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FILED PURSUANT TO RULE 424(b)(4)
File No. 333-31342
PROSPECTUS
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[i2 TECHNOLOGIES,
INC. LOGO] i2 TECHNOLOGIES, INC.
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$350,000,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE DECEMBER 15, 2006
AND
4,605,790 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
On December 10, 1999, i2 Technologies, Inc. issued and sold $350,000,000
aggregate principal amount of 5 1/4% Convertible Subordinated Notes due December
15, 2006 in a private offering. The initial purchasers of the notes subsequently
transferred their notes to various other holders in transactions exempt from
registration under the Securities Act of 1933. In connection with our private
offering, we agreed to register the notes and the shares of common stock into
which the notes are convertible to facilitate secondary trading by these
holders, to whom we refer as selling securityholders. This prospectus is part of
a registration statement that fulfills this obligation. All securities offered
by this prospectus are offered by selling securityholders.
The notes are convertible by holders into shares of our common stock at a
rate of 13.1594 shares per each $1,000 principal amount of notes, subject to
adjustment as described in this prospectus. In addition, at certain times and
under certain circumstances, we may redeem the notes at our election or at the
election of the holders of the notes. You can find a more extensive description
of the notes beginning on page 15.
The notes are not secured and are subordinated to all of our present and
future senior indebtedness.
The notes are eligible for trading on the Private Offerings, Resales and
Trading through Automated Linkages, or PORTAL, Market.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ITWO." On April 5, 2000, the closing sale price for our common stock was
$105.00.
INVESTING IN OUR NOTES AND COMMON STOCK INVOLVES RISKS. SEE RISK FACTORS
BEGINNING ON PAGE 3 TO READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE
BUYING NOTES AND SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is April 6, 2000.
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TABLE OF CONTENTS
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PAGE
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i2 Technologies............................................. 2
Risk Factors................................................ 3
Information Regarding Forward-Looking Statements............ 13
Use of Proceeds............................................. 13
Ratio of Earnings to Fixed Charges.......................... 13
Selected Consolidated Financial Data........................ 14
Description of the Notes.................................... 15
Material United States Federal Income Tax Considerations.... 29
Selling Securityholders..................................... 35
Plan of Distribution........................................ 38
Incorporation by Reference.................................. 39
Where You Can Find More Information......................... 40
Legal Matters............................................... 40
Experts..................................................... 40
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i2 TECHNOLOGIES
i2 is a leading global provider of intelligent eBusiness solutions that
help enterprises optimize business processes both internally and among trading
partners. Our 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. Our
solutions consider the real conditions of companies to optimize key business
processes -- from product design to customer relationships. We have recently
launched TradeMatrix, a robust platform of business-to-business solutions,
services and marketplaces, which will allow customers, partners, suppliers and
service providers to do business together in real time. TradeMatrix offers a
full breadth of services that include planning, procurement, commerce,
fulfillment, customer care, retail, strategic sourcing and product development.
Our RHYTHM product suite principally includes solutions for supply chain
management, customer management, product lifecycle management, inter-process
planning and strategic planning, which provide the basis for these value-added
services offered to marketplace participants. We recently have signed agreements
to develop and host public and private Internet-based electronic marketplaces
with our customers and partners in the automotive, aerospace, high-tech,
softgoods and consumer packaged goods industries. Our RHYTHM software
applications, along with new software solutions and services designed
specifically for the TradeMatrix environment, are used to power these electronic
marketplaces. We also provide services such as consulting, training and
maintenance in support of these offerings.
Our principal executive offices are located at One i2 Place, 11701 Luna
Road, Dallas, Texas 75234, and our telephone number is (469) 357-1000.
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties that we do not
presently know or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, they could materially
adversely affect our business, financial condition or results of operations. In
that case, the trading price of our common stock could decline.
Our financial results may vary significantly from quarter-to-quarter and we
may fail to meet expectations, which may negatively impact the price of our
stock. Our operating results have varied significantly from quarter-to-quarter
in the past, and we expect our 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 our 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
us or our competitors;
- changes in prices of our products and those of our competitors;
- foreign currency exchange rate fluctuations;
- market acceptance of new products;
- mix of direct and indirect sales;
- changes in our strategic relationships; and
- changes in our 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. We will continue to determine our investment and expense levels
based on expected future revenues. A significant portion of our expenses is not
variable in the short term, and we cannot reduce our costs quickly to respond to
decreases in revenues. Therefore, if revenues are below expectations, this
shortfall is likely to adversely and disproportionately affect our operating
results. In addition, we may reduce our 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 our
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, we may not maintain positive operating margins in future quarters.
Any of these factors could cause our operating results to be below the
expectations of public market analysts and investors, and the price of our
common stock may fall.
We anticipate seasonal fluctuations in revenues, which may cause volatility
in the price of our common stock and the notes. The market price of our common
stock has been volatile in the past, and the market price of the notes and our
common stock may be volatile in the future. Historically, our revenues have
tended to be strongest in the fourth quarter of the year. We believe that our
seasonality is due to the calendar year budgeting cycles of many of our
customers and our compensation policy that rewards sales personnel for achieving
annual revenue quotas. In future periods, these seasonal trends may cause our
quarter-to-quarter operating results to vary, which may result in failing to
meet the expectations of public market analysts and investors.
We depend on significant individual license sales. Therefore, our operating
results for a given period could suffer serious harm if we fail to close the
large sales we targeted for that period. We generally
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derive 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 our total software license revenues in each
respective quarter. Moreover, due to customer purchasing patterns, we typically
realize a significant portion of our software license revenues in the last few
weeks of a quarter. As a result, we are subject to significant variations in
license revenues and results of operations if we incur any delays in customer
orders. If in any future period we fail to close one or more substantial license
sales that we have targeted to close in that period, this failure could
seriously harm our operating results for that period.
We may not remain competitive, and increased competition could seriously
harm our business. Our competitors offer a variety of eBusiness including 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, or ERP,
solutions that currently or may in the future incorporate applications
competitive with our 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 our products as a complement to their own systems.
However, as we attempt to increase our market share and expand our product
offerings, and as enterprise resource planning vendors expand their own product
offerings, our relationships with these vendors have and may continue to become
more competitive. We believe 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 RHYTHM.
Relative to us, many of our 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, we
expect to experience increasing price competition as we compete for market
share, and we may not be able to compete successfully with our existing or new
competitors. If we experience increased competition, substantial harm may result
to our business, operating results and financial condition.
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Our strategy of establishing and promoting our TradeMatrix is unproven and
may be unsuccessful. As part of our business strategy, we are offering the
TradeMatrix platform to trading community participants in digital marketplaces.
This strategy is unproven, and currently we are providing only a limited portion
of our intended TradeMatrix services in only a small number of digital trading
communities. We have limited experience developing and operating digital
marketplaces, and we cannot be certain that these trading communities will be
operated effectively, that enterprises will join and remain in these trading
communities, that we will develop and provide successfully all intended
TradeMatrix services, or that we will generate significant revenues from these
services. To date, we have not generated significant revenues from these
services. If this business strategy is flawed, or if we are unable to execute
effectively, our business, operating results and financial condition could be
substantially harmed.
In addition, we expect to rely on third parties' efforts to promote our
TradeMatrix platform. Because our revenues from these sources are likely to be
largely based on subscriptions to or utilization of our digital marketplaces,
any failure by these third parties to successfully promote our TradeMatrix
platform, or any reluctance to participate in our digital marketplaces on the
part of suppliers, manufacturers, distributors, logistics providers or
customers, could harm our business, results of operations and financial
condition.
Rapid growth in our operations could continue to strain our managerial and
operational resources. We have 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. Our 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. We have also increased the scope of our operating
and financial systems and the geographic distribution of our operations and
customers. This growth has strained our management and operations, and they will
continue to be strained if rapid growth continues. Our officers and other key
employees will need to implement and improve our operational, customer support
and financial control systems and effectively expand, train and manage our
employee base. Further, we expect that we will be required to manage an
increasing number of relationships with various customers and other third
parties. We may not be able to manage future expansion successfully, and our
inability to do so would harm our business, operating results and financial
condition.
Any decrease in demand for our RHYTHM suite of products and services could
significantly reduce our revenues. We derive substantially all of our revenues
from licenses of our RHYTHM suite of products and related services.
RHYTHM-related revenues, including maintenance and consulting contracts, will
continue to account for substantially all of our revenues for the foreseeable
future. As a result, our future operating 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 our business,
operating results and financial condition.
We are investing significant resources in developing and marketing our
intelligent eBusiness solutions. The market for these solutions is new and
evolving, and, if this market does not develop as we anticipate, or if we are
unable to develop acceptable solutions, serious harm would result to our
business. We currently derive a substantial portion of our revenues from
licenses for decision-support software products associated with supply chain
management software and related services. However, we are 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 we introduce 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 our 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
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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 we
may not develop acceptable solutions to address this functionality. Any one of
these events could seriously harm our business, operating results and financial
condition.
Rapid adoption of our TradeMatrix platforms could reduce our software
licensing revenues. Our 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 our historical model of deriving revenues from licenses of the RHYTHM suite
of products, which we largely recognize 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 our utilization of the
digital marketplace services may be more robust. We can not predict the rate at
which our customers will adopt the TradeMatrix platform or whether these
expanded service offerings will adversely impact our license revenues.
We do 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 our TradeMatrix platform increases, the platform may
experience slower response times or other problems. We 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
our products and services.
Our TradeMatrix platform may experience performance problems or delays as a
result of service interruptions. We must protect our 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 we have taken, a natural disaster or other unanticipated
problems at our data centers could result in interruptions in our services or
significant damage to equipment supporting the platform. In addition, failure of
any of our telecommunications providers to provide consistent data
communications capacity could result in interruptions in our services. Each of
these could experience outages, delays and other difficulties due to system
failures unrelated to our systems. Any damage to or failure of our systems or
service providers could result in reductions in, or terminations of, services
supplied to our customers, which could have a material adverse effect on our
business.
If we publish inaccurate catalog content data, our business could
suffer. The accurate publication of catalog content is critical to our
customers' businesses. Our 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 our business reputation, harm our ability
to win new customers and potentially expose us to legal liability. In addition,
from time to time some of our customers may submit inaccurate pricing or other
inaccurate catalog information. Even though such inaccuracies are not caused by
our work and are not within our control, such inaccuracies could deter current
and potential customers from using our products and could harm our business,
operating results and financial condition.
The markets in which we compete experience rapid technological change. If
we do not respond to the technological advances we could seriously harm our
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. We must continue to enhance our current
product line and develop and introduce new products and services that keep pace
with the technological developments of our competitors. We must also satisfy
increasingly sophisticated customer
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requirements. If we cannot successfully respond to the technological advances of
others, or if our new products or product enhancements and services do not
achieve market acceptance, these events could seriously harm our business,
operating results and financial condition.
If use of the Internet for commerce and communication does not increase as
we anticipate, our business will suffer. We are 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.
Our 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 our products and services.
Future regulation of the Internet may slow its growth, resulting in
decreased demand for our 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 our
business, or the application of existing laws and regulations to the Internet
and other online services could decrease the expansion of the Internet, causing
our costs to increase and our growth to be harmed.
Concerns that our products do not adequately protect the privacy of
consumers could inhibit sales of our products. One of the principal features of
our 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. Our products augment
these profiles over time by collecting usage data. Although we have designed our
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 we cannot adequately address consumers' privacy
concerns, these concerns could seriously harm our business, financial condition
and operating results.
If our encryption technology fails to ensure the security of our customers'
online transactions, serious harm to our 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. Our 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
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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 our business, financial condition and operating results.
We may not successfully integrate or realize the intended benefits of our
recent acquisitions. We acquired InterTrans Logistics Solutions Limited, or
ITLS, in April 1998 and SMART in July 1999. In addition, we have acquired other
businesses and products to help broaden and strengthen our product portfolio.
The success of these acquisitions will depend primarily on our ability to:
- retain, motivate and integrate the acquired personnel;
- integrate multiple information systems; and
- integrate acquired software with our existing products and services.
We may encounter difficulties in integrating our operations and products
with those of ITLS, SMART and others. We may not realize the benefits that we
anticipated when we made these acquisitions. Our failure to successfully
integrate our operations and products with those of ITLS, SMART and others could
seriously harm our business, operating results and financial condition.
We may make future acquisitions or enter into joint ventures that may not
be successful. In the future, we may acquire additional businesses, products and
technologies, or enter into joint venture arrangements, that could complement or
expand our business. In furtherance of this strategy, in March 2000 we 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 us 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 our financial condition
and operating results. We expect that we 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 we complete
the pending Aspect and SupplyBase acquisitions. Further, we may not be able to
integrate any acquired business, product or technology with our existing
operations or train, retain and motivate personnel from the acquired business.
If we are unable to fully integrate an acquired business, product or technology
or train, retain and motivate personnel from the acquired business, we may not
receive the intended benefits of that acquisition.
We face risks associated with international sales and operations that could
harm our company. Our international operations are subject to risks inherent in
international business activities. In addition, we may expand our international
operations in the future which would increase our exposure to these risks. The
risks we face 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;
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- 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 we transact business, could harm our operating
results. To date, our international revenues have been denominated primarily in
U.S. dollars. The majority of our 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 our operating results. As our international operations expand, we will
use an increasing number of foreign currencies, causing our exposure to currency
exchange rate fluctuations to increase. Although we have implemented limited
hedging programs to mitigate our 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 our business, results of operations or
financial condition in the future.
We depend on our strategic partners and other third parties. If we fail to
derive benefits from our existing and future strategic relationships, our
business will suffer. From time to time, we have 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 our business strategy. However, some
of our current and potential strategic partners are either actual or potential
competitors, which may impair the viability of these relationships. In addition,
some of our relationships have failed to meet expectations and may fail to meet
expectations in the future. We may not be able to enter into successful new
strategic relationships in the future.
The loss of any of our key personnel or our failure to attract additional
personnel could seriously harm our company. We rely upon the continued service
of a relatively small number of key technical and senior management personnel,
particularly Sanjiv Sidhu, our chairman and chief executive officer. Our future
success depends on retaining our key employees and our continuing ability to
attract, train and retain other highly qualified technical and managerial
personnel. Very few of our key technical personnel and none of our senior
management personnel are bound by employment agreements. As a result, our
employees could leave with little or no prior notice. In the past, we have had
difficulty recruiting qualified personnel. We may not be able to attract,
assimilate or retain other highly qualified technical and managerial personnel
in the future. Our loss of any of our key technical and senior management
personnel or our inability to attract, train and retain additional qualified
personnel could seriously harm our business, operating results and financial
condition.
If we fail to adequately protect our intellectual property rights or face a
claim of intellectual property infringement by a third party, we could lose our
intellectual property rights or be liable for significant damages. We rely
primarily on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary
rights. In addition, we generally license RHYTHM products to end users in object
code (machine-readable) format, and our 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 our products or to obtain and use information that we regard as proprietary.
Although we believe software piracy may be a problem, we are not able to
determine the extent to which piracy of our software products exists. Policing
unauthorized use of our products is difficult, and we cannot be certain that the
steps we have taken will prevent misappropriation of our 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 us 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, we increasingly may be subject to claims of
intellectual property infringement. Although we are not aware that any of our
products infringe
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upon the proprietary rights of third parties, third parties may claim
infringement by us 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 us to enter into royalty or licensing agreements. If we enter
into royalty or licensing agreements in settlement of any litigation or claims,
these agreements may not be on terms acceptable to us. Unfavorable royalty and
licensing agreements could seriously harm our business, operating results and
financial condition.
We resell some software that we license from third parties. Although we may
continue this practice, third-party software licenses may not continue to be
available to us on commercially reasonable terms. Our inability to maintain or
obtain any of these software licenses will delay or reduce our product shipments
until we can identify, license and integrate equivalent software. Any loss of
these licenses or delay or reduction in product shipments could harm our
business, operating results and financial condition.
Our products' failure to remain compatible with existing and new computers
and software operating systems would seriously harm our business. Our 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, we
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 we 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 our business, operating
results and financial condition.
Our software is complex and may contain undetected errors. Our software
programs are complex and may contain undetected errors or "bugs." Although we
conduct extensive testing, we may not discover bugs until our customers install
and use a given product or until the volume of services that a product provides
increases. On occasion, we have 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 us by customers, any of which could seriously harm our
business, operating results and financial condition.
Releases and problems with new products may cause purchasing delays, which
would harm our revenues. Customers may delay their purchasing decisions in
anticipation of our new or enhanced products, or products of competitors. Delays
in customer purchasing decisions could seriously harm our 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 our
business, operating results and financial condition.
Our failure to successfully recruit and retain technical and implementation
personnel could reduce our license revenues or limit the growth of our license
revenues. A shortage of qualified technical sales support personnel could harm
our ability to expand sales and enter into new vertical markets. We will depend
on our trained implementation personnel or those of independent consultants to
implement our products and services. A shortage in the number of trained
implementation personnel could limit our ability to implement our software and
services on a timely and effective basis. Delayed or ineffective implementation
of our software and services may limit our ability to expand our revenues and
may result in customer dissatisfaction and harm to our reputation. Any of these
events could seriously harm our business, operating results and financial
condition.
We may be subject to product liability claims. Our license agreements
typically seek to limit our exposure to product liability claims from our
customers. However, these contract provisions may not preclude all potential
claims. Additionally, our general liability insurance may be inadequate to
protect us from all liabilities that we may face. Product liability claims could
require us to spend significant time and
10
<PAGE> 11
money in litigation or to pay significant damages. As a result, any claim,
whether or not successful, could harm our reputation and business, operating
results and financial condition.
Our executive officers and directors have voting control. Our executive
officers and directors together beneficially own approximately 43% of the total
voting power of our company. Accordingly, these stockholders will be able to
determine the composition of our Board of Directors, will retain the voting
power to approve all matters requiring stockholder approval and will continue to
have significant influence over our affairs. Certain decisions concerning our
operations or financial structure may present conflicts of interest between the
stockholders and the holders of notes. For example, if we encounter financial
difficulties or are unable to pay our debts as they mature, the interests of our
executive officers and directors may conflict with those of the holders of
notes. In addition, our executive officers and directors may wish to pursue
acquisitions, divestitures, financings or other transactions and business
strategies that, in their judgment, could enhance their equity interest in our
company, even though these transactions might involve increased risks to the
holders of notes.
Our charter and by-laws have anti-takeover provisions. Provisions of our
Certificate of Incorporation and our Bylaws as well as the Delaware General
Corporation Law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. We are 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.
Our stock price historically has been volatile, which may make it more
difficult for you to resell the notes or the common stock into which the notes
are convertible when you want at prices you find attractive. The market price of
our common stock has been volatile in the past, and the market price of our
common stock may be volatile in the future. The following factors may
significantly affect the market price of the notes and the common stock into
which the notes are convertible:
- quarterly variations in our results of operations;
- the announcement of new products, product enhancements, joint ventures
and other alliances by us or our competitors;
- technological innovations by us or our 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 our common stock.
If we are required to register as an investment company, we would become
subject to substantial regulation, which would interfere with our ability to
implement our business plan. We have substantial cash, cash equivalents and
short-term investments. We plan to continue investing these assets in short-
term instruments consistent with prudent cash management policy and not
primarily for the purpose of achieving investment returns. Investment in
securities primarily for the purpose of achieving investment returns could
result in our being classified as an "investment company" under the Investment
Company Act of 1940. The Investment Company Act requires the registration of
companies that are primarily in the business of investing, reinvesting or
trading securities or that fail to meet certain statistical tests regarding
their composition of assets and sources of income, even though they consider
themselves not to be primarily engaged in investing, reinvesting or trading
securities. We believe that we are primarily engaged in a business other than
investing, reinvesting or trading securities and, therefore, are not an
investment company within the meaning of the Investment Company Act. If the
Investment Company Act required us to register as an investment company, we
would become subject to substantial regulation with respect to our capital
structure, management, operations, and transactions with affiliated persons and
other matters. Application of the provisions of the Investment Company Act to us
may materially and adversely affect our business, prospects and operating
results.
11
<PAGE> 12
The price of our common stock may decline due to shares eligible for future
sale. Sales of substantial amounts of common stock in the public market, or the
appearance that a large number of shares is available for sale, could adversely
affect the market price for our common stock. In addition to the adverse effect
a price decline could have on holders of common stock, that decline would likely
impede our ability to raise capital by issuing additional shares of common stock
or other equity securities.
The notes rank below our existing and future senior debt, and we may be
unable to repay our obligations under the notes. The notes are unsecured and
subordinated in right of payment to all of our existing and future senior debt.
Because the notes are subordinate to our senior debt, if we experience:
- a bankruptcy, liquidation or reorganization,
- an acceleration of the notes due to an event of default under the
indenture, or
- certain other events,
we will be permitted to make payments on the notes only after we have satisfied
all of our senior debt obligations. Therefore, we may not have sufficient assets
remaining to pay amounts due on any or all of the notes. In addition, the notes
effectively are subordinate to all liabilities, including trade payables, of our
subsidiaries and any subsidiaries that we may in the future acquire or
establish. Consequently, our right to receive assets of any subsidiaries upon
their liquidation or reorganization, and the rights of the holders of the notes
to share in those assets, would be subordinate to the claims of the
subsidiaries' creditors.
The notes are our obligations exclusively. The indenture for the notes does
not limit our ability, or that of any of our presently existing or future
subsidiaries, to incur senior debt, other indebtedness and other liabilities. We
may have difficulty paying our obligations under the notes if we, or any of our
subsidiaries, incur additional indebtedness or other liabilities. As of December
31, 1999, we had approximately $14.2 million of senior debt outstanding, and our
subsidiaries had approximately $45.1 million of outstanding indebtedness and
other liabilities. From time to time we and our subsidiaries may incur
additional indebtedness, including senior debt, which could adversely affect our
ability to pay our obligations under the notes.
We may be unable to repurchase the notes. At maturity, the entire
outstanding principal amount of the notes will become due and payable. In
addition, if a Change in Control, as defined in "Description of the
Notes -- Repurchase at Option of Holders Upon a Change in Control," of our
company occurs, each holder of the notes may require us to repurchase all or a
portion of that holder's notes. At maturity or if a Change in Control occurs, we
may not have sufficient funds or may be unable to arrange for additional
financing to pay the principal amount or repurchase price due. Under the terms
of the indenture for the notes, we may elect, if we meet certain conditions, to
pay the repurchase price with shares of common stock. Any future borrowing
arrangements or agreements relating to senior debt to which we become a party
may contain restrictions on, or prohibitions against, our repurchases of the
notes. If the maturity date or Change in Control occurs at a time when our other
arrangements prohibit us from repurchasing the notes, we could try to obtain the
consent of the lenders under those arrangements to purchase the notes, or we
could attempt to refinance the borrowings that contain the restrictions. If we
do not obtain the necessary consents or refinance these borrowings, we will be
unable to repurchase the notes. In that case, our failure to repurchase any
tendered notes or notes due upon maturity would constitute an event of default
under the indenture. Any such default, in turn, may cause a default under the
terms of our senior debt. As a result, in those circumstances, the subordination
provisions of the indenture would, absent a waiver, prohibit any repurchase of
the notes until we pay the senior debt in full.
There is only a limited market for the notes. There is a limited trading
market for the notes. We cannot assure you as to the liquidity of any markets
that may develop for the notes, your ability to sell your notes or the price at
which you may be able to sell your notes. The notes are eligible for trading on
the PORTAL market; however, we do not intend to apply for listing of the notes
on any securities exchange or any automated quotation system.
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<PAGE> 13
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking
statements. In some cases, you can identify forward-looking statements by terms
such as "may," "will," "should," "could," "would," "expects," "plans,"
"anticipates," "believes," "estimates," "projects," "predicts," "potential" or
"continue" or other terms of or the negative of those forms or other comparable
terms. Our forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements. These
factors are discussed in more detail elsewhere in this prospectus, including
under the caption "Risk Factors." Because of these uncertainties, you should not
place undue reliance on our forward-looking statements. We do not intend to
update any of these factors or to publicly announce the result of any revisions
to any of our forward-looking statements contained herein, whether as a result
of new information, future events or otherwise.
USE OF PROCEEDS
All of the notes and the shares of common stock issuable upon conversion of
the notes are being sold by the selling securityholders or by their pledgees,
donees, transferees or other successors in interest. We will not receive any
proceeds from the sale of the notes or the shares of our common stock issuable
upon conversion of the notes.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges....... 12.6x 10.0x 3.7x 7.5x 7.2x
</TABLE>
The ratio of earnings to fixed charges is computed by dividing fixed
charges into earnings before income taxes plus fixed charges. Fixed charges
include, as applicable, interest expense, amortization of debt issuance costs
and the estimated interest component of rent expense.
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<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The following statements of operations data for the years ended December
31, 1996, 1997, 1998 and 1999, and the balance sheet data as of December 31,
1996, 1997, 1998 and 1999, have been derived from consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants. The statement of operations data for the year ended December 31,
1995, and the balance sheet data as of December 31, 1995, have been derived from
unaudited consolidated financial statements. Amounts shown are in thousands,
except per share data.
<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
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) We 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.
14
<PAGE> 15
DESCRIPTION OF THE NOTES
We have issued the notes under a document called the "Indenture." The
Indenture is a contract between us and Chase Bank of Texas, National
Association, who acts as trustee (the "Trustee"). The Indenture and the notes
are governed by New York law. Because this section is a summary, it does not
describe every aspect of the notes. This summary is subject to and qualified in
its entirety by reference to all the provisions of the Indenture, including
definitions of certain terms used in the Indenture. For example, in this section
we use capitalized words to signify defined terms that have been given special
meaning in the Indenture. We describe the meaning for only the more important
terms. Wherever we refer to particular defined terms, those defined terms are
incorporated by reference here. In this section, references to "i2 Technologies"
or "us" refer solely to i2 Technologies, Inc. and not our subsidiaries.
GENERAL
The notes are general, unsecured obligations of i2 Technologies. The notes
are subordinated, which means that they rank behind certain of our indebtedness
as described below. The notes are limited to $350,000,000 aggregate principal
amount. Payment of the full principal amount of the notes will be due on
December 15, 2006.
The notes bear interest at the annual rate shown on the front cover of this
prospectus from December 10, 1999. We will pay interest semi-annually on June 15
and December 15 of each year, beginning June 15, 2000, until the principal is
paid or made available for payment. Interest will be paid to the person in whose
name the note is registered at the close of business on the preceding June 1 or
December 1, as the case may be, subject to certain exceptions specified in the
Indenture. Interest payable per $1,000 principal amount of notes for the period
from December 10, 1999 to June 15, 2000, will be $26.9792.
You may convert the notes into shares of common stock initially at the
conversion rate stated on the front cover of this prospectus at any time before
the close of business on December 15, 2006, unless the notes have been
previously redeemed or repurchased. The conversion rate may be adjusted as
described below.
We may redeem the notes at our option at any time on or after December 20,
2002, in whole or in part, at the redemption prices set forth below under
"-- Optional Redemption by i2 Technologies," plus accrued and unpaid interest to
the redemption date. If there is a Change in Control of i2 Technologies, you may
have the right to require us to repurchase your notes as described below under
"-- Repurchase at Option of Holders Upon a Change in Control."
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The notes will be issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 and greater multiples.
The notes are evidenced by one or more global notes which are deposited
with the Trustee as custodian for DTC and registered in the name of Cede & Co.
("Cede"), as nominee of DTC. The global note and any notes issued in exchange
for the global note are subject to restrictions on transfer and bear the legend
regarding those restrictions set forth under "Notice to Investors." Except as
set forth below, record ownership of the global note may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
15
<PAGE> 16
The global note will not be registered in the name of any person, or
exchanged for notes that are registered in the name of any person, other than
DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an Event of Default with respect to the notes represented by the global
note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities issued
in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
- you cannot get notes registered in your name if they are represented by
the global note;
- you cannot receive certificated (physical) notes in exchange for your
beneficial interest in the global notes;
- you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that certain kinds of purchasers
(for example, certain insurance companies) can only own securities in definitive
(certificated) form. These laws may limit your ability to transfer your
beneficial interests in the global note to these types of purchasers.
Only institutions (such as a securities broker or dealer) that have
accounts with the DTC or its nominee (called "participants") and persons that
may hold beneficial interests through participants can own a beneficial interest
in the global security note. The only place where the ownership of beneficial
interests in the global security note will appear and the only way the transfer
of those interests can be made will be on the records kept by DTC (for their
participants' interests) and the records kept by those participants (for
interests of persons held by participants on their behalf).
Secondary trading in bonds and notes of corporate issuers is generally
settled in clearing-house (that is, next-day) funds. In contrast, beneficial
interests in a global note usually trade in DTC's same-day funds settlement
system, and settle in immediately available funds. We make no representations as
to the effect that settlement in immediately available funds will have on
trading activity in those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note, as well as any payment of
Liquidated Damages, to Cede, the nominee for DTC, as the registered owner of the
global note. We will make these payments by wire transfer of immediately
available funds on each payment date.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global note as
shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on that payment date. Payments by participants to owners of
beneficial interests in notes represented by the global note held through
participants will be the responsibility of those participants, as is now the
case with securities held for the accounts of customers registered in "street
name."
We will send any redemption notices to Cede. We understand that if less
than all the notes are being redeemed, DTC's practice is to determine by lot the
amount of the holdings of each participant to be redeemed.
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an "omnibus proxy" to us as soon as
16
<PAGE> 17
possible after the record date. The omnibus proxy assigns Cede's consenting or
voting rights to those participants to whose accounts the notes are credited on
the record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange) only at the
direction of one or more participants to whose account with DTC interests in the
global note are credited and only in respect of such portion of the principal
amount of the notes represented by the global note as to which such participant
or participants has or have given such direction.
DTC has also advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Certain of such participants (or
their representatives), together with other entities, own DTC. Indirect access
to the DTC system is available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to beneficial
interests in the global note. We and the Trustee have no responsibility or
liability for any aspect of DTC's or any participants' records relating to
beneficial interests in the global note, including for payments made on the
global note, and we and the Trustee are not responsible for maintaining,
supervising or reviewing any of those records.
CONVERSION RIGHTS
You may, at your option, convert any portion of the principal amount of a
note that is an integral multiple of $1,000 into shares of common stock at any
time prior to the close of business on the maturity date, unless the note has
been previously redeemed or repurchased, at a conversion rate equal to 13.1594
shares per $1,000 principal amount of notes. This conversion rate is equivalent
to a conversion price of approximately $75.99. The conversion rate is subject to
adjustment as described below. Your right to convert a note called for
redemption or delivered for repurchase will terminate at the close of business
on the Business Day immediately preceding the redemption date or repurchase date
for that note, unless we default in making the payment due upon redemption or
repurchase.
The holder of a note can convert the note by delivering the note to an
office or agency of the Trustee in the Borough of Manhattan, The City of New
York, accompanied by a duly signed and completed notice of conversion, a copy of
which may be obtained from the Trustee. In the case of a global note, DTC will
effect the conversion upon notice from the holder of a beneficial interest in
the global note in accordance with DTC's rules and procedures. The conversion
date will be the date on which the note and the duly signed and completed notice
of conversion are so delivered. As promptly as practicable on or after the
conversion date, we will issue and deliver to the Trustee a certificate or
certificates for the number of full shares of common stock issuable upon
conversion, together with payment in lieu of any fraction of a share. The
certificates will be sent by the Trustee to the Conversion Agent for delivery to
the holder of the note being converted. The shares of common stock issuable upon
conversion of the notes will be fully paid and
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<PAGE> 18
nonassessable and will also rank equally with other shares of our common stock
outstanding from time to time.
If you surrender a note for conversion on a date that is not an Interest
Payment Date, you will not be entitled to receive any interest for the period
from the next preceding Interest Payment Date to the date of conversion, except
as described below. However, if you are a holder of a note on a Regular Record
Date that is surrendered for conversion after the Regular Record Date but before
the next succeeding Interest Payment Date, you will receive the interest payable
on such note on such succeeding Interest Payment Date. Accordingly, any note
surrendered for conversion during the period from the close of business on a
Regular Record Date to the opening of business on the next succeeding Interest
Payment Date must be accompanied by payment of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of notes being
surrendered for conversion. However, you will not be required to make that
payment if you are converting a note, or a portion of a note, that we have
called for redemption, or that you are entitled to require us to repurchase from
you, if your conversion right would terminate because of the redemption or
repurchase between the Regular Record Date and the close of business on the next
succeeding Interest Payment Date.
No other payment or adjustment for interest, or for any dividends on our
common stock, will be made upon conversion. If you receive common stock upon
conversion of a note, you will not be entitled to receive any dividends payable
to holders of common stock as of any record date before the close of business on
the conversion date. We will not issue fractional shares upon conversion of
notes. Instead, we will pay an amount in cash based on the market price of the
common stock at the close of business on the conversion date.
If you deliver a note for conversion, you will not be required to pay any
taxes or duties in respect of the issue or delivery of common stock on
conversion. However, we are not required to pay any tax or duty that may be
payable in respect of any transfer involved in the issue or delivery of the
common stock in a name other than that of the holder of the note. We will not
issue or deliver certificates representing shares of common stock unless the
person requesting the issuance or delivery has paid to us the amount of any such
tax or duty or has established to our satisfaction that such tax or duty is
payable.
The conversion rate is subject to adjustment if:
(1) there is a dividend or other distribution payable in common stock
on shares of our common stock;
(2) we issue to all holders of common stock rights, options or
warrants entitling them to subscribe for or purchase common stock at less
than the then current market price, calculated as described in the
Indenture, of our common stock; however, if those rights, options or
warrants are only exercisable upon the occurrence of certain triggering
events, then the conversion rate will not be adjusted until the triggering
events occur;
(3) we subdivide, reclassify or combine our common stock;
(4) we distribute to all holders of our common stock evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
- those dividends, distributions and rights, options and warrants
referred to in paragraphs (1) and (2) above;
- dividends and distributions paid exclusively in cash; or
- distributions upon mergers or consolidations;
(5) we make a distribution consisting exclusively of cash, to all
holders of our common stock if: the aggregate amount of the distribution
combined together with (A) other such all-cash distributions made within
the preceding 12 months in respect of which no adjustment has been made and
(B) any cash and the fair market value of other consideration payable in
respect of any tender offer by
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<PAGE> 19
i2 Technologies or any of our subsidiaries for our common stock concluded
within the preceding 12 months in respect of which no adjustment has been
made, exceeds 10% of our market capitalization, being the product of the
current market price per share of the common stock on the record date for
such distribution and the number of shares of common stock then
outstanding; or
(6) the successful completion of a tender offer made by i2
Technologies or any of our subsidiaries for our common stock which involves
aggregate consideration that, together with (A) any cash and other
consideration payable in a tender offer by i2 Technologies or any of our
subsidiaries for our common stock expiring within the 12 months preceding
the expiration of such tender offer in respect of which no adjustment has
been made and (B) the aggregate amount of any such all-cash distributions
referred to in paragraph (5) above to all holders of common stock within
the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 10% of our market
capitalization on the expiration of such tender offer.
We reserve the right to make such increases in the conversion rate in
addition to those required by the provisions described above as we may consider
to be advisable so that any event treated for United States federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. No adjustment of the conversion rate will be required to be made
until the cumulative adjustments amount to 1.0% or more of the conversion rate.
We will compute any adjustments to the conversion rate and give notice to the
holders of any such adjustments.
If we merge or consolidate with another person or sell or transfer all or
substantially all of our assets, each note then outstanding will, without the
consent of the holder of any note, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
common stock into which the note was convertible immediately prior to the
merger, consolidation or sale. This calculation will be made based on the
assumption that the holder of common stock failed to exercise any rights of
election that the holder may have to select a particular type of consideration.
The adjustment will not be made for a merger that does not result in any
reclassification, conversion, exchange or cancellation of our common stock.
We may, from time to time, increase the conversion rate by any amount for
any period of at least 20 days if our Board of Directors has determined that
such increase would be in our best interests. If our Board of Directors makes
such a determination, it will be conclusive. We will give holders of notes at
least 15 days' notice of such an increase in the conversion rate. No such
increase will be taken into account for purposes of determining whether the
closing price of the common stock exceeds the conversion price by 105% in
connection with an event which otherwise would be a "Change in Control," as
defined below.
If at any time we make a distribution of property to our shareholders that
would be taxable to such shareholders as a dividend for United States federal
income tax purposes, e.g., distributions of evidences of indebtedness or assets
of i2 Technologies, but generally not stock dividends on common stock or rights
to subscribe for common stock, and, pursuant to the anti-dilution provisions of
the Indenture, the number of shares into which notes are convertible is
increased, that increase may be deemed for United States federal income tax
purposes to be the payment of a taxable dividend to holders of notes. See
"Material United States Federal Income Tax Considerations -- Dividends."
SUBORDINATION
The notes are subordinated and, as a result, the payment of the principal,
any premium and interest on the notes, including amounts payable on any
redemption or repurchase, will be subordinated to the prior payment in full, in
cash or other payment satisfactory to holders of Senior Debt, of all of our
Senior Debt.
"Senior Debt" means the principal of, and premium, if any, and interest,
including all interest accruing subsequent to the commencement of any bankruptcy
or similar proceeding, whether or not a claim for post-petition interest is
allowable as a claim in any such proceeding, on, and all fees and other
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<PAGE> 20
amounts payable in connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of the Indenture or thereafter created, incurred or assumed:
- our indebtedness evidenced by any credit or loan agreement, note, bond,
debenture or other similar instrument;
- all of our obligations for money borrowed;
- our obligations as lessee under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting
principles;
- all our obligations under interest rate, currency and credit swaps, caps,
floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements;
- all our obligations with respect to letters of credit, bank guarantees,
bankers' acceptances and similar facilities, including related
reimbursement obligations;
- all our obligations issued or assumed as the deferred purchase price of
property or services, but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business;
- all our obligations of the type referred to above of another person and
all dividends of another person, the payment of which, in either case, we
have assumed or guaranteed, or for which we are responsible or liable,
directly or indirectly, jointly or severally, as obligor, guarantor or
otherwise, or which is secured by a lien on our property; or
- renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for
any indebtedness or obligation described in the bullets above.
Senior Debt will not include any indebtedness or obligation if the terms of the
indebtedness or obligation, or the terms of the instrument under which the
indebtedness or obligation is issued, expressly provide that the indebtedness or
obligation is not superior in right of payment to the notes. In addition, Senior
Debt will not include any particular indebtedness or obligation that we may owe
to any of our direct or indirect subsidiaries.
We may not make any payment on account of principal, premium or interest on
the notes, or redemption or repurchase of the notes, if either of the following
occurs:
- we default in our obligations to pay principal, premium, interest or
other amounts on our Designated Senior Debt, as defined below, including
a default under any redemption or repurchase obligation, and the default
continues beyond any grace period that we may have to make those
payments; or
- any other default occurs and is continuing on any Designated Senior Debt
and (1) the default permits the holders of the Designated Senior Debt to
accelerate its maturity and (2) the Trustee has received a notice (a
"Payment Blockage Notice") of the default from i2 Technologies or such
other person permitted to give such notice under the Indenture.
If payments of the notes have been blocked by a payment default on Senior
Debt, payments on the notes may resume when the payment default has been cured
or waived or ceases to exist. If payments on the notes have been blocked by a
nonpayment default, payments on the notes may resume on the earlier of (1) the
date the nonpayment default is cured or waived or ceases to exist or (2) 179
days after the Payment Blockage Notice is received.
No nonpayment default that existed on the day a Payment Blockage Notice was
delivered to the Trustee can be used as the basis for any subsequent Payment
Blockage Notice. In addition, once a holder
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<PAGE> 21
of Designated Senior Debt has blocked payment on the notes by giving a Payment
Blockage Notice, no new period of payment blockage can be commenced until both
of the following are satisfied:
- 365 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice; and
- all scheduled payments of principal, any premium and interest on the
notes have come due and have been paid in full in cash.
"Designated Senior Debt" means indebtedness under our existing credit
facilities with Chase Bank of Texas and Wells Fargo Bank (Texas) and any other
Senior Debt in which the instrument creating or evidencing the debt, or the
assumption or guarantee of the debt, or related agreements or documents to which
we are a party, expressly provides that the indebtedness will be "Designated
Senior Debt" for purposes of the Indenture. That instrument, agreement or other
document may place limitations and conditions on the right of that Senior Debt
to exercise the rights of Designated Senior Debt.
In addition, upon any acceleration of the principal due on the notes as a
result of an Event of Default or payment or distribution of our assets to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary, marshaling of assets, assignment for the
benefit of credits, or in bankruptcy, insolvency, receivership or other similar
proceedings, all principal, premium, interest and other amounts due on all
Senior Debt must be paid in full, in cash or other payment satisfactory to
holders of Senior Debt, before you will be entitled to receive any payment.
Because of this subordination, in the event of insolvency, our creditors who are
holders of Senior Debt may recover more, ratably, than you would, and this
subordination may reduce or eliminate payments to you. As of December 31, 1999,
we had approximately $14.2 million of Senior Debt outstanding.
In addition, the notes are "structurally subordinated" to all indebtedness
and other liabilities, including trade payables and lease obligations, of our
subsidiaries. This occurs because any right of i2 Technologies to receive any
assets of our subsidiaries upon their liquidation or reorganization, and the
consequent right of the holders of the notes to participate in those assets,
will be effectively subordinated to the claims of that subsidiary's creditors,
including trade creditors, except to the extent that i2 Technologies itself is
recognized as a creditor of the subsidiary, in which case the claims of i2
Technologies would still be subordinate to any security interest in the assets
of the subsidiary and any indebtedness of the subsidiary senior to that held by
i2 Technologies. As of December 31, 1999, our subsidiaries had approximately
$45.1 million of indebtedness and other liabilities outstanding.
The Indenture does not limit our ability or the ability of any of our
subsidiaries to incur indebtedness, including Senior Debt.
OPTIONAL REDEMPTION BY I2 TECHNOLOGIES
On and after December 20, 2002, we may redeem the notes, in whole or in
part, at our option, at the redemption prices specified below. The redemption
price, expressed as a percentage of principal amount, is as follows for the
12-month periods beginning on December 15 of the following years (December 20
through December 14 in the case of the first of such periods):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002..................................................... 103.000%
2003..................................................... 102.250%
2004..................................................... 101.500%
2005..................................................... 100.750%
</TABLE>
and 100% of the principal amount on and after December 15, 2006. In each case we
will also pay accrued interest to, but excluding, the redemption date. If the
redemption date is also an interest payment date, we will pay the accrued
interest becoming due on that date to the holder of record as of the relevant
record
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<PAGE> 22
date. The Indenture requires us to give notice of redemption not more than 60
and not less than 30 days before the redemption date.
No "sinking fund" is provided for the notes, which means that the Indenture
does not require us to redeem or retire the notes periodically.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control, as defined below, occurs, you will have the right,
at your option, to require us to repurchase all of your notes not called for
redemption, or any portion of the principal amount of your notes that is equal
to $5,000 or any integral multiple of $1,000 in excess of $5,000. The price we
are required to pay is 100% of the principal amount of the notes to be
repurchased, together with interest accrued to, but excluding, the repurchase
date. If the redemption date is also an interest payment date, we will pay the
accrued interest becoming due on that date to the holder of record as of the
relevant record date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in common stock valued at 95% of the average of the closing
sales prices of the common stock for the five trading days immediately preceding
and including the third day prior to the repurchase date. We may only pay the
repurchase price in common stock if we satisfy conditions provided in the
Indenture.
Within 30 days after the occurrence of a Change in Control, we are
obligated to give you notice of the Change in Control and of the repurchase
right arising as a result of the Change in Control. We must also deliver a copy
of this notice to the Trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of our notice irrevocable
written notice to the Trustee of your exercise of your repurchase right,
together with the notes with respect to which that right is being exercised. We
are required to make the repurchase on the date that is 45 days after the date
of our notice.
A "Change in Control" will be deemed to have occurred at the time after the
notes are originally issued that any of the following occurs:
(1) any person, including any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Securities Exchange Act of 1934,
acquires beneficial ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of transactions, of
shares of our capital stock entitling that person to exercise 50% or more
of the total voting power of all shares of our capital stock entitled to
vote generally in elections of directors; however, any acquisition by i2
Technologies, any subsidiary of i2 Technologies or any employee benefit
plan of i2 Technologies and any merger or consolidation that is not a
Change in Control under clause (2) below will not trigger this provision;
(2) we consolidate with or merge with or into any other person or
another person merges into us, except if the transaction satisfies any of
the following:
- the holders of 50% or more of the total voting power of all shares of
our capital stock entitled to vote generally in elections of directors
immediately prior to the transaction have, directly or indirectly, 50%
or more of the total voting power of all shares of capital stock of
the continuing or surviving corporation entitled to vote generally in
elections of directors of the continuing or surviving corporation
immediately after the transaction;
- the transaction is a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of our capital stock;
- the transaction is a merger effected only to change our jurisdiction
of incorporation and it results in a reclassification, conversion or
exchange of outstanding shares of our common stock only into shares of
common stock of i2 Technologies or another corporation; or
(3) we convey, transfer, sell, lease or otherwise dispose of all or
substantially all of our assets to another person.
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<PAGE> 23
However, a Change in Control will not be deemed to have occurred if the
closing sales price per share of our common stock for any five trading days
within the period of 10 consecutive trading days ending immediately after the
later of the Change in Control or the public announcement of the Change in
Control, in the case of a Change in Control relating to an acquisition of
capital stock, or the period of 10 consecutive trading days ending immediately
before the Change in Control, in the case of Change in Control relating to a
merger, consolidation or asset sale, equals or exceeds 105% of the conversion
price of the notes in effect on each of those trading days.
For purposes of these provisions:
- the conversion price is equal to $1,000 divided by the conversion rate;
- whether a person is a "beneficial owner" will be determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934; and
- "person" includes any syndicate or group that would be deemed to be a
"person" under Section 13(d)(3) of the Securities Exchange Act of 1934.
Rule 13e-4 under the Securities Exchange Act of 1934 requires the
dissemination of prescribed information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to you. We will comply with this rule to the extent it applies
at that time.
We may, to the extent permitted by applicable law, at any time purchase
notes in the open market or by tender at any price or by private agreement. Any
note that we so purchase may, to the extent permitted by applicable law, be
reissued or resold or may, at our option, be surrendered to the Trustee for
cancellation. Any notes surrendered may not be reissued or resold and will be
canceled promptly.
The definition of Change in Control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your notes as a result of conveyance, transfer, sale, lease or
other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may adversely
affect you.
Our ability to repurchase notes upon the occurrence of a Change in Control
is subject to important limitations. Some of the events constituting a Change in
Control could result in an event of default under, or be prohibited or limited
by, the terms of any Senior Debt. As a result, unless we were to obtain a
waiver, a repurchase of the notes in cash could be prohibited under the
subordination provisions of the Indenture until the Senior Debt is paid in full.
Although we have the right to repurchase the notes with common stock, subject to
certain conditions, we cannot assure you that we would have the financial
resources, or would be able to arrange financing, to pay the repurchase price in
cash for all the notes that might be delivered by holders of notes seeking to
exercise the repurchase right. If we were to fail to repurchase the notes when
required following a Change in Control, an Event of Default under the Indenture
would occur, whether or not such repurchase is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under our Senior Debt. See "-- Subordination."
MERGERS AND SALES OF ASSETS BY I2 TECHNOLOGIES
We may not consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person, and we may not permit any person to consolidate with or merge
into us or convey, transfer, sell or lease such person's properties and assets
substantially as an entirety to us, unless each of the following requirements is
met:
- the person formed by the consolidation or into or with which we merge or
the person to which our properties and assets are conveyed, transferred,
sold or leased, is a corporation, limited liability
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<PAGE> 24
company, partnership or trust organized and existing under the laws of
the United States, any State or the District of Columbia and, if other
than us, shall expressly assume the due and punctual payment of the
principal of, any premium, and interest on the notes and the performance
of our other covenants under the Indenture;
- immediately after giving effect to that transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and
- if required by the Indenture, an officer's certificate and legal opinion
relating to these conditions is delivered to the Trustee.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
- we fail to pay principal of or any premium on any note when due, whether
or not the payment is prohibited by the subordination provisions of the
Indenture;
- we fail to pay any interest on any note when due and that default
continues for 30 days, whether or not the payment is prohibited by the
subordination provisions of the Indenture;
- we fail to give the notice that we are required to give in the event of a
Change in Control, whether or not the notice is prohibited by the
subordination provisions of the Indenture;
- we fail to perform any other covenant in the Indenture and that failure
continues for 60 days after written notice to us by the Trustee or the
holders of at least 25% in aggregate principal amount of outstanding
notes;
- failure to pay when due (after expiration of any applicable grace period)
the principal of, or acceleration of, any indebtedness for money borrowed
by us or any of our significant subsidiaries in excess of $10 million if
the indebtedness is not discharged, or the acceleration is not annulled,
within 30 days after written notice to us by the Trustee or the holders
of at least 25% in aggregate principal amount of the outstanding notes;
or
- events of bankruptcy, insolvency or reorganization with respect to i2
Technologies specified in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders, unless such holders
shall have furnished to the Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
If an Event of Default, other than an Event of Default arising from events
of bankruptcy, insolvency or reorganization with respect to i2 Technologies,
occurs and is continuing, either the Trustee or the holders of at least 25% in
principal amount of the outstanding notes may accelerate the maturity of all
notes. After acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding notes may, under circumstances set forth in the Indenture, rescind
the acceleration if all Events of Default, other than the nonpayment of
principal of the notes which have become due solely because of the acceleration,
have been cured or waived as provided in the Indenture. If an Event of Default
arising from events of bankruptcy, insolvency or reorganization occurs and is
continuing with respect to i2 Technologies, then the principal of, and accrued
interest on, all of the notes will automatically become immediately due and
payable without any declaration or other act on the part of the holders of the
notes or the Trustee.
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<PAGE> 25
Before you may take any action to institute any proceeding relating to the
Indenture, or to appoint a receiver or a trustee, or for any other remedy, each
of the following must occur:
- you must have given the Trustee written notice of a continuing Event of
Default;
- the holders of at least 25% of the aggregate principal amount of all
outstanding notes must make a written request of the Trustee to take
action because of the default and must have offered reasonable
indemnification to the Trustee against the costs, liabilities and
expenses of taking such action; and
- the Trustee must not have taken action for 60 days after receipt of such
notice and furnishing of indemnification.
These limitations do not apply to a suit for the enforcement of payment of
the principal of or any premium or interest on a note, or the repurchase price
payable for a note, on or after the due dates for such payments or of the right
to convert the note in accordance with the Indenture.
We will furnish to the Trustee annually a statement as to our performance
of our obligations under the Indenture and as to any default in performance.
MODIFICATION AND WAIVER
The consent of the holders of a majority in principal amount of the
outstanding notes affected is required to make a modification or amendment to
the Indenture. However, a modification or amendment requires the consent of the
holder of each outstanding note affected if it would:
- change the stated maturity of the principal or interest of a note;
- reduce the principal amount, any premium or interest on any note;
- reduce the amount payable upon a redemption or mandatory repurchase;
- modify the provisions with respect to the repurchase rights of holders of
notes in a manner adverse to the holders;
- change the place of currency of payment on a note;
- impair the right to institute suit for the enforcement of any payment on
any note;
- modify the subordination provisions in a manner that is adverse to the
holders of the notes;
- adversely affect the right to convert the notes;
- modify our obligation to deliver information required under Rule 144A to
permit resales of the notes and common stock issued upon conversion of
the notes if we cease to be subject to the reporting requirements under
the Securities Exchange Act of 1934;
- reduce the percentage of holders whose consent is needed to modify or
amend the Indenture;
- reduce the percentage of holders whose consent is needed to waive
compliance with certain provisions of the Indenture or to waive certain
defaults; or
- modify the provisions dealing with modification and waiver of the
Indenture.
The holders of a majority in principal amount of the outstanding notes must
consent to waive compliance by us with certain restrictive provisions of the
Indenture. The holders of a majority in principal amount of the outstanding
notes may waive any past default, except a default in the payment of principal,
any premium, interest or the repurchase price.
Notes will not be considered outstanding if money for their payment or
redemption has been deposited or set aside in trust for the holders.
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<PAGE> 26
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding notes that are entitled to
take any action under the Indenture. In limited circumstances, the Trustee will
be entitled to set a record date for action by holders. If a record date is set
for any action to be taken by holders, such action may be taken only by persons
who are holders of outstanding notes on the record date and must be taken within
180 days following the record date or such other period as we may specify (or as
the Trustee may specify, if it set the record date). This period may be
shortened or lengthened (but not beyond 180 days) from time to time.
REGISTRATION RIGHTS
We have entered into a registration rights agreement with the Initial
Purchasers (the "Registration Rights Agreement"). In the Registration Rights
Agreement we agreed, for the benefit of the holders of the notes and the shares
of common stock issuable upon conversion of the notes (together, the
"Registrable Securities") that we will, at our expense:
- use our reasonable efforts to cause the shelf registration statement of
which this prospectus is a part to be declared effective under the
Securities Act within 180 days after the date the notes are originally
issued, subject to our right to postpone having the shelf registration
statement declared effective for an additional 90 days in limited
circumstances; and
- use our reasonable efforts to keep effective the shelf registration
statement until two years after the date the notes are originally issued
or, if earlier, until there are no outstanding Registrable Securities
(the "Effectiveness Period").
We are permitted to suspend the use of this prospectus in connection with
sales of Registrable Securities during prescribed periods of time for reasons
relating to pending corporate developments, public filings with the SEC and
other events. The periods during which we can suspend the use of the prospectus
may not, however, exceed a total of 45 days in any 90-day period or a total of
90 days in any 365-day period. We will issue a release made to Reuters Economic
Services and Bloomberg Business News promptly following the effectiveness of the
shelf registration statement and take certain other actions required to permit
public resales of the Registrable Securities.
We may, upon written notice to all the holders of notes, postpone having
the shelf registration statement declared effective for a reasonable period not
to exceed 90 days if we possess material non-public information, the disclosure
of which would have a material adverse effect on i2 Technologies and its
subsidiaries taken as a whole. Notwithstanding any such postponement, we will
pay liquidated damages ("Liquidated Damages") in respect of the Registrable
Securities if on or prior to 180 days following the date the notes were
originally issued, the shelf registration statement is not declared effective (a
"Registration Default").
In that case, Liquidated Damages will accrue (1) in respect of the notes at
the rates set forth below on the principal amount of the notes and (2) in
respect of the common stock issued upon conversion of the notes, at the rates
set forth below applied to the conversion price at that time. Liquidated Damages
will accrue from and including the day following the Registration Default to,
but excluding, the day on which the Registration Default has been cured.
The rates at which Liquidated Damages will accrue will be as follows:
- 0.25% per annum to and including the 90th day after the Registration
Default; and
- 0.5% per annum from and after the 91st day after the Registration
Default.
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<PAGE> 27
In addition, we will pay Liquidated Damages if either of the following
occurs after the effectiveness of the shelf registration statement if:
- the shelf registration statement ceases to be effective, or we otherwise
prevent or restrict holders of Registrable Securities from making sales
under the shelf registration statement, for more than 45 days, whether or
not consecutive, during any 90-day period; or
- the shelf registration statement ceases to be effective, or we otherwise
prevent or restrict holders of Registrable Securities from making sales
under the shelf registration statement, for more than 90 days, whether or
not consecutive, during any 12-month period.
In either event, Liquidated Damages will accrue at a rate of 0.5% per annum
(1) in respect of the notes, on the principal amount of the notes and (2) in
respect of the common stock issued upon conversion of the notes, applied to the
conversion price at that time. Liquidated Damages will accrue from the 46th day
of the 90-day period or the 91st day of the 12-month period until the earlier of
the following:
- the time the shelf registration statement again becomes effective or the
holders of Registrable Securities are again able to make sales under the
shelf registration statement, depending on which event triggered the
increase in interest rate; or
- the time the Effectiveness Period expires.
Liquidated Damages will be paid semi-annually in arrears, with the first
semi-annual payment due on the first Interest Payment Date following the date on
which the Liquidated Damages begin to accrue.
A holder who elects to sell any Registrable Securities pursuant to the
shelf registration statement will be required to be named as a selling security
holder in the related prospectus, may be required to deliver a prospectus to
purchasers, may be subject to certain civil liability provisions under the
Securities Act in connection with those sales and will be bound by the
provisions of the Registration Rights Agreement that apply to a holder making
such an election, including certain indemnification provisions.
We will pay all fees and expenses related to the filing of the shelf
registration statement and maintaining its effectiveness for resales of
Registrable Securities. Holders of at least a majority of the Registrable
Securities may request us to undertake one underwritten offering pursuant to the
Registration Rights Agreement. In the event of this one underwritten offering,
we will pay the fees and expenses incurred by us in connection with the
offering, including those of our independent counsel and accountants. In
addition, we will pay the fees and expenses of a single counsel selected by a
plurality of all Electing Holders who own an aggregate of not less than 25% of
the Registrable Securities included in the offering. Except as provided in the
two preceding sentences, each Electing Holder will be responsible for all
underwriting discounts and commissions, fees and expenses payable in connection
with the sale of its Registrable Securities.
We have mailed to registered holders of Registrable Securities a Notice and
Questionnaire. If we receive a completed Notice and Questionnaire 10 or more
days before the effective time of the registration statement of which this
prospectus is a part, the holder will be entitled to have its Registrable
Securities included in the shelf registration statement at the effective time,
provided such holder supplied all of such holder's requisite information. If we
receive the Notice and Questionnaire nine or fewer days before the effective
time of the shelf registration statement, the Registrable Securities covered by
the Notice and Questionnaire will be included in the shelf registration
statement reasonably promptly after receipt of such Notice and Questionnaire,
which may be after the date the shelf registration statement is declared
effective, provided such holder supplied all of such holder's requisite
information.
In the event we receive a properly complete Notice and Questionnaire after
the shelf registration statement has been declared effective, we will within
five business days, file any amendments to the shelf registration statement or
supplements related to the prospectus as are necessary to permit the holder to
sell its Registrable Securities. We will pay Liquidated Damages (1) in respect
of such holder's notes that are Registrable Securities at the rate of 0.5% of
the principal amount per annum and (2) in respect of shares
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<PAGE> 28
of common stock issued upon conversion of notes, at the rate of 0.5% of the
conversion price at the time per annum if either of the following occurs until
the default is cured:
- we fail to file a post-effective amendment or supplement, as the case may
be, to the shelf registration statement within five days after receipt by
us of a completed Notice and Questionnaire; or
- in the case of a post-effective amendment, such amendment is not declared
effective within 45 days of filing (subject to certain exceptions).
In no event will Liquidated Damages in respect to any Registrable
Securities exceed 0.5% in any period. As used above, the term "Electing Holder"
means any holder of Registrable Securities that has returned a completed and
signed Notice and Questionnaire to us in accordance with the procedures
described above.
This summary of certain provisions of the Registration Rights Agreement is
not complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a copy of which will be
made available to beneficial owners of the notes upon request to us.
NOTICES
We will give notice to holders of the notes by mail to the addresses of the
holders as they appear in the Security Register. Notices will be deemed to have
been given on the date of mailing.
REPLACEMENT OF NOTES
We will replace, at the expense of the holders, notes that become
mutilated, destroyed, stolen or lost upon delivery to the Trustee of the
mutilated notes or evidence of the loss, theft or destruction thereof
satisfactory to us and the Trustee. In the case of a lost, stolen or destroyed
note, indemnity satisfactory to the Trustee and us may be required at the
expense of the holder of the note before a replacement note will be issued.
GOVERNING LAW
The Indenture and the notes will be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of laws
principles.
THE TRUSTEE
The Trustee for the holders of notes issued under the Indenture is Chase
Bank of Texas, National Association. If an Event of Default shall occur, and
shall not be cured, the Trustee will be required to use the degree of care of a
prudent person in the conduct of his own affairs in the exercise of its powers.
Subject to these provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any holders of
the notes, unless they shall have furnished to the Trustee reasonable security
or indemnity.
28
<PAGE> 29
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material United States federal income
and, in the case of holders of the notes or the common stock who are not U.S.
persons, as that term is defined in the Internal Revenue Code of 1986, as
amended, the estate tax considerations, relating to the purchase, ownership and
disposition of the notes and of the common stock into which notes may be
converted. This discussion is not a complete analysis of all other potential tax
considerations relating to such considerations.
This discussion is based on the provisions of the Internal Revenue Code,
the applicable Treasury regulations promulgated or proposed thereunder, judicial
authority and current administrative rulings and practice. All of these sources
of authority are subject to change, possibly on a retroactive basis.
This discussion deals only with holders that will hold notes and common
stock into which notes may be converted as capital assets as defined in the
Internal Revenue Code. It does not address tax considerations applicable to
investors that may be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or currencies or
persons that will hold notes as a position in a hedging transaction, straddle or
conversion transaction for tax purposes. We have not sought any ruling from the
Internal Revenue Service with respect to the statements made and the conclusions
reached in the following discussion, and there can be no assurance that the
Internal Revenue Service will agree with such statements and conclusions.
We urge investors considering the purchase of notes to consult their own
tax advisors with respect to the application of the United States federal income
and estate tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction or under any applicable tax treaty.
UNITED STATES HOLDERS
Following is a discussion of the material United States federal income tax
considerations applicable to beneficial owners of the notes or the common stock,
into which the notes may be converted who are U.S. persons, as defined in the
Internal Revenue Code. A U.S. person is:
- a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof,
- an estate the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
Payment of Interest. Interest on a note generally will be includable in the
income of a holder as ordinary income at the time such interest is received or
accrued, in accordance with such holder's method of accounting for United States
federal income tax purposes.
Amortizable Bond Premium. If a holder of a note acquires the note at a
cost, excluding for this purpose that portion of the purchase price equal to the
value of the conversion option, that is in excess of the amount payable at
maturity, the holder may elect to amortize the excess cost on a constant
interest rate basis over the term of such note. The amortized premium may be
used to offset interest income. However, because the notes may be redeemed at
our option at a price in excess of their principal amount, a holder may be
required to amortize any bond premium based on the earlier call date and the
call price payable at that time. If the holder makes an election to amortize
bond premium, the tax basis with respect to the notes will be reduced by the
allowable bond premium amortization. The amortization election would apply to
all debt instruments held or subsequently acquired by the electing holder and
cannot be revoked without permission from the Internal Revenue Service. On
conversion of a note into shares of common
29
<PAGE> 30
stock, no additional amortization of any bond premium will be allowed, and any
remaining premium will be added to the holder's basis in the common stock
received.
Market Discount. Except as described below, gain recognized on the
disposition of a note that has accrued market discount will be treated as
ordinary income, and not capital gain, to the extent of the accrued market
discount. Market discount is defined generally as the excess, if any, of the
principal amount of the note over the tax basis of the note in the hands of the
holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the obligation over the holder's tax basis in the
obligation is less than 0.25% of the principal amount multiplied by the number
of complete years after the acquisition date to the obligation's date of
maturity. Unless the holder elects to accrue market discount on a constant yield
basis, the accrued market discount generally would be the amount calculated by
multiplying the market discount by a fraction, the numerator of which is the
number of days the obligation has been held by the holder and the denominator of
which is the number of days after the holder's acquisition of the obligation up
to and including its maturity date.
If a holder of a note acquired with market discount disposes of such note
in any transaction other than a sale, exchange or involuntary conversion, such
holder will be deemed to have realized an amount equal to the fair market value
of the note and will be required to recognize as ordinary income any accrued
market discount. See the discussion below under "-- Sale, Exchange or Redemption
of the Notes" for the tax consequences of a sale or exchange. A partial
principal payment, if any, on a note will be includable as ordinary income upon
receipt to the extent of any accrued market discount thereon. Although it is not
free from doubt, any accrued market discount not previously taken into income
prior to a conversion of a note into shares of common stock should carry over to
the common stock received on conversion and be treated as ordinary income upon a
subsequent disposition of such common stock, to the extent of any gain
recognized on such disposition. Unless the election described below is in
effect, a holder of a note acquired at a market discount also may be required to
defer the deduction of all or a portion of the interest on any indebtedness
incurred or maintained to purchase or carry the note until the maturity of the
note or the earlier disposition of the note in a taxable transaction.
A holder of a note acquired at a market discount may elect to include the
market discount in income as it accrues on either a straight-line basis or a
constant yield basis. This election would apply to all market discount
obligations acquired by the electing holder on or after the first day of the
first year to which the election applies. The election may be revoked only with
the consent of the Internal Revenue Service. If a holder of a note elects to
include market discount in income currently, the rules discussed above regarding
ordinary income recognition resulting from a sale and certain other disposition
transactions and those regarding the deferral of interest deductions would not
apply.
Sale, Exchange or Redemption of the Notes. Upon the sale, exchange or
redemption of a note, a holder generally will recognize capital gain or loss,
except to the extent the market discount rules discussed above otherwise
provide, equal to the difference between:
- the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption, except to the extent such
amount is attributable to accrued interest income, which is taxable as
ordinary income, and
- such holder's adjusted tax basis in the note.
A holder's adjusted tax basis in a note generally will equal the cost of
the note to such holder, increased by any market discount, as discussed above,
previously included in income by the holder and decreased by any principal
payments received by such holder and bond premium amortized by the holder with
respect to the notes. Any capital gain or loss will be long-term if the holder's
holding period is more than 12 months and will be short-term if the holding
period is equal to or less than 12 months. In the case of individual holders,
long-term capital gains are taxed at a maximum rate of 20%, and short-term
capital gains are taxed at a maximum rate of 39.6%. In taxable years beginning
after December 31, 2000, the rate
30
<PAGE> 31
of tax applicable to long-term capital gains in certain circumstances may be
reduced below 20% for property held for more than five years.
Constructive Dividends on Notes. If at any time:
- We make a distribution of cash or property to our stockholders or
purchase common stock and such distribution or purchase would be taxable
to such stockholders as a dividend for United States federal income tax
purposes (e.g., distributions of evidences of our indebtedness or assets,
but generally not stock dividends or rights to subscribe for common
stock) and, pursuant to the anti-dilution provisions of the indenture,
the conversion rate of the notes is increased, or
- the conversion rate of the notes is increased at our discretion,
such increase in the conversion rate may be deemed to be a distribution to
holders of notes treated as a taxable dividend to the extent of our current and
accumulated earnings and profits, then as a tax-free return of capital to the
extent of the holder's adjusted basis in the notes and thereafter as capital
gain from the sale or exchange of such notes. Holders of notes could therefore
have taxable income as a result of an event pursuant to which they received no
cash or property.
Conversion of the Notes. A holder generally will not recognize any income,
gain or loss upon conversion of a note into common stock, except with respect to
cash received in lieu of a fractional share of common stock. Such holder's tax
basis in the common stock received on conversion of a note will be the same as
such holder's adjusted tax basis in the note at the time of conversion, reduced
by any basis allocable to a fractional share interest, and the holder's holding
period for the common stock received on conversion will generally include the
holding period of the note converted.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss, measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share.
Dividends on Common Stock. The amount of any distribution by us in respect
of the common stock will be equal to the amount of cash and the fair market
value, on the date of distribution, of any property distributed. Generally,
distributions will be treated as a dividend, subject to tax as ordinary income,
to the extent of our current and accumulated earnings and profits, then as a
tax-free return of capital to the extent of the holder's tax basis in the common
stock and thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate holder will qualify for
the 70% dividends received deduction if the holder owns less than 20% of the
voting power and value of our stock, other than any non-voting, non-convertible,
non-participating preferred stock. A corporate holder that owns 20% or more of
the voting power and value of our stock, other than any non-voting,
non-convertible, non-participating preferred stock, generally will qualify for
an 80% dividends received deduction. The dividends received deduction is
subject, however, to certain holding period, taxable income and other
limitations.
Sale of Common Stock. Upon the sale or exchange of our common stock, a
holder generally will recognize capital gain or loss (except to the extent the
market discount rules discussed above otherwise provide) equal to the difference
between:
- the amount of cash and the fair market value of any property received
upon the sale or exchange and
- such holder's adjusted tax basis in the common stock.
Such capital gain or loss will be long-term if the holder's holding period is
more than 12 months and will be short-term if the holding period is equal to or
less than 12 months. In the case of individual holders, long-term capital gains
are taxed at a maximum rate of 20% and short-term capital gains are taxed at a
31
<PAGE> 32
maximum rate of 39.6%. In taxable years beginning after December 31, 2000, the
rate of tax applicable to long-term capital gains in certain circumstances may
be reduced below 20% for property held for more than five years. A holder's
basis and holding period in the common stock received upon conversion of a note
are determined as discussed above under "Conversion of the Notes."
Information Reporting and Backup Withholding Tax. In general, information
reporting requirements will apply to payments of principal, premium, if any, and
interest on a note, payments of dividends on common stock, payments of the
proceeds of the sale of a note and payments of the proceeds of the sale of our
common stock to certain noncorporate United States Holders. The payor will be
required to withhold backup withholding tax at the rate of 31% if:
- the payee fails to furnish a taxpayer identification number to the payor
or establish an exemption from backup withholding,
- the Internal Revenue Service notifies the payor that the taxpayer
identification number furnished by the payee is incorrect,
- there has been a notified payee underreporting with respect to interest,
dividends or original issue discount described in Section 3406(c) of the
Internal Revenue Code or
- there has been a failure of the payee to certify under the penalty of
perjury that the payee is not subject to backup withholding under the
Internal Revenue Code.
Any amounts withheld under the backup withholding rules from a payment to a
United States Holder will be allowed as a credit against such holder's United
States federal income tax and may entitle the holder to a refund, provided that
the required information is furnished to the Internal Revenue Service.
NON-UNITED STATES HOLDERS
Following is a discussion of the material United States federal income and
estate tax consequences applicable to the beneficial owners of notes or the
common stock into which the notes may be converted who are not U.S. persons, as
defined in the Internal Revenue Code.
Payment of Interest. Generally, interest income of a non-U.S. holder that
is not effectively connected with a United States trade or business will be
subject to a withholding tax at a 30% rate, or, if applicable, a lower treaty
rate. However, interest paid on a note by us or any paying agent to a non-U.S.
holder will qualify for an exemption provided under the Internal Revenue Code
for certain portfolio interest income and therefore will not be subject to
United States federal income tax or withholding tax, provided that such interest
income is not effectively connected with a United States trade or business of
the non-U.S. holder and provided that the non-U.S. holder:
- does not actually or constructively own, pursuant to the conversion
feature of the notes or otherwise, 10% or more of the combined voting
power of all classes of our stock entitled to vote,
- is not a controlled foreign corporation as defined in the Internal
Revenue Code related to us actually or constructively through stock
ownership,
- is not a bank which acquired the notes in consideration for an extension
of credit made pursuant to a loan agreement entered into in the ordinary
course of business and
- either
- provides a Form W-8, or a suitable substitute form, signed under
penalties of perjury that includes its name and address and certifies
as to its non-United States status, or
- is a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business and provides a statement to us or our agent
under penalties of perjury in which it certifies that Form W-8, or a
suitable substitute
32
<PAGE> 33
form, has been received by it from the non-U.S. holder or qualifying
intermediary and furnishes us or our agent with a copy thereof.
Except to the extent that an applicable treaty otherwise provides, a
non-U.S. holder generally will be taxed in the same manner as a holder who is a
U.S. person with respect to interest if the interest income is effectively
connected with a United States trade or business of the non-U.S. holder.
Effectively connected interest received by a corporate non-U.S. holder may also,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate, or, if applicable, a lower treaty rate. Even though such effectively
connected interest is subject to income tax, and may be subject to the branch
profits tax, it is not subject to withholding tax if the holder delivers a
properly executed Internal Revenue Service Form 4224, or successor form, to the
payor.
Amended Treasury Regulations, which are generally effective for payments
made after December 31, 2000, provide alternative methods for satisfying the
certification requirements described immediately above.
Sales, Exchange or Redemption of the Notes. A non-U.S. holder of a note
will generally not be subject to United States federal income tax or withholding
tax on any gain realized on the sale, exchange or redemption of a note,
including the receipt of cash in lieu of fractional shares upon conversion of a
note into common stock, unless:
- the gain is effectively connected with a United States trade or business
of the non-U.S. holder,
- in the case of a non-U.S. holder who is an individual, such holder is
present in the United States for a period or periods aggregating 183 days
or more during the taxable year of the disposition and certain other
conditions are met or
- the holder is subject to tax pursuant to the provisions of the Internal
Revenue Code applicable to certain United States expatriates.
Conversion of the Notes. In general, no United States federal income tax or
withholding tax will be imposed upon the conversion of a note into common stock
by a non-U.S. holder except with respect to the receipt of cash in lieu of
fractional shares by non-U.S. holders upon conversion of a note where any of the
conditions described above under "Non-United States Holders -- Sale, Exchange or
Redemption of the Notes" is satisfied.
Sale or Exchange of Common Stock. A non-U.S. holder generally will not be
subject to United States federal income tax or withholding tax on the sale or
exchange of common stock unless any of the conditions described above under
"Non-United States Holder -- Sale, Exchange or Redemption of the Notes" is
satisfied.
Dividends. Distributions by us with respect to the common stock that are
treated as dividends paid, or deemed paid, as described above under "United
States Holders -- Dividends on Common Stock" to a non-U.S. holder, excluding
dividends that are effectively connected with the conduct of a trade or business
in the United States by such holder and are taxable as described below, will be
subject to United States federal withholding tax at a 30% rate, or lower rate
provided under any applicable income tax treaty. Except to the extent that an
applicable tax treaty otherwise provides, a non-U.S. holder generally will be
taxed in the same manner as a holder that is a U.S. person on dividends paid, or
deemed paid, that are effectively connected with the conduct of a trade or
business in the United States by the non-U.S. holder. If such non-U.S. holder is
a foreign corporation, it may also be subject to a United States branch profits
tax on such effectively connected income at a 30% rate or such lower rate as may
be specified by an applicable income tax treaty. Even though such effectively
connected dividends are subject to income tax, and may be subject to the branch
profits tax, they will not be subject to U.S. withholding tax if the holder
delivers Internal Revenue Service Form 4224, or successor form, to the payor.
Amended Treasury Regulations, which are generally effective for payments
made after December 31, 2000, provide alternative methods for satisfying the
certification requirements described immediately above.
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<PAGE> 34
Death of a Non-United States Holder. A note held by an individual who is
not a citizen or resident of the United States at the time of death will not be
included in the decedent's gross estate for United States estate tax purposes,
provided that such holder or beneficial owner did not at the time of death
actually or constructively own 10% or more of the combined voting power of all
classes of our stock entitled to vote, and provided that, at the time of death,
payments with respect to such note would not have been effectively connected
with the conduct by such non-U.S. holder of a trade or business within the
United States.
Common stock actually or beneficially held by an individual who is not a
U.S. person at the time of his or her death, or previously transferred by the
non-U.S. person subject to certain retained rights or powers, will be subject to
United States federal estate tax unless otherwise provided by an applicable
estate tax treaty.
Information Reporting and Backup Withholding Tax. United States information
reporting requirements and backup withholding tax will not apply to payments on
a note to a non-U.S. holder if the statement described in "Non-United States
Holders -- Payment of Interest" is duly provided by such holder, provided that
the payor does not have actual knowledge that the holder is a U.S. person.
Information reporting requirements and backup withholding tax generally
will not apply to any payment of the proceeds of the sale of a note, or any
payment of the proceeds of the sale of common stock effected outside the United
States by a foreign office of a broker. However, if the broker:
- is a United States person,
- is a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United
States or
- is a controlled foreign corporation for United States federal income tax
purposes,
payment of the proceeds of any such sale effected outside the United States by a
foreign office of such broker will not be subject to backup withholding tax, but
will be subject to information reporting requirements unless such broker has
documentary evidence in its records that the beneficial owner is a non-U.S.
holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or through
the United States office of a broker is subject to information reporting and
backup withholding requirements, unless the beneficial owner of the note
provides the statement described in "Non-United States Holders -- Payment of
Interest" or otherwise establishes an exemption. Under Treasury regulations,
dividend payments will be subject to information reporting and backup
withholding unless applicable certification requirements are satisfied.
United States Real Property Holding Corporations. The discussion of the
United States taxation of non-U.S. holders of notes and common stock assumes
that we are at no time a United States real property holding corporation within
the meaning of the Internal Revenue Code. Under present law, we would not be a
United States real property holding corporation so long as the fair market value
of our United States real property interests is less than 50% of the sum of the
fair market value of our United States real property interests, our interests in
real property located outside the United States, and our other assets which are
used or held or used in a trade or business. We believe that we are not a United
States real property holding corporation and do not expect to become such a
corporation.
If we become a United States real property holding corporation, gain
recognized by non-U.S. holders on a disposition of notes or common stock would
be subject to United States federal income tax in certain circumstances.
The preceding discussion of material United States federal income tax
considerations is for general information only and is not tax advice.
Accordingly, each prospective holder should consult its own tax adviser as to
particular tax consequences to it of purchasing, holding and disposing of the
notes and the common stock, including the applicability and effect of any state,
local or foreign tax laws, and of any proposed changes in applicable laws.
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<PAGE> 35
SELLING SECURITYHOLDERS
The notes were originally purchased from us on December 10, 1999. The
initial purchasers of the notes have advised us that the notes were resold in
transactions exempt from the registration requirements of the Securities Act to
qualified institutional buyers (within the meaning of Rule 144A under the
Securities Act of 1933). These subsequent purchasers, or their transferees,
pledgees, donees or successors, may from time to time offer and sell any or all
of the notes and/or shares of common stock issuable upon conversion of the notes
pursuant to this prospectus.
The selling securityholders listed below provided us the information
contained in the following table with respect to themselves and the respective
principal amount of notes and common stock beneficially owned by them and which
may be sold by each of them under this prospectus. We have not independently
verified this information.
The selling securityholders may choose to sell notes and/or shares of
common stock issuable upon conversion of the notes from time to time. See "Plan
of Distribution."
The following table sets forth as of April 6, 2000:
- the name of each selling securityholder who has provided us with notice
pursuant to the Registration Rights Agreement of their intent to sell or
otherwise dispose of notes and/or shares of common stock issuable upon
conversion of the notes pursuant to the registration statement,
- the principal amount of notes and the number of shares of common stock
issuable upon conversion of the notes which they may sell from time to
time pursuant to the registration statement, and
- the percentage of outstanding notes and common stock beneficially owned
by each selling securityholder.
<TABLE>
<CAPTION>
SHARES OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK
OF NOTES THAT NOTES THAT MAY BE
NAME OF SELLING SECURITYHOLDER(1) MAY BE SOLD OUTSTANDING SOLD(2)
- --------------------------------- ---------------- ------------- ------------
<S> <C> <C> <C>
AIG/National Union Fire Insurance................... $ 865,000 * 11,382
Allstate Insurance Co............................... 2,000,000 * 26,318
Associated Electric & Gas Insurance Services
Limited........................................... 650,000 * 8,553
Bank of America Pension Plan........................ 500,000 * 6,579
Bankers Trust Trustee for Daimler Chrysler Corp.
Emp. #1 Pension Plan Dtd. 4/1/89.................. 1,810,000 * 23,818
BBT Fund, L.P....................................... 3,150,000 * 41,452
BNP Arbitrage SNC................................... 6,500,000 1.9% 85,536
Boilermaker-Blacksmith Pension Trust................ 955,000 * 12,567
CALAMOS Convertible Fund -- CALAMOS Investment
Trust............................................. 1,125,000 * 14,804
CALAMOS Convertible Portfolio -- CALAMOS Advisors
Trust............................................. 20,000 * 263
CALAMOS Global Growth and Income Fund -- CALAMOS
Investment Trust.................................. 120,000 * 1,579
CALAMOS Growth and Income Fund -- CALAMOS Investment
Trust............................................. 725,000 * 9,540
Champion International Corporation Master Retirement
Trust............................................. 825,000 * 10,856
City of Knoxville Pension System.................... 290,000 * 3,816
David Lipscomb University General Endowment......... 90,000 * 1,184
Deephaven Domestic Convertible Trading Ltd.......... 2,500,000 * 32,898
Delaware PERS....................................... 1,365,000 * 17,962
Delta Airlines Master Trust......................... 1,800,000 * 23,686
</TABLE>
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<PAGE> 36
<TABLE>
<CAPTION>
SHARES OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK
OF NOTES THAT NOTES THAT MAY BE
NAME OF SELLING SECURITYHOLDER(1) MAY BE SOLD OUTSTANDING SOLD(2)
- --------------------------------- ---------------- ------------- ------------
<S> <C> <C> <C>
Deutsche Bank Securities Inc. ...................... 86,175,000 24.6% 1,134,011
Evergreen Income & Growth Fund...................... 2,500,000 * 32,898
EQAT Alliance Balanced.............................. 1,525,000 * 20,068
EQAT Alliance Growth and Income Account............. 2,245,000 * 29,542
EQAT Alliance Growth Investors...................... 1,270,000 * 16,712
EQAT Alliance Separate Account -- Balanced.......... 95,000 * 1,250
EQAT Alliance Separate Account -- Convertibles...... 1,565,000 * 20,594
Fortis Series Fund, Inc. -- Growth and Income
Series............................................ 850,000 * 11,185
Franklin & Marshall College......................... 135,000 * 1,776
Goldman, Sachs & Co. ............................... 797,000 * 10,488
Granville Capital Corporation....................... 7,500,000 2.1% 98,695
Greek Catholic Union II............................. 12,000 * 157
Highbridge International LLC........................ 21,675,000 6.2% 285,230
ICI American Holdings Trust......................... 650,000 * 8,553
Island Holdings..................................... 52,000 * 684
Janus Capital Corporation........................... 61,109,000 17.5% 804,157
Jefferies & Company................................. 513,000 * 6,750
KBC Financial Products USA.......................... 3,000,000 * 39,478
Kentfield Trading Ltd............................... 7,925,000 2.26% 104,288
Kettering Medical Center Funded Depreciation
Account........................................... 60,000 * 789
Knoxville Utilities Board Retirement System......... 190,000 * 2,500
Lipper Convertibles, L.P. .......................... 5,500,000 1.6% 72,376
Lipper Offshore Convertibles, L.P. ................. 1,000,000 * 13,159
Marsico Growth & Income Fund........................ 9,225,000 2.6% 121,395
Memphis Light, Gas and Water Retirement Fund........ 720,000 * 9,474
Merrill Lynch Convertible Fund, Inc. ............... 250,000 * 3,289
Morgan Stanley Dean Witter Convertible Securities
Trust............................................. 2,000,000 * 26,318
Museum of Fine Arts, Boston......................... 55,000 * 723
Nalco Chemical Company.............................. 350,000 * 4,605
Nations Marsico Annuity Growth & Income............. 555,000 * 7,303
Nations Marsico Growth & Income Fund................ 4,220,000 1.2% 55,532
New Hampshire Retirement System..................... 322,000 * 4,237
New York Life Insurance and Annuity Company......... 1,200,000 * 15,791
New York Life Insurance Company..................... 9,800,000 2.8% 128,962
Nomura Securities International, Inc................ 3,500,000 1.0% 46,057
Paloma Securities LLC............................... 1,000,000 * 13,159
Paloma Strategic Securities Limited................. 1,000,000 * 13,159
Parker-Hannifin Corporation......................... 65,000 * 855
Penn Treaty Network America Insurance Co............ 130,000 * 1,710
PIMCO Convertible Bond Fund......................... 2,500,000 * 32,898
Port Authority of Allegheny County Retirement and
Disability Allowance Plan for the Employees
Represented by Local 85 of the Amalgamated Transit
Union............................................. 1,005,000 * 13,225
ProMutual........................................... 200,000 * 2,631
Putnam Asset Allocation Funds -- Balanced
Portfolio......................................... 300,000 * 3,947
Putnam Asset Allocation Funds -- Conservative
Portfolio......................................... 200,000 * 2,631
Putnam Balanced Retirement Fund..................... 140,000 * 1,842
Putnam Convertible Income -- Growth Trust........... 3,613,000 1.0% 47,544
Putnam Convertible Opportunities and Income Trust... 55,000 * 723
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
SHARES OF
PRINCIPAL AMOUNT PERCENTAGE OF COMMON STOCK
OF NOTES THAT NOTES THAT MAY BE
NAME OF SELLING SECURITYHOLDER(1) MAY BE SOLD OUTSTANDING SOLD(2)
- --------------------------------- ---------------- ------------- ------------
<S> <C> <C> <C>
Radiant Capital LLC................................. 100,000 * 1,315
Retail Clerks Pension Trust......................... 1,000,000 * 13,159
Scudder Dividend and Growth Fund.................... 173,000 * 2,276
Southern Farm Bureau Life Insurance -- FRIC......... 600,000 * 7,895
SPT................................................. 795,000 * 10,461
Starvest Combined Portfolio......................... 1,105,000 * 14,541
State of Oregon Equity.............................. 5,500,000 1.6% 72,376
State Street Bank Custodian for GE Pension Trust.... 955,000 * 12,567
The Dow Chemical Company Employees' Retirement
Plan.............................................. 1,875,000 * 24,673
The Fondren Foundation.............................. 60,000 * 789
The Frist Foundation................................ 220,000 * 2,895
The TCW Group, Inc. ................................ 70,000 * 921
Unifi, Inc. Profit Sharing Plan and Trust........... 95,000 * 1,250
United Food and Commercial Workers Local 1262 and
Employers Pension Fund............................ 395,000 * 5,197
University of Rochester............................. 51,000 * 671
Value Line Convertible Fund, Inc. .................. 500,000 * 6,579
Van Kampen Harbor Fund.............................. 2,524,000 * 33,214
Van Kampen Convertible Securities Fund.............. 476,000 * 6,263
Van Waters & Rogers, Inc. Retirement Plan (f.k.a.
Univar Corporation)............................... 280,000 * 3,684
Zeneca Holdings Trust............................... 625,000 * 8,224
Other holders of notes or future transferees of such
holders(3)........................................ 58,563,000 16.7% 770,697
------------ ---- ---------
Total..................................... $350,000,000 100% 4,605,790
============ ==== =========
</TABLE>
- ---------------
* Indicates less than one percent.
(1) Each of the named securityholders beneficially owns less than one percent of
our outstanding common stock. Other holders of notes collectively
beneficially own 1.2% of our outstanding common stock. No holder may offer
notes or shares of common stock pursuant to this prospectus until such
holder is named as a selling securityholder. Information about other selling
securityholders will be set forth in prospectus supplements, if required.
(2) Assumes full conversion of the notes held by such holder at the rate of
13.1594 shares per each $1,000 in principal amount of the notes.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, if required.
No selling securityholder nor any of its affiliates has held any position
or office with, has been employed by or otherwise has had any material
relationship with us or our affiliates, during the three years prior to the date
of this prospectus.
A selling securityholder may offer all or some portion of the notes and
shares of our common stock issuable upon conversion of the notes. Accordingly,
no estimate can be given as to the amount or percentage of notes or common stock
that will be held by the selling securityholders upon termination of sales
pursuant to this prospectus. In addition, the selling securityholders identified
in the table above may have sold, transferred or disposed of all or a portion of
their notes since the date on which they provided the information regarding
their holdings in transactions exempt from the registration requirements of the
Securities Act. Information concerning the selling securityholders may change
from time to time and any such changed information will be set forth in
supplements or amendments to this prospectus if and when necessary.
37
<PAGE> 38
PLAN OF DISTRIBUTION
We are registering the notes and the shares of common stock issuable upon
conversion of the notes to permit public secondary trading of such securities by
the holders from time to time after the date of this prospectus. We have agreed,
among other things, to bear all expenses (other than underwriting discounts and
selling commissions) in connection with the registration and sale of the notes
and the shares of common stock issuable upon conversion of the notes covered by
this prospectus.
We will not receive any of the proceeds from the offering of the notes or
the shares of common stock issuable upon conversion of the notes by the selling
securityholders. The notes and shares of common stock issuable upon conversion
of the notes may be sold from time to time:
- directly by any selling securityholder to one or more purchasers,
- to or through underwriters, brokers or dealers,
- through agents on a best-efforts basis or otherwise, or
- through a combination of such methods of sale.
If notes or shares of common stock issuable upon conversion of the notes
are sold through underwriters, brokers or dealers, the selling securityholder
will be responsible for underwriting discounts or commissions or agents'
commissions.
The notes or shares of common stock issuable upon conversion of the notes
may be sold:
- in one or more transactions at a fixed price or prices, which may be
changed,
- at prevailing market prices at the time of sale or at prices related to
such prevailing prices,
- at varying prices determined at the time of sale, or
- at negotiated prices.
Such sales may be effected in transactions (which may involve crosses or
block transactions):
- on any national securities exchange or quotation service on which the
notes or shares of common stock may be listed or quoted at the time of
sale,
- in the over-the-counter market,
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market, or
- through the writing of options.
In connection with sales of the notes or shares of common stock issuable
upon conversion of the notes or otherwise, any selling securityholder may:
- enter into hedging transactions with brokers, dealers or others, which
may in turn engage in short sales of the notes or shares of common stock
issuable upon conversion of the notes in the course of hedging the
positions they assume,
- sell short and deliver notes or shares of common stock issuable upon
conversion of the notes to close out such short positions, or
- loan or pledge notes or shares of common stock issuable upon conversion
of the notes to brokers, dealers or others that in turn may sell such
securities.
A selling securityholder may pledge or grant a security interest in some or
all of the notes or shares of common stock issuable upon conversion of the notes
owned by it, and if it defaults in the performance of its secured obligations,
the pledgees or secured parties may offer and sell the notes or shares of common
stock issuable upon conversion of the notes from time to time pursuant to this
prospectus. The selling
38
<PAGE> 39
securityholders may also transfer and donate shares in other circumstances in
which case the transferees, donees, pledgees or other successors in interest
will be the selling securityholders for purposes of this prospectus.
The selling securityholders may sell short common stock and may deliver
this prospectus in connection with such short sales and use the shares covered
by this prospectus to cover such short sales.
The outstanding common stock is publicly traded on the Nasdaq National
Market. The initial purchasers of the notes have advised us that certain for the
initial purchasers are making and currently intend to continue making a market
in the notes; however, they are not obligated to do so and any such
market-making may be discontinued at any time without notice, in the sole
discretion of the initial purchasers. We do not intend to apply for listing of
the notes on the Nasdaq National Market or any securities exchange. Accordingly,
we cannot assure that any trading market will develop for the notes or have any
liquidity.
The selling securityholders and any brokers, dealers, agents or
underwriters that participate with the selling securityholders in the
distribution of the notes or the shares of common stock issuable upon conversion
of the notes may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by such brokers,
dealers, agents or underwriters and any profits realized by the selling
securityholders on the resales of the notes or the shares may be deemed to be
underwriting commissions or discounts under the Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144, Rule 144A or
such other available exemption rather than pursuant to this prospectus. There is
no assurance that any selling securityholder will sell any or all of the notes
or shares of common stock issuable upon conversion of the notes described
herein, and any selling securityholder may transfer, devise or gift such
securities by other means not described herein.
We agreed to indemnify and hold the initial purchasers of the notes
harmless against certain liabilities under the Securities Act. The Registration
Rights Agreement provides for us and the selling securityholders to indemnify
each other against certain liabilities arising under the Securities Act.
We agreed pursuant to the Registration Rights Agreement to use our best
efforts to cause the registration statement to which this prospectus relates to
become effective and to keep the registration statement effective during the
periods described in "Description of the Notes -- Registration Rights."
INCORPORATION BY REFERENCE
The SEC 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 that information. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this
offering is completed.
- Our annual report on Form 10-K for the year ended December 31, 1999;
- Our current reports on Form 8-K filed January 21 and March 14, 2000 (as
amended by Form 8-K/A filed March 17, 2000); and
- The description of our common stock contained in our registration
statement on Form 8-A (File No. 0-28030), as filed with the SEC on March
20, 1996.
Any statement contained in the 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 prospectus to the extent that a statement
contained herein or in any applicable prospectus supplement or any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein
39
<PAGE> 40
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 prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any document we file 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. Our SEC
filings are also available to the public from our Web site at www.i2.com or at
the SEC's Web site at www.sec.gov. However, the information on our Web site does
not constitute a part of this prospectus.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address. In addition, we will provide without
charge to each person, including any beneficial owner, to whom a copy of this
prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the documents incorporated by reference in this
prospectus, other than exhibits and schedules thereto, unless such exhibits or
schedules are specifically incorporated by reference into the information that
this prospectus incorporates. Written or oral requests for copies of these
documents should be directed to:
Investor Relations
One i2 Place
11701 Luna Road
Dallas, Texas 75234
Telephone: (469) 357-1000
You should rely only on the information provided in this document or
incorporated in this document by reference. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this document, including any information incorporated herein by
reference, is accurate as of any date other than that on the front of the
document.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by Brobeck, Phleger & Harrison LLP, Austin, Texas. Certain partners
of Brobeck, Phleger & Harrison LLP own in the aggregate approximately 11,000
shares of our common stock.
EXPERTS
The consolidated financial statements included in our Report on Form 10-K
dated December 31, 1999, incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
40
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT IS
IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT
IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS
IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER
THAT DATE.
<TABLE>
<S> <C> <C>
[i2 TECHNOLOGIES,
INC. LOGO] i2 TECHNOLOGIES, INC.
</TABLE>
$350,000,000
5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006
AND
4,605,790 SHARES OF COMMON STOCK
--------------------
PROSPECTUS
--------------------
APRIL 6, 2000
- --------------------------------------------------------------------------------
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