merge with and into
Target (the "Merger"), and Target will become a wholly owned subsidiary of
Parent.
Except as otherwise provided, capitalized terms referred to herein have
the meanings set forth in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to Parent in connection with the Merger.
As such, and for the purpose of rendering this opinion, we have examined and are
relying upon (without any independent investigation or review thereof) the truth
and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents (including
all schedules and exhibits thereto):
1. The Agreement;
2. The Registration Statement; and
3. Such other instruments and documents related to Parent, Target,
Merger Sub and the Merger as we have deemed necessary or appropriate.
<PAGE> 2
[BROBECK, PHLEGER & HARRISON LLP LETTERHEAD]
April 17, 2000
Page 2
i2 Technologies, Inc.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
A. Original documents submitted to us (including signatures) are authentic,
documents submitted to us as copies conform to the original documents, and there
has been (or will be by the Effective Time) due execution and delivery of all
documents where due execution and delivery are prerequisites to the
effectiveness thereof; and
B. The Merger will be consummated in accordance with the Agreement without
any waiver or breach of any material provision thereof, and the Merger will be
effective under applicable state law.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that the statements regarding United States federal income tax
consequences set forth in the Registration Statement under the heading "Certain
Federal Income Tax Considerations," insofar as they constitute statements of law
or legal conclusions, are correct in all material respects. We express no
opinion as to any federal, state or local, foreign or other tax consequences,
other than as set forth in the Registration Statement under the heading "Certain
Federal Income Tax Considerations."
In addition to the assumptions and representations described above,
this opinion is subject to the exceptions, limitations and qualifications set
forth below.
(1) This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, will not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
(2) No opinion is expressed as to any transaction other than the Merger
(whether or not undertaken in connection with the Merger) or as to any
transaction whatsoever, including the Merger, if all the transactions described
in the Agreement are not consummated in accordance with the terms of such
Agreement and without waiver or breach of any material provision thereof or if
all of the statements, representations, warranties and assumptions upon which we
relied are not true and accurate at all relevant times. In the event any one of
the statements, representations, warranties or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and may not be relied upon.
This opinion is rendered to you solely in connection with the filing of
the Registration Statement. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also consent to the references to
our firm name wherever appearing in the
<PAGE> 3
[BROBECK, PHLEGER & HARRISON LLP LETTERHEAD]
April 17, 2000
Page 3
i2 Technologies, Inc.
Registration Statement with respect to the discussion of the federal income tax
consequences of the Merger, including any amendments to the Registration
Statement. This opinion may not be relied upon for any other purpose, and may
not be made available to any other person, without our prior written consent.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COOLEY GODWARD LLP
We consent to the reference to Cooley Godward LLP under the captions "United
States Federal Income Tax Consequences of the Merger" and "Legal Matters" in
this Registration Statement on Form S-4 of i2 Technologies, Inc.
Cooley Godward LLP
By: /s/ KEITH A. FLAUM
Keith A. Flaum
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 14, 2000,
(except with respect to the matters discussed in the second paragraph of Note 8
and Note 13, as to which the dates are February 17, 2000, and March 12, 2000,
respectively) included in the i2 Technologies, Inc. Form 10-K for the year
ended December 31, 1999, and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Dallas, Texas
April 18, 2000
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 24, 2000,
(except with respect to paragraph 4 of Note 4, as to which the date is March 10,
2000, and Note 9, as to which the date is March 13, 2000) included in Aspect
Development, Inc.'s Form 10-K for the year ended December 31, 1999, and to all
references to our Firm included in or made a part of this registration
statement.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
April 18, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 26, 1998, except with respect to paragraph 3 of
Note 4, as to which the date is August 14, 1998 and paragraph 4 of Note 4, as to
which the date is March 10, 2000, with respect to the consolidated financial
statements of Aspect Development, Inc. included in the Registration Statement
(Form S-4) and related Prospectus of i2 Technologies, Inc. for the registration
of shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
April 17, 2000
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 24, 1999, with respect to the financial
statements of Transition Analysis Component Technology, Inc. included in the
Registration Statement (Form S-4) and related Prospectus of i2 Technologies,
Inc. for the registration of shares of its common stock.
/s/ Ernst and Young LLP
White Plains, New York
April 18, 2000
<PAGE> 1
EXHIBIT 23.7
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
SupplyBase, Inc.:
We consent to the inclusion of our report dated March 24, 2000, with respect to
the balance sheets of SupplyBase, Inc. as of December 31, 1998 and 1999, and
the related statements of operations, stockholders' deficit, and cash flows for
each of the years in the three-year period ended December 31, 1999, in the
Registration Statement on Form S-4 of i2 Technologies, Inc. and to the
reference to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG LLP
San Francisco, California
April 17, 2000
<PAGE> 1
(Form of Proxy)
i2 TECHNOLOGIES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -
____________, 2000
(THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS OF i2)
The undersigned stockholder of i2 Technologies, Inc. hereby appoints Sanjiv S.
Sidhu and William M. Beecher, and each of them, with full power of substitution,
proxies to vote the shares of stock which the undersigned could vote if
personally present at the Special Meeting of Stockholders of i2 Technologies,
Inc. to be held at _____ __.m., local time, on ____________, 2000, at
___________________________________, and any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEMS 1 AND 2. ANY HOLDER WHO WISHES TO WITHHOLD THE
DISCRETIONARY AUTHORITY REFERRED TO IN ITEM 3 SHOULD MARK A LINE THROUGH THE
ENTIRE ITEM.
1. APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK PURSUANT TO THE
MERGER AGREEMENT AMONG i2 TECHNOLOGIES, INC., HOYA MERGER CORP. AND
ASPECT DEVELOPMENT, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. GRANTING THE BOARD OF DIRECTORS DISCRETIONARY AUTHORITY TO ADJOURN THE
SPECIAL MEETING TO SOLICIT ADDITIONAL VOTES FOR APPROVAL OF THE SHARE
ISSUANCE UNDER THE MERGER AGREEMENT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING
Please date and sign exactly as your name appears on the envelope in
which this material was mailed. If shares are held jointly, each
stockholder should sign. Executors, administrators, trustees, etc.
should use full title and, if more than one, all should sign. If the
stockholder is a corporation, please sign full corporate name by an
authorized officer. If the stockholder is a partnership, please sign
full partnership name by an authorized person.
Receipt of the joint proxy statement/prospectus dated ___________,2000
is hereby acknowledged.
Dated: _________, 2000.
-----------------------------------
Name(s) of Stockholder
-----------------------------------
Signature(s) of Stockholder
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
VOTE BY INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
Follow the instructions at our Internet Address: http://www.eproxy.com/itwo
OR
VOTE BY PHONE
HAVE YOUR PROXY CARD IN HAND.
Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours
a day, 7 days a week.
There is NO CHARGE to you for this call.
You will be asked to enter your 11-digit Control Number, which is
located in the box in the lower right hand corner of this form.
OR
VOTE BY PROXY CARD
<PAGE> 1
EXHIBIT 99.2
(Form of Proxy)
ASPECT DEVELOPMENT, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - ____________, 2000
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF ASPECT)
The undersigned stockholder of Aspect Development, Inc. hereby appoints Romesh
T. Wadhwani and David Dury, and each of them, with full power of substitution,
proxies to vote the shares of stock which the undersigned could vote if
personally present at the Special Meeting of Stockholders of Aspect Development,
Inc. to be held at _____ __.m., local time, on _________, 2000, at
______________________________ ______________________________.
1. ADOPTION OF THE MERGER AGREEMENT AMONG i2 TECHNOLOGIES, INC., HOYA
MERGER CORP. AND ASPECT DEVELOPMENT, INC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. GRANTING THE BOARD OF DIRECTORS DISCRETIONARY AUTHORITY TO ADJOURN THE
SPECIAL MEETING TO SOLICIT ADDITIONAL VOTES FOR ADOPTION OF THE MERGER
AGREEMENT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED FOR PROPOSAL 1 AND
PROPOSAL 2. ANY HOLDER WHO WISHES TO WITHHOLD THE DISCRETIONARY
AUTHORITY REFERRED TO IN PROPOSAL 3 SHOULD MARK A LINE THROUGH THE
ENTIRE PROPOSAL.
Please date and sign exactly as your name appears on the envelope in
which this material was mailed. If shares are held jointly, each
stockholder should sign. Executors, administrators, trustees, etc.
should use full title and, if more than one, all should sign. If the
stockholder is a corporation, please sign full corporate name by an
authorized officer. If the stockholder is a partnership, please sign
full partnership name by an authorized person.
Receipt of the joint proxy statement/prospectus dated ________________,
2000 is hereby acknowledged.
------------------------------------------
Name(s) of Stockholder
------------------------------------------
Signature(s) of Stockholder
Dated: , 2000
-----------------------------------
<PAGE> 1
EXHIBIT 99.3
CONSENT OF ROMESH T. WADHWANI
I hereby consent to being named as becoming a director of i2
Technologies, Inc. in its Registration Statement on Form S-4 to be filed with
the Securities and Exchange Commission.
/s/ ROMESH T. WADHWANI
-----------------------------------
Romesh T. Wadhwani
Dated: April 11, 2000
<PAGE> 1
EXHIBIT 99.4
[LETTERHEAD OF GOLDMAN, SACHS & CO. ]
PERSONAL AND CONFIDENTIAL
April 14, 2000
Board of Directors
i2 Technologies, Inc.
11701 Luna Road
Dallas, TX 75234
Re: Registration Statement (File No. 333- ) of
i2 Technologies, Inc.
Gentlemen:
Reference is made to our opinion letter dated March 12, 2000 with respect to the
fairness from a financial point of view to i2 Technologies, Inc. ("i2") of the
exchange ratio (the "Exchange Ratio") of 1.10 (0.55 as adjusted for the Aspect
Development, Inc. ("Aspect") dividend paid on March 13, 2000) shares of common
stock, par value $0.00025 per share, of i2 ("i2 Shares") to be paid for each
share of common stock, par value $0.001 per share, of Aspect ("Aspect Share"),
pursuant to the Agreement and Plan of Reorganization, dated as of March 12, 2000
among i2, Hoya Merger Corp., a direct wholly-owned subsidiary of i2, and Aspect
(the "Agreement").
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of i2 in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that i2 has determined to include our opinion in
the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary of this Joint Proxy Statement/Prospectus", "The
Merger" and Appendix D and to the inclusion of the foregoing opinion in the
Joint Proxy Statement/Prospectus included in the above-mentioned Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
<PAGE> 1
Exhibit 99.5
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
Aspect Development, Inc.
1395 Charleston Road
Mountain View, California 94043
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board
of Directors of Aspect Development, Inc. ("Aspect") as Appendix E to the joint
Proxy Statement/Prospectus of i2 Technologies, Inc. ("i2") and Aspect relating
to the proposed merger transaction involving i2 and Aspect, and references
thereto in such joint Proxy Statement/Prospectus under the captions "SUMMARY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS -- Opinions of Financial Advisors" and
"THE MERGER -- Opinions of Financial Advisors -- Opinion of Aspect's Financial
Advisor." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, and we do not admit that we
are "experts" for purposes of, the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
By: /s/ CREDIT SUISSE FIRST BOSTON CORPORATION
--------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
Palo Alto, California
April 18, 2000
