10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2007

or

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

For the transition period from              to             

Commission file number 0-28030

i2 Technologies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	75-2294945
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One i2 Place 11701 Luna Road Dallas, Texas	75234 (Zip code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (469) 357-1000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.00025 par value

Preferred Share Purchase Rights

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer  ¨	Accelerated filer  x
Non-accelerated filer (Do not check if a smaller reporting company)  ¨	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the common equity held by non-affiliates (affiliates being, for these purposes only, directors, executive officers and holders of more than 5% of the registrant’s Common Stock) on June 29, 2007, was $257.7 million.

As of March 11, 2008, the registrant had approximately 21,452,855 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Selected designated portions of the registrant’s definitive proxy statement to be filed on or before April 29, 2008 in connection with the registrant’s 2008 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report.

i2 TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	01
Item 1A.	Risk Factors	09
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	21
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations….	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure…	48
Item 9A.	Controls and Procedures	49
Item 9B.	Other Information	49
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accounting Fees and Services	50
PART IV
Item 15.	Exhibits and Financial Statement Schedules	51
SIGNATURES

The disclosures set forth in this report are qualified by Item 1A, Risk Factors, and by the section captioned “Forward-Looking Statements” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as other cautionary statements set forth elsewhere in this report.

References in this report to the terms “optimal” and “optimization” and words to that effect are not necessarily intended to connote the mathematically optimal solution, but may connote near-optimal solutions, which reflect practical considerations such as customer requirements as to response time, precision of the results and other commercial factors.

All references to common stock and per share amounts for periods prior to February 17, 2005 have been retroactively restated to reflect the 1-for-25 reverse stock split we implemented on February 16, 2005. See Item 5, Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

ITEM 1.    BUSINESS

Nature of Operations.    We are a provider of supply chain management solutions, consisting of various software and service offerings. In addition to application software, we offer hosted software solutions, such as business optimization and technical consulting, managed services, training, solution maintenance, software upgrades and development. We operate our business in one business segment. Supply chain management is the set of processes, technology and expertise involved in managing supply, demand and fulfillment throughout divisions within a company and with its customers, suppliers and partners. The goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, improving operational visibility, increasing operating velocity and integrating planning and execution. Our offerings are designed to help customers better achieve the following critical business objectives:

• Visibility – a clear and unobstructed view up and down the supply chain

• Planning – supply chain optimization to match supply and demand considering system-wide constraints

• Collaboration – interoperability with supply chain partners and elimination of functional silos

• Control – management of data and business processes across the extended supply chain

Globally, we have approximately 500 customers in a variety of industries including:

• Technology

• Computer & Electronics

• Telecommunications Equipment and Services

• Semiconductor

• Consumer Electronics

• Contract Manufacturers

• Automotive, Aerospace and Industrial

• Automotive Original Equipment Manufacturers

• Suppliers

• Aerospace and Defense

• Industrial Manufacturers

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• Process Industries

• Metals

• Consumer Industries & Retail

• Retailers

• Consumer Packaged Goods

• Soft Goods (Textiles/Apparel & Footwear)

• Consumer Durables

No individual customer accounted for more than 10% of our total revenues during 2007, 2006 or 2005.

i2 was founded in 1988 and incorporated in Delaware in 1989. Our executive offices are located at One i2 Place, 11701 Luna Road, Dallas, Texas 75234, and our telephone number is (469) 357-1000.

Industry Background

Today’s competitive business environment is driving companies to seek ways to make their businesses more agile and offer greater operating efficiency while improving flexibility and responsiveness to continuously changing market conditions. Many companies are facing higher competitive standards as the economy becomes more consumer-driven. At the same time, globalization is driving an on-going pressure to reduce costs. Consumers are increasingly more specific about when and where they want a product, what they want that product to be and do, and the price they will pay for a product. These demands impact the extended supply chain, leading businesses to seek improvements in asset utilization, lower the cost of goods, reduce inventories, shorten lead times and reduce the cost of fulfilling orders. Furthermore, a company’s extended supply chain may span multiple continents, requiring suppliers in one part of the world to collaborate with a plant in another to serve customers in yet a third location. These forces are prompting companies to collaborate with a broad range of suppliers and customers to improve visibility and efficiency across multi-enterprise supply chains.

We believe that traditional enterprise resource planning (ERP) systems fail to provide both the forward visibility across divisions or enterprises and the high-speed decision-support capabilities that we believe are necessary to quickly plan and execute decisions. To increase competitiveness, we believe companies need solutions that can be integrated with their existing systems to provide tools for managing the variability in their supply chains, allowing them to monitor events throughout the life of a product, from the point of order, through manufacturing and distribution and until it reaches a customer’s hands. Companies need visibility into order, inventory and transportation systems so they can evaluate tradeoffs for fast and accurate decision-making and execute their plans across the critical processes in their supply chains.

The growth of the internet and the proliferation of software applications have accelerated many companies’ efforts to increase efficiencies by leveraging information technology based on open standards. We believe this has prompted demands for a dynamic, open and integrated environment among customers, suppliers and manufacturers. In response to these evolving market forces, many companies have sought to re-engineer their business processes to reduce manufacturing cycle times, shift from mass production to order-driven manufacturing, increase the use of outsourcing and share information more readily with vendors and customers.

Integration and business process management have become an increasingly important issue for enterprises to lower costs and realize value from their diverse environment of applications and distributed systems. Customers seek integration at several levels — business process (design, execution and monitoring), applications, user interface, data and technology. A wide variety of companies are pursuing the integration market opportunity, including ERP companies, leading Independent Software Vendors (ISVs), Enterprise Application Integration (EAI) vendors, Systems Integrators (SIs) and other information technology (IT) services

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organizations. i2 has demonstrated a complete solution to the various requirements sought by customers by providing a single design, development and integration framework utilizing service oriented architecture — the i2 Agile Business Process Platform.

Leading software and technology companies are developing offshore (global) workforces, in part to take advantage of the technical talent and lower costs of human resources in India, China and other locations. This has led many companies to initiate their own offshore operations or outsource some development, implementation and operations activities to Offshore IT Services (OIS) firms.

Development of the i2 Solutions

Advanced Planning and Scheduling.    We have offered a set of supply chain management solutions since our company was founded nearly 20 years ago. Our founders, Sanjiv Sidhu and Ken Sharma, sought to expand enterprise application software beyond traditional ERP systems, which were basically transaction accounting and processing systems that did not consider production constraints or offer more sophisticated monitoring, decision-support and execution capabilities. We took the first step beyond ERP with the development of an advanced planning and scheduling application that took into account actual constraints to improve the flow of materials within a factory. That solution, i2 Factory Planner, has assisted many of our customers in improving the efficiency and profitability of their factories while reducing their materials and inventory costs.

Supply Chain Planning/Supply Chain Management.    Our applications evolved into solutions for supply chain planning that encompassed constraint-based planning and scheduling for multiple factories, distribution centers and warehouses. We acquired and developed technologies that help companies manage demand, design distribution and supply networks, and plan and manage fulfillment. The integration of those solutions with our factory and supply planning solutions made us a leader in enterprise solutions for supply chain management.

Supplier Relationship Management.    We continued to expand our product base by applying our solutions for the extended supply chain to the supplier relationship processes and functions. To facilitate cost-effective sourcing and product design, we acquired and developed technologies that help customers to more efficiently source, negotiate the pricing of and procure materials and components from suppliers, thereby enabling them to make design decisions while cognizant of the effect on the supply chain of existing products and the total product portfolio.

Distributed Fulfillment and Revenue Management.    Our distributed order execution technology has enabled us to develop integrated, closed-loop planning and execution solutions. These solutions are designed to help companies support an “order from anywhere, fulfill from anywhere, return to anywhere” strategy to meet the demands of dynamic multi-channel selling models. We continue to invest in this technology, which provides a scalable and flexible framework for creating new solutions and is used by our customers across multiple entities for transaction processing, visibility and event management capabilities. We have also invested in solutions that help customers optimize merchandising, revenue and pricing.

Supply and Demand Synchronization.    i2’s new-generation supply chain management solutions focus on the multi-echelon value chain, encompassing the customer’s customer and the supplier’s supplier. Our new-generation solutions are designed to enable businesses to manage and tune their supply chains simultaneously so that they can quickly change parameters to meet their dynamic business needs. These solutions are built on the i2 Agile Business Process Platform, a unique service-oriented architecture (SOA) that includes a layer of technology services for integration and data management, user interface development and a visual business process workflow engine. The platform is business process management (BPM) compliant and has been designed to interoperate with legacy, ERP and other enterprise architectures.

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Business Content Library.    Our Business Content Library (BCL) is a collection of i2 workflows and solutions that have incorporated best practices for business processes and can be accessed via the i2 Agile Business Process Platform. These workflows enable systems and individuals to interact and collaborate to do a piece of standardized work. The workflows can be implemented on top of a company’s pre-existing IT systems and applications.

Products

Our solutions — bundles of software products and technology services — are designed to help customers address various supply chain problems and opportunities, including:

• Linking certain aspects of planning and decision-making to execution of such plans and the monitoring of changing conditions across the supply chain

• Improving current business processes, return on assets and profitability

• Reduction of risks, cycle-times and cash needed in operations

• Increasing market share

• Improving customer service levels and delivering on commitments to customers

• Creating an environment for continuous process improvement

• Enhancing competitive advantage

• Enhancing time to value for process redesign and acquisition integration

In the old generation of supply chain management, process had to adapt to the software. In the new generation of supply chain management, the software adapts to the process. We offer new-generation supply chain management solutions that enable companies to take control of their extended supply chain horizontally with their trading partners and vertically within their enterprise. Our primary products are focused on optimizing the following business processes: manufacturing and planning; transportation and distribution management; merchandising, assortment and allocation planning; execution, collaboration and visibility; supplier relationship management; as well as data management and business analytics. Our products are complemented by our business process consulting, implementation, outsourcing, development and related services.

Manufacturing and Planning:    i2 solutions for manufacturing and planning help businesses coordinate the production and distribution of goods and materials throughout the supply chain to final delivery to the customer. They also help businesses analyze their revenues with merchandising, planning and pricing tools.

Solutions for supply planning are designed to provide multi-enterprise visibility, collaboration, decision-support and execution capabilities. Using these tools, a business may estimate future demand for its products to help planners more accurately estimate future supply needs. As a result, businesses can make better decisions about how much of what products to make, when and where to make them, and what parts to utilize to make those products. Solutions for supply planning include i2 Factory Planner, i2 Supply Chain Planner, i2 Inventory Optimization and various scheduling products.

Solutions for demand management and retail management provide tools designed to forecast and continuously manage demand, plan-merchandising strategies, manage markdowns and promotions pricing, and optimize price quoting. Using these products, companies can begin to optimize their revenues by selling products at prices set by analytic products. Demand management products include i2 Demand Manager, i2 Markdown Optimizer, i2 Merchandise Planner, i2 Inventory Optimization, i2 Sales and Operations Planning, i2 Merchandise Financial Planning, i2 Buying and Assortment Management, and i2 Allocation and Replenishment.

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Transportation and Distribution Management:    Solutions for transportation and distribution management help businesses optimize the flow of goods between suppliers, enterprise supply chain locations and customers. These tools provide integrated products for planning and executing transportation and distribution activities, as well as tools for strategic supply chain design and transportation modeling. Using i2 solutions, a business can procure, plan, execute and monitor freight movements across multiple modes, borders and enterprises. As a result, businesses can make better decisions about where and how to ship products, reducing their transportation costs while executing supply chain plans and achieving customer service objectives. Transportation and distribution management products include i2 Supply Chain Strategist, i2 Transportation Bid Collaboration, i2 Transportation Planner, i2 Transportation Modeler, i2 Transportation Manager and i2 New-Generation Transportation.

Execution, Collaboration and Visibility:    Solutions to optimize plan execution and collaboration help businesses integrate the planning and execution processes, creating a closed-loop environment. These solutions provide tools designed to stage inventory, plan replenishment, manage orders and provide visibility to lower fulfillment costs, improve on-time delivery performance and enhance customer satisfaction. The i2 Collaborative Supply Execution solution is designed to provide inventory and plan collaboration, transaction processing, visibility, event management, integration and workflow capabilities. Other solutions in this category include i2 Supply Chain Visibility, i2 Customer Order Management, i2 Collaborative Replenishment and i2 Configurator.

Supplier Relationship Management:    Supplier relationship management solutions help companies and their suppliers collaborate on sourcing and procurement for supply management. This solution is designed to bridge product development, sourcing, supply planning and procurement across the supply chain, providing the ability to create, execute and sustain global sourcing strategies. Sourcing solutions provide decision-support and optimization tools that are designed to help companies improve decision-making on supplies and the parts to use in products. During product development, these products can help to optimize designs by considering sourcing and supply chain constraints, as well as allowing design collaboration when outsourcing manufacturing or custom parts. During procurement, supplier relationship management solutions help companies to define sourcing strategies to reduce supply risks and costs, negotiate terms and streamline the requisitioning and buying of materials. Sourcing products include i2 Strategic Sourcing, i2 Product Sourcing and i2 Negotiate.

Data Management:    We offer a data management solution that is designed to provide customers with the ability to manage data from multiple sources including legacy, ERP and other applications. i2 Master Data Management can be deployed: to create and maintain application-specific data; to consolidate data from multiple disparate sources; to cleanse, transform, synchronize and validate data; as well as to filter unwanted data. Other data management products include i2 MDM Enterprise, i2 Product Management and i2 Vendor Management.

On-Demand and Software as a Service:    i2 offers on-demand and software as a service (SaaS) solutions. With i2 Supply Chain Operations Management, a variety of on-demand services are provided to enable customers to better manage demand sensing, execution, order fulfillment and key account management. i2 FreightMatrix uses private branded internet marketplaces in which companies gain access to i2’s broad logistics footprint in a secure private-labeled, shared-hosting environment, allowing companies to reduce costs, increase efficiencies and manage their supply chain, or their customer’s supply chain, online.

Product Development

We focus our ongoing product development efforts on meeting the requests of, and delivering on our commitments to, our current customers, enhancing our solutions and the underlying technology across our products, and developing or enhancing products that will enable us to enter new markets. In order to address customer recommendations, we have developed a User Enhancement Voting Process in collaboration with the i2 User Group. This process allows customers to provide input so that our solutions evolve to meet our customers’ business challenges and opportunities. In addition, we invest in solutions that help us more fully complete our solution offerings and enable cross-product workflows. We have continued to invest in products and technologies that we anticipate will be important and differentiated in the future.

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Our Solutions Operations activities are primarily conducted in North America and India. Most product management and product marketing employees are based in North America, but many development and services teams are based in India. The India location offers many benefits to i2, including centralization of development efforts and cost structure advantages. For the years ended December 31, 2007, 2006 and 2005, our research and development expense totaled approximately $33.5 million, $35.2 million and $37.3 million, respectively.

Services and Maintenance

Our customer service and support program includes software maintenance, the delivery of functional enhancements and updates, and around-the-clock availability for high severity issues.

We maintain a technical support team that operates through our service and support centers located in North America, Greater Asia Pacific, Europe and Africa. Our customer service and support activities consist of the following:

Consulting Services.    We offer our customers both on-site and off-site consulting services for assisting in the implementation of our products and services and integration with the customers’ existing systems. In addition, we offer process and change management-consulting support to key customers. We and our customers also use third-party consulting firms.

Development Services.    Customers may also contract with us for services to provide custom development of our applications. In some cases, the modifications or additions to the software may be incorporated into future releases of our products.

Managed Services.    We offer our customers outsourced supply chain management planning services providing reports, analysis and recommendations in the on-going operation of business processes. We offer hosted software services on a subscription basis.

Training.    We offer education and training programs for our customers and third-party implementation providers with classes offered at our offices or at customer locations. We also offer web-based and self-paced learning programs. These classes focus on the fundamental principles of our software products as well as their implementation and use.

Maintenance and Product Updates.    We provide ongoing support services for our products. Maintenance contracts are typically sold to customers at the time of the initial license and may be renewed for additional periods. Our maintenance agreements with our customers provide the right to receive most product updates and enhancements to the products purchased by the customer, as well as telephone and online support. Our support services are packaged into three tiers (silver, gold and platinum), which offer customers the ability to choose the level of service they desire.

Sales and Marketing

We sell our software and services through a direct customer-facing organization that is augmented by other sales channels, including systems consulting and integration firms and other industry-related partners. Our direct customer-facing organization consists of account representatives and client managers that are supported by a team of personnel that includes solution and industry specialists.

We currently have joint marketing agreements with software vendors and other industry-related firms such as IBM and Microsoft. Additionally, we have alliances with top global and regional systems consulting and integration, hardware, software, and other relevant services firms including Accenture, IBM Global Services, Infosys and Tata Consulting Services, among others. These joint-marketing agreements and alliances generally provide the vendors with the ability to market our products and access our marketing materials and product

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training. By using these indirect sales channels, we seek to capitalize on the installed base of other companies and obtain favorable product recommendations from the business partners, thereby increasing the market coverage of our products.

In addition, we have a partner program with Value Added Resellers (VARs) to serve mid-market customers, provide increased coverage around the world and expand into new industries.

Competition

The markets in which we operate are highly competitive. Our competitors are diverse and offer a variety of solutions targeting various segments of the extended supply chain as well as the enterprise as a whole. Some competitors compete with suites of applications, while most offer solutions designed specifically to target particular functions or industries. We face strong competition across the entire competitive landscape, including competition on breadth and quality of product and service offerings, pricing, delivery times and after-sales support.

We believe our principal competitors are as follows:

• ERP Software Vendors.    These include companies such as Oracle and SAP, which have added or are attempting to add capabilities for supply chain planning or collaboration to their transaction system products. In addition, both companies are engaged in a multi-year effort to re-deploy their solutions on a Service Oriented Architecture platform.

• Other Software Vendors.    These include companies such as Adexa which compete principally with our production, logistics and fulfillment optimization products; companies such as Red Prairie, Manhattan Associates and JDA Software which compete with our transportation and distribution management products; companies such as JDA Software which compete primarily with our retail applications; and companies such as Manhattan Associates and Kinaxis which compete principally with our fulfillment and certain of our demand optimization products.

• Custom and Offshore Development.    Increasingly we compete with internal development efforts by corporate IT departments. Additionally, we also compete with independent developers of enterprise application software such as Infosys, Satyam, Wipro and other entities in countries with relatively low wage structures.

Proprietary Rights and Licenses

We regard our trademarks, copyrights, patents, trade secrets, technology and other proprietary rights as critical to our business. To protect our proprietary rights, we primarily rely on a combination of copyright, patent, trademark and trade secret laws, confidentiality procedures and contractual provisions. We license our software products in object code (machine-readable) format to customers under license agreements and we generally do not sell or otherwise transfer title to our software products to our customers. Our non-exclusive license agreements generally allow the use of our software products solely by the customer for specified purposes without the right to sublicense or transfer our software products.

Trademarks are important to our business as we use them in our marketing and promotional activities as well as with the delivery of our software products. Our registered trademarks include i2, i2 and the i2 logo and PLANET.

We hold over 140 U.S. patents and have more than 155 pending patent applications. These patents predominantly relate to planning, scheduling optimization, demand fulfillment, collaboration, e-commerce and data management and reporting. These patents expire at various times through 2021. We also depend on trade secrets and proprietary know-how for certain unpatented aspects of our business. To protect our proprietary

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information, we enter into confidentiality agreements with our employees, consultants and licensees, and generally control access to and distribution of our proprietary information. We sublicense some software that we license from third parties and incorporate in, or license in conjunction with, our products.

In connection with our efforts to protect our proprietary rights, on September 5, 2006, we announced that we had filed a lawsuit against SAP AG and SAP Americas, Inc. The lawsuit, filed in the United States District Court for the Eastern District of Texas, alleges infringement of seven patents related to supply chain management.

International Operations

We have international offices in Australia, Belgium, Canada, China, Finland, France, Germany, India, Japan, Korea, the Netherlands, Singapore, South Africa, Taiwan and the United Kingdom. Total assets related to our international operations accounted for 35% of our total consolidated assets as of December 31, 2007, 34% of our total consolidated assets as of December 31, 2006 and 37% of our total consolidated assets as of December 31, 2005. International revenue totaled $110.7 million, or 43% of total revenue, in 2007; $120.3 million, or 43% of total revenue, in 2006; and $158.2 million, or 47% of total revenue, in 2005. See Note 14 — Segment Information, International Operations and Customer Concentrations in our Notes to Consolidated Financial Statements.

Employees

At December 31, 2007, we had approximately 1,285 full-time employees. Our future success depends in significant part upon the continued service of our key technical, sales and senior management personnel and our ability to attract, train and retain other highly qualified personnel.

Our employees in Germany are represented by a Works Council. Although there are no formal employee representative bodies in other countries, the employees of certain of our foreign subsidiaries are covered by national, regional or sectoral collective agreements as required by statute or standard local practice.

We have never experienced a work stoppage. We believe employee relations to be satisfactory.

Seasonality

We typically experience lower bookings, revenue and cash collections during the first and third quarters of each year. For additional discussion related to bookings, revenue and cash collections, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Available Information

We make available, free of charge, through our investor relations web site, our reports on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as reasonably practicable after they are filed with the Securities and Exchange Commission (SEC). The address for our investor relations web site is http://www.i2.com/investor.

The information contained on our website is not part of, and is not incorporated in, this or any other report we file with or furnish to the SEC.

In June 2003, we adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to, among others, our Chief Executive Officer and Chief Financial Officer. The full text of the Code of Business Conduct and Ethics is available at our investor relations web site, http://www.i2.com/investor. We intend to disclose any amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to our Chief Executive Officer or Chief Financial Officer on our investor relations web site.

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ITEM 1A.    RISK FACTORS

Any investment in our company will be subject to risks inherent to our business. Before making an investment decision, you should carefully consider the risks described below together with all of the other information included in this report. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties that we are not aware of or focused on or that we currently deem immaterial may also impair our business operations. This report is qualified in its entirety by these risk factors.

If any of the following risks actually occur, they could have a material adverse effect on our business, financial condition, cash flow or results of operations. In that case, the trading price of our securities could decline and you may lose all or part of your investment.

Risks Related To Our Business

Certain Large Stockholders Have Called For the Public Sale of the Company, and the Board of Directors of i2 Has Formed a Strategic Review Committee in Connection With an Ongoing Review of i2’s Management, Operations and Strategy.

On September 13, 2007, Amalgamated Gadget, L.P. (“Amalgamated”), a beneficial owner of approximately 17.7% of our common stock, filed an amendment to its Schedule 13D announcing that it was exercising rights under the terms of our Series B preferred stock to name two persons to our Board of Directors and stating, among other things, that i2 should explore strategic options, including a possible outright sale of i2 or its assets. Michael J. Simmons and David L. Pope were elected to the Board of Directors in September 2007 by the holders of our Series B preferred stock. On October 3, 2007, S.A.C. Capital Advisors, LLC filed a Schedule 13D announcing that it was a beneficial owner of approximately 8.9% of our common stock and stating, among other things, that the value of i2’s assets is not appropriately reflected in the price of our common stock and that the best way to increase stockholder value would be a public sale of i2. On November 1, 2007, the Company announced that, in connection with an ongoing review of i2’s management, operations and strategy which was initiated early this year, the Board of Directors of i2 has formed a Strategic Review Committee comprised of three independent directors to consider and evaluate the merits of the various strategic options available to i2 to enhance stockholder value. Those strategic options may include: changes to our operations; actions or transactions intended to enhance the value or utilization of our existing assets; joint ventures or strategic partnerships; selective acquisitions, dispositions or other capital transactions; and a merger, sale or other extraordinary business transaction involving the Company.

Continued pressure by activist stockholders for the sale of the Company, and/or the Company’s ongoing exploration of strategic options, could create distractions for our management, sales staff and other employees and create uncertainty in existing and potential customers regarding our ability to meet our contractual obligations. Such distractions and uncertainty could lead to the Company incurring significant costs and expenses as well as increased employee turnover and a substantial diversion of management’s time and resources and, accordingly, could harm our business, results of operations, cash flow and financial condition. There can be no assurance as to what strategic option, if any, the Board of Directors will decide to pursue to enhance stockholder value or when such decision will be made. Regardless of the decision of the Board of Directors, there can be no assurance that such decision will enhance stockholder value or be agreed to or supported by all of our stockholders.

Upon a change of control, unless otherwise agreed to by a majority of the holders of outstanding Series preferred stock, we are required to exchange outstanding shares of Series B preferred stock for cash at 110% of face value plus all accrued but unpaid dividends. The exchange amount pursuant to this provision as of December 31, 2007 was approximately $117.3 million. The fixed payment due to the holders of our Series B preferred stock upon a change of control may cause a holder of Series B preferred stock to be in favor of a change of control event at a lower value than would be favored by holders of common stock.

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Additionally, upon a change of control, at the election of the holders, we would be required to repurchase our convertible notes for cash at the higher of (a) 100% of the principal amount plus accrued and unpaid interest or (b) the conversion value of the convertible notes together with a make-whole premium designed to approximate the lost option time value if the event occurs prior to November 15, 2010. At December 31, 2007, the unpaid principal amount was approximately $86.3 million. The conversion value and make whole payment would depend upon the price of i2’s common stock at the time of a change of control and would exceed the principal amount of the convertible notes if the price were greater than $13.45 per share.

Our Financial Results Have Varied And May Continue To Vary Significantly From Quarter To Quarter And We May Fail To Meet Analysts’ And Investors’ Expectations.

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, some of which are outside of our control. Although our revenues are subject to fluctuation, significant portions of our expenses are not variable in the short term, such as our lease and purchase commitments. If we cannot reduce expenses quickly to respond to decreases in revenues, a revenue shortfall is likely to adversely and disproportionately affect our operating results. These factors have caused our operating results to be below the expectations of securities analysts and investors in the past and may do so again in the future.

We Have Historically Experienced Negative Cash Flows. A Failure To Maintain Profitability And Achieve Consistent Positive Cash Flows Would Have A Significant Adverse Effect On Our Business, Impair Our Ability To Support Our Operations And Adversely Affect Our Liquidity.

We experienced negative cash flows during the quarters ended March 31, 2007, September 30, 2006, March 31, 2006 and each of the five years ended December 31, 2005, primarily due to sharp declines in our revenues and our historical inability to reduce our expenses to a level at or below the level of our revenues. A failure to maintain profitability and achieve consistent positive cash flows could impair our ability to support our operations, adversely affect our liquidity and threaten our ability to repay our debts when they come due. Negative cash flows and the adverse market perception associated therewith may negatively affect our ability to sell our products and maintain existing customer relationships, and may adversely affect our ability to obtain additional debt or equity financing on advantageous terms. There can be no assurance that we will be successful in obtaining or maintaining an adequate level of cash resources and we may be forced to act more aggressively in the future in the area of expense reduction in order to conserve cash resources.

We May Require Additional Private Or Public Debt Or Equity Financing. Such Financing May Only Be Available On Disadvantageous Terms, Or May Not Be Available At All. Any New Financing Could Have A Substantial Dilutive Effect On Our Existing Stockholders.

At December 31, 2007, we had cash and cash equivalents of $121.0 million and a working capital balance of $63.6 million. Our cash position may decline in the future, and we may not be successful in maintaining an adequate level of cash resources.

We had $86.3 million in face value of our 5% senior convertible notes outstanding as of December 31, 2007. Holders of our 5% senior convertible notes have the right to require us to repurchase all or any portion of the senior convertible notes on November 15, 2010 and may convert the senior convertible notes at any time on or after May 15, 2010. In addition, holders of the senior convertible notes may convert the senior convertible notes prior to May 15, 2010 upon the occurrence of any of the following events:

• if the senior convertible notes have been called for redemption;

• upon certain dividends or distributions to all holders of our common stock;

• upon the occurrence of specified corporate transactions constituting a “fundamental change” (the occurrence of a “change in control” or a “termination of trading,” each as defined in the indenture governing our senior convertible notes);

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• if the average of the trading prices for the senior convertible notes during any five consecutive trading-day period is less than 98% of the average of the conversion values for the senior convertible notes (the product of the last reported sale price of our common stock and the conversion rate) during that period; or

• at any time after May 15, 2008 if the closing sale price of our common stock is equal to or greater than $23.21 for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter.

Upon conversion of the senior convertible notes, we will be required to satisfy our conversion obligation with respect to the principal amount of the senior convertible notes to be converted in cash, with any remaining amount to be satisfied in shares of our common stock.

We may be required to seek private or public debt or equity financing in order to support our operations, satisfy the conversion obligation with respect to our senior convertible notes and/or repay our senior convertible notes. The debt incurrence restrictions imposed by the indenture governing our senior convertible notes could restrict or impede our ability to incur additional debt. We may not be able to obtain additional debt or equity financing on satisfactory terms, or at all, and any new financing could have a substantial dilutive effect on our existing stockholders.

Our 5% Senior Convertible Notes Contain Covenants That Restrict The Incurrence Of Additional Indebtedness.

The indenture governing our 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. Such covenant specifies that we shall not, and that we shall not permit any of our subsidiaries to, directly or indirectly, incur or guarantee or assume any indebtedness other than “permitted indebtedness.” Permitted indebtedness is defined in the indenture to include, among others, the following categories of indebtedness: (i) all indebtedness outstanding on November 23, 2005; (ii) indebtedness under our 5% senior convertible notes; (iii) indebtedness under our $15.0 million letter of credit line; (iv) between $25.0 million and $50.0 million of additional senior secured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture); and (v) at least $100.0 million of additional subordinated unsecured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture). The debt incurrence restrictions imposed by the indenture governing our senior convertible notes could restrict or impede our ability to incur additional debt, which in turn could impair our ability to support our operations, adversely affect our liquidity and threaten our ability to repay our debts when they become due.

If We Are Unable To Develop And Generate Additional Demand For Our Products, Serious Harm Could Result To Our Business.

We have invested significant resources in developing and marketing our products and services. The demand for, and market acceptance of, our products and services is subject to a high level of uncertainty. Adoption of software solutions, particularly by those individuals and enterprises that have historically relied upon traditional means of commerce and communication, requires a broad acceptance of substantially different methods of conducting business and exchanging information. Our products and services are often considered complex and may involve a new approach to the conduct of business by our customers. As a result, intensive marketing and sales efforts may be necessary to educate prospective customers regarding the uses and benefits of these products and services in order to generate additional demand. The market for our products and services may weaken, competitors may develop superior products and services or we may fail to develop acceptable solutions to address new market conditions. Any one of these events could have a material adverse effect on our business, results of operations, cash flow and financial condition.

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We May Not Be Competitive, And Increased Competition Could Seriously Harm Our Business.

Relative to us, some of our competitors have one or more of the following advantages:

• Longer operating history

• Greater financial, technical, marketing, sales and other resources

• More consistent positive cash flows

• Longer history of profitable operations

• Greater name recognition

• A broader range of products to offer

• Better product functionality and performance in certain areas

• 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. We understand that some competitors are offering enterprise application software at no charge as components of product bundles. Further, traditional enterprise resource planning vendors have focused more resources on the development and marketing of enterprise application software, particularly in the product and industry segments in which we compete, and, increasingly, corporate information technology departments are undertaking internal development efforts. As a result of these and other factors, we may be unable to compete successfully with our existing or new competitors.

We Have Been And Continue To Be Subject To Product Quality And Performance Claims And Other Litigation, Which Could Seriously Harm Our Business.

From time to time, customers make claims pertaining to the quality and performance of our software and services, citing a variety of issues. Whether customer claims regarding the quality and performance of our products and services are founded or unfounded, they may adversely impact customer demand and affect the market perception of our company, our products and our services. Any such damage to our reputation could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Our software products generally are used by our customers in mission-critical applications where component failures or software errors could cause significant damages. Although we conduct testing and quality assurance through a release management process, we may not discover errors until our customers install and use a given product or until the volume of services that a product provides increases. Errors could result in loss of customers and reputation, adverse publicity, loss of revenues, delays in market acceptance, diversion of development and consulting resources and claims against us by customers. To mitigate this exposure, 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 insurance policies may be inadequate to protect us from all liability that we may face. Product liability claims could require us to spend significant time and money in litigation or to pay significant damages. As a result, any claim, whether or not successful, could harm our reputation and have a material adverse effect on our business, results of operations, cash flow and financial condition.

On March 7, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint alleges breach of fiduciary duty and unjust enrichment in connection with stock option grants to certain of the defendant officers and directors on three dates in 2004 and 2005. The complaint states that those

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stock option grants were manipulated so as to work to the recipients’ favor when material non-public information about the company was later disclosed to positive or negative effect. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. We have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law.

On October 23, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitled John McPadden, Sr. v. Sanjiv S. Sidhu, Stephen Bradley, Harvey B. Cash, Richard L. Clemmer, Michael E. McGrath, Lloyd G. Waterhouse, Jackson L. Wilson, Jr., Robert L. Crandall and Anthony Dubreville and i2 Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment based upon allegations that the company sold its wholly-owned subsidiary, Trade Services Corporation, for an inadequate price in 2005. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. We have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the outcome or amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

We may face other claims and litigation in the future that could harm our business and impair our liquidity. Defending against existing and potential litigation and other proceedings may continue to require us to spend significant time and money and to pay significant damages. We cannot assure you that the time, effort and financial resources that could be required will not adversely affect our business, results of operations, cash flow and financial condition.

The Loss Of 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, sales and senior management personnel. However, our employees can typically resign with little or no previous notice and our voluntary attrition rate is believed to be higher than the software industry’s average. Our future success depends on our ability to retain our key employees and to attract, train and retain other highly qualified personnel. Our loss of any of our key employees or our inability to attract, train and retain other highly qualified personnel could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Restructuring and Reorganization Initiatives Have Been Executed, And Such Activities Pose Significant Risks To Our Business

In late July 2007, we began restructuring initiatives involving reducing our workforce in an effort to achieve our profitability objectives. These activities pose significant risks to our business, including the risk that terminated employees will disparage the company, file legal claims against us related to their termination of employment, become employed by competitors or share our intellectual property or other sensitive information with others and that the reorganization will not achieve targeted efficiencies. The failure to retain and effectively manage our remaining employees or achieve our targeted efficiencies through the reorganization could increase our costs, adversely affect our development efforts and adversely affect the quality of our products and customer service. If customers become dissatisfied with our products or service, our maintenance renewals may decrease, our customers may take legal action against us and our sales to existing customers could decline, leading to reduced revenues. Failure to achieve the desired results of our restructuring and reorganization initiatives could increase employee turnover and harm our business, results of operations, cash flow and financial condition.

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Chief Executive Officer Succession

Effective July 30, 2007, Pallab K. Chatterjee was appointed interim CEO following the resignation of Michael E. McGrath from his position as an officer of the Company. Prior to his appointment as interim CEO, Mr. Chatterjee was our Executive Vice President, Solutions Operations and Chief Delivery Officer. Our Board of Directors has identified a number of CEO candidates and expects to name a permanent CEO pending the outcome of the ongoing exploration of strategic options currently being conducted by the Strategic Review Committee of the Board. Until that time, Mr. Chatterjee will continue to serve as the company’s interim CEO and remains a candidate for the permanent CEO position.

This transition to an interim CEO and then a permanent CEO could be a distraction to our senior management, business operations and customers. The search for a permanent replacement could also result in significant recruiting and relocation costs. If we fail to successfully attract and appoint a permanent CEO with the appropriate level of expertise, we could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition.

Because Our Software Products Are Intended To Work Within Complex Business Processes, Implementation Or Upgrades Of Our Products Can Be Difficult, Time-Consuming And Expensive, And Customers May Be Unable To Implement Or Upgrade Our Products Successfully Or Otherwise Achieve The Benefits Attributable To Our Products. This May Result In Customer Dissatisfaction, Harm To Our Reputation And Cause Non-Payment Issues.

Our products typically must integrate with the many existing computer systems and software programs of our customers. This can be complex, time-consuming and expensive, and may cause delays in the deployment of our products. As a result, some customers may have difficulty implementing our products successfully or otherwise achieving the benefits attributable to our products. Delayed or ineffective implementation or upgrades of our software and services may limit our future sales opportunities, impact revenues, result in customer dissatisfaction and harm to our reputation, or cause non-payment issues.

Failure To Complete Development Projects As Planned Could Harm Our Operating Results And Create Business Distractions And Negative Publicity That Could Harm Our Business.

Risks associated with our software solutions and other development projects include, but are not limited to:

• Customers may withhold cash payments or cancel contracts if we fail to meet our delivery commitments, the customers have financial difficulties or change strategy, or the functionality delivered is not acceptable to the customers. We are particularly susceptible to this with respect to arrangements where payments are scheduled to occur later in the engagement.

• The cancellation or scaling back of one or more of our larger software solutions or other development projects could have a material adverse impact on future software solutions revenues.

• We may be unable to recognize revenue associated with software solutions and other development projects in accordance with expectations. We generally recognize revenue from software solutions and other development projects over time using the percentage of completion method of contract accounting. Failure to complete project phases in accordance with the overall project plan can create variability in our expected revenue streams if we are not able to recognize revenues related to particular projects because of delays in development.

• Many of our software solutions and other development projects are fixed-price arrangements. If we fail to accurately estimate the resources required for a fixed-price project or the customer attempts to change the scope of the project, the profit, if any, realized from the project would be adversely affected to the extent that we have to add additional resources to complete the project.

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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. However, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our intellectual property. This is particularly true in India, where a significant portion of our Solutions Operations are located, and other foreign countries such as China and Russia where the laws do 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. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. In connection with our efforts to protect our proprietary rights, on September 5, 2006 we filed a lawsuit against SAP AG and SAP Americas, Inc. alleging infringement of seven patents related to supply chain management. During September 2007, SAP filed suit asking for a judgment against i2 alleging that we had directly and/or indirectly infringed on one or more claims on two patents. This and any other litigation to defend our intellectual property rights could be time-consuming and costly.

There has been a substantial amount of litigation in the software industry regarding intellectual property rights. As a result, we may be subject to claims of intellectual property infringement. Although we are not aware that any of our products infringe 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 favorable to us. Unfavorable royalty and licensing agreements could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Serious Harm To Our Business Could Result If Our Encryption Technology Fails To Ensure The Security Of Our Customers’ Online Transactions.

The secure exchange of confidential information over public networks is a significant concern of consumers engaging in on-line transactions and interaction. Some of our software applications use encryption technology to provide the security necessary to effect the secure exchange of valuable and confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the algorithms that these applications use to protect customer transaction data. If any compromise or breach were to occur, it could have a material adverse effect on our business, results of operations, cash flow and financial condition.

We Are Dependent On Third-Party Software That We Incorporate Into And Include With Our Products And Solutions, And Impaired Relations With These Third Parties, Defects In Third-Party Software Or The Inability To Enhance Their Software Over Time Could Harm Our Business.

We incorporate and include third-party software into and with certain of our products and solutions. Additionally, we may incorporate and include additional third-party software into and with our products and solutions in future product offerings. The operation of our products could be impaired if errors occur in the third-party software that we utilize. It may be more difficult for us to correct any defects in third-party software because the development and maintenance of the software is not within our control. Accordingly, our business could be adversely affected in the event of any errors in this software. There can be no assurance that these third parties will continue to make their software available to us on acceptable terms, to invest the appropriate levels of resources in their products and services to maintain and enhance the software capabilities, or to remain in

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business. Further, due to the limited numbers of vendors of certain types of third-party software, it may be difficult for us to replace any third-party software if a vendor seeks to terminate our license to the software or our ability to license the software to customers. Any impairment in our relationship with these third parties could have a material adverse effect on our business, results of operations, cash flow and financial condition.

We Face Risks Associated With International Sales And Operations That Could Harm Our Company.

International revenues accounted for approximately 43% of our total revenues during 2007, and we expect to continue to generate a significant portion of our revenues from international sales in the future. Our international operations are subject to risks inherent in international business activities, including the tendency of markets outside of the U.S. to be more volatile and difficult to forecast than the U.S. market. Any of the following factors, among other things, could adversely affect the success of our international operations:

• Difficulties and costs of staffing and managing geographically disparate operations

• Extended accounts receivable collection cycles in certain countries

• Compliance with a variety of foreign business practices, laws and regulations

• Overlap of different tax structures and regimes, including transfer pricing

• Meeting import and export licensing requirements

• Trade restrictions

• Changes in tariff and tax rates

• Changes in general economic and political conditions in international markets

In addition, we conduct a large portion of our software solutions development and services operations in India. The distributed nature of our development and consulting resources could create operational challenges and complications since we have a heightened risk exposure to changes in the economic, security and political conditions of India. Operational issues, recruiting and retention issues, ability to obtain work permits, economic and political instability, military actions, currency fluctuations and other unforeseen occurrences in India could impair our ability to develop and introduce new software applications and functionality in a timely manner, or hinder our ability to provide cost-competitive services, either of which could put our products at a competitive disadvantage and cause us to lose existing customers or fail to attract new customers.

We May Make Future Acquisitions Or Enter Into Joint Ventures That Are Not Successful, Which Could Seriously Harm Our Business.

Historically, we have acquired technology or businesses to supplement and expand our product offerings. In the future, we could acquire additional products, technologies or businesses, or enter into joint venture arrangements, for the purpose of complementing or expanding our business. Negotiation of potential acquisitions or joint ventures and our integration of acquired products, technologies or businesses could divert management’s time and resources. Future acquisitions could cause us to issue equity securities that would dilute existing stockholders, incur debt or contingent liabilities, amortize intangible assets, or write off in-process research and development and other acquisition-related expenses that could have a material adverse affect on our business, results of operations, cash flow and financial condition. We may not be able to properly integrate acquired products, technologies or businesses with our existing products and operations, train, retain and motivate personnel from the acquired businesses, or combine potentially different corporate cultures. Failure to do so could deprive us of the intended benefits of those acquisitions. In addition, we may be required to write-off acquired research and development if further development of purchased technology becomes unfeasible, which may adversely affect our business, results of operations, cash flow and financial condition.

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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. However, the majority of our international expenses, including the wages of approximately 63% of our employees, 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. We have implemented limited hedging programs to mitigate our exposure to currency fluctuations affecting international accounts receivable, cash balances and intercompany accounts, but we do not hedge our exposure to currency fluctuations affecting future international revenues and expenses and other commitments. For the foregoing reasons, currency exchange rate fluctuations have caused, and likely will continue to cause, variability in our foreign currency denominated revenue streams and our cost to settle foreign currency denominated liabilities.

We May Not Be Able to Fully Realize The Benefits Of Our Deferred Tax Assets.

Our ability to utilize our domestic net operating loss carryforwards during their remaining life is dependent upon our ability to generate sufficient domestic taxable income during the carryforward periods. If we do not generate sufficient domestic taxable income, the remaining net operating loss carryforwards may expire without being fully utilized.

In addition, pursuant to section 382 of the Internal Revenue Code, the amount of and benefit from our domestic net operating loss carryforwards, and other tax attributes, may be impaired or limited in certain circumstances. Events which cause limitations on the amount of net operating losses and other tax attributes that we may utilize in the future include, but are not limited to, a cumulative change in ownership of greater than 50% in the value of the company (for those instruments that constitute equity for section 382 purposes), over the lesser of a three-year period ending on a specific testing date or a previous ownership change date. A testing date generally occurs upon the issuance, transfer or repurchase of the company’s securities or debt that is treated as a security for purposes of determining an ownership change. A cumulative change in ownership of greater than 50% would limit our ability to fully utilize our domestic net operating loss carryforwards.

Failure Or Circumvention Of Our Controls And Procedures Or Failure To Comply With Regulations Related To Controls And Procedures Could Seriously Harm Our Business.

Over time, we have made significant changes in and may consider making additional changes to our internal controls, our disclosure controls and procedures, and our corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our controls, policies and procedures could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Risks Related To Our Industry

If Our Products Are Not Able To Deliver Fast, Demonstrable Value To Our Customers, Our Business Could Be Seriously Harmed.

Enterprises are requiring their application software vendors to provide faster time to value on their technology investments. We must continue to improve the speed of our implementations and the pace at which our products deliver value or our competitors may gain important strategic advantages over us. If we cannot successfully respond to these market demands, or if our competitors do so more effectively than we do, our business, results of operations, cash flow and financial condition could be materially and adversely affected.

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Releases Of And Problems With New Products May Cause Purchasing Delays, Which Would Harm Our Revenues.

Our practice and the practice in the industry is to periodically develop and release new products and enhancements. As a result, 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 have a material adverse effect on our business, results of operations, cash flow and financial condition.

Risks Related To Our Stock

Our Stock Price Historically Has Been Volatile, Which May Make It More Difficult To Resell Common Stock At Attractive Prices.

The market price of our common stock has been highly volatile in the past, and may continue to be volatile in the future. The following factors could significantly affect the market price of our common stock:

• Continued quarterly variations in our results of operations and cash flows

• Technological innovations by our competitors or us

• Announcement of new customers, new products, product enhancements, joint ventures and other alliances by our competitors or us

• Additional equity or debt financing transactions, or the absence thereof

• Stock valuations or performance of our competitors

• General market conditions, geopolitical events or market conditions specific to particular industries

• Perceptions in the marketplace of performance problems involving our products and services

The Price Of Our Common Stock May Decline Due To Shares Eligible For Future Sale.

Sales of substantial amounts of our common stock in the public market, or the appearance that a large number of our shares are 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.

Our Executive Officers And Directors, In Particular Sanjiv Sidhu And An Affiliate Of Q Investments, Have Significant Influence Over Stockholder Votes.

As of December 31, 2007, our current executive officers and directors together beneficially controlled approximately 22.2% of the total voting power of our company, which includes, approximately 21.1% controlled by Sanjiv Sidhu, our current Chairman and former Chief Executive Officer and President, and entities that he controls. Further, an affiliate of Q Investments beneficially controls approximately 17.7% of the voting power of the company, and has the right to appoint two directors to our Board of Directors (which it exercised in 2007). S.A.C. Capital Advisors beneficially controls approximately 7.3% and BlackRock Advisors, LLC beneficially controls approximately 6.9% of the voting power of the company. Accordingly, Mr. Sidhu, the Q Investments affiliate, S.A.C. Capital Advisors and BlackRock Advisors have had and will have significant influence in determining the composition of our Board of Directors and other significant matters requiring stockholder approval or acquiescence, including amendments to our certificate of incorporation, a substantial sale of assets, a merger or similar corporate transaction or a non-negotiated takeover attempt. Such concentration of ownership may discourage a potential acquirer from making an offer to buy our company that other stockholders might find favorable, which in turn could adversely affect the market price of our common stock.

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Our Charter And Bylaws Have Anti-Takeover Provisions And We Have A Stockholder Rights Plan Which, In Combination, Effectively Inhibit A Non-Negotiated Merger Or Business Combination.

Provisions of our certificate of incorporation and our bylaws, Delaware law and our stockholder rights plan 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 effectively inhibits a non-negotiated merger or other business combination.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

Our corporate headquarters, located in Dallas, Texas, are occupied under a lease that expires in 2010. This facility houses our executive and administrative staff as well as sales, marketing, research and development and consulting personnel. We also lease space for our other offices in the U.S., Australia, Belgium, Canada, China, Finland, France, Germany, India, Japan, Korea, the Netherlands, Singapore, South Africa, Taiwan and the United Kingdom primarily to provide sales, customer support, consulting services and research and development activities. While we consider our properties suitable and adequate for our present needs, we are attempting to renegotiate existing leases or possibly subleasing a portion of our existing properties.

ITEM 3.    LEGAL PROCEEDINGS

Derivative Actions

On March 7, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitled George Keritsis and Mark Kert v. Michael E. McGrath, Michael J. Berry, Pallab K. Chatterjee, Robert C. Donohoo, Hiten D. Varia, M. Miriam Wardak, Sanjiv S. Sidhu, Stephen P. Bradley, Harvey B. Cash, Richard L. Clemmer, Lloyd G. Waterhouse, Jackson L. Wilson Jr., Robert L. Crandall and i2 Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment in connection with stock option grants to certain of the defendant officers and directors on three dates in 2004 and 2005. The complaint states that those stock option grants were manipulated so as to work to the recipients’ favor when material non-public information about the company was later disclosed to positive or negative effect. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. As discussed below, we have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

On October 23, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitled John McPadden, Sr. v. Sanjiv S. Sidhu, Stephen Bradley, Harvey B. Cash, Richard L. Clemmer, Michael E. McGrath, Lloyd G. Waterhouse, Jackson L. Wilson, Jr., Robert L. Crandall and Anthony Dubreville and i2 Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment based upon allegations that the company sold its wholly-owned subsidiary, Trade Services Corporation, for an inadequate price in 2005. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. As discussed below, we have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors

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and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the outcome or amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

Indemnification Agreements

We have indemnification agreements with certain of our officers, directors and employees that may require us, among other things, to indemnify such officers, directors and employees against certain liabilities that may arise by reason of their status or service as directors, officers or employees and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. We have also entered into agreements regarding the advancement of costs with certain other officers and employees.

Pursuant to these indemnification and cost-advancement agreements, we have advanced fees and expenses incurred by certain current and former directors, officers and employees in connection with the governmental investigations and actions related to the 2003 restatement of our consolidated financial statements and other matters. We incurred approximately $0.2 million, $14.0 million and $4.9 million of expense for legal fees and expenses for current and former employees during 2007, 2006 and 2005, respectively.

We may continue to advance fees and expenses incurred by certain current and former directors, officers and employees in the future. The maximum potential amount of future payments we could be required to make under these indemnification and cost-advancement agreements is unlimited. Additionally, our corporate by-laws allow us to choose to indemnify any employee for certain events or occurrences while the employee is, or was, serving at our request in such capacity.

Under the terms of our software license agreements with our customers, we agree that in the event the licensed software infringes upon any patent, copyright, trademark, or any other proprietary right of a third-party, we will indemnify our customer licensees against any loss, expense, or liability from any damages that may be awarded against our customer. We include this infringement indemnification in substantially all of our software license agreements and selected managed service arrangements. In the event the customer cannot use the software or service due to infringement and we can not obtain the right to use, replace or modify the software or service in a commercially feasible manner so that it no longer infringes, then we may terminate the license and provide the customer a pro-rata refund of the fees paid by the customer for the infringing software or service. We believe the estimated fair value of these intellectual property indemnification clauses is minimal.

India Tax Assessments

We are under tax examinations in India primarily related to our intercompany pricing for services rendered by our Indian subsidiary to other i2 companies and our qualification for a tax holiday, and have been assessed an aggregate of $7.1 million for the Indian statutory fiscal years ended March 31, 2002, 2003 and 2004. We believe the Indian tax authorities’ positions regarding our intercompany transactions and tax holiday qualification are without merit, that all intercompany transactions were conducted at appropriate pricing levels and that our operations qualify for the tax holiday claimed. Accordingly, we have appealed all of these assessments and have also sought assistance from the United States competent authority under the mutual agreement procedure of the income tax treaty between the United States and India, which provides us with an opportunity to resolve these matters in an environment which includes governmental representatives of both countries.

Pending resolution of these matters, we have paid approximately $3.5 million of the assessed amount and have arranged for approximately $2.9 million in bank guarantees in favor of the Indian government in respect of a portion of the balance. The bank guarantees are supported by letters of credit issued in the United States and are reflected on our condensed consolidated balance sheet as restricted cash.

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We expect that the ultimate resolution of these matters will not exceed the tax contingency reserves that we have established for them.

Certain Accruals

We have accrued for estimated losses in the accompanying consolidated financial statements for matters where we believe the likelihood of an adverse outcome is probable and the amount of the loss is reasonably estimable. We are subject to various claims and legal proceedings that arise in the ordinary course of our business from time to time, including claims and legal proceedings that have been asserted against us by former employees and certain customers, and have been in negotiations to settle certain of those contingencies. The adverse resolution of any one or more of those matters or the matters described in this Item 3 over and above the amount, if any, that has been estimated and accrued in our consolidated financial statements could have a material adverse effect on our business, financial condition, results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the NASDAQ Global Market under the ticker symbol ITWO.

The following table lists the high and low per share intra-day sales prices for our common stock as reported by the NASDAQ Global Market during the following periods:

	High		Low
2007
Fourth quarter	$	18.80	$	12.22
Third quarter		18.95		13.25
Second quarter		26.90		17.39
First quarter		27.46		21.54
2006
Fourth quarter	$	23.28	$	16.88
Third quarter		19.34		11.64
Second quarter		18.08		12.27
First quarter		19.42		14.08

As of March 11, 2008, there were approximately 21,452,855 shares of our common stock outstanding held by approximately 440 holders of record.

Dividends

We have never declared or paid cash dividends on our common stock. We currently intend to retain any earnings for use in our business and do not anticipate paying any cash dividends in the foreseeable future. Future dividends, if any, will be determined by our Board of Directors.

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Stock Performance Graph

The graph depicted below shows a comparison of cumulative total stockholder returns for i2 common stock, the NASDAQ Global Market (U.S. Companies) Index and the NASDAQ Computer and Data Processing Services Group Index. The graph assumes that $100 was invested in i2 common stock on December 31, 2002 and in each index, and that all dividends were reinvested. No cash dividends have been declared on shares of i2 common stock. The graph covers the period from December 31, 2002 to December 31, 2007. The data for the graph was provided to us by R.R. Donnelley & Sons Company. The comparisons in the graph are required by regulations of the SEC and are not intended to forecast or to be indicative of the possible future performance of our common stock.

Stock Performance Graph Data Points:

	12/31/02	12/31/03	12/31/04	12/30/05	12/29/06	12/31/2007
i2 Technologies, Inc.	100.00	144.35	60.00	49.08	79.37	43.83
NASDAQ Composite	100.00	150.36	163.00	166.58	183.68	201.91
NASDAQ Computer	100.00	128.15	144.10	154.94	174.66	210.79

The foregoing graph shall not be deemed to be filed as part of this Form 10-K and does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of i2 under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent i2 specifically incorporates the graph by reference.

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Stock Option Plans

Information regarding stock-based compensation awards (including both stock options and stock rights awards) outstanding and available for future grants as of December 31, 2007, segregated between stock-based compensation plans approved by stockholders and stock-based compensation plans not approved by stockholders, is presented in the table below (in thousands, except per share amounts). Included in the table are stock options granted to former employees of acquired companies that were assumed by us. We do not intend to grant additional stock options under any of the assumed plans of acquired companies. While our stockholders approved certain of our acquisitions of the companies from which these plans were assumed, our stockholders have not approved any of the assumed plans. See Note 10 — Stock-Based Compensation Plans, in our Notes to Consolidated Financial Statements for a description of our stock option plans.

Plan Category	Number of Shares to be Issued Upon Exercise of Outstanding Awards (000)	Weighted Average Exercise Price of Outstanding Awards		Number of Shares Available for Future Grants (000)
Plans approved by stockholders:
1995 Plan	4,116	$	14.93	2,869
Plans not approved by stockholders:
2001 Plan	100		49.99	690
Assumed plans of acquired companies	1		399.73	1
Total	4,217	$	15.78	3,560

Stock Rights Plan

On January 17, 2002, our Board of Directors approved adoption of a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock. After adjusting for the 1-for-25 reverse stock split we implemented on February 16, 2005, each share of common stock has attached to it one right to purchase 25 units of one one-thousandth of a share of Series A junior participating preferred stock at a price of $75.00 per unit. The rights, which expire on January 17, 2012, will only become exercisable upon distribution. Distribution of the rights will not occur until ten days after the earlier of (i) the public announcement that a person or group has acquired beneficial ownership of 15.0% or more of our outstanding common stock or (ii) the commencement of, or announcement of an intention to make, a tender offer or exchange offer that would result in a person or group acquiring the beneficial ownership of 15.0% or more of our outstanding common stock.

Shares of Series A preferred stock purchasable upon exercise of the rights are not redeemable. Each share of Series A preferred stock will be entitled to a dividend of 40 times the dividend declared per share of common stock. In the event of liquidation, each share of Series A preferred stock will be entitled to a payment of the greater of (i) 40 times the payment made per share of common stock or (ii) $1,000. Each share of Series A preferred stock will have 40 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share of Series A preferred stock will be entitled to receive 40 times the amount received per share of common stock. Because of the nature of the dividend, liquidation and voting rights, the value of the 25 units of Series A preferred stock purchasable upon exercise of each right should approximate the value of one share of common stock.

If, after the rights become exercisable, we are acquired in a merger or other business combination transaction, or 50% or more of our consolidated assets or earning power are sold, proper provision will be made so that each holder of a right will thereafter have the right to receive upon exercise that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the right.

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If any person or group becomes the beneficial owner of 15.0% or more of the outstanding shares of common stock, proper provision will be made so that each holder of a right, other than rights beneficially owned by the acquiring person (which will thereafter be void), will have the right to receive upon exercise that number of shares of common stock or units of Series A preferred stock (or cash, other securities or property) having a market value of two times the exercise price of the right.

The rights have significant anti-takeover effects by causing substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The rights should not interfere with any merger or other business combination approved by the Board of Directors since the rights may be redeemed by us at the redemption price of $0.25 per right prior to the occurrence of a distribution date. Additional details of this stock rights plan are presented in Note 9 — Stockholders’ Equity (Deficit) and Income per Common Share in our Notes to Consolidated Financial Statements.

Convertible Debt

As of December 31, 2007, we had approximately $86.3 million in face value of outstanding indebtedness that is convertible into shares of our common stock. Details of this debt are presented in Note 6 — Borrowings and Debt Issuance Costs in our Notes to Consolidated Financial Statements included elsewhere in this report.

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ITEM 6.    SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data for the periods indicated. The selected consolidated financial data set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this report. Amounts shown are in thousands, except per share data. The revenue amounts and certain expense amounts for years prior to 2006 have been reclassified from previously reported amounts.

	Years Ended December 31,
	2007			2006			2005			2004			2003
Consolidated Statement of Operations:
Revenues:
Software solutions	$	47,721		$	76,243		$	89,937		$	54,155		$	61,115
Services		122,682			106,493			103,792			118,731			141,953
Maintenance		87,457			92,828			100,612			116,765			136,097
Contract		2,450			4,113			42,526			72,877			126,488
Total revenues		260,310			279,677			336,867			362,528			465,653
Costs and expenses:
Cost of revenues:
Software solutions		8,567			12,862			14,720			20,137			23,939
Services and maintenance		108,471			97,960			103,758			121,504			150,560
Contract		—			311			1,575			4,718			11,844
Amortization of acquired technology		25			21			—			369			579
Sales and marketing		41,872			48,185			51,727			74,946			87,928
Research and development		33,513			35,200			37,337			56,279			66,236
General and administrative		38,691			56,129			61,117			71,646			105,713
Amortization of intangibles		78			17			—			39			540
Restructuring charges and adjustments		3,955			(403	)		11,269			2,688			4,797
Total costs and expenses		235,172			250,282			281,503			352,326			452,136
Operating income (loss)		25,138			29,395			55,364			10,202			13,517
Non-operating expense, net:
Interest income		5,488			5,305			7,697			4,179			4,942
Interest expense		(4,948	)		(6,069	)		(16,315	)		(17,873	)		(20,641	)
Realized gains on investments, net		—			475			10,144			79			370
Foreign currency hedge and transaction losses, net		(678	)		(219	)		(4,217	)		(3,212	)		(424	)
(Loss) gain on early repayment of debt obligation		—			—			(3,017	)		2,223			3,435
Other expense, net		(1,134	)		(850	)		(1,547	)		(1,069	)		(2,200	)
Total non-operating expense, net		(1,272	)		(1,358	)		(7,255	)		(15,673	)		(14,518	)
Income (loss) before income taxes		23,866			28,037			48,109			(5,471	)		(1,001	)
Provision (benefit) for income taxes		6,133			3,821			4,664			(674	)		5,462
Income (loss) from continuing operations		17,733			24,216			43,445			(4,797	)		(6,463	)
Income from discontinued operations		—			—			43,884			3,445			6,978
Net income (loss)		17,733			24,216			87,329			(1,352	)		515
Preferred stock dividend and accretion of discount		3,071			2,940			3,020			1,720			—
Net income (loss) applicable to common stockholders	$	14,662		$	21,276		$	84,309		$	(3,072	)	$	515
Net income (loss) per common share applicable to common stockholders:
Total
Basic	$	0.57		$	0.84		$	3.50		$	(0.17	)	$	0.03
Diluted	$	0.55		$	0.82		$	3.45		$	(0.17	)	$	0.03
Discontinued operations
Basic	$	—		$	—		$	1.82		$	0.19		$	0.40
Diluted	$	—		$	—		$	1.80		$	0.19		$	0.40
Continuing operations including preferred stock dividend and accretion of discount
Basic	$	0.57		$	0.84		$	1.68		$	(0.36	)	$	(0.37	)
Diluted	$	0.55		$	0.82		$	1.65		$	(0.36	)	$	(0.37	)
Weighted-average common shares outstanding:
Basic		25,816			25,328			24,084			18,004			17,331
Diluted		26,748			25,883			24,469			18,004			17,331

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	December 31,
	2007		2006			2005			2004			2003
Balance Sheet Data:
Cash and cash equivalents	$	120,978	$	109,419		$	112,882		$	133,273		$	288,822
Restricted cash	$	8,456	$	4,626		$	4,773		$	7,717		$	15,532
Short-term investments	$	—	$	—		$	—		$	144,532		$	5,000
Working capital	$	63,565	$	17,368		$	(34,336	)	$	101,152		$	10,130
Total assets	$	202,153	$	190,069		$	202,445		$	390,673		$	430,374
Total long-term debt	$	84,453	$	83,822		$	75,691		$	316,800		$	356,800
Total redeemable preferred stock	$	103,450	$	101,686		$	100,065		$	97,045		$	—
Total stockholders’ equity (deficit)	$	14,493	$	(25,338	)	$	(70,654	)	$	(173,033	)	$	(296,938	)

The following tables set forth unaudited consolidated quarterly statements of operations data for the years ended December 31, 2007 and 2006. Amounts shown are in thousands, except per share data.

	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues:
Software solutions	$	13,433		$	11,412		$	10,522		$	12,354
Services		28,695			31,553			33,365			29,069
Maintenance		21,009			22,018			22,571			21,859
Contract		2,450			—			—			—
Total revenues		65,587			64,983			66,458			63,282
Costs and expenses:
Cost of revenues:
Software solutions		2,474			2,175			2,066			1,852
Services and maintenance		26,780			27,267			27,420			27,004
Sales and marketing		11,698			12,957			7,928			9,289
Research and development		8,805			8,750			8,224			7,734
General and administrative		10,387			10,580			9,295			8,532
Restructuring charges and adjustments		(25	)		(49	)		3,921			108
Total costs and expenses		60,119			61,680			58,854			54,519
Operating income		5,468			3,303			7,604			8,763
Non-operating expense, net:
Interest income		1,346			1,302			1,413			1,427
Interest expense		(1,240	)		(1,236	)		(1,236	)		(1,236	)
Foreign currency hedge and transaction losses, net		(117	)		(74	)		(107	)		(380	)
Other expense, net		(321	)		(231	)		(300	)		(282	)
Total non-operating expense, net		(332	)		(239	)		(230	)		(471	)
Income before income taxes		5,136			3,064			7,374			8,292
Income tax expense		859			740			2,057			2,477
Net income	$	4,277		$	2,324		$	5,317		$	5,815
Preferred stock dividend and accretion of discount		757			765			773			776
Net income applicable to common stockholders	$	3,520		$	1,559		$	4,544		$	5,039
Net income per common share applicable to common stockholders:
Basic	$	0.14		$	0.06		$	0.18		$	0.19
Diluted	$	0.13		$	0.06		$	0.17		$	0.19
Weighted-average common shares outstanding:
Basic		25,610			25,770			25,900			25,985
Diluted		26,954			26,806			26,541			26,587

Amortization of intangibles is not material and is included in general and administrative expense.

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	March 31, 2006			June 30, 2006			September 30, 2006			December 31, 2006
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues:
Software solutions	$	16,922		$	15,388		$	20,569		$	23,364
Services		23,874			26,143			27,007			29,469
Maintenance		23,214			23,120			23,745			22,749
Contract		33			33			33			4,014
Total revenues		64,043			64,684			71,354			79,596
Costs and expenses:
Cost of revenues:
Software solutions		3,403			2,447			3,271			3,741
Services and maintenance		23,471			24,376			25,156			24,957
Contract		—			—			—			311
Sales and marketing		11,096			12,573			12,307			12,209
Research and development		8,947			8,932			8,818			8,503
General and administrative		13,538			11,843			15,252			15,534
Restructuring charges and adjustments		(50	)		(95	)		(103	)		(155	)
Total costs and expenses		60,405			60,076			64,701			65,100
Operating income		3,638			4,608			6,653			14,496
Non-operating expense, net:
Interest income		1,046			1,172			1,553			1,534
Interest expense		(1,540	)		(1,532	)		(1,523	)		(1,474	)
Realized gains on investments		586			6			—			(117	)
Foreign currency hedge and transaction losses, net		(216	)		177			(207	)		27
Other expense, net		281			(333	)		(327	)		(471	)
Total non-operating expense, net		157			(510	)		(504	)		(501	)
Income before income taxes		3,795			4,098			6,149			13,995
Income tax expense (benefit)		2,014			1,297			1,595			(1,085	)
Net income	$	1,781		$	2,801		$	4,554		$	15,080
Preferred stock dividend and accretion of discount		629			770			770			770
Net income applicable to common stockholders	$	1,152		$	2,031		$	3,784		$	14,310
Net income per common share applicable to common stockholders:
Total
Basic	$	0.05		$	0.08		$	0.15		$	0.56
Diluted	$	0.04		$	0.08		$	0.15		$	0.54
Weighted-average common shares outstanding:
Basic		25,195			25,247			25,370			25,500
Diluted		25,653			25,699			25,892			26,355

Amortization of intangibles is not material and is included in general and administrative expense.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical or current facts, including, without limitation, statements about our business strategy, plans, objectives and future prospects, are forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations, which could have a material adverse effect on our business, results of operations, cash flow and financial condition. Such risks and uncertainties include, without limitation, the following:

• Certain large stockholders have called for the public sale of the Company, and the Board of Directors of i2 has formed a Strategic Review Committee in connection with an ongoing review of i2’s management, operations and strategy. Continued pressure by activist stockholders for the sale of the Company and/ or the Company’s ongoing exploration of strategic options, could create distractions for our management, sales staff and other employees and create uncertainty in existing and potential customers regarding our ability to meet our contractual obligations. Such distractions and uncertainty could increase our employee turnover and harm our business, results of operations, cash flow and financial condition.

• We have recently implemented restructuring and reorganization initiatives. Failure to achieve the desired results of our restructuring and reorganization initiatives could increase our employee turnover, harm our business, results of operations, cash flow and financial condition.

• Effective July 30, 2007, our Chief Executive Officer resigned and we appointed an interim CEO. Failure to appoint a permanent CEO with the appropriate level of expertise could increase our employee turnover, harm our business, results of operations, cash flow and financial condition.

• Our financial results have varied and may continue to vary significantly from quarter-to-quarter. We may fail to meet analysts’ and investors’ expectations.

• We experienced negative cash flows for the quarters ended March 31, 2007, September 30, 2006 and March 31, 2006, and for each of the five years ended December 31, 2005. A failure to maintain profitability and achieve consistent positive cash flows would have a significant adverse effect on our business, impair our ability to support our operations and adversely affect our liquidity.

• Holders of our 5% senior convertible notes may convert the senior convertible notes upon the occurrence of certain events prior to May 15, 2010, and at any time on or after May 15, 2010, and have the right to require us to repurchase all or any portion of the senior convertible notes on November 15, 2010. There is no assurance that at the time of conversion or required repurchase, we will have the ability to satisfy the cash portion of any such conversion obligation or to make any such required repurchase.

• We may require additional private or public debt or equity financing. Such financing may only be available on disadvantageous terms, or may not be available at all. Any new financing could have a substantial dilutive effect on our existing shareholders.

• The indenture governing our 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. The debt incurrence restrictions imposed by the indenture could restrict or impede our ability to incur additional debt, which in turn could impair our ability to support our operations, adversely affect our liquidity and threaten our ability to repay our debts when they become due.

• If we are unable to develop and generate additional demand for our products, serious harm could result to our business.

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• We may not be competitive, and increased competition could seriously harm our business. Our focus on a solutions-oriented approach may not be successful.

• We face risks related to product quality and performance claims and other litigation that could have a material adverse effect on our relationships with customers and our business, results of operations, cash flow and financial condition. We may face other claims and litigation in the future that could harm our business and impair our liquidity. Loss of key personnel or our failure to attract, train and retain additional personnel could negatively affect our operating results and revenues and seriously harm our company.

• We face risks related to product quality and performance claims and other litigation that could have a material adverse effect on our relationships with customers and our business, results of operations, cash flow and financial condition. We may face other claims and litigation in the future that could harm our business and impair our liquidity.

• We face other risks indicated in Item 1A., “Risk Factors,” and in our other filings with the SEC.

Many of these risks and uncertainties are beyond our control and, in many cases, we cannot accurately predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. When used in this document, the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “continue,” “may,” “will,” “should” or the negative of such terms and similar expressions as they relate to us, our customers or our management are intended to identify forward-looking statements.

References in this report to the terms “optimal” and “optimization” and words to that effect are not intended to connote the mathematically optimal solution, but may connote near-optimal solutions, which reflect practical considerations such as customer requirements as to response time, precision of the results and other commercial factors.

Overview

Nature of Operations.    We are a provider of supply chain management solutions, consisting of various software and service offerings. In addition to application software, we offer hosted software solutions, such as business optimization and technical consulting, managed services, training, solution maintenance, software upgrades and development. We operate our business in one business segment. Supply chain management is the set of processes, technology and expertise involved in managing supply, demand and fulfillment throughout divisions within a company and with its customers, suppliers and partners. The goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, improving operational visibility, increasing operating velocity and integrating planning and execution. Our offerings are designed to help customers better achieve the following critical business objectives:

• Visibility — a clear and unobstructed view up and down the supply chain

• Planning — supply chain optimization to match supply and demand considering system-wide constraints

• Collaboration — interoperability with supply chain partners and elimination of functional silos

• Control — management of data and business processes across the extended supply chain

Revenue Categories

We recognize revenue for software and our related service offerings in accordance with Statement of Position (SOP) 81-1, “Accounting for Certain Construction Type and Certain Production Type Contracts,” SOP 97-2, “Software Revenue Recognition,” as modified by SOP 98-9, “Modification of SOP 97-2, Software Revenue

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Recognition with Respect to Certain Transactions,” SEC Staff Accounting Bulletin (SAB) 104, “Revenue Recognition,” and SAB 103, “Update of Codification of Staff Accounting Bulletins,” and SAB “Topic 13, Revenue Recognition.”

Software Solutions.    Software solutions revenue includes core license revenue, recurring license revenue, and fees received to develop the licensed functionality. We recognize these revenues under SOP 97-2 or SOP 81-1 based on our evaluation of whether the associated services are essential to the licensed software as described within SOP 97-2. If the services are considered essential, revenue is generally recognized on a percentage of completion basis under SOP 81-1. Services are considered essential to the software when they involve significant modifications or additions to the software features and functionality. In addition, we have several subscription and other recurring revenue transactions, which are recognized ratably over the life of each contract.

Services.    Services revenue is primarily derived from fees for services that are not essential to the software, including implementation, integration, training and consulting, and is generally recognized when services are performed. In addition, services revenue may include fees received from arrangements to customize or enhance previously purchased licensed software, when such services are not essential to the previously licensed software. Services revenue also includes reimbursable expense revenue, with the related costs of reimbursable expenses included in cost of services.

Maintenance.    Maintenance revenue consists of fees generated by providing support services, such as telephone support, and unspecified upgrades/enhancements on a when-and-if available basis. A customer typically prepays maintenance and support fees for an initial period, and the related revenue is deferred and generally recognized over the term of such initial period. Maintenance is renewable by the customer on an annual basis thereafter. Rates for maintenance, including subsequent renewal rates, are typically established based upon a specified percentage of net license fees as set forth in the contract.

Contract Revenue.    As explained in more detail below, we do not consider contract revenue to be an indication of the current performance of our business. We collected the cash associated with contract revenue in prior periods and recorded the revenue as we fulfilled the contract obligations. Our deferred contract revenue balance is zero.

Transition to a Solutions-Oriented Provider

Our software and service offerings have changed in recent years in response to market demands as well as the introduction of new technology and products. We are transitioning our business approach to being a solutions-oriented provider, and accordingly have experienced a shift to a greater level of services revenue versus software solutions revenue.

In early 2006, we increased our hiring of services personnel based on our expectations regarding the demand for our services and our existing services backlog. In addition to generating increased services revenue from the increased headcount, we have also increased the billability of our services personnel and have been successful at strategically placing certain of our research and development staff on billable services projects when their skill sets are appropriate.

These changes impact the mix of revenues we generate. This affects our profitability because services will typically earn a lower margin than software solutions. These changes also influence the proportion of revenue recognized on a percentage of completion basis or subscription basis. We now expect that a higher proportion of our software solutions revenue will be recognized under a percentage of completion basis or subscription basis, rather than being recognized in the period the contract is signed.

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Key Performance Indicators and Operating Metrics

The markets in which we operate are highly competitive. Our competitors are diverse and offer a variety of solutions targeting various segments of the extended supply chain as well as the enterprise as a whole. Some competitors offer suites of applications, while most offer solutions designed to target specific processes or industries. We believe our principal competitors continue to strengthen, in part based on consolidation within the industry. In addition, our shift to a more solutions-oriented approach, where services are more critical, increases our exposure to competition from offshore providers and consulting companies. All of these factors are creating pricing pressure for our software and service offerings. However, we believe our focus on a solutions-oriented approach that leverages our deep supply chain expertise differentiates us from our competitors.

In managing our business and reviewing our results, management focuses most intently on our revenue generation process, including bookings, backlog and operating revenue (total revenue excluding contract revenue), as well as our cash flow from operations and liquidity.

Bookings.    We define bookings as the total value of non-contingent fees payable to the company pursuant to the terms of duly executed contracts. Bookings result in revenue as products are delivered or services are performed, and may reflect contracts from which revenue will be recognized over multi-year periods. Bookings do not include amounts subject to contingencies, such as optional renewal periods, amounts subject to a customer’s internal approvals, and amounts that are refundable for reasons outside of our standard warranty provisions. Because our revenues are recognized under several different accounting standards and thus are subject to period-to-period variability, we closely monitor our bookings as a leading indicator of future revenues and the overall performance of our business.

Total bookings for the years ended December 31, 2007 and December 31, 2006 were $264.7 million and $257.3 million, respectively, an increase of approximately 3% or $7.4 million. A number of the bookings entered into during the fourth quarter of 2007 are multi-year arrangements. We did not begin tracking total bookings until the fourth quarter of 2005, so there is no comparable number available for the year ended December 31, 2005. We have experienced seasonality in our quarterly bookings, with the third quarter typically being the weakest of the year. Although, our fourth quarter 2007 bookings were approximately 28% higher than our fourth quarter 2006 bookings and our total bookings grew approximately 3% in 2007 when compared to 2006, bookings for the year ended December 31, 2007 were below our original expectations. We believe this was due to execution issues, focus on internal organizational and management changes including our restructuring initiatives during the third quarter and public comments made by certain large stockholders regarding our competitive position and future direction. Unless we are able to generate bookings growth in the next several quarters, in the future our revenue will continue to decline.

Backlog.    Backlog represents the balance of bookings that has yet to be recognized as revenue. The amount of backlog for which we have received payment is recorded as deferred revenue on our consolidated balance sheet. We review our backlog to assess future revenue that may be recognized from bookings in previous fiscal periods. This review allows us to determine whether we are recognizing more or less revenue compared to the bookings in that period and whether our backlog is increasing or decreasing.

Revenue.    In our internal analysis of revenue, we focus on operating revenue (total revenue excluding contract revenue). Contract revenue is the result of the recognition of certain revenue that was carried on our balance sheet as a portion of deferred revenue and was a result of our 2003 financial restatement. Inclusion of contract revenue in the evaluation of our performance would skew comparisons of our periodic results since recognition of that revenue was based on fulfillment of contractual obligations which often required only minimal cash outlays and generally did not involve any significant activity in the period of recognition. Additionally, the cash associated with contract revenue had been collected in prior periods. All remaining contract revenue was recognized March 31, 2007, so it is not relevant to our on-going operations and we exclude it from comparisons to prior period results.

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Our annual operating revenue (total revenue excluding contract revenue) was approximately $257.9 million, $275.6 million and $294.3 million in 2007, 2006 and 2005, respectively. These declines represent annual declines of 6% for each period. As part of our transition to being a solutions-oriented provider, we have experienced a shift to a greater level of services revenue, which has partially offset our decline in software solutions and maintenance revenue.

Software solutions revenue declined 37% or $28.5 million for the year ended December 31, 2007 compared to the same period in 2006, and declined 15% or $13.7 million for the year ended December 31, 2006 compared to the same period in 2005. In 2005 and 2006 our total software solutions bookings were consistently lower than our software solutions revenue, thereby significantly reducing our backlog and in 2007 our total software solutions bookings were slightly above our software solution revenue, increasing our backlog, as indicated in the table below. This has contributed to sequentially lower software solutions revenue in the three years ended December 31, 2007. This trend will continue unless we experience growth in software solutions bookings in the next several quarters.

	December 31, 2007		December 31, 2006			December 31, 2005
Additions to Backlog:
Software Solutions Bookings	$	54,556	$	49,540		$	36,433
Platform Technology/Source Code Bookings		500		10,480			10,000
Net Additions to Backlog		55,056		60,020			46,433
Less: Software Solutions Revenue Recognized		47,721		76,243			89,937
Increase/(Decrease) in Backlog	$	7,335	$	(16,223	)	$	(43,504	)

Services revenue increased 15% or $16.2 million for the year ended December 31, 2007 when compared to the same period in 2006, and increased 3% or $2.7 million for the year ended December 31, 2006 when compared to the same period in 2005. These increases are due to continual shifts in the demands of the market, changes in our sales approach and an increase in our services offerings. We expect services revenue to continue to be a larger percentage of our total revenue than it has been in previous years. Services revenue generally earns a lower margin than our other revenue types, although we have experienced significantly higher margins in our services business in 2007 compared to 2006 and 2005 due to leverage and efficiency from the services platform.

Maintenance revenue declined 6% or $5.4 million for the year ended December 31, 2007 when compared to the same period in 2006, and declined 8% or $7.8 million for the year ended December 31, 2006 when compared to the same period in 2005. These declines in maintenance revenue were primarily caused when customers failed to renew their maintenance agreements or renewed them at lower rates. Although we have put programs in place that demonstrate the value of maintenance to our customers, we expect maintenance revenue to continue to decline in the near term.

Application of Critical Accounting Policies and Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and judgments related to the application of certain accounting policies.

While we base our estimates on historical experience, current information and other factors deemed relevant, actual results could differ from those estimates. We consider accounting estimates to be critical to our reported financial results if (i) the accounting estimate requires us to make assumptions about matters that are uncertain and (ii) different estimates that we reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements.

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Revenue Recognition

We consider our policies for revenue recognition to be critical due to the continuously evolving standards and industry practice related to revenue recognition, changes to which could materially impact the way we report revenues. Accounting polices related to: allowance for doubtful accounts, deferred taxes, goodwill and intangible assets, loss contingencies, and restructuring charges are also considered to be critical as these policies involve considerable subjective judgment and estimation by management. Critical accounting policies, and our procedures related to these policies, are described in detail below. Also, see Note 1 — Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements.

Software Solutions Revenue — SOP 97-2.    The recognition of revenue under SOP 97-2 requires us to make judgments concerning whether the services associated with the license, if any, are considered “essential” to the licensed functionality. If they are deemed essential, revenue cannot be recognized under SOP 97-2, but rather is required to be recognized under SOP 81-1. During 2003, we implemented formal processes for evaluation of each of our licensed products to determine whether they can be implemented without essential services, and are therefore considered eligible for recognition under 97-2. We also implemented processes, including internal representations from sales, services and research and development personnel, to evaluate each transaction that is comprised solely of products that are eligible under SOP 97-2 to determine whether there are specific requirements or commitments associated with the licensed functionality that would require recognition under SOP 81-1. We are also required to assess the existence of vendor specific objective evidence (“VSOE”) of fair value for undelivered elements in agreements recognized under SOP 97-2, which for our arrangements commonly include implementation services and maintenance. If we lose our ability to demonstrate VSOE for undelivered elements, the timing of recognition of transactions under SOP 97-2 will change.

Software Solutions Revenue — SOP 81-1- and Services Revenue.    A significant portion of these revenues pertain to projects recognized under the percentage of completion method of SOP 81-1, which requires that we make estimates about the number of hours required and the amount of fees to be received to periodically assess the progress to completion of a particular project. We are also required as a prerequisite for using percentage of completion to assess whether we have the ability to reliably estimate the hours and fees for each project.

Collectibility.    All of our revenues are subject to our assessment of the probability of collection of the underlying fees. The revenue type that is most susceptible to collection risk is software solutions revenue recognized under SOP 97-2, since the revenue is generally recognized up-front upon delivery of the software, and payment is usually due approximately 30 to 60 days after recognition. To assess our collection risk, we have reviewed our collection history and determined that for certain countries, particularly in the Greater Asia Pacific region and in certain of the developing countries within Europe, we will only recognize our license revenues under SOP 97-2 on a cash received basis. For our other revenue types, which are recurring in nature in that they occur over several months, we have a policy in place whereby we review customers that have invoices that are overdue by more than 30 days and we begin deferring recognition of revenue for customers that become delinquent in their payment. This policy prevents us from continuing to recognize revenue related to an implementation or maintenance arrangement when payments are late, and it therefore appears that collection is not probable. Our policies and procedures in this area have resulted in minimizing our bad debt expense since we are diligent in our evaluation of collectibility risk prior to recognizing revenue.

Stock compensation expense

As disclosed in our footnotes, the valuation of stock compensation expense is based on several variables that are inputs to the Black Scholes model. The most critical judgment involved in this area involves the estimation of the impact of forfeitures. Under FAS 123(R), we are required to estimate the impact of forfeitures of stock options, and reduce our expenses based on those estimates. We calculate our monthly forfeiture rates, annualize the amount and apply the resulting amount as a reduction of current period expense. We are then required to regularly evaluate our actual forfeiture experience and make periodic adjustments to expense as needed.

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In February 2007, we granted Restricted Stock Units (“RSUs”) to certain key employees that vest based on specified performance over a two-year performance period. This performance period is from January 1, 2008 to December 31, 2009. On a quarterly basis, we estimate the potential impact of forfeitures on this grant and assess whether vesting is probable. Based on these assessments, we record the appropriate expense.

Taxes

We operate directly and indirectly in numerous countries and are subject to the tax laws, rules and regulations of those jurisdictions. Positions we take in our tax filings are subject to scrutiny by the local country tax authorities and, to the extent it affects our domestic tax position, the Internal Revenue Service. Determining the appropriate tax treatment of complicated issues involves the use of significant judgments and estimates; such judgments and estimates may not be agreed to by the relevant taxing authority, which may require extensive discussions and negotiations to resolve these matters. We accrue tax expense in an amount at which we believe an issue may be ultimately resolved in a manner differently from the position taken in our tax filings. The amount of our accrued tax expense for a particular matter may be significantly different from that determined upon the ultimate resolution of the issue. It is also possible that a tax issue may arise of which we were unaware and no accrual was made. In both cases, adjustments to income tax expense in the relevant reporting period may be material.

We expect tax expense variability to increase as a result of the implementation of FIN 48, which was effective January 1, 2007.

Accrued Expenses

We are required to use judgment in estimating amounts recorded as accrued expenses. Such estimates include our assessment of estimated losses resulting from claims and legal proceedings. We record a liability if our assessments indicate that the likelihood of an unfavorable outcome is probable and the related cost can be reasonably estimated.

Amortization of Intangible Assets and Impairment of Intangible Assets.

From time to time, we have sought to enhance our product offerings through technology and business acquisitions. When an acquisition of a business is accounted for using the purchase method, the amount of the purchase price is allocated to the fair value of assets acquired, net of liabilities assumed. Any excess purchase price is allocated to goodwill. Intangible assets are amortized over their estimated useful lives, while goodwill is only written down when it is deemed to be impaired.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” we test goodwill for impairment annually. Impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value.

Analysis of Financial Results — Twelve Months Ended December 31, 2007 Compared to Twelve Months Ended December 31, 2006

Summary of the Year Ended December 31, 2007 Results

• Total revenue decreased $19.4 million from the same period in 2006

• Total costs and expenses decreased $15.1 million for the same period in 2006

• Net income applicable to common stockholders decreased $6.6 million compared to the same period in 2006

• Diluted earnings per share were $0.55 versus $0.82 in the same period in 2006

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• Cash flow from operations was $16.4 million versus $14.8 million in the same period in 2006

• Total bookings were $264.7 million

Revenues

The following table sets forth revenues and the percentages of total revenues of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the twelve months ended December 31, 2007 and December 31, 2006. The period-to-period comparisons of financial results are not necessarily indicative of future results.

	Twelve Months Ended December 31, 2007		Percent of Revenue		Twelve Months Ended December 31, 2006		Percent of Revenue		Change 2007 versus 2006
									Twelve months ended December 31
									$ Change			% Change
SOP 97-2 recognition	$	9,758	4	%	$	19,962	7	%	$	(10,204	)	-51	%
SOP 81-1 recognition		15,556	6	%		22,305	8	%		(6,749	)	-30	%
Recurring items		22,407	8	%		33,976	12	%		(11,569	)	-34	%
Total Software solutions		47,721	18	%		76,243	27	%		(28,522	)	-37	%
Services		122,682	47	%		106,493	38	%		16,189		15	%
Maintenance		87,457	34	%		92,828	33	%		(5,371	)	-6	%
Contract		2,450	1	%		4,113	2	%		(1,663	)	-40	%
Total revenues	$	260,310	100	%	$	279,677	100	%	$	(19,367	)	-7	%

Software Solutions Revenue.    Total software solutions revenue decreased 37% or $28.5 million for the twelve months ended December 31, 2007 compared to the same period in 2006. Overall we experienced lower software solutions revenue in the twelve months ended December 31, 2007 due to less current period bookings being recognized as revenue and a smaller size of projects being recognized under percentage of completion accounting, when compared to the same period in 2006. In addition, we did not have revenue from platform technology transactions in the 2007 period. The components of the changes in software solutions revenue are explained below.

During the twelve months ended December 31, 2007, we recognized revenue under SOP 97-2 related to 62 contracts at an average of $0.2 million per contract compared to 72 contracts at an average of $0.3 million per contract in the comparable period of 2006.

The primary cause of the decline in revenue recognized under SOP 81-1 for the twelve months ended December 31, 2007 is a decline in the amount of revenue generated on each project as compared to the same period in 2006, due mainly to the continued decline in our backlog. Revenue recognized under SOP 81-1 is dependent upon the amount of work performed and milestones met during the applicable period on projects booked in prior periods. During the twelve months ended December 31, 2007 we recognized revenue under 34 projects at an average of $0.5 million per project compared to 35 projects at an average of $0.6 million per project in the comparable period of 2006.

The decline in revenue from recurring items for the twelve months ended December 31, 2007 was primarily driven by the recognition of $10.5 million in 2006 from a platform technology transaction which was not repeated in 2007.

Services Revenue.    Services revenue increased 15% or $16.2 million for the twelve months ended December 31, 2007 compared to the same period in 2006 primarily as a result of a 4% increase in revenue recognized per billable hour together with a 6% increase in total billable hours. Services revenue also increased when compared to 2006 due to an increase of approximately $1.0 million in billable travel costs. The increase in billable hours was due to a 6% increase in average number of services personnel from the twelve-month period ended December 31, 2006.

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Maintenance Revenue.    Maintenance revenue decreased 6% or $5.4 million for the twelve months ended December 31, 2007 compared to the same period in 2006 primarily as a result of customers not renewing their maintenance agreements or customers renewing on less favorable terms, with such decreases not being offset by initial maintenance agreements with new customers.

International Revenue.    Our international revenues included in the categories discussed above are primarily generated from customers located in Europe, Asia, Latin America and Canada. International revenue totaled $110.7 million, or 43% of total revenue, in the twelve months ended December 31, 2007 compared to $120.7 million, or 43% of total revenue, in the same period in 2006. International revenue remained relatively consistent in the twelve-month periods ended December 31, 2007 and December 31, 2006.

Customer Concentration.    During the periods presented, no individual customer accounted for more than 10% of total revenues.

Impact of Indian Rupee on Expenses

During the twelve months ended December 31, 2007 we experienced margin compression as a result of appreciation in the Indian rupee. Our rupee-denominated expenses increased modestly during 2007, but this translated into a double-digit percentage increase in our dollar-denominated expenses in our India operations. If we assume the same currency exchange rate for our rupee expenditures in 2007 as we experienced in 2006 the impact of rupee appreciation was approximately $2.3 million for the twelve-months ended December 31, 2007.

Cost of Revenues

The following table sets forth cost of revenues and the gross margins of selected items reflected in our condensed consolidated statements of operations and comprehensive income for the twelve months ended December 31, 2007 and December 31, 2006. The period-to period comparisons of financial results are not necessarily indicative of future results.

	Twelve Months Ended December 31, 2007		Margin		Twelve Months Ended December 31, 2006		Margin		Change 2007 versus 2006
									Twelve months ended December 31
									$ Change			% Change
Software solutions	$	8,567	82	%	$	12,862	83	%	$	(4,295	)	-33	%
Services and maintenance		108,471	48	%		97,960	51	%		10,511		11	%
Contract		—	—			311	92	%		(311	)	-100	%
Amortization of acquired technology		25	—			21	—			4		19	%
Total cost of revenues	$	117,063			$	111,154			$	5,909		5	%

Cost of Software Solutions.    Cost of software solutions consists of:

• Salaries and other related costs of employees who provide essential services to customize or enhance the software for the customer

• Commissions paid to non-customer third parties in connection with joint marketing and other related agreements, which are generally expensed when they become payable

• Royalty fees associated with third-party software utilized with our technology. Such royalties are generally expensed when the products are shipped; however, royalties associated with fixed cost arrangements are generally expensed over the period of the arrangement.

• The cost of user product documentation

• The cost of delivery of software

• Provisions for the estimated costs of servicing customer claims, which we accrue on a case-by-case basis

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Cost of software solutions decreased 33% or $4.3 million for the twelve month months ended December 31, 2007 compared to the same period in 2006 primarily because of a decrease in the number of hours worked on projects requiring essential services, which is reflected in our lower software solutions revenues for the 2007 period.

During the twelve months ended December 31, 2007 and December 31, 2006, the costs attributable to the performance of essential services related to SOP 81-1 was $3.5 million and $7.1 million, respectively. The remaining costs of software solutions are not directly attributable to specific arrangements, so we do not believe there is a reasonable basis to calculate the cost of each type of software solutions transaction or the resulting contribution margin.

Cost of Services and Maintenance.    Cost of services and maintenance includes expenses related to implementation, training, and customization and enhancement of previously licensed software solutions, as well as providing telephone support, upgrades and updated user documentation. Cost of services and maintenance increased 11% or $10.5 million for the twelve months ended December 31, 2007 compared to the same period in 2006 as a result of increased services personnel to support our growing services business. Average services and maintenance headcount increased 6% for the twelve months ended December 31, 2007 as compared to the same period in 2006. For the twelve months ended December 31, 2007, employee-related costs associated with this expense category increased $9.1 million, travel and entertainment increased $1.2 million and equipment expense increased $0.5 million as compared to the same period in 2006.

Amortization of Acquired Technology.    In connection with our business acquisitions, we acquired developed technology that we offer as a part of our solutions. In accordance with applicable accounting standards, the amortization of acquired technology is included as a part of our cost of revenues because it relates to software products that are marketed to potential customers.

Operating Expenses

The following table sets forth operating expenses and the percentages of total revenue for those operating expenses as reported in our condensed consolidated statements of operations and comprehensive income. The period-to-period comparisons of financial results are not necessarily indicative of future results.

	Twelve Months Ended December 31, 2007		Percent of Revenue		Twelve Months Ended December 31, 2006			Percent of Revenue		Change 2007 versus 2006
										Twelve months ended December 31
										$ Change			% Change
Sales and marketing	$	41,872	16	%	$	48,185		17	%	$	(6,313	)	-13	%
Research and development		33,513	13	%		35,200		13	%		(1,687	)	-5	%
General and administrative		38,691	15	%		56,129		20	%		(17,438	)	-31	%
Amortization of intangibles		78	—			17		—			61		359	%
Restructuring charges and adjustments		3,955	2	%		(403	)	—			4,358		-1081	%
Total operating expenses	$	118,109			$	139,128				$	(21,019	)	-15	%

Sales and Marketing Expense.    Sales and marketing expense consists primarily of personnel costs, commissions, office facilities, travel and promotional events such as trade shows, seminars, technical conferences, advertising and public relations programs. For the twelve months ended December 31, 2007, average sales and marketing headcount decreased 9% compared to the same period in 2006. Sales and marketing expense for the twelve months ended December 31, 2007 decreased primarily due to decreases in employee-related costs of $6.2 million.

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Research and Development Expense.    Research and development expense consists of costs related to continued software development and product enhancements to existing software. Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. To date, the establishment of technological feasibility of our products and general release of such software has substantially coincided. As a result, software development costs qualifying for capitalization have been insignificant; therefore, we have not capitalized any software development costs other than those recorded in connection with our acquisitions. The primary component of research and development expense is employee-related cost. Our average headcount remained relatively consistent during the periods presented as reflected by the relatively consistent level of expense.

General and Administrative Expense.    General and administrative expense includes the personnel and other costs of our finance, legal, accounting, human resources, information systems and executive departments, as well as external litigation costs. General and administrative expense for the twelve months ended December 31, 2007 decreased 31% or $17.4 million compared to the same period in 2006 due to a decline in legal expense of $11.5 million, a decline in insurance expense of $2.3 million, a decline in professional services expense of $1.2 million, a decline of employee-related expense of $1.2 million and a decline in travel and entertainment of $0.5 million. For the twelve months ended December 31, 2007, average general and administrative headcount decreased 10% compared to the same period in 2006.

Restructuring Expense.    During 2007, we initiated a reorganization, and eliminated approximately 50 positions. The purpose of the restructuring was to reduce management layers to both decrease cost and increase speed around decision-making and internal processes. The realignment included the elimination of certain management levels as well as other targeted cost reductions. We recorded a charge of approximately $4.0 million, primarily related to severance costs. Additional details of the restructuring charges and remaining accruals are presented in Note 11 — Restructuring Charges and Adjustments in our Notes to Consolidated Financial Statements.

Non-Operating Expense, Net

For the twelve months ended December 31, 2007 and December 31, 2006, non-operating (expense) income, net, was as follows:

	Twelve Months Ended December 31, 2007			Twelve Months Ended December 31, 2006			Change 2007 versus 2006
							Twelve months ended December 31
							$ Change		% Change
Interest income	$	5,488		$	5,305		183		3	%
Interest expense		(4,948	)		(6,069	)	(1,121	)	-18	%
Realized gains (losses) on investments, net		—			475		(475	)	-100	%
Foreign currency hedge and transaction losses, net		(678	)		(219	)	459		210	%
Other expense, net		(1,134	)		(850	)	284		33	%
Total non-operating expense, net	$	(1,272	)	$	(1,358	)	(86	)	-6	%

Total non-operating expense, net, decreased 6% or $0.1 million for the twelve months ended December 31, 2007 as compared to the same period in 2006.

Interest income increased in the twelve months ended December 31, 2007 compared to the same period in 2006 due to higher interest rates earned on invested balances. The average rate earned for the twelve months ended December 31, 2007 was 29 basis points higher then the average rate earned in the prior year period. This increase was partially offset by lower average cash balances. For the twelve months ended December 31, 2007, average cash balances decreased 6%.

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Interest expense decreased for the twelve months ended December 31, 2007 as compared to the same period in 2006 due to lower debt levels following the retirement of certain indebtedness in December 2006.

Other expense, net, increased $0.3 million for the twelve months ended December 31, 2007 as compared to the same period in 2006. Included in this change is the impact of $0.4 million of sales tax refunds received in the first quarter of 2006.

Provision for Income Taxes

We recognized income tax expense of $6.1 million and $3.8 million in 2007 and 2006, respectively, representing effective income tax rates of 25.7% in 2007 and 13.6% in 2006.

The effective income tax rates during 2007 and 2006 differ from the U.S. statutory rate of 35% due to several factors. These factors include, among others, changes in our valuation allowance, the effect of foreign operations, state income taxes (net of federal income tax benefits), non-deductible meals and entertainment, and research and development tax credits. The effect of these factors on the income tax rate is detailed in Note 13 — Income Taxes in our Notes to Consolidated Financial Statements.

At December 31, 2007, we maintained a full valuation allowance against our domestic net deferred tax assets and a valuation allowance of approximately $0.9 million against our foreign net deferred tax assets. Each quarter, we review the necessity and amounts of the domestic and foreign valuation allowances. Despite the valuation allowance, the future tax-deductible benefits related to these deferred tax assets remain available to offset future taxable income over the remaining useful lives of the underlying deferred tax assets.

At December 31, 2007, we have recorded approximately $8.8 million in tax contingency reserves in our taxes payable accounts relating to tax positions we have taken during tax years that remain open for examination by tax authorities.

Analysis of Financial Results — Twelve Months Ended December 31, 2006 Compared to Twelve Months Ended December 31, 2005

Summary of the Year Ended December 31, 2006 Results

• Total revenues decreased $57.2 million from the same period in 2005

• Total costs and expenses decreased $31.2 million from the same period in 2005

• Net income from continuing operations applicable to common stockholders decreased $19.2 million from the same period in 2005

• Diluted earnings per share applicable to common stockholders from continuing operations were $0.82 versus $1.65 in the same period in 2005

• Cash flow from operations increased $15.4 million from the same period in 2005.

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Revenues

The following table sets forth revenues and the percentage of revenues reflected in our consolidated statements of operations and comprehensive income for 2006 and 2005. The period-to-period comparisons of financial results are necessarily indicative of future results.

	Twelve Months Ended December 31, 2006		Percent of Revenue		Twelve Months Ended December 31, 2005		Percent of Revenue		Change 2006 versus 2005
									Twelve months ended December 31
									$ Change			% Change
SOP 97-2 recognition	$	19,962	7	%	$	25,736	8	%	$	(5,774	)	-22	%
SOP 81-1 recognition		22,305	8	%		43,810	13	%		(21,505	)	-49	%
Recurring items		33,976	12	%		20,391	6	%		13,585		67	%
Total Software solutions		76,243	27	%		89,937	27	%		(13,694	)	-15	%
Services		106,493	38	%		103,792	31	%		2,701		3	%
Maintenance		92,828	33	%		100,612	30	%		(7,784	)	-8	%
Contract		4,113	2	%		42,526	12	%		(38,413	)	-90	%
Total revenues	$	279,677	100	%	$	336,867	100	%	$	(57,190	)	-17	%

Software Solutions Revenue.    Total software solutions revenue decreased 15% or $13.7 million for the twelve months ended December 31, 2006 compared to the same period in 2005. Overall, we experienced lower software solutions revenue in the twelve months ended December 31, 2006 due to less current period bookings being recognized as revenue and a smaller size of projects being recognized under percentage of completion accounting, when compared to the same period in 2005. The components of the changes in software solutions revenue are explained below.

A significant cause of the decline in revenue recognized under SOP 97-2 for the twelve months ended December 31, 2006 is the recognition in the twelve months ended December 31, 2005 due to variability in the timing of recognition of revenue from software solutions under SOP 97-2 and we expect this variability to continue. Variability is caused by the timing and amount of software solutions bookings, and whether the software solutions require essential services. Variability is also caused by the timing of cash receipts for arrangements where significant uncertainty exists regarding collectibility of license fees. During the twelve months ended December 31, 2006, we recognized revenue related to 72 contracts at an average of $0.3 million per contract compared to 77 contracts at an average of $0.3 million per contract in the comparable period of 2005.

The primary cause of the decline in revenue recognized under SOP 81-1 for the twelve months ended December 31, 2006 is a decline in the number of projects generating revenue and the amount of revenue generated on each project as compared to the same period in 2006, due mainly to the continued decline in our backlog. Revenue recognized under SOP 81-1 is dependent upon the amount of work performed and milestones met during the applicable period on projects booked in prior periods. During the twelve months ended December 31, 2006 we recognized revenue under 35 projects at an average of $0.6 million per project compared to 50 projects at an average of $0.9 million per project in the comparable period of 2005.

Revenue from recurring items increased $13.6 million, or 67%, in 2006 when compared to the same period in 2005. Included in the 2006 increase was $10.5 million of revenue recognized from $10.5 million in platform technology bookings in the second quarter of 2006. Recurring items include revenue from our supply chain leader and other subscription transactions, for which the revenue is deferred and recognized ratably over the contractual term of the transaction. Recurring revenue related to supply chain leader transactions for each of the twelve-month periods ended December 31, 2006 and December 31, 2005 was $12.4 million. These supply chain leader transactions have varying lives and begin expiring in the second quarter of 2007.

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Services Revenue.    Services revenue increased 3% or $2.7 million for the twelve months ended December 31, 2006 compared to the same period in 2005 because of a 3% increase in billable hours partially offset by a 10% decrease in revenue recognized per billable hour. Services revenue also increased in 2006 when compared to 2005 due to an increase of approximately $1.7 million of billable travel costs. The increase in billable hours was due to growth in the average number of services personnel during the second half of 2006, when compared to the comparable period in 2005, as we attempted to match the levels of services personnel with the market demand for our services.

Maintenance Revenue.    Maintenance revenue decreased 8% or $7.8 million for the twelve months ended December 31, 2006 compared to the same period in 2005 due to a continuing decline in both the number and dollar amount of maintenance renewals, mainly due to cost cutting efforts of our customers.

Contract.    Contract revenue consists of license, services, and maintenance revenue attributable to those transactions for which we determined to change the accounting from revenue recognition under SOP 97-2 to contract accounting under SOP 81-1 in connection with the 2003 restatement of our consolidated financial statements for the years ended December 31, 2000 and 2001 and the first three quarters of 2002. Contract revenue is not indicative of the current performance of our business, as it reflects the recognition of deferred revenues where cash was collected in prior periods. Contract revenue decreased $38.4 million, or 90%, during 2006 when compared to the same period in 2005. This decrease in contract revenue during 2006 was a result of the lower amount of remaining deferred contract revenue, the decreased number of deferred transactions and the occurrence of fewer events that allow the recognition of this revenue.

International Revenue.    Our international revenues included in the categories discussed above are primarily generated from customers located in Europe, Asia, Latin America and Canada. International revenue totaled $120.3 million, or 43% of total revenue, in the twelve months ended December 31, 2006 compared to $158.2 million, or 47% of total revenue, in the same period in 2005.

Customer Concentration.    During the periods presented, no individual customer accounted for more than 10% of total revenues.

Cost of Revenues

The following table sets forth cost of revenues and the gross margins of selected items reflected in our consolidated statements of operations and comprehensive income. The year-to-year comparisons of financial results are not necessarily indicative of future results.

	Twelve Months Ended December 31, 2006		Gross Margin		Twelve Months Ended December 31, 2005		Gross Margin		Change 2006 versus 2005
									Twelve months ended December 31
									$ Change			% Change
Software solutions	$	12,862	83	%	$	14,720	84	%	$	(1,858	)	-13	%
Services and maintenance		97,960	51	%		103,758	49	%		(5,798	)	-6	%
Contract		311	92	%		1,575	96	%		(1,264	)	-80	%
Amortization of acquired technology		21	—			—	—			21		—
Total cost of revenues	$	111,154			$	120,053			$	(8,899	)	-7	%

Cost of Software Solutions.    Cost of software solutions decreased $1.9 million, or 13%, in 2006. The decrease was related to renegotiated prepaid third-party royalty agreements resulting in a lower expense run rate. During the twelve months ended December 31, 2006 and December 31, 2005, the costs attributed to the performance of essential services related to SOP 81-1 were $7.1 million and $13.4 million, respectively. The remaining costs of software solutions are not directly attributable to specific arrangements, so we do not believe there is a reasonable basis to calculate the cost of each type of software solutions transaction or the resulting contribution margin.

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Cost of Services and Maintenance.    Cost of services and maintenance decreased $5.8 million, or 6%, in 2006. The decrease in 2006 includes decreases in payroll related costs of $4.7 million, travel and entertainment of $2.0 million and subcontractors of $1.2 million. These decreases were partially offset by non-cash stock option expense of $2.7 million. Average services and maintenance headcount decreased 5% in 2006 when compared to 2005.

Cost of Contract.    Cost of contract decreased $1.3 million, or 80%, in 2006. Because contract expenses are recorded when the corresponding revenue is recognized, we expect cost of contract to vary. As of December 31, 2006, we had no remaining deferred contract costs.

Amortization of Acquired Technology.    In connection with our business acquisitions, we acquired developed technology that we offer as a part of our solutions. In accordance with applicable accounting standards, the amortization of acquired technology is included as a part of our cost of revenues because it relates to software products that are marketed to potential customers.

Operating Expenses

The following table sets forth operating expenses and the percentages of total revenue for those operating expenses as reported in our consolidated statements of operations and comprehensive income. The year-to-year comparisons of financial results are not necessarily indicative of future results:

	Twelve Months Ended December 31, 2006			Percent of Revenue		Twelve Months Ended December 31, 2005		Percent of Revenue		Change 2006 versus 2005
										Twelve months ended December 31
										$ Change			% Change
Sales and marketing	$	48,185		17	%	$	51,727	15	%	$	(3,542	)	-7	%
Research and development		35,200		13	%		37,337	11	%		(2,137	)	-6	%
General and administrative		56,129		20	%		61,117	18	%		(4,988	)	-8	%
Amortization of intangibles		17		—			—	—			17		—
Restructuring charges and adjustments		(403	)	—			11,269	3	%		(11,672	)	-104	%
Total operating expenses	$	139,128				$	161,450			$	(22,322	)	-14	%

Sales and Marketing Expense.    Sales and marketing expense decreased $3.5 million, or 7%, in 2006. The decrease in 2006 includes decreases in payroll-related costs of $5.6 million and decreases in overhead costs of $1.2 million. These decreases were partially offset by an increase in non-cash stock option expense of $3.5 million. Average sales and marketing staff decreased approximately 17% in 2006 when compared to 2005.

Research and Development Expense.    Research and development expense decreased $2.1 million, or 6%, in 2006. This decrease in expense includes a decrease in overhead expense of $4.6 million, a decrease in facilities expense of $1.0 million, a decrease in communications expense of $0.4 million and a decrease in travel and entertainment expense of $0.4 million. These decreases in expense were partially offset by an increase in payroll-related expense of $1.1 million and non-cash stock option expense of $3.5 million.

General and Administrative Expenses.    General and administrative expense decreased $5.0 million, or 8%, in 2006. This decrease reflects an accrual made in 2005 of approximately $10.0 million for the estimated settlement of certain outstanding contingent liabilities. In addition, payroll-related expense decreased $3.1 million and facilities expense decreased $2.4 million in 2006. These decreases in the components of general and administrative expense were partially offset by an increase in stock compensation expense of $5.7 million and an increase in indemnification expense of $9.1 million.

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Restructuring Charges.    In March 2005, we implemented a restructuring plan to resize our infrastructure and reduce our overhead to improve efficiencies and reduce operating expense. The restructuring included the involuntary termination of 184 employees and closing or partially vacating four office locations. During the first quarter of 2005, we recorded a restructuring charge of $10.4 million for the involuntary terminations and $2.1 million for the office closures.

Non-Operating Expense, Net

Non-operating expense, net, was as follows:

	Twelve Months Ended December 31, 2006			Twelve Months Ended December 31, 2005			Change 2006 versus 2005
							Twelve months ended December 31
							$ Change		% Change
Interest income	$	5,305		$	7,697		(2,392	)	-31	%
Interest expense		(6,069	)		(16,315	)	(10,246	)	63	%
Realized gains (losses) on investments, net		475			10,144		(9,669	)	-95	%
Foreign currency hedge and transaction losses, net		(219	)		(4,217	)	(3,998	)	95	%
Loss on extinguishment of debt		—			(3,017	)	3,017		-100	%
Other expense, net		(850	)		(1,547	)	(697	)	45	%
Total non-operating expense, net	$	(1,358	)	$	(7,255	)	(5,897	)	-81	%

Interest income decreased in the twelve months ended December 31, 2006 compared to the same period in 2005 due to lower balances partially offset by higher interest rates earned on invested balances. For the twelve months ended December 31, 2007, average cash balances decreased 54%, reflecting the repayment of our 5.25% convertible subordinated note. The decrease in realized gains on investments in 2006 as compared to 2005 is due to the sale of an investment in 2005 for approximately $11.0 million that was non-recurring in nature. During 2006, foreign currency losses decreased due to favorable foreign currency exchange rate movements in 2006 when compared to 2005, relative to our foreign currency positions, and improved hedge effectiveness.

The market interest rates on investments and the relative exchange values of foreign currencies are influenced by the monetary and fiscal policies of the governments in the countries in which we operate. The nature, timing and extent of any impact on our financial statements resulting from changes in those governments’ policies are not predictable. Risks associated with market interest rates and foreign exchange rates are discussed below under the section captioned “Sensitivity to Market Risks.”

Provision for Income Taxes

We recognized income tax expense of $3.8 million and $4.7 million in 2006 and 2005, respectively, representing effective income tax rates of 13.6% in 2006 and 5.1% in 2005. Our effective tax rates vary from period to period due to several factors including, among others, changes in our valuation allowance, the effect of foreign operations, state income taxes (net of federal income tax benefits), non-deductible meals and entertainment, and research and development tax credits. The effect of these factors on the income tax rate is detailed in Note 13 — Income Taxes in our Notes to Consolidated Financial Statements.

At December 31, 2006, we maintained a full valuation allowance against our domestic net deferred tax assets and a valuation allowance of approximately $1.1 million against our foreign net deferred tax assets. Each quarter, we review the necessity and amounts of the domestic and foreign valuation allowances. Despite the valuation allowance, the future tax-deductible benefits related to these deferred tax assets remain available to offset future taxable income over the remaining useful lives of the underlying deferred tax assets.

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At December 31, 2006, we have recorded approximately $7.4 million in tax contingency reserves in our taxes payable accounts relating to tax positions we have taken during tax years that remain open for examination by tax authorities.

Contractual Obligations

The following table summarizes our significant contractual obligations at December 31, 2007, and the effect such obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts already recorded on our balance sheet as current liabilities at December 31, 2007.

	Total			Less Than One Year			1-3 Years			3-5 Years			More Than 5 Years
Operating Lease Obligations (excluding restructured facilities)	$	30,104		$	12,926		$	15,837		$	1,341		$	—
Sub-Lease income		(2,092	)		(818	)		(664	)		(610	)		—
Long-term debt obligations (1)		120,211			4,313			8,625			8,625			98,648
Other purchase obligations (2)		11,310			7,146			3,184			980			—
Total	$	159,533		$	23,567		$	26,982		$	10,336		$	98,648

¹ Included in the long-term debt obligations are semi-annual interest payments through December 15, 2015.

² Other purchase obligations and commitments include payments due under various types of licenses and maintenance obligations.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

On July 13, 2006, the FASB issued FIN No. 48 — Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”). We adopted the provisions of FIN 48 on January 1, 2007. See “-Recently Adopted Accounting Pronouncements.” As of December 31, 2007, we had approximately $4.5 million of non-current tax liabilities, including interest and penalties, related to uncertain tax positions. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities.

Off-Balance-Sheet Arrangements

As of December 31, 2007, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Liquidity and Capital Resources

Our working capital was $63.6 million at December 31, 2007 compared to $17.4 million at December 31, 2006, an improvement of $46.2 million or 266%. The improvement resulted from a $32.9 million decrease in current liabilities (comprised of decreases of $12.3 million in deferred revenue, $7.6 million in accrued liabilities, $6.5 million in accounts payable, and $6.4 million in accrued compensation and related expenses) and an increase of $13.3 million in current assets (comprised of an increase of $15.4 million in cash, including restricted cash, partially offset by decreases of $1.5 million in other current assets and $0.6 million in accounts receivable).

Our working capital balance at December 31, 2007 and December 31, 2006 included deferred revenue. At December 31, 2007 and December 31, 2006, we had approximately $61.7 million and $74.0 million, respectively, of deferred revenue recorded as a current liability, representing pre-paid revenue for all of our different revenue categories. Our deferred revenue balance includes a margin to be earned when it is recognized, so the conversion of the liability to revenue will require cash outflows that are less than the amount of the liability.

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Our cash and cash equivalents increased $11.6 million during the twelve months ended December 31, 2007. This increase is primarily the result of $16.4 million of cash provided by operating activities and $2.1 million of cash provided by financing activities, partially offset by $7.3 million of cash used in investing activities.

During the twelve months ended December 31, 2007, cash provided by operating activities was approximately $16.4 million. Management tracks projected cash collections and projected cash outflows to monitor short-term liquidity requirements and to make decisions about future resource allocations and take actions to adjust our expenses with the goal of remaining cash flow positive from operations on an annual basis. Based on the timing of license bookings and maintenance renewals as well as working capital changes, cash flow from operations is typically seasonally stronger in the second and fourth quarters.

Cash used in investing activities was approximately $7.3 million during the twelve months ended December 31, 2007. We had cash outflows related to investing activities consisting of an increase in restricted cash of $3.8 million, a business acquisition of $2.1 million, and purchases of property, plant and equipment of $1.3 million.

During the twelve months ended December 31, 2007, cash provided by financing activities was approximately $2.1 million. We had cash inflows from financing activities of $3.4 million consisting of the proceeds from the issuance of common stock upon the exercise of stock options and under our employee stock purchase plan, partially offset by cash outflows of $1.3 million from the scheduled dividend paid on our outstanding preferred stock.

At December 31, 2007, we had a net cash balance of $45.0 million compared to a net cash balance of $30.2 million at December 31, 2006. We define net cash as the sum of our total cash and cash equivalents and restricted cash minus our total short-term and long-term debt.

We maintain a $15.0 million letter of credit line. Under this line, we are required to maintain restricted cash (in an amount equal to 125% of the outstanding letters of credit) in a depository account maintained by the lender to secure letters of credit issued in connection with the line. The line has no financial covenants and expires on December 15, 2008. As of December 31, 2007, approximately $5.6 million in letters of credit were outstanding under this line and approximately $7.2 million in restricted cash was pledged as collateral. As of December 31, 2006, $2.9 million in letters of credit were outstanding under this line and $4.0 million in restricted cash was pledged as collateral.

We had $86.3 million in face value of our 5% senior convertible notes outstanding at December 31, 2007. Holders of our senior convertible notes have the right to require us to repurchase all or any portion of the senior convertible notes on November 15, 2010 and may convert the senior convertible notes at any time on or after May 15, 2010. In addition, holders of the senior convertible notes may convert the senior convertible notes prior to May 15, 2010 upon the occurrence of any of the following events:

• if the senior convertible notes have been called for redemption;

• upon certain dividends or distributions to all holders of our common stock;

• upon the occurrence of specified corporate transactions constituting a “fundamental change” (the occurrence of a “change in control” or a “termination of trading,” each as defined in the indenture governing our senior convertible notes);

• if the average of the trading prices for the senior convertible notes during any five consecutive trading-day period is less than 98% of the average of the conversion values for the senior convertible notes (the product of the last reported sale price of our common stock and the conversion rate) during that period; or

• at any time after May 15, 2008 if the closing sale price of our common stock is equal to or greater than $23.21 for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter.

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Upon conversion of the senior convertible notes, we will be required to satisfy our conversion obligation with respect to the principal amount of the senior convertible notes to be converted in cash, with any remaining amount to be satisfied in shares of our common stock.

The indenture governing the 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. Such covenant specifies that we shall not, and that we shall not permit any of our subsidiaries to, directly or indirectly, incur or guarantee or assume any indebtedness other than “permitted indebtedness.” Permitted indebtedness is defined in the indenture to include, among others, the following categories of indebtedness: (i) all indebtedness outstanding on November 23, 2005; (ii) indebtedness under the senior convertible notes; (iii) indebtedness under our $15.0 million letter of credit line; (iv) between $25.0 million and $50.0 million of additional senior secured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture); and (v) at least $100.0 million of additional subordinated unsecured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture). At December 31, 2007 we were in compliance with the aforementioned debt incurrence covenants.

We experienced negative cash flows for the quarters ended March 31, 2007, September 30, 2006 and March 31, 2006, and for each of the five years ended December 31, 2005, primarily due to sharp declines in our revenues and our historical inability to reduce our expenses to a level at or below the level of our revenues. We may be required to seek private or public debt or equity financing in order to support our operations, satisfy the conversion obligation with respect to our senior convertible notes and/or repay our senior convertible notes. The debt incurrence restrictions imposed by the indenture governing our senior convertible notes could restrict or impede our ability to incur additional debt. We may not be able to obtain additional debt or equity financing on satisfactory terms, or at all, and any new financing could have a substantial dilutive effect on our existing stockholders.

Sensitivity to Market Risks

Foreign Currency Risk.    Revenues originating outside of the United States totaled 43% for 2007 and 2006 and totaled 47% of total revenues in 2005. Since we conduct business on a global basis in various foreign currencies, we are exposed to movements in foreign currency exchange rates. We utilize a foreign currency risk mitigation program that utilizes foreign currency forward exchange contracts to reduce the effect of various nonfunctional currency exposures. The objective of this program is to reduce the effect of changes in foreign currency exchange rates on our results of operations. Furthermore, our goal is to offset foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the forward contracts. Our program cannot completely protect us from the risk of foreign currency losses as our currency exposures are constantly changing and we do not use foreign exchange contracts for all of our exposures. Details of our foreign currency risk management program are presented in Note 12 — Foreign Currency Risk Management in our Notes to Consolidated Financial Statements.

During the twelve months ended December 31, 2007 we experienced margin compression as a result of appreciation in the Indian rupee. Our rupee-denominated expenses increased modestly during 2007, but this translated into a double-digit percentage increase in our dollar-denominated expenses in our India operations. If we assume the same currency exchange rate for our rupee expenditures in 2007 as we experienced in 2006 the impact of rupee appreciation was approximately $2.3 million for the twelve-months ended December 31, 2007.

Interest Rate Risk.    Our investments are subject to interest rate risk. Interest rate risk is the risk that our financial condition and results of operations could be adversely affected due to movements in interest rates. We invest our cash in a variety of interest-earning financial instruments, including bank time deposits, money market funds and taxable and tax-exempt variable-rate and fixed-rate obligations of corporations, municipalities and local, state and national governmental entities and agencies. These investments are primarily denominated in U.S. Dollars. Cash balances in foreign currencies overseas are primarily operating balances and are generally invested in short-term time deposits of the local operating bank.

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Due to the demand nature of our money market funds and the short-term nature of our time deposits and debt securities portfolio, these assets are sensitive to changes in interest rates. The Federal Reserve Board influences the general direction of market interest rates in the U.S. where the majority of our cash and investments are held. The Federal Reserve Board decreased the discount rate by 150 basis points between December 31, 2006 and December 31, 2007. The weighted-average yield earned on our cash balances at December 31, 2007 was 4.18%, compared to 3.89% as of December 31, 2006. If overall interest rates fall by 100 basis points in 2008, our interest income will decline approximately $1.2 million, assuming investment levels consistent with December 31, 2007 levels.

Due to volatility in the capital markets, beginning in the third quarter of 2007 we chose not to invest in commercial paper and instead invested in money market instruments. These money market instruments are reflected in cash and cash equivalents on our balance sheet. We typically invest our cash in a variety of interest-earning financial instruments, including bank time deposits, money market funds and taxable and tax-exempt variable-rate and fixed-rate obligations of corporations and federal, state and local governmental entities and agencies. These investments are primarily denominated in U.S. Dollars. Furthermore, we attempt to limit our restricted cash and cash balances held in foreign locations.

Credit Risk.    Financial assets that potentially subject us to a concentration of credit risk consist principally of investments and accounts receivable. Cash on deposit is held with financial institutions with high credit standings. Debt security investments are generally in highly-rated corporations and municipalities as well as agencies of the U.S. government; however, a significant portion of these investments are in corporate debt securities, which carry a higher level of risk compared to municipal and U.S. government-backed securities. Our customer base consists of large numbers of geographically diverse enterprises dispersed across many industries. As a result, concentration of credit risk with respect to accounts receivable is not significant. However, we periodically perform credit evaluations for most of our customers and maintain reserves for potential losses. In certain situations we may seek letters of credit to be issued on behalf of some customers to mitigate our exposure to credit risk. We currently use foreign exchange contracts to reduce the effects of the risks associated with receivables denominated in non-functional currencies. Risk of non-performance by counterparties to such contracts is minimal due to the size and credit standings of the financial institutions involved.

Inflation.    Inflation has not had a material impact on our results of operations or financial condition.

Recently Issued Accounting Pronouncements

See Note 1 — Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on our financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is included in the section captioned “Sensitivity to Market Risks” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is included in Part IV, Item 15(a)(1) and (2).

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.    As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” as of the end of the period covered by this report. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of our company that are designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in that they were designed to provide reasonable assurance that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to provide reasonable assurance that such information is accumulated and communicated to our company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that any system of controls, however well designed and operated, is based in part upon certain assumptions and can provide only reasonable, and not absolute, assurance that the objectives of the system are met.

Management’s Report on Internal Control Over Financial Reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective at December 31, 2007.

Our internal control system is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting.    During our most recent fiscal quarter, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

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PART III

Certain information required by Part III is omitted from this report because we will file a definitive proxy statement pursuant to Regulation 14A related to our 2008 annual meeting of stockholders no later than 120 days after December 31, 2007, and specified information to be included therein is incorporated herein by reference.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

With the exception of the information relating to our Code of Business Conduct and Ethics that is presented in Part I, Item 1 under the heading “Available Information,” the information required by this Item is incorporated by reference to our 2008 proxy statement under the sections captioned “Proposal 1 — Election of Three Class II Directors,” “Executive Compensation and Other Matters — Directors and Executive Officers,” “Corporate Governance — Code of Business Conduct and Ethics,” “Corporate Governance — Committees of the Board of Directors” and “Compliance with Section 16 (a) of the Securities Exchange Act of 1934.”

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to our 2008 proxy statement under the sections captioned “Executive Compensation and Other Matters” (other than under “— Directors and Executive Officers”) and “Corporate Governance — Compensation Committee Interlocks and Insider Participation.”

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to our 2008 proxy statement under the section captioned “Principal Stockholders.”

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to our 2008 proxy statement under the sections captioned “Corporate Governance — Board Matters” and “Corporate Governance — Committees of the Board of Directors.”

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to our 2008 proxy statement under the section captioned “Independent Registered Public Accounting Firm.”

50

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Form 10-K:

1. Consolidated Financial Statements.    The following consolidated financial statements of i2 Technologies, Inc., as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 are filed as part of this Form 10-K on the pages indicated:

	Page
Reports of Independent Registered Public Accounting Firms	F-1
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations and Comprehensive Income	F-5
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8

2. Consolidated financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

3. Exhibits.    Exhibits to this Form 10-K have been included only with the copy of this Form 10-K filed with the Securities and Exchange Commission. Copies of individual exhibits will be furnished to stockholders upon written request to i2 and payment of a reasonable fee.

Exhibit Number	Description
3.1*	—Certificate of Amendment of Restated Certificate of Incorporation of i2 Technologies, Inc. (filed as Exhibit 3.1 to the 8-K filed by i2 on February 15, 2005).
3.2*	—Amended and Restated Bylaws, as amended through May 21, 2001 (filed as Exhibit 3.1 to i2’s Registration Statement on Form S-3 (Reg. No. 333-59106)).
3.3*	—Certificate of Designations of 2.5% Series B Convertible Preferred Stock of i2, dated as of May 26, 2004 (filed as Exhibit 3.1 to i2’s Current Report on Form 8-K filed June 16, 2004)
3.4*	—Certificate of Amendment to Restated Certificate of Incorporation (filed as Exhibit 3.1 to i2’s Current Report on Form 8-K filed on February 18, 2005)
4.1*	—Specimen Common Stock certificate (filed as Exhibit 4.1 to i2’s Registration Statement on Form S-1 (Reg. No. 333-1752) (the “Form S-1”)).
4.3*	—Registration Rights Agreement, dated as of December 10, 1999, among i2 and Goldman, Sachs & Co., Morgan Stanley Dean Witter and Credit Suisse First Boston (filed as Exhibit 4.3 to the Notes Form S-3).
4.4	—Rights Agreement, dated as of January 17, 2002, between i2 and Mellon Investor Services LLC, which includes the form of Certificate of Designation for the Series A junior participating preferred stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Series A preferred Stock as Exhibit C.
4.5*	—Preferred Stock Purchase Agreement, dated as of April 27, 2004, by and between i2 and R² Investments, LDC (filed as Exhibit 4.1 to i2’s Current Report on Form 8-K filed on May 4, 2004)
4.6*	—First Amendment to Rights Agreement, dated as of April 27, 2004, between i2 and Mellon Investor Services, LLC (filed as Exhibit 4.2 to i2’s Current Report on Form 8-K filed on May 4, 2004)

51

Exhibit Number	Description
4.7*	—Second Amendment to Rights Agreement, dated as of April 28, 2004, between i2 and Mellon Investor Services LLC (filed as Exhibit 4.1 to i2’s Current Report on Form 8-K filed on May 14, 2004).
4.8*	—Indenture, dated as of November 23, 2005, between i2 Technologies, Inc., and JPMorgan Chase Bank, National Association, as trustee (filed as exhibit 4.1 to the 8-K filed by i2 on November 29, 2005).
4.9*	—Form of Certificate (filed as exhibit 4.2 to the 8-K filed by i2 on November 29, 2005).
4.10*	—Form of Warrant (filed as exhibit 4.3 to the 8-K filed by i2 on November 29, 2005).
10.1*	—Form of Registration Rights Agreement, dated April 1, 1996, among i2, Sanjiv S. Sidhu and Sidhu-Singh Family Investments, Ltd. (filed as Exhibit 10.2 to the Form S-1).
10.2*	—i2 Technologies, Inc. 1995 Stock Option/Stock Issuance Plan, as amended and restated through December 16, 2004 (included as Exhibit B to i2’s definitive proxy statement filed on November 16, 2004).
10.3*	—Form of Indemnification Agreement between i2 and its officers and directors (filed as Exhibit 10.4 to the Form S-1).
10.4*	—Form of Employee Proprietary Information Agreement between i2 and each of its employees (filed as Exhibit 10.9 to the Form S-1).
10.5*	—First Amendment to Loan and Security Agreement, dated June 30, 2001, by and between i2 and RightWorks Corporation (filed as Exhibit 10.26 to the RightWorks S-4).
10.6*+	—Letter Agreement, dated February 5, 2004, between James Contardi and i2 Technologies, Inc. (filed as Exhibit 10.29 to i2’s Annual Report on Form 10-K for the year ended December 31, 2003)
10.7*	—Stipulation and Agreement of Settlement with Certain Defendants, dated May 7, 2004, in connection with Scheiner v. i2 Technologies, Inc., et al., Civ. Action No. 3:01-CV-418-H in the United States District Court for the Northern District of Texas (Dallas Division) (filed as Exhibit 10.1 to i2’s Current Report on Form 8-K filed on May 21, 2004).
10.8*	—Stock Purchase Agreement, dated as of April 28, 2004, by and between i2 and Sanjiv S. Sidhu (filed as Exhibit 10.1 to i2’s Current Report on Form 8-K filed on May 14, 2004).
10.9*	—Registration Rights Agreement, dated as of June 3, 2004, by and between i2 and R² Investments, LDC (filed as Exhibit 10.2 to i2’s Current Report on Form 8-K filed June 16, 2004).
10.10*+	—Employment Agreement, dated as of February 27, 2005, between i2 and Michael E. McGrath (filed as Exhibit 10.1 to i2’s Current Report on Form 8-K filed March 2, 2005).
10.11	—Lease with One Colinas Crossing dated March 24, 1999 between Colinas Crossing, LP and i2.
10.12*	—Stock Purchase Agreement, dated as of February 28, 2005, between i2 and Integrated Development Enterprise, Inc. (filed as Exhibit 10.2 to i2’s Current Report on Form 8-K filed March 2, 2005).
10.13*+	—Amendment to Employment Agreement and Termination of Share Rights Agreement, dated March 28, 2005, by and between i2 Technologies and Michael McGrath (filed as exhibit 10.1 to the 8-K filed by i2 on April 1, 2005).
10.14*+	—Restricted Stock Agreement, dated March 28, 2005 by and between i2 Technologies, Inc. and Michael McGrath (filed as exhibit 10.2 to the 8-K filed by i2 on April 1, 2005).
10.15*	—Common Stock Purchase Agreement, dated June 28, 2005, between i2 Technologies, Inc., and R2 Investments, LDC (filed as exhibit 10.1 to the 8-K filed by i2 on June 29, 2005).

52

Exhibit Number	Description
10.16*	—Stock Purchase Agreement, dated June 29, 2005, between Primavera Systems, Inc. and i2 Technologies, Inc. (filed as exhibit 10.1 to the 8-K filed by i2 on July 1, 2005).
10.17*+	—Employment Agreement, dated July 26, 2005, by and between i2 Technologies, Inc., and Michael Berry (filed as exhibit 10.1 to the 8-K filed by i2 on July 29, 2005).
10.18*	—LLC Interest Purchase Agreement, dated May 9, 2005, by and between Novia Corp., SoftSRM, LLC, i2 Technologies US, Inc., and i2 Technologies, Inc. (filed as exhibit 10.1 to the 10-Q filed on August 9, 2005).
10.19*+	—Employment Agreement, dated September 26, 2005, by and between i2 Technologies, Inc., and Barbara Stinnett (filed as exhibit 10.1 to the 8-K filed by i2 on October 10, 2005).
10.20*+	—Amendment to the Employment Agreement, dated October 25, 2005, by and between i2 Technologies, Inc., and Michael McGrath (filed as exhibit 10.1 to the 8-K filed by i2 on October 25, 2005).
10.21*+	—Amendment to the Employment Agreement, dated November 8, 2005, by and between i2 Technologies, Inc. and Michael Berry (filed as exhibit 10.1 to the 10-Q filed by i2 on November 9, 2005).
10.22*	—Asset Purchase Agreement, dated November 17, 2005, by and between IHS Parts Management Inc., and i2 Technologies US, Inc. (filed as exhibit 10.1 to the 8-K filed by i2 on November 19, 2005).
10.23*	—Purchase Agreement, dated November 21, 2005, by and between i2 and Highbridge, Marathon Global, Leonardo, Amatis Limited, and Deutsche Bank AG London (filed as exhibit 10.1 to the 8-K filed by i2 on November 29, 2005).
10.24*	—Registration Rights Agreement, dated November 23, 2005 by and between i2 and Highbridge, Marathon Global, Leonardo, Amatis Limited, and Deutsche Bank AG London (filed as exhibit 10.2 to the 8-K filed by i2 on November 29, 2005).
10.25*	—Amendment to Employment Agreement, dated as of February 1, 2006, between the Company and Michael E. McGrath (filed as exhibit 10.1 to the 8-K filed by i2 on February 2, 2006).
10.26*	—Settlement Agreement with Mutual Releases, dated and effective as of December 15, 2006 between the Company and Gregory Brady (filed as exhibit 10.1 to the 8-K filed by i2 on December 20, 2006).
10.27*	—Amendment to Employment Agreement between the Company and Michael E. McGrath (filed as exhibit 10.1 to the 8-K filed by i2 on December 22, 2006).
10.28*	—Amendment to Employment Agreement between the Company and Michael J. Berry (filed as exhibit 10.1 to the 8-K filed by i2 on February 20, 2007).
10.29*	—Change in control agreements entered into with each Hiten Varia and Pallab Chatterjee (filed as exhibits 10.1 and 10.2 to the 8-K filed by i2 on March 15, 2007).
10.30*	—Resignation Agreement, dated July 30, 2007, between Michael E. McGrath and i2 Technologies, Inc. and General Release, dated July 30, 2007, by Michael E. McGrath in favor of i2 Technologies, Inc. and certain other persons (filed as Exhibits 10.1 and 10.2 to the 8-K filed by i2 on August 2, 2007).
10.31*	—Resignation Agreement and General Release dated August 6, 2007 between i2 Technologies, Inc. and Barbara D. Stinnett (filed as Exhibit 10.1 to the 8-K filed by i2 on August 8, 2007).
10.32*	—Interim Chief Executive Officer Agreement between Pallab Chatterjee and i2, dated September 28, 2007 (filed as Exhibit 10.1 to the 8-K filed by i2 on October 5, 2007).

53

Exhibit Number	Description
16.1*	—Letter from Deloitte & Touche LLP, dated July 2, 2007, to the Securities and Exchange Commission related to the i2’s change in independent accounting firm (filed as Exhibit 16.1 to the 8-K filed on July 2, 2007).
21.1	—List of subsidiaries.
23.1	—Consent of Grant Thornton LLP.
23.2	—Consent of Deloitte & Touche LLP.
24.1	—Power of Attorney, pursuant to which amendments to this Form 10-K may be filed (included on the signature page contained in Part IV of this Form 10-K).
31.1	—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Pallab K. Chatterjee, the Interim Chief Executive Officer of i2.
31.2	—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Michael J. Berry, Executive Vice President and Chief Financial Officer of i2.
32.1	—Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Pallab K. Chatterjee, the Interim Chief Executive Officer of i2.
32.2	—Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Michael J. Berry, Executive Vice President and Chief Financial Officer of i2.

* Incorporated herein by reference to the indicated filing.

+ Management contract or compensatory plan or arrangement.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	i2 TECHNOLOGIES, INC.
Dated: March 14, 2008	By:	/s/    MICHAEL J. BERRY
		Michael J. Berry
		Executive Vice President, Finance and Accounting, and Chief Financial Officer (principal financial and accounting officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Pallab K. Chatterjee and Michael J. Berry, and each or any of them, his true and lawful attorneys-in-fact and agents, each with the power of substitution and resubstitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    PALLAB K. CHATTERJEE         Pallab K. Chatterjee	Interim Chief Executive Officer (principal executive officer)	March 14, 2008
/S/    MICHAEL J. BERRY         Michael J. Berry	Executive Vice President, Finance and Accounting, and Chief Financial Officer (principal financial and accounting officer)	March 14, 2008
/s/    SANJIV S. SIDHU         Sanjiv S. Sidhu	Chairman	March 14, 2008
/s/    STEPHEN P. BRADLEY         Stephen P. Bradley	Director	March 14, 2008
/s/    Harvey B. Cash         Harvey B. Cash	Director	March 14, 2008
/s/    RICHARD L. CLEMMER         Richard L. Clemmer	Director	March 14, 2008
/s/    MICHAEL E. MCGRATH         Michael E. McGrath	Director	March 14, 2008
/s/    DAVID L. POPE         David L. Pope	Director	March 14, 2008
/s/    MICHAEL J. SIMMONS         Michael J. Simmons	Director	March 14, 2008
/s/    LLOYD G. WATERHOUSE         Lloyd G. Waterhouse	Director	March 14, 2008
/s/    JACKSON L. WILSON, JR.         Jackson L. Wilson, Jr.	Director	March 14, 2008

55

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

i2 Technologies, Inc.

We have audited i2 Technologies, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated financial statements as of and for the year ended December 31, 2007 of the Company and our report dated March 14, 2008 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Dallas, Texas

March 14, 2008

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

i2 Technologies, Inc.

We have audited the accompanying consolidated balance sheet of i2 Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2007, and the related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2007, and the results of their operations and their cash flows for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 13 to the consolidated financial statements, the Company changed its method of accounting for unrecognized tax benefits as of January 1, 2007, in connection with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2008 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Dallas, Texas

March 14, 2008

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of i2 Technologies, Inc.

Dallas, Texas

We have audited the accompanying consolidated balance sheet of i2 Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2006, and the related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2006, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, in 2006 the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

March 30, 2007

F-3

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

i2 TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

	December 31, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	120,978		$	109,419
Restricted cash		8,456			4,626
Accounts receivable, net		25,108			25,677
Other current assets		7,746			9,231
Total current assets		162,288			148,953
Premises and equipment, net		7,559			10,691
Goodwill		16,684			14,760
Non-current deferred tax asset		8,454			8,060
Other non-current assets		7,168			7,605
Total assets	$	202,153		$	190,069
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	4,741		$	11,283
Accrued liabilities		14,631			22,245
Accrued compensation and related expenses		17,636			24,010
Deferred revenue		61,715			74,047
Total current liabilities		98,723			131,585
Total long-term debt, net		84,453			83,822
Taxes payable		4,484			—
Total liabilities		187,660			215,407
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred Stock, $0.001 par value, 5,000 shares authorized, none issued and outstanding		—			—
Series A junior participating preferred stock, $0.001 par value, 2,000 shares authorized, none issued and outstanding		—			—
Series B 2.5% convertible preferred stock, $1,000 par value, 150 shares authorized, 107 and 105 issued and outstanding at December 31, 2007 and December 31, 2006, respectively		103,450			101,686
Common stock, $0.00025 par value, 2,000,000 shares authorized, 21,448 and 21,005 shares issued and outstanding at December 31, 2007 and December 31, 2006, respectively		5			5
Additional paid-in capital		10,458,101			10,442,261
Accumulated other comprehensive income		9,963			2,398
Accumulated deficit		(10,557,026	)		(10,571,688	)
Net stockholders’ equity (deficit)		14,493			(25,338	)
Total liabilities and stockholders’ equity (deficit)	$	202,153		$	190,069

See accompanying notes to consolidated financial statements.

F-4

i2 TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

	Years Ended December 31,
	2007			2006			2005
Revenues:
Software solutions	$	47,721		$	76,243		$	89,937
Services		122,682			106,493			103,792
Maintenance		87,457			92,828			100,612
Contract		2,450			4,113			42,526
Total revenues		260,310			279,677			336,867
Costs and expenses:
Cost of revenues:
Software solutions		8,567			12,862			14,720
Services and maintenance		108,471			97,960			103,758
Contract		—			311			1,575
Amorization of aquired technology		25			21			—
Sales and marketing		41,872			48,185			51,727
Research and development		33,513			35,200			37,337
General and administrative		38,691			56,129			61,117
Amortization of intangibles		78			17			—
Restructuring charges and adjustments		3,955			(403	)		11,269
Total costs and expenses		235,172			250,282			281,503
Operating income		25,138			29,395			55,364
Non-operating expense, net:
Interest income		5,488			5,305			7,697
Interest expense		(4,948	)		(6,069	)		(16,315	)
Realized gains on investments, net		—			475			10,144
Foreign currency hedge and transaction losses, net		(678	)		(219	)		(4,217	)
Loss on extinguishment of debt		—			—			(3,017	)
Other expense, net		(1,134	)		(850	)		(1,547	)
Total non-operating expense, net		(1,272	)		(1,358	)		(7,255	)
Income before income taxes		23,866			28,037			48,109
Income tax expense		6,133			3,821			4,664
Income from continuing operations		17,733			24,216			43,445
Income from discontinued operations, net of taxes		—			—			43,884
Net income		17,733			24,216			87,329
Preferred stock dividend and accretion of discount		3,071			2,940			3,020
Net income applicable to common stockholders	$	14,662		$	21,276		$	84,309
Net income per common share applicable to common stockholders:
Total:
Basic	$	0.57		$	0.84		$	3.50
Diluted	$	0.55		$	0.82		$	3.45
Discontinued operations
Basic	$	—		$	—		$	1.82
Diluted	$	—		$	—		$	1.80
Continuing operations including preferred stock dividend and accretion of discount
Basic	$	0.57		$	0.84		$	1.68
Diluted	$	0.55		$	0.82		$	1.65
Weighted-average common shares outstanding:
Basic		25,816			25,328			24,084
Diluted		26,748			25,883			24,469
Comprehensive income:
Net income (loss) applicable to common stockholders	$	14,662		$	21,276		$	84,309
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities arising during the period		—			—			174
Foreign currency translation adjustments		7,565			3,545			(4,996	)
Total other comprehensive income (loss)		7,565			3,545			(4,822	)
Total comprehensive income	$	22,227		$	24,821		$	79,487

See accompanying notes to consolidated financial statements.

F-5

I2 TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)

Years Ended December 31, 2007, 2006 and 2005

(In thousands)

	Preferred Stock			Common Stock			Warrants and Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity/(Deficit)
	Shares	Amount		Shares	Amount
Balance as of December 31, 2004	101		97,045	18,608		5		10,403,515		3,675			(10,677,273	)		(173,033	)
Preferred stock dividend and accretion of discount	3		3,020	—		—		—		—			(3,020	)		—
Issuance of common stock from investments, exercise of options and issuance of common stock under stock purchase plans and investments	—		—	2,094		—		15,750		—			—			15,750
Amortization of deferred compensation	—		—	—		—		997		—			—			997
Change in fair value of securities available-for-sale, net of tax	—		—	—		—		—		174			—			174
Foreign currency translation	—		—	—		—		—		(4,996	)		—			(4,996	)
Issuance of warrants from convertible debt issuance	—		—	—		—		3,125		—			—			3,125
Net income	—		—	—		—		—		—			87,329			87,329
Balance as of December 31, 2005	104		100,065	20,702		5		10,423,387		(1,147	)		(10,592,964	)		(70,654	)
Preferred stock dividend and accretion of discount	1		1,621	—		—		—		—			(2,940	)		(1,319	)
Common stock issuance from options and employee stock plans	—		—	—		—		2,584		—			—			2,584
Stock based compensation	—		—	303		—		16,290		—			—			16,290
Foreign currency translation	—		—	—		—		—		3,545			—			3,545
Net income	—		—	—		—		—		—			24,216			24,216
Balance as of December 31, 2006	105	$	101,686	21,005	$	5	$	10,442,261	$	2,398		$	(10,571,688	)	$	(25,338	)
Preferred stock dividend and accretion of discount	2		1,764	—		—		—		—			(3,071	)		(1,307	)
Common stock issuance from options and employee stock plans	—		—	443		—		3,399		—			—			3,399
Stock based compensation	—		—			—		12,441		—			—			12,441
Foreign currency translation	—		—	—		—		—		7,565			—			7,565
Net income	—		—	—		—		—		—			17,733			17,733
Balance as of December 31, 2007	107		103,450	21,448		5		10,458,101		9,963			(10,557,026	)		14,493

See accompanying notes to consolidated financial statements.

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i2 TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Twelve Months Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	17,733		$	24,216		$	87,329
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance expense		1,042			1,188			1,238
Warrant accretion		631			631			100
Depreciation and amortization		4,726			5,901			6,309
Stock based compensation		12,388			16,293			997
Loss on extinguishment of debt		—			—			3,017
Gain on sale of discontinued operations		—			—			(36,471	)
Gain on sale of securities		—			(501	)		(11,491	)
Write down of investment		—			—			1,000
Loss (gain) on disposal of premises and equipment		256			(170	)		1,013
Expense (credit) for bad debts charged to costs and expenses		6			(479	)		(45	)
Deferred income taxes		816			(1,736	)		(1,854	)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		910			746			9,377
Other assets		8,123			7,665			3,113
Deferred contract costs		—			311			1,579
Accounts payable		(2,852	)		(691	)		(2,510	)
Accrued liabilities		(7,948	)		(12,437	)		(2,460	)
Accrued compensation and related expenses		(6,842	)		(364	)		(3,358	)
Deferred revenue		(12,549	)		(25,807	)		(57,558	)
Net cash provided by operating activities		16,440			14,766			(675	)
Cash flows used in investing activities:
Restrictions (placed) released on cash		(3,830	)		147			2,944
Purchases of premises and equipment		(1,341	)		(2,386	)		(3,162	)
Purchases of short-term investments		—			—			(95,950	)
Proceeds from sale of short-term investments		—			—			240,656
Proceeds from sale of premises and equipment		24			232			—
Proceeds from sale of securities		—			501			11,491
Proceeds from sale of discontinued operations		—			—			32,670
Purchases of long-term investments		—			—			(1,000	)
Business acquisitions		(2,124	)		(569	)		—
Net cash used in investing activities		(7,271	)		(2,075	)		187,649
Cash flows provided by (used in) financing activities:
Repurchase of debt		—			(24,997	)		(293,579	)
Proceeds from sale of convertible debt		—			7,500			78,750
Cash dividends paid — preferred stock		(1,307	)		(1,327	)
Payment of debt issuance costs		—			(484	)		(4,909	)
Net proceeds from common stock issuance from options and employee stock purchase plans		3,399			2,584			800
Proceeds from sale of common stock, net of issuance costs								14,950
Net cash provided by (used in) financing activities		2,092			(16,724	)		(203,988	)
Effect of exchange rates on cash		298			570			(3,377	)
Net change in cash and cash equivalents		11,559			(3,463	)		(20,391	)
Cash and cash equivalents at beginning of period		109,419			112,882			133,273
Cash and cash equivalents at end of period	$	120,978		$	109,419		$	112,882
Supplemental cash flow information
Interest paid	$	4,312		$	5,417		$	16,535
Income taxes paid (net of refunds received)	$	5,093		$	4,780		$	7,440
Schedule of non-cash financing activities
Preferred stock dividend and accretion of discount	$	1,764		$	1,613		$	3,020
Allocation of debt proceeds to warrants for common stock	$	—		$	—		$	3,125

See accompanying notes to consolidated financial statements.

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table dollars in thousands, except per share data)

1.    Summary of Significant Accounting Policies

Nature of Operations.    We are a provider of supply chain management solutions, consisting of various software and service offerings. In addition to application software, we offer hosted software solutions, such as business optimization and technical consulting, managed services, training, solution maintenance, software upgrades and development. We operate our business in one business segment. Supply chain management is the set of processes, technology and expertise involved in managing supply, demand and fulfillment throughout divisions within a company and with its customers, suppliers and partners. The goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, improving operational visibility, increasing operating velocity and integrating planning and execution. Our offerings are designed to help customers better achieve the following critical business objectives:

• Visibility — a clear and unobstructed view up and down the supply chain

• Planning — supply chain optimization to match supply and demand considering system-wide constraints

• Collaboration — interoperability with supply chain partners and elimination of functional silos

• Control — management of data and business processes across the extended supply chain

Principles of Consolidation.    The consolidated financial statements include the accounts of i2 Technologies, Inc. and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates.    Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, provision for doubtful accounts and sales returns, fair value of investments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, restructuring obligations, fair value of stock options, warrants and derivatives, and contingencies and litigation, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from the estimates made by management with respect to these items and other items that require management’s estimates.

Cash and cash equivalents.    Cash and cash equivalents include cash on hand, demand deposits with financial institutions, short-term time deposits and other liquid investments in debt securities with initial maturities of less than three months when acquired by us.

Restricted Cash.    At December 31, 2007 restricted cash included $8.4 million pledged as collateral for outstanding letters of credit and bank guarantees. At December 31, 2006, restricted cash included $4.0 million pledged as collateral for outstanding letters of credit and bank guarantees. We attempt to limit our restricted cash and cash balances held in foreign locations. (See Note 6 — Borrowings and Debt Issuance Costs)

Allowance for Doubtful Accounts.    The allowance for doubtful accounts is a reserve established through a provision for bad debts charged to expense and represents our best estimate of probable losses resulting from non-payment of amounts recorded in the existing accounts receivable portfolio. The allowance, in our judgment, is necessary to reserve for known and inherent collection risks in the accounts receivable portfolio. In estimating

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the allowance for doubtful accounts, we consider our historical write-off experience, accounts receivable aging reports, the credit-worthiness of individual customers, economic conditions affecting specific customer industries and general economic conditions, among other factors. Should any of these factors change, our estimate of probable losses due to bad debts could also change, which could affect the level of our future provisions for bad debts.

Financial Instruments.    Financial assets that potentially subject us to a concentration of credit risk consist principally of investments and accounts receivable. Cash on deposit is held with financial institutions with high credit standings. Debt security investments are generally in highly rated corporations and municipalities as well as agencies of the U.S. government. Our customer base consists of large numbers of geographically diverse customers dispersed across many industries. As a result, concentration of credit risk with respect to accounts receivable is not significant. However, we periodically perform credit evaluations for most of our customers and maintain reserves for potential losses. In certain situations we may require letters of credit to be issued on behalf of some customers to mitigate our exposure to credit risk. We may also use foreign exchange contracts to hedge the risk in receivables denominated in non-functional currencies. Risk of non-performance by counterparties to such contracts is minimal due to the size and credit standings of the financial institutions used.

Premises and Equipment.    Premises and equipment are recorded at cost and are depreciated over their useful lives ranging from three to seven years using the straight-line method. Leasehold improvements are amortized over the shorter of the expected term of the lease or estimated useful life.

Goodwill.    We test goodwill for impairment once annually, or more frequently if an event occurs or circumstances change that may indicate that the fair value of our reporting unit is below its carrying value. Goodwill is tested for impairment using a two-step approach. The first step is to compare the fair value of the reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired and the second step is not required. If the fair value of the reporting unit is less than its carrying amount, the second step of the impairment test measures the amount of the impairment loss, if any. The second step of the impairment test is to compare the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess. The implied fair value of goodwill is calculated in the same manner that goodwill is calculated in a business combination, whereby the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price. The excess “purchase price” over the amounts assigned to assets and liabilities would be the implied fair value of goodwill.

As stated above, we currently operate as a single reporting unit and all of our goodwill is associated with the entire company. Accordingly, we generally assume that the minimum fair value of our single reporting unit is our market capitalization, which is the product of (i) the number of shares of common stock issued and outstanding and (ii) the market price of our common stock.

Goodwill totaled $16.7 million and $14.8 million at December 31, 2007 and December 31, 2006, respectively. This increase was due to an acquisition in 2007. We performed an impairment test on goodwill at December 31, 2007 and December 31, 2006, and determined there was no evidence of impairment.

Capitalized Research and Development Costs.    Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. To date, the establishment of technological feasibility of our products

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

has coincided with the general release of such software. As a result, we have not capitalized any such costs other than those recorded in connection with our acquisitions.

Revenue Recognition.    We derive revenues from licenses of our software and related services, which include assistance in implementation, integration, customization, maintenance, training and consulting. We recognize revenue for software and related services in accordance with Statement of Position (SOP) 81-1, “Accounting for Certain Construction Type and Certain Production Type Contracts,” SOP 97-2, “Software Revenue Recognition,” as modified by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions,” SEC Staff Accounting Bulletin (SAB) 104, “Revenue Recognition.”

Software Solutions Revenue.    Recognition of software solutions revenue occurs under SOP 81-1 and under SOP 97-2, as amended.

Software solutions revenue recognized under SOP 81-1 includes both fees associated with licensing of our products, as well as any fees received to deliver the licensed functionality (for example, the provision of essential services). Essential services involve customizing or enhancing the software so that the software performs in accordance with specific customer requirements. Arrangements accounted for under SOP 81-1 follow either the percentage-of-completion method or the completed contract method. The percentage-of-completion method is used when the required services are quantifiable, based on the estimated number of labor hours necessary to complete the project, and under that method revenues are recognized using labor hours incurred as the measure of progress towards completion but is limited to revenue that has been earned by the attainment of any milestones included in the contract. We do not capitalize costs associated with services performed where milestones have not been attained. The completed contract method is used when the required services are not quantifiable, and under that method revenues are recognized only when we have satisfied all of our product and/or service delivery obligations to the customer. Similar to the treatment of milestones, we do not capitalize or defer costs associated with services performed on contracts recognized under the completed contract method that have not been completed.

Under SOP 97-2, software license revenues are generally recognized upon delivery, provided persuasive evidence of an arrangement exists, fees are fixed or determinable and collection is deemed probable. We evaluate each of these criteria as follows:

• Evidence of an arrangement:    We consider a non-cancelable agreement signed by the customer to be evidence of an arrangement.

• Delivery:    Delivery is considered to occur when media containing the licensed programs is provided to a common carrier or, in the case of electronic delivery, the customer is given access to the licensed programs. Our typical end user license agreement does not include customer acceptance provisions.

• Fixed or determinable fee:    We consider the fee to be fixed or determinable if the fee is not subject to refund or adjustment and the payment terms are within our normal established practices. If the fee is not fixed or determinable, we recognize the revenue as amounts become due and payable.

• Collection is deemed probable:    We conduct a credit review for significant transactions at the time of the arrangement to determine the credit-worthiness of the customer. Collection is deemed probable if we expect that the customer will pay amounts under the arrangement as payments become due. If we determine that collection is not probable, we defer the revenue and recognize the revenue upon receipt of cash. Based on our collections history in certain countries, we apply a cash-basis recognition requirement for software solutions agreements in those countries.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue for software solution arrangements that include one or more additional elements (i.e., services and maintenance) to be delivered at a future date is generally recognized using the residual method as set forth in SOP 98-9. Under the residual method, the fair value of the undelivered element(s) is deferred, and the remaining portion of the arrangement fee is recognized as license revenue. If fair values have not been established for the undelivered element(s), all revenue associated with the arrangement is deferred until the earlier of the point at which all element(s) have been delivered or the fair value of the undelivered elements has been determined. Fair value for an individual element within an arrangement may be established when that element, when contracted for separately, is priced in a consistent manner. Fair value for our maintenance and consulting services has been established based on our maintenance renewal rates and consulting billing rates, respectively. Arrangements that include a right to unspecified future products are accounted for as subscriptions and recognized ratably over the term of the arrangement. Software solution license fees from reseller arrangements are generally based on the sublicenses granted by the reseller and recognized when the license is sold to the end customer.

Services Revenue.    Services revenue is primarily derived from fees for services that are not essential to the software, including implementation, integration, training and consulting, and is generally recognized when services are performed. In addition, services revenue may include fees received from arrangements to customize or enhance previously purchased licensed software, when such services are not essential to the previously licensed software. Services revenue also includes reimbursable expense revenue, with the related costs of reimbursable expenses included in cost of services. Contractual terms may include the following payment arrangements: fixed fee, full-time equivalent, milestone, and time and material. In order to recognize service revenue, the following criteria must be met:

• Signed agreement:    The agreement must be signed by the customer.

• Fee is determinable:    The signed agreement must specify the fees to be received for the services.

• Delivery has occurred:    Delivery is substantiated by time cards and, where applicable, supplemented by an acceptance from the customer that milestones as agreed in the statement of work have been met.

• Collectibility is probable:    We conduct a credit review for significant transactions at the time of the engagement to determine the credit-worthiness of the customer. We monitor collections over the term of each project, and if a customer becomes delinquent, the revenue may be deferred.

Maintenance Revenue.    Maintenance revenue consists of fees generated by providing support services, such as telephone support, and unspecified upgrades/enhancements on a when-and-if available basis. A customer typically prepays maintenance and support fees for an initial period, and the related revenue is deferred and generally recognized over the term of such initial period. Maintenance is renewable by the customer on an annual basis thereafter. Rates for maintenance, including subsequent renewal rates, are typically established based upon a specified percentage of net license fees as set forth in the contract.

Contract Revenue.    Contract revenue is the result of the recognition of certain revenue that was carried on our balance sheet as a portion of deferred revenue and was a result of our 2003 financial restatement. Inclusion of contract revenue in the evaluation of our performance would skew comparisons of our periodic results since recognition of that revenue was based on fulfillment of contractual obligations which often required only minimal cash outlays and generally did not involve any significant activity in the period of recognition. Additionally, the cash associated with contract revenue had been collected in prior periods. All remaining contract revenue was recognized by March 31, 2007, and it is not relevant to our on-going operations. Our deferred contract revenue balance was $3.2 million at December 31, 2006.

Royalties and Affiliate Commissions.    Royalties paid for third-party software products integrated with our technology are expensed when the products are shipped. Commissions payable to affiliates in connection with

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

sales assistance are generally expensed when the commission becomes payable. Accrued royalties payable totaled $0.8 and $2.1 million at December 31, 2007 and 2006, respectively, while accrued affiliate commissions payable totaled $0.6 million and $1.1 million as of December 31, 2007 and 2006, respectively.

Concurrent Transactions.    We occasionally enter into transactions which are concluded at or about the same time as other arrangements with the same customer. These concurrent transactions are accounted for under Accounting Principles Board (APB) Opinion No. 29, Accounting for Non-monetary Transactions, as interpreted by EITF 01-02 Interpretations of APB Opinion No. 29. Generally, the recognition of a gain or loss on the exchange is measured based on the fair value of the assets involved to the extent that the fair value can be reasonably determined. A transaction that is not a culmination of the earnings process is recorded based on the net book value of the asset relinquished.

Deferred Taxes.    Deferred tax assets and liabilities represent estimated future tax amounts attributable to the differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their respective tax bases. These estimates are computed using the tax rates in effect for the applicable period. Realization of our deferred tax assets is, for the most part, dependent upon our U.S. consolidated tax group of companies having sufficient federal taxable income in future years to utilize our domestic net operating loss carry-forwards before they expire. We adjust our deferred tax valuation allowance on a quarterly basis in light of certain factors, including our financial performance.

Loss Contingencies.    There are times when non-recurring events occur that require management to consider whether an accrual for a loss contingency is appropriate. Accruals for loss contingencies typically relate to certain legal proceedings, customer and other claims and litigation. Accruals for loss contingencies are included in accrued liabilities on our consolidated balance sheet. As required by SFAS No. 5, Accounting for Contingencies, we determine whether an accrual for a loss contingency is appropriate by assessing whether a loss is deemed probable and can be reasonably estimated. We analyze our legal proceedings, warranty and other claims and litigation based on available information to assess potential liability. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results assuming a combination of litigation and settlement strategies. The adverse resolution of any one or more of these matters over and above the amounts that have been estimated and accrued in the current consolidated financial statements could have a material adverse effect on our business, results of operations, cash flow and financial condition.

Restructuring Charges.    We recognize restructuring charges consistent with applicable accounting standards. We reduce charges for obligations on leased properties with estimated sublease income. Furthermore, we analyze current market conditions, including current lease rates in the respective geographic regions, vacancy rates and costs associated with subleasing, when evaluating the reasonableness of future sublease income. The accrual for office closure and consolidation is an estimate that assumes certain facilities will be subleased or the underlying leases will otherwise be favorably terminated prior to the contracted lease expiration date. Significant subjective judgment and estimates must be made and used in calculating future sublease income.

Net Income Per Common Share.    We calculate net income per common share in accordance with SFAS No. 128, Earnings per Share, and EITF 03-6, Participating Securities and the Two Class Method under FASB Statement No. 128, Earnings per Share. EITF 03-6 provides guidance on how to determine whether a security should be considered a participating security for purposes of computing earnings per share and how earnings should be allocated to a participating security when using the two-class method for computing earnings per share. We have determined that our redeemable preferred stock represents a participating security because it has voting rights and, therefore, we have calculated basic net income per common share consistent with the provisions of EITF 03-6 for all periods presented. Diluted net income per common share includes (i) the dilutive

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

effect of stock options, stock rights and warrants granted using the treasury stock method, (ii) the effect of contingently issuable shares earned during the period and (iii) shares issuable under the conversion feature of our convertible notes and preferred stock using the if-converted method. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for 2007, 2006 and 2005 is provided in Note 9 — Stockholders’ Equity (Deficit) and Income Per Common Share.

Stock-Based Compensation Plans.    Prior to January 1, 2006, employee compensation expense under stock option plans was reported only if options were granted below market price at grant date in accordance with the intrinsic value method of APB No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Because the exercise price of our employee stock options equaled the market price of the underlying stock on the date of grant, no compensation expense was recognized on options granted.

Effective January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” which is a revision to SFAS No. 123, “Accounting for Stock Based Compensation.” See Note 10, Stock Based Compensation Plans for further discussion.

Foreign Currency Translation.    The functional currency for the majority of our foreign subsidiaries is the local currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date while income and expense amounts are translated at average exchange rates during the period. The resulting foreign currency translation adjustments are disclosed as a separate component of stockholders’ equity (deficit) and other comprehensive income. The functional currency of one significant foreign subsidiary is the US dollar; therefore, there is no translation adjustment required for this subsidiary. Transaction gains and losses arising from transactions denominated in a non-functional currency and due to changes in exchange rates are recorded in foreign currency hedge and transaction losses, net in our consolidated statements of operations.

Fair Values of Financial Instruments.    Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. The estimated fair value approximates carrying value for all financial instruments except investment securities and long-term debt. Fair values of securities are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar instruments. The fair value of long-term debt is based on quoted market prices, if available. If a quoted market price is not available, fair value is estimated by discounting future cash flows using the interest rates currently offered for similar debt of similar remaining maturity. At December 31, 2007, the fair value of our outstanding 5% convertible notes approximates their carrying value.

Comprehensive Income.    Comprehensive income includes all changes in equity during a period, except those resulting from investments by and distributions to owners.

Recent Accounting Pronouncements

Effective January 1, 2007 we adopted FIN No. 48 — Accounting for Uncertainty in Income Taxes- an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured at the largest amount of benefit, determined on a cumulative probability basis,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

that is more likely than not to be realized upon final settlement. FIN 48’s use of the term “more likely than not” in Steps 1 and 2 is consistent with how the term is used in FAS 109 (i.e., the likelihood of an occurrence greater than 50%). FIN 48 applies to all tax positions related to income taxes subject to FAS 109, and is effective for fiscal years beginning after December 15, 2006. Upon adoption, there was no cumulative effect to our accumulated deficit as a result of this change in accounting principle.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. We adopted SAB 108 in the first quarter of 2007. Adoption of this pronouncement did not have a material impact on our financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 creates a single definition of fair value, establishes a framework for measuring fair value, and enhances disclosure requirements about items measured at fair value. The Statement applies to both items recognized and reported at fair value in the financial statements and items disclosed at fair value in the notes to the financial statements. The Statement does not change existing accounting rules governing what can or what must be recognized and reported at fair value in the company’s financial statements, or disclosed at fair value in the company’s notes to the financial statements. Additionally, Statement 157 does not eliminate practicability exceptions that exist in accounting pronouncements amended by this Statement when measuring fair value. As a result, the company will not be required to recognize any new assets or liabilities at fair value. We plan to adopt SFAS 157 in the first quarter of 2008. We are assessing the impact the adoption of SFAS 157 will have on our financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. We plan to adopt SFAS No. 159 in the first quarter of fiscal 2008. We do not anticipate that the adoption of SFAS 159 will have a material impact on our financial statements.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), (“SFAS No. 141R”), “Business Combinations”, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, however, includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. We will adopt SFAS No. 141R in the first quarter of 2009 and apply its provisions prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141R will be dependent on the extent and nature of any future acquisitions.

2.    Other Non-Current Assets

Other non-current assets includes unamortized debt issuance costs, long-term lease deposits, and acquired intangibles such as, software, information databases and installed customer base/relationships. Unamortized debt issuance costs of $3.2 million, as of December 31, 2007, are being amortized to interest expense over the estimated life of the debt at a rate of approximately $1.0 million per year. This unamortized debt issuance cost will be fully amortized in approximately 3 years. Other non-current assets include intangible assets that are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

evaluated for impairment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). SFAS No. 144 requires that we evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset. The amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Details of other non-current assets at December 31, 2007 and December 31, 2006 are below:

	2007		2006
Unamortized debt issuance costs	$	3,161	$	4,203
Lease deposits		3,784		3,119
Acquired intangibles		223		250
Other		—		33
Total	$	7,168	$	7,605

3.    Investment Securities

Short-term time deposits and other liquid investments in debt securities with original maturities of less than three months when acquired by us are classified as available-for-sale and reported as cash and cash equivalents in our consolidated balance sheets. Based on their maturities, interest rate movements do not affect the balance sheet valuation of these investments. Investment securities reported as cash and cash equivalents as of December 31, 2007 and 2006 were as follows:

	2007		2006
Short-term time deposits	$	5,143	$	4,048
Commercial paper		—		86,376
	$	5,143	$	90,424

Due to volatility in the capital markets, beginning in the third quarter of 2007 we chose not to invest in commercial paper and instead invested in money market instruments. These money market instruments are reflected in cash and cash equivalents on our balance sheet. We typically invest our cash in a variety of interest-earning financial instruments, including bank time deposits, money market funds and taxable and tax-exempt variable-rate and fixed-rate obligations of corporations and federal, state and local governmental entities and agencies. These investments are primarily denominated in U.S. Dollars.

4.    Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable at December 31, 2007 and 2006 include billed receivables of approximately $23.7 million and approximately $24.1 million, respectively and unbilled receivables of approximately $1.4 million and approximately $1.8 million, respectively. Unbilled receivables relate to revenues that have been recognized, but not invoiced. Such receivables are generally invoiced in the month following recognition as revenue.

Activity in the allowance for doubtful accounts was as follows:

	2007		2006			2005
Balance at beginning of period	$	193	$	901		$	985
Provision (credit) for bad debts charged to costs and expenses		6		(479	)		(45	)
Write-offs, net of recoveries and other adjustments		19		(229	)		(39	)
Balance at end of period	$	218	$	193		$	901

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.    Premises and Equipment and Lease Commitments

Premises and equipment as of December 31, 2006 and 2005 consisted of the following:

	2007			2006
Computer equipment and software	$	33,095		$	39,714
Furniture and fixtures		23,287			23,015
Leasehold improvements		19,702			19,589
		76,084			82,318
Less: Accumulated depreciation		(68,525	)		(71,627	)
	$	7,559		$	10,691

Depreciation of premises and equipment totaled $4.5 million in 2007, $5.9 million in 2006 and $6.3 million in 2005. Depreciation is calculated using the straight-line method. We disposed of net premises and equipment totaling $0.3 million in 2007, $0.2 million in 2006 and, $1.1 million in 2005.

We lease our office facilities and certain office equipment under operating leases that expire at various dates through 2011. We have renewal options for most of our operating leases. We incurred total rent expense of $9.1 million in 2007, $10.2 million in 2006 and $11.8 million in 2005.

Future minimum lease payments under all non-cancellable operating leases, excluding estimated sublease income of $2.1 million, as of December 31, 2007 are as follows:

2008		12,926
2009		11,376
2010		4,461
2011		842
2012		499
Thereafter		—
Total	$	30,104

6.    Borrowings and Debt Issuance Costs

5% Senior Convertible Notes

In November and December 2005 we issued $78.8 million and in January 2006 we issued $7.5 million of 5% senior convertible notes with a maturity date of November 15, 2015. In connection therewith, in November 2005, we issued 484,889 detachable warrants for common stock with an exercise price of $15.4675 per share, subject to adjustment, and a 10-year life to the purchasers of the notes, on a pro-rata basis in accordance with their investment in the notes. The notes are effectively junior to any of our secured obligations to the extent of the value of the assets securing such obligations. There are no subsidiary company guarantees related to the 5% senior convertible notes.

The notes are convertible, subject to certain conditions, into cash and shares, if any, of our common stock at an initial conversion price of $15.4675 per share, which is subject to adjustment. Upon conversion, we will satisfy our conversion obligation with respect to the principal amount of the notes to be converted in cash, with any remaining amount to be satisfied in shares of our common stock.

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Holders of the notes may convert their notes at any time on or after May 15, 2010. In addition, holders of the notes may convert the notes at any time prior to May 15, 2010 upon the occurrence of any of the following events, none of which have occurred:

• if the notes have been called for redemption;

• upon certain dividends or distributions to all holders of our common stock;

• upon the occurrence of specified corporate transactions constituting a “fundamental change” (the occurrence of a “change in control” or a “termination of trading,” each as defined in the indenture governing the notes);

• if the average of the trading prices for the notes during any five consecutive trading-day period is less than 98% of the average of the conversion values for the notes (the product of the last reported sale price of our common stock and the conversion rate) during that period; or

• at any time after May 15, 2008 if the closing sale price of our common stock is equal to or greater than $23.21 for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter.

Holders of the notes have the right to require us to repurchase all or any portion of the notes on or after November 15, 2010 at a purchase price equal to 100% of the principal amount of the notes to be repurchased plus any accrued and unpaid interest to but excluding such repurchase date.

If we redeem our Series B Preferred Stock, we must also offer to repurchase the notes for cash at a purchase price equal to 100% of the principal amount of the notes plus shares equal to the conversion value, if any, plus accrued and unpaid interest to but excluding the repurchase date; provided, that if we redeem less than all of the outstanding shares of our Series B Preferred Stock, we shall be obligated to repurchase only an equivalent and proportionate amount of the notes.

The notes contain provisions that allow the holders, upon a change in control or a termination of trading of our common stock, to require us to repurchase for cash any or all of the notes at 100% of the principal amount plus accrued and unpaid interest. If the change in control or termination of trading occurs prior to November 15, 2010, a holder who elects to convert will be entitled to receive a make-whole premium, equal to the approximate lost option time value.

Prior to May 20, 2008, the Notes are not redeemable at our option. On or after May 20, 2008, we may redeem the Notes at any time or from time to time in whole or in part, for cash, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to but excluding the redemption date, so long as (i) the last reported sale price of our Common Stock has exceeded 175% of the conversion price then in effect for at least 20 trading days in the 30 consecutive trading days ending on the trading day prior to the date upon which we deliver to the holders the notice of redemption and (ii) on the date that we deliver a redemption notice through the date of redemption, the Common Stock issuable upon conversion of the Notes is either (1) covered by a registration statement covering resales thereof that is effective and available for use and is expected to remain effective and available for use for the 30 days following the date of such redemption notice or (2) eligible to be resold by non-affiliates pursuant to Rule 144(k) under the Securities Act of 1933, as amended.

The indenture governing our 5% senior convertible notes contains a debt incurrence covenant that places restrictions on the amount and type of additional indebtedness that we can incur. Such covenant specifies that we shall not, nor shall we permit any of our subsidiaries to, directly or indirectly, incur or guarantee or assume any indebtedness other than “permitted indebtedness.” Permitted indebtedness is defined in the indenture to include, among others, the following categories of indebtedness: (i) all indebtedness outstanding on November 23, 2005;

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) indebtedness under the senior convertible notes; (iii) indebtedness under our $15.0 million letter of credit line; (iv) between $25.0 million and $50.0 million of additional senior secured indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture); and (v) at least $100.0 million of additional subordinated indebtedness (the maximum permitted amount to be determined by application of a formula contained in the indenture).

In accounting for the 5% notes, we determined that components of the notes, including the over-allotment option, a portion of the conversion option and the liquidated damages clause were derivatives. Derivative instruments are contractual commitments or payment exchange agreements between counterparties that derive their value from an underlying asset, index, interest rate or exchange rate. Derivatives must be valued separately and accounted for as an asset, liability or equity, depending on their characteristics. We determined each derivative component should be recorded as a liability. We valued the derivative components using a Black Scholes model or using a model determining what penalties would be incurred if certain conditions were not met. We determined the derivatives to be immaterial.

We assessed the characteristics of the warrants and determined that they should be reflected in the stockholders’ equity (deficit) portion of our Consolidated Balance Sheet, valued using a Black Scholes model. In the Black Scholes valuation we used a then current stock price of $13.36, a strike price of $15.4675, an estimated life of 2 years, a risk free rate of 4.35% and a volatility rate of 94.7919%. The effect of recording the warrants as equity is that the debt is recorded at a discount to its liquidation value and this discount of $3.1 million is being accreted through earnings over five years. We determined a five-year life to be appropriate due to the conversion features in the debt and the probability that the debt would be converted prior to the ultimate maturity. At December 31, 2007, this discount was $1.8 million.

Other

We maintain a $15.0 million letter of credit line. Under this line, we are required to maintain restricted cash (in an amount equal to 125% of the outstanding letters of credit) in a depository account maintained by the lender to secure letters of credit issued in connection with the line. The line has no financial covenants and expires on December 15, 2008. As of December 31, 2007 approximately $5.6 million in letters of credit were outstanding under this line and approximately $7.2 million in restricted cash was pledged as collateral. As of December 31, 2006, $2.9 million in letters of credit were outstanding under this line and $4.0 million in restricted cash was pledged as collateral.

7.    Commitments and Contingencies

Governmental Investigations and Actions

On July 15, 2005, the SEC filed a civil action against three former officers of the company relating to events that occurred prior to the restatement of the company’s financial statements in 2003. The civil charges against each of such former officers were settled on various dates in 2006 and early 2007. The most recent of such settlements, involving the civil charges against Gregory A. Brady, occurred on February 15, 2007.

Purported Shareholder Derivative Lawsuits

On March 7, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitled George Keritsis and Mark Kert v. Michael E. McGrath, Michael J. Berry, Pallab K. Chatterjee, Robert C. Donohoo, Hiten D. Varia, M. Miriam Wardak, Sanjiv S. Sidhu, Stephen P. Bradley, Harvey B. Cash, Richard L. Clemmer, Lloyd G. Waterhouse, Jackson L. Wilson Jr., Robert L. Crandall and i2

F-18

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment in connection with stock option grants to certain of the defendant officers and directors on three dates in 2004 and 2005. The complaint states that those stock option grants were manipulated so as to work to the recipients’ favor when material non-public information about the company was later disclosed to positive or negative effect. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. As discussed below, we have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

On October 23, 2007, a purported shareholder derivative lawsuit was filed in the Delaware Chancery Court against certain of our current and former officers and directors, naming the company as a nominal defendant. The complaint, entitled John McPadden, Sr. v. Sanjiv S. Sidhu, Stephen Bradley, Harvey B. Cash, Richard L. Clemmer, Michael E. McGrath, Lloyd G. Waterhouse, Jackson L. Wilson, Jr., Robert L. Crandall and Anthony Dubreville and i2 Technologies, Inc., alleges breach of fiduciary duty and unjust enrichment based upon allegations that the company sold its wholly-owned subsidiary, Trade Services Corporation, for an inadequate price in 2005. The complaint is derivative in nature and does not seek relief from the company, but does seek damages and other relief from the defendant officers and directors. As discussed below, we have entered into indemnification agreements in the ordinary course of business with certain of the defendant officers and directors and may be obligated throughout the pendency of this action to advance payment of legal fees and costs incurred by the defendants pursuant to our obligations under the indemnification agreements and/or applicable Delaware law. Based on the stage of the litigation, it is not possible to estimate the outcome or amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.

Indemnification Agreements

We have indemnification agreements with certain of our officers, directors and employees that may require us, among other things, to indemnify such officers, directors and employees against certain liabilities that may arise by reason of their status or service as directors, officers or employees and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. We have also entered into agreements regarding the advancement of costs with certain other officers and employees.

Pursuant to these indemnification and cost-advancement agreements, we have advanced fees and expenses incurred by certain current and former directors, officers and employees in connection with the governmental investigations and actions related to the 2003 restatement of our consolidated financial statements and other matters. We incurred approximately $0.2 million, $14.0 million and $4.9 million of expense for legal fees and expenses for current and former employees during 2007, 2006 and 2005, respectively.

In an effort to reduce our future obligations in respect of such legal fees and expenses, on December 15, 2006 the company entered into a Settlement Agreement With Mutual Releases with Mr. Brady (the “Settlement Agreement”). The Settlement Agreement provided for (i) certain payments by the company to finally settle various issues of advancement and indemnification under existing agreements by the company to provide Mr. Brady with indemnification as well as an existing court order, and (ii) mutual general releases by Mr. Brady and the company, each in favor of the other. Pursuant to the terms of the Settlement Agreement, in January 2007 the company paid an aggregate of $2.5 million in full settlement and compromise of all claims of Mr. Brady under the existing indemnification agreements and the court order. We had accrued the $2.5 million as of

F-19

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2006. Under the terms of the Settlement Agreement, the company shall have no further obligation to advance costs, fees or expenses to Mr. Brady or to indemnify Mr. Brady in connection with any present, threatened or future litigation by virtue of the fact that Mr. Brady was a director, officer, employee or agent of the company or was serving at any time at the request of the company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

We may continue to advance fees and expenses incurred by certain other current and former directors, officers and employees in the future. The maximum potential amount of future payments we could be required to make under these indemnification and cost-advancement agreements is unlimited. Additionally, our corporate by-laws allow us to choose to indemnify any employee for certain events or occurrences while the employee is, or was, serving at our request in such capacity.

Under the terms of our software license agreements with our customers, we agree that in the event the licensed software infringes upon any patent, copyright, trademark, or any other proprietary right of a third party, it will indemnify our customer licensees against any loss, expense, or liability from any damages that may be awarded against our customer. We include this infringement indemnification in substantially all of our software license agreements and selected managed service arrangements. In the event the customer cannot use the software or service due to infringement and we can not obtain the right to use, replace or modify the license or service in a commercially feasible manner so that it no longer infringes then we may terminate the license and provide the customer a pro-rata refund of the fees paid by the customer from the infringing license or service. We believe the estimated fair value of these intellectual property indemnification clauses is minimal.

We are under tax examinations in India primarily related to our intercompany pricing for services rendered by our Indian subsidiary to other i2 companies and our qualification for a tax holiday, and have been assessed an aggregate of $7.1 million for the Indian statutory fiscal years ended March 31, 2002, 2003 and 2004. We believe the Indian tax authorities’ positions regarding our intercompany transactions and tax holiday qualification are without merit, that all intercompany transactions were conducted at appropriate pricing levels and that our operations qualify for the tax holiday claimed. Accordingly, we have appealed all of these assessments and have also sought assistance from the United States competent authority under the mutual agreement procedure of the income tax treaty between the United States and India, which provides us with an opportunity to resolve these matters in an environment which includes governmental representatives of both countries.

Pending resolution of these matters, we have paid approximately $3.5 million of the assessed amount and have arranged for approximately $2.9 million in bank guarantees in favor of the Indian government in respect of a portion of the balance. The bank guarantees are supported letters of credit issued in the United States and are reflected on our condensed consolidated balance sheet as restricted cash.

We expect the ultimate resolution of these matters will not exceed the tax contingency reserves we have established for them.

Certain Accruals

We have accrued for estimated losses in the accompanying consolidated financial statements for matters where we believe the likelihood of an adverse outcome is probable and the amount of the loss is reasonably estimable. We are subject to various claims and legal proceedings that arise in the ordinary course of our business from time to time, including claims and legal proceedings that have been asserted against us by former employees and certain customers, and have been in negotiations to settle certain of those contingencies. The adverse resolution of any one or more of those matters or the matters described in this Note 7 over and above the amount, if any, that has been estimated and accrued in our consolidated financial statements could have a material adverse effect on our business, financial condition, results of operations or cash flows.

F-20

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.    Stock Transactions

On June 28, 2005 we entered into a Common Stock Purchase Agreement with R² Investments, LDC, an affiliate of Q Investments. Pursuant to the terms and conditions of the Purchase Agreement, R² purchased 1,923,077 shares of i2’s common stock, par value $0.00025 per share, at $7.80 per share, the closing price on June 23, 2005 when the transaction was approved by i2’s Board of Directors. The sale resulted in proceeds of $14.9 million after issuance costs of approximately $0.1 million.

On June 3, 2004, we sold 100,000 shares of our 2.5% Series B Convertible Preferred Stock to Amalgamated Gadget, L.P. for and on behalf or R² Investments, LDC or its subsidiary R² Top Hat, Ltd. (collectively “R²”), pursuant to a Preferred Stock Purchase Agreement, dated April 27, 2004. The purchase price for the Series B preferred stock was $1,000 per Series B share, or $100.0 million in the aggregate. Pursuant to the terms of the Preferred Stock Purchase Agreement, R² has certain preemptive rights upon the issuance of certain of our securities during the three-year period ending June 3, 2007. Dividends on the Series B preferred stock, which may be paid in cash or in additional shares of Series B preferred stock, at our option, will be payable semi-annually at the rate of 2.5% per year. The Series B preferred stock will automatically convert into shares of our common stock on June 3, 2014 and will be convertible into shares of common stock at the option of the holder at any time prior thereto. The conversion price of $23.15 per share is subject to certain adjustments. If we were entitled to effect a conversion we would issue approximately 4.6 million shares in 2007 and approximately 4.5 million shares in 2006, with a value of approximately $58.0 million at December 31, 2007 and approximately $103.8 million at December 31, 2006. Under certain circumstances, we will also have the right to redeem the Series B preferred stock. Upon a change in control, unless otherwise agreed to by holders of a majority of outstanding Series B shares, we will be required to exchange the outstanding shares of Series B preferred stock for cash at 110% of face value plus all accrued but unpaid dividends. The exchange amount pursuant to this provision as of December 31, 2007 would be approximately $117.3 million and December 31, 2006 would be approximately $115.8 million. We may, at our option, redeem the Series B shares at any time after June 3, 2008 for cash at 104% of face value plus all accrued but unpaid dividends. The redemption amount pursuant to this provision as of December 31, 2007 would be approximately $110.9 million and December 31, 2006 would be $109.5 million. The Series B preferred stock is recorded net of $4.7 million of issuance costs, consisting of legal and investment-banking fees incurred to complete the transaction. The issuance costs are being accreted over a ten-year period through the date of automatic conversion. In 2007, 2006 and 2005 we recorded issuance cost accretion of approximately $0.4 million, $0.4 million and $0.5 million, respectively, and issued 1,327 shares or $1.3 million, 1,289 shares or $1.3 million and 2,551 or $2.6 million, respectively, of our Series B preferred stock as payment of our dividend to R² Investments, LDC. In 2007 and 2006 we also paid a cash dividend of $1.3 million on our Series B preferred stock. Subsequent to this transaction, R² became a related party.

9.    Stockholders’ Equity (Deficit) and Income Per Common Share

Reverse Stock Split.    All references to common stock and per share amounts for periods prior to February 17, 2005 have been retroactively restated to reflect the 1-for-25 reverse stock split of our common stock we implemented on February 16, 2005.

Stock Rights Plan.    On January 17, 2002, our Board of Directors approved adoption of a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock. After adjusting for the 1-for-25 reverse stock split we implemented on February 16, 2005, each share of common stock has attached to it one right to purchase 25 units of one one-thousandth of a share of Series A junior participating preferred stock at a price of $75.00 per unit. The rights, which expire on January 17, 2012, will only become exercisable upon distribution. Distribution of the rights will not occur until ten days after the earlier of (i) the public announcement that a person or group has acquired beneficial ownership of 15.0% or more of our

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

outstanding common stock or (ii) the commencement of, or announcement of an intention to make, a tender offer or exchange offer that would result in a person or group acquiring the beneficial ownership of 15.0% or more of our outstanding common stock.

The purchase price payable, and the number of units of Series A preferred stock issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution in the event of a stock dividend or the grant of certain rights to purchase units of Series A preferred stock at a price less than the then current market price of the units of Series A preferred stock, among other things. The number of outstanding rights and the number of units of Series A preferred stock issuable upon exercise of each right are also subject to adjustment in the event of a stock split of the common stock or a stock dividend on the common stock payable in common stock prior to the distribution date.

Shares of Series A preferred stock purchasable upon exercise of the rights are not redeemable. Each share of Series A preferred stock will be entitled to a dividend of 40 times the dividend declared per share of common stock. In the event of liquidation, each share of Series A preferred stock will be entitled to a payment of the greater of (i) 40 times the payment made per share of common stock or (ii) $1,000. Each share of Series A preferred stock will have 40 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share of Series A preferred stock will be entitled to receive 40 times the amount received per share of common stock. These rights are protected by customary anti-dilution provisions. Because of the nature of the dividend, liquidation and voting rights, the value of the 25 units of Series A preferred stock purchasable upon exercise of each right should approximate the value of one share of common stock.

If, after the rights become exercisable, we are acquired in a merger or other business combination transaction, or 50% or more of our consolidated assets or earning power are sold, proper provision will be made so that each holder of a right will thereafter have the right to receive upon exercise that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the right.

If any person or group becomes the beneficial owner of 15.0% or more of the outstanding shares of common stock, proper provision will be made so that each holder of a right, other than rights beneficially owned by the acquiring person (which will thereafter be void), will have the right to receive upon exercise that number of shares of common stock or units of Series A preferred stock (or cash, other securities or property) having a market value of two times the exercise price of the right.

We may redeem the rights in whole, but not in part, at a price of $0.25 per right at the sole discretion of our Board of Directors at any time prior to distribution of the rights. At December 31, 2007 and December 31, 2006, none of the rights had been exercisable. The terms of the rights may be amended by our Board of Directors without the consent of the holders of the rights except that after the distribution of the rights, no amendment may adversely affect the interests of the holders of the rights and the consent of the holders of the shares of Series B preferred stock is required. Until a right is exercised, the holder of a right will have no rights by virtue of ownership as a stockholder of the company, including, without limitation, the right to vote or to receive dividends.

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The rights have significant anti-takeover effects by causing substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The rights should not interfere with any merger, or other business combination approved by the Board of Directors and the holders of the shares of Series B preferred stock. The rights may be redeemed by us at the redemption price of $0.25 per right prior to the occurrence of a distribution date.

Net Income Per Common Share.    Basic net income per common share was computed by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding for the reporting period following the two-class method. Under the two-class method, participating convertible securities are required to be included in the calculation of basic net income per common share when the effect is dilutive. Accordingly, for the years ended December 31, 2007, December 31, 2006 and December 31, 2005, the effect of the convertible preferred stock is included in the calculation of basic net income per common share.

Diluted net income per common share includes the dilutive effect of stock options, share rights awards, and warrants granted using the treasury stock method, and the effect of contingently issuable shares earned during the period and shares issuable under the conversion feature of our convertible debt and convertible preferred stock using the if-converted method. A loss causes all common stock equivalents to be anti-dilutive due to an increase of the weighted average shares from the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. EITF 04-8 requires the inclusion of the effect of contingently convertible instruments in the calculation of diluted income per share including when the market price of our common stock is below the conversion price of the convertible security and the effect is not anti-dilutive. Accordingly, the effect of our convertible debt is included in the calculation of diluted earnings per share. The effect of our convertible preferred stock is included in basic earnings per share under the two-class method per EITF 03-6, “Participating Securities and the Two-Class Method” under FASB No. 128 — Earnings per Share; therefore, it is similarly included in diluted income per share when the effect is dilutive.

The following is a reconciliation of the number of shares used in the calculation of basic net income per common share under the two-class method and diluted earnings per share and the number of anti-dilutive shares excluded from such computations for 2007, 2006 and 2005.

	December 31,
	2007	2006	2005
Common and common equivalent shares outstanding using two-class method — basic:
Weighted average common shares outstanding	21,268	20,808	19,675
Participating convertible preferred stock	4,548	4,520	4,409
Total common and common equivalent shares outstanding using two-class method — basic	25,816	25,328	24,084
Effect of dilutive securities:
Outstanding stock option and share right awards	840	528	281
Warrants associated with 5% debt	92	27	104
Weighted average common and common equivalent shares outstanding — diluted	26,748	25,883	24,469
Anti-dilutive shares excluded from calculation:
Outstanding stock option and share right awards	1,906	1,145	3,653
Convertible debt	—	1,820	5,333
Convertible debt	736	—	—
Total anti-dilutive shares excluded from calculation	2,642	2,965	8,986

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.    Stock-Based Compensation Plans.

Employee Stock Purchase Plans.    Prior to May 1, 2007, we maintained a stock purchase plans for the benefit of our employees and the employees of our wholly-owned subsidiaries. The purchase plans were designed to allow eligible employees to purchase shares of our common stock through periodic payroll deductions. Payroll deductions could not exceed 15% of a participant’s base salary, and employees were allowed to purchase a maximum of 320 shares per purchase period under the purchase plans. The purchase price per share was 85% of the lesser of the fair market value of our common stock at the start of the purchase period or the fair market value at the end of the purchase period. Participation could be terminated at any time by a participating employee and automatically ended upon termination of employment. We discontinued the Employee Stock Purchase Plans on the last business day of April 2007 and on May 1, 2007, we replaced the plan with a company match on our 401k plan. The company provides 100% match on the first 3% of the employee contribution. During 2007 we had expense of approximately $1.0 million related to the employer match.

1995 Stock Option/Stock Issuance Plan.    The 1995 Stock Option/Stock Issuance Plan, a stockholder approved stock-based compensation plan, replaced our original 1992 Stock Plan. All options outstanding under the 1992 Plan were incorporated into the 1995 Plan; however, all outstanding options under the 1992 Plan continue to be governed by the terms and conditions of the existing option agreements for those options. The 1995 Plan is divided into three equity programs: (i) the Discretionary Grant Program, (ii) the Stock Issuance Program and (iii) the Automatic Grant Program.

The Discretionary Grant Program provides for the grant of stock appreciation rights and incentive stock options to employees and for the grant of stock appreciation rights and nonqualified stock options to employees, directors and consultants. Exercise prices may not be less than 100% and 85% of the fair market value per share of our common stock on the date of grant for incentive options and nonqualified stock options, respectively. Options granted under this program generally expire ten years after the date of grant. Prior to March 2001, options granted under the Discretionary Option Grant Program generally vested in four equal annual increments. Options granted after March 2001 generally vest 1% on the date of grant, 24% on the first anniversary of the grant date and the remaining options vest in 36 equal monthly increments thereafter. Some options granted under the Discretionary Option Grant Program may be immediately exercisable, subject to a right of repurchase at the original exercise price for all unvested shares.

The Stock Issuance Program provides for the issuance of shares of our common stock to any person at any time, at such prices and on such terms as established by the plan administrator. The purchase price per share cannot be less than 85% of the fair market value of our common stock on the issuance date. Shares of our common stock may also be issued pursuant to share right awards, restricted stock units and restricted stock awards that entitle the recipients to receive those shares upon the attainment of designated performance goals or the satisfaction of specified service requirements.

Effective with the 2007 Annual Meeting of Stockholders, the Automatic Grant Program provides that each person who is first elected or appointed as a non-employee member of our Board of Directors shall automatically be granted an award with a value equal to $175,000; with 50% of the value (or $87,500) in the form of an option grant issued at the fair market value on the date of grant, and the remaining value (or $87,500) in the form of a restricted stock award. On the date of each Annual Meeting of Stockholders, and provided that the individual has served as a non-employee Board member for at least six (6) months prior to the date of the Annual Meeting of Stockholders, will automatically be granted an award with a value equal to $125,000; with 50% of the value (or $62,500) in the form of an option grant issued at the fair market value on the date of grant, and the remaining value (or $62,500) in the form of a restricted stock award. Options granted to eligible non-employee Board members under the Automatic Option Grant Program vest in three equal annual installments, with the first such installment vesting one year from the option grant date.

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i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The 1995 Plan has an automatic share increase feature whereby the number of shares of our common stock reserved for issuance under the plan will automatically increase on the first trading day of January each calendar year by an amount equal to 5.0% of the sum of (a) the total number of shares of our common stock outstanding on the last trading day in December of the immediately preceding calendar year, plus (b) the total number of shares of our common stock repurchased by us on the open market during the immediately preceding calendar year pursuant to a stock repurchase program. In no event shall any such annual increase exceed 1,600,000 shares of our common stock or such lesser number of shares of our common stock as determined by our Board of Directors in its discretion. Through December 31, 2007, we have reserved a total of 11,834,212 shares of our common stock for issuance under the plan. The number of shares for which an individual may receive options, stock appreciation rights and other stock-based awards in his or her initial year of hire is limited to 1,000,000. Unless extended or terminated earlier, the plan will terminate on October 14, 2014.

2001 Non-officer Stock Option/Stock Issuance Plan.    In March 2001, the Board of Directors adopted the 2001 Non-officer Stock Option/Stock Issuance Plan. Based on the provisions of the 2001 Plan, its adoption did not require stockholder approval and accordingly such approval was not obtained. Under the provisions of this plan, 800,000 shares have been reserved for issuance. The 2001 Plan is divided into two equity programs: (i) the Discretionary Option Grant Program and (ii) the Stock Issuance Program.

The Discretionary Option Grant Program provides for the grant of nonqualified stock options to non-officer employees and consultants. Exercise prices may be less than, equal to or greater than the fair market value per share of our common stock on the date of grant. Options granted under this program generally expire ten years after the date of grant. Prior to March 2001, options granted under the Discretionary Option Grant Program generally vested 25% on the first anniversary of the grant date with the remaining options vesting in 36 equal monthly increments. Options granted after March 2001 generally vest 1% on the date of grant, 24% on the first anniversary of the grant date and the remaining options vest in 36 equal monthly increments thereafter. Some options granted under the Discretionary Option Grant Program may be immediately exercisable, subject to a right of repurchase at the original exercise price for all unvested shares.

The Stock Issuance Program provides for the issuance of shares of our common stock to non-officer employees and consultants at any time, at such prices and on such terms as established by the plan administrator. Shares of our common stock may also be issued pursuant to share right awards that entitle the recipients to receive those shares upon the attainment of designated performance goals or the satisfaction of specified service requirements.

Assumed Stock Option Plans.    We have assumed the stock option plans of various companies we have acquired. While our stockholders approved some of the acquisitions, our stockholders have not specifically approved any of the assumed stock option plans. Approximately 1,500,000 shares of our common stock have been reserved for issuance under the assumed plans.

Modification of Stock Options Granted to our Former CEO.    On December 21, 2006, we entered into an amendment to the employment agreement with our then CEO, Michael McGrath, to modify the period during which Mr. McGrath’s vested equity instruments are exercisable following a termination of Mr. McGrath’s employment resulting from death or disability, a voluntary termination or a termination without cause. Mr. McGrath resigned July 31, 2007 and under the terms of this modification, he has until December 31, 2008 to exercise his vested options. Notwithstanding the foregoing, any equity instrument shall be cancelled and no longer exercisable upon the expiration of the stated term of such equity instrument. In connection with the amended employment agreement, we recorded non-cash stock option expense of $1.3 million in December 2006 and recorded an additional $0.5 million during the first half of 2007.

F-25

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Exchange of Stock Options for Restricted Stock Units.    In April 2006, we announced that we filed an exchange offer with the SEC under which eligible employees had the opportunity to exchange certain stock options for restricted stock units. We offered to exchange restricted stock units for outstanding options with exercise prices per share equal to or greater than $45.00. The number of restricted stock units issued in exchange for a properly tendered eligible option was based on exchange ratios that depended on the exercise price of the tendered option. The exchange ratios represented the number of option shares to be exchanged for one restricted stock unit and ranged from 5-for-1 to 72-for-1. The exchange offer expired on May 31, 2006; 797 employees were eligible to participate and 549 employees participated, 1,033,498 options were tendered and cancelled, and 133,033 restricted stock units were issued under such exchange offer. Through the twelve months ended December 31, 2007 and December 31, 2006, we recorded $0.8 million and $1.9 million, respectively, of expense related to the amortization of the grant date fair value of options subject to exchange and the restricted stock units issued. An additional approximately $0.3 million of expense associated with the restricted stock units will be recognized over the remainder of the five-month vesting period of those awards.

Adoption of SFAS No. 123(R).    Effective January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” which is a revision to SFAS No. 123, “Accounting for Stock Based Compensation”, using the modified prospective method of transition. Under the provisions of SFAS No. 123(R), the estimated fair value of share based awards granted under stock incentive plans are recognized as compensation expense over the vesting period. Using the modified prospective method, compensation expense is recognized beginning with the effective date of adoption of SFAS No. 123(R) for all share based payments (i) granted after the effective date of adoption and (ii) granted prior to the effective date of adoption and that remain unvested on the date of adoption.

Prior to January 1, 2006, we accounted for stock based compensation plans using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and its related interpretations. Under the provisions of APB 25, no compensation expense was recognized when stock options were granted with exercise prices equal to or greater than the fair market value per share of our common stock on the date of grant.

We elected to apply the simplified method to determine the hypothetical additional paid-in capital (APIC) pool provided by FSP FAS 123(R) — 3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards”. There was no effect on our financial statements from making this election. Since we have significant tax net operating loss carryforwards, any excess tax benefit will not be realized until the period in with the losses have been fully utilized and the benefit reduces income taxes payable. In the event of a shortfall (i.e., the tax benefit realized is less than the amount previously recognized through periodic stock compensation expense recognition and related deferred tax accounting), the shortfall would be charged against APIC to the extent of previous excess benefits, if any, including the hypothetical APIC pool, and then to income tax expense. During 2006, the shortfalls had no net impact on income tax expense because of our valuation allowance. We intend to settle our stock-based awards with new shares.

F-26

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We calculate our stock-based compensation expense on a straight-line basis over the vesting periods of the related options. The table below shows the allocation of our total stock-based compensation expense for the twelve months ended December 31, 2007 and December 31, 2006. Due to our net operating losses, there was no tax expense or benefit recorded in connection with our stock-based compensation.

	Year Ended
	December 31, 2007						December 31, 2006
	Option Expense		Restricted Stock Expense		Total Expense		Option Expense		Restricted Stock Expense		Total Expense
Cost of services and maintenance	$	1,997	$	507	$	2,504	$	2,683	$	117	$	2,800
Sales and marketing		2,044		743		2,787		3,466		178		3,644
Research and development		2,465		564		3,029		3,530		213		3,743
General and administrative		3,335		733		4,068		5,833		273		6,106
Total	$	9,841	$	2,547	$	12,388	$	15,512	$	781	$	16,293

Under the modified prospective method of SFAS No. 123(R), we are not required to restate prior financial statements to reflect expensing of share-based compensation. As required by SFAS No. 123(R), we have presented pro forma disclosures of our net income and net income per share for the year ended December 31, 2005 assuming the estimated fair value of the options granted prior to January 1, 2006 was amortized to expense over the option-vesting period as illustrated below:

	2005
Net income applicable to common stockholders	$	84,309
Add: Total stock-based employee compensation expense included in reported net income		997
Less: Total stock-based employee compensation expense determined under fair value based method for all awards		(30,401	)
Pro forma net income	$	54,905
Net income per common share — Basic
As reported	$	3.50
Pro forma	$	2.17
Net income per common share — Diluted
As reported	$	3.45
Pro forma	$	2.12

Fair values of stock options and employee stock purchase plan (ESPP) shares are estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Stock Options Year Ended December 31,						ESPP Year Ended December 31,
	2007		2006		2005		2007		2006		2005
Expected term (years)	4		4		4		0.5		0.5		0.5
Volatility factor	0.81		0.90		1.04		0.32		0.64		1.13
Risk-free interest rate	4.67	%	4.82	%	4.00	%	4.67	%	4.76	%	4.20	%
Dividend yield	0	%	0	%	0	%	0	%	0	%	0	%

F-27

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Black-Scholes option-pricing model requires the input of highly subjective assumptions. We continue to assess the assumptions and methodologies used to calculate the estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, which could materially impact our fair value determinations.

A combined summary of activity in our 1995 Plan, 2001 Plan and our assumed stock option plans during the years ended December 31, 2007, 2006 and 2005 is as follows (in thousands, except per share amounts and contractual life):

	Number of Options			Weighted Average Exercise Price ($)	Weighted Remaining Contractual Life (Years)	Aggregate Intrinsic Value ($)
Outstanding balance, December 31, 2004		4,149		123.19	3.50	183
Granted
Grant price = fair market value		2,570		10.75
Grant price > fair market value		14		47.12
Exercised		(5	)	14.39
Forfeited		(856	)	29.95
Expired		(677	)	148.54
Outstanding balance, December 31, 2005		5,195		79.67	5.85	8,745
Granted
Grant price = fair market value		944		14.29
Grant price > fair market value		7		16.13
Exercised		(124	)	8.62
Converted (1)		(1,033	)	162.43
Forfeited		(407	)	12.39
Expired		(1,000	)	173.88
Outstanding balance, December 31, 2006		3,582		22.24	7.80	30,775
Granted
Grant price = fair market value		202		19.09
Grant price > fair market value		567		25.67
Exercised		(189	)	12.09
Forfeited.		(465	)	18.60
Expired		(202	)	101.11
Outstanding balance, December 31, 2007		3,495		19.05	5.71	4,238
Options exercisable at December 31, 2006		1,737		31.36	6.87	13,694
Options exercisable at December 31, 2007		2,213		19.80	4.17	3,157
(1) Issued/converted pursuant to the tender offer announced in April 2006 described above.
Weighted average grant date fair value of options granted during 2005	$	7.96
Weighted average grant date fair value of options granted during 2006	$	11.18
Weighted average grant date fair value of options granted during 2007	$	14.84

(1) Issued/converted pursuant to the tender offer described above.

F-28

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of activity in our restricted stock plan as of the three years ended December 31, 2007, 2006 and 2005 is as follows (in thousands, except per share amounts and contractual life:

	Number of Shares			Weighted Average Exercise Price ($)	Weighted Remaining Contractual Life (Years)	Aggregate Intrinsic Value ($)
Outstanding balance, December 31, 2004		104		—	1.09	1,792
Granted
Grant price < fair market value		130		—
Vested		(77	)	—
Forfeited		(89	)	—
Outstanding balance, December 31, 2005		68		—	1.56	953
Granted
Grant price < fair market value		408		—
Vested		(40	)	—
Forfeited		(28	)	—
Outstanding balance, December 31, 2006		408		—	1.57	9,299
Granted
Grant price = fair market value (1)		400		—
Grant price < fair market value		218		—
Vested		(157	)	—
Forfeited		(145	)	—
Outstanding balance, December 31, 2007		724		—	1.89	9,124
Weighted average grant date fair value of restricted shares granted during 2007	$	22.19

(1) Represents a grant of restricted stock units to certain key employees that vest based on specified performance over a two-year performance period. This performance period is from January 1, 2008 to December 31, 2009. We are required to assess whether the performance criteria is probable of being achieved, and only recognize compensation expense if the vesting is considered probable. On a quarterly basis, we assess whether vesting is probable and based on that assessment record the appropriate expense. Based on our assessments during 2007, no compensation expense associated with these performance-based RSUs is reflected in our results of operations in the twelve-month period ended December 31, 2007.

In connection with stock option and restricted stock awards, we recognized compensation expense of $12.4 million, $16.3 million and $1.0 million for the twelve months ended December 31, 2007, December 31, 2006 and December 31, 2005, respectively. Total compensation cost related to nonvested awards not yet recognized was $17.2 million at December 31, 2007. The expense is expected to be recognized over a weighted-average period of 1.2 years on a straight-line basis. The total fair value of options vested during the twelve-month periods ended December 31, 2007, December 31, 2006 and December 31, 2005 was $8.2 million, $9.7 million and $28.7 million, respectively. The aggregate intrinsic value of options exercised was $2.0 million during the twelve-month periods ended December 31, 2007 and $1.8 million during the twelve-month periods ended December 31, 2006 and December 31, 2005. The intrinsic value of a stock option is the amount by which the fair market value of the underlying stock exceeds the exercise price of the option. When we issue shares upon stock option exercises, our policy is to first issue any available treasury shares and then issue new shares.

F-29

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of nonvested stock option awards for the years ended December 31, 2007 and December 31, 2006, and changes during the respective periods is presented below:

	Nonvested Shares		Weighted Average Grant Date Fair Value ($)
Unvested balance, December 31, 2005	2,303		9.30
Granted
Grant price = fair market value	944		9.74
Grant price > fair market value	7		8.20
Forfeited	(407	)	9.00
Vested	(974	)	9.24
Outstanding unvested balance, December 31, 2006	1,873		9.61
Granted
Grant price = fair market value	202		19.09
Grant price > fair market value	567		25.67
Forfeited	(465	)	18.60
Vested	(829	)	13.85
Outstanding unvested balance, December 31, 2007	1,348		17.64

Of the options outstanding at December 31, 2007, and in the absence of acceleration of vesting or cancellations, approximately 688,869 options will vest in 2008, 430,076 in 2009, 204,402 in 2010 and 24,644 in 2011.

A summary of nonvested share awards as of December 31, 2007 and December 31, 2006, and changes during the respective periods is presented below:

	Nonvested Shares		Weighted Average Grant Date Fair Value ($)
Outstanding unvested balance, December 31, 2005	68		18.64
Granted
Grant price < fair market value	408		14.56
Vested	(40	)	17.59
Forfeited	(28	)	14.29
Outstanding unvested balance, December 31, 2006	408		14.96
Granted
Grant price = fair market value (1)	400		25.70
Grant price < fair market value	218		15.75
Vested	(157	)	14.80
Forfeited	(145	)	22.60
Outstanding unvested balance, December 31, 2007	724		19.64

F-30

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about our stock options outstanding at December 31, 2007:

Range of Exercise Prices	Options Outstanding			Options Exercisable
	Number of Shares	Weighted Average Exercise Price ($)	Weighted Average Remaining Contractual Life (Years)	Shares	Weighted Average Exercise Price ($)
$    7.25 — $    12.50	913	7.96	4.46	693	8.05
$  12.51 — $    62.50	2,523	18.74	6.23	1,463	17.95
$  62.51 — $    93.75	6	84.93	0.89	6	84.93
$  93.76 — $  137.50	20	107.90	2.99	20	107.90
$137.50 — $2,301.00	31	298.88	2.33	31	298.88
	3,493	19.05	5.71	2,213	19.80

11.    Restructuring Charges and Adjustments

2007 Restructuring Plan.    During the second half of 2007 we initiated a reorganization and eliminated approximately 55 positions. The purpose of the restructuring was to reduce management layers to both decrease cost and increase speed around decision-making and internal processes. The realignment included the elimination of certain management levels as well as other targeted cost reductions. We recorded a charge of approximately $4.0 million, primarily related to severance costs. As of December 31, 2007, approximately $0.2 million of employee severance and termination remains in our 2007 restructuring accrual.

2005 Restructuring Plan.    On March 30, 2005, we implemented a restructuring plan to “resize” our infrastructure and reduce our overhead to improve efficiencies and reduce operating expense. The restructuring included the involuntary termination of 184 employees and closing or partially vacating four office locations. These activities are being accounted for in accordance with SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities.” During the first quarter of 2005, we recorded a restructuring charge of $10.4 million for the involuntary terminations and $2.1 million for office closures. As of December 31, 2007, approximately $0.1 million of employee severance and termination remains in our 2006 restructuring accrual.

Consolidated Restructuring Accrual

The following table summarizes the 2007 and 2006 restructuring related payments and accruals, as well as the components of the remaining restructuring accruals, net of estimated sublease income of $0.5 million and $1.1 million, included in accrued liabilities at December 31, 2006 and December 31, 2005, respectively. There was no remaining estimated sublease income at December 31, 2007.

	Employee Severance and Termination			Office Closure and Consolidation			Total
Remaining accrual balance at December 31, 2005	$	234		$	1,343		$	1,577
Adjustments to prior restructuring plans		(36	)		(367	)		(403	)
Cash payments		(6	)		(853	)		(859	)
Remaining accrual balance at December 31, 2006		192			123			315
Adjustments to prior restructuring plans		(23	)		—			(23	)
2007 expense		3,934			20			3,955
Cash payments		(3,820	)		(143	)		(3,963	)
Remaining accrual balance at December 31, 2007	$	283		$	—		$	283

F-31

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.    Foreign Currency Risk Management

Because we conduct business on a global basis in various foreign currencies, we are exposed to adverse movements in foreign currency exchange rates. We maintain a program to mitigate foreign currency exposures that utilize foreign currency forward contracts to reduce selected non-functional currency exposures. The objective of this program is to reduce the effect of changes in foreign currency exchange rates on our results of operations. Furthermore, our goal is to offset foreign currency transaction gains and losses recorded for accounting purposes with gains and losses realized on the forward contracts.

We generally enter into forward contracts to purchase or sell various foreign currencies as of the last day of each month. These forward contracts generally have original maturities of up to one month and are net-settled in U.S. Dollars. Each forward contract is based on the current market forward exchange rate as of the contract date and no premiums are paid or received. Accordingly, these forward contracts have no fair value as of the contract date. Changes in the applicable foreign currency exchange rates subsequent to the contract date cause the fair value of the forward contracts to change. These changes in the fair value of forward contracts are recorded through earnings and the corresponding assets or liabilities are recorded on our balance sheet. Gains and losses on the forward contracts are included as a component of non-operating expense, net, in our Consolidated Statements of Operations and offset foreign exchange gains and losses from the revaluation of intercompany balances or other current monetary assets and liabilities denominated in currencies other than the functional currency of the reporting entity. During 2007, we recognized net gains of $3.6 million on foreign currency forward transactions and net losses of $4.3 million on foreign currency transactions. During 2006, we recognized net gains of $0.1 million on foreign currency forward contracts and net losses of $0.3 million on foreign currency transactions. During 2005, we recognized net gains of $1.3 million on foreign currency forward contracts and net losses of $5.5 million on foreign currency transactions.

A summary of our foreign currency forward contracts by currency as of December 31, 2007 and 2006 are presented in the following table (in thousands). All of these contracts originated, without premiums, on December 31, 2007 and 2006, respectively, based on then-current market forward exchange rates. Accordingly, these forward contracts had no fair value on December 31, 2007 and 2006 and no amounts related to these forward contracts were recorded in our financial statements.

		2007			2006
		Notional Amount of Forward Contract in Foreign Currency	Notional Amount of Forward Contract in U.S. Dollars		Notional Amount of Forward Contract in Foreign Currency	Notional Amount of Forward Contract in U.S. Dollars
Forward contracts to purchase:
Australian Dollars	AUD	399	$	350	—	$	—
British Pounds	GBP	997		1,975	7,195		14,089
Canadian Dollars	CAD	12,304		12,517	11,810		10,180
Danish Kroner	DKK	3,872		759	3,990		710
European Euros	EUR	2,751		4,012	—		—
Indian Rupees	INR	846,837		21,488	730,325		16,480
Japanese Yen	JPY	475,278		4,279	229,730		1,938
Singapore Dollars	SGD	1,225		856	822		536
South Korean Won	KRW	270,447		290	174,574		188
Taiwanese Dollars	TWD	—		—	16,701		516
Total forward contracts to purchase			$	46,526		$	44,637
Forward contracts to sell:
Australian Dollars	AUD	—		—	157		123
South African Rand	ZAR	—		—	1,136		160
Total forward contracts to sell			$	—		$	283

F-32

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our foreign currency forward contracts include credit risk to the extent that the bank counterparties may be unable to meet the terms of agreements. We reduce such risk by limiting our counterparties to major financial institutions. Additionally, the potential risk of loss with any one party resulting from this type of credit risk is monitored.

13.    Income Taxes

The components of income before income taxes from domestic and foreign operations for the years ended December 31, 2007, 2006 and 2005 are as follows:

	2007		2006		2005
Domestic	$	10,714	$	19,426	$	35,466
Foreign		13,152		8,611		12,643
Total	$	23,866	$	28,037	$	48,109

Our provision (benefit) for income taxes consists of the following:

	2007			2006			2005
Current:
State	$	126		$	—		$	—
Foreign		6,241			5,557			6,518
Deferred:
Foreign		(234	)		(1,736	)		(1,854	)
Total	$	6,133		$	3,821		$	4,664

Our provision (benefit) for income taxes reconciles to the amount computed by applying the statutory U.S. federal rate of 35% to income from continuing operations before income taxes as follows:

	2007			2006			2005
Expense computed at statutory rate	$	8,353		$	9,812		$	16,838
Stock based compensation		1,749			2,372			—
Foreign operations		1,541			1,558			240
Increase/(decrease) in valuation allowance		(5,660	)		(13,182	)		(12,332	)
Dividend received from foreign subsidiary		—			3,094			—
Other		150			167			(82	)
Provision for income taxes	$	6,133		$	3,821		$	4,664

F-33

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Components of deferred tax assets and liabilities at December 31, 2007 and 2006 are comprised of the following:

	2007			2006
Deferred tax assets
Deferred revenue	$	5,567		$	13,547
Accrued liabilities		7,141			12,807
Acquired intangibles		46,606			53,020
Capitalized expenses		56,646			63,520
Other		12,924			7,158
Total future deductible items		128,884			150,052
Loss carryforwards		687,285			681,897
Tax credits		41,131			17,359
Total tax loss carryforwards and credits		728,416			699,256
Total deferred tax assets		857,300			849,308
Valuation allowance against deferred tax assets		(847,834	)		(840,076	)
Net deferred tax assets	$	9,466		$	9,232

At December 31, 2007 and 2006, we had approximately $1.8 billion of U.S. federal net operating loss carryforwards for domestic federal tax purposes. These loss carryforwards are subject to certain annual limitations and are scheduled to expire as follows:

2008	$	2,260
2009-2011		11,456
2012-2016		7,348
2017-2021		1,110,540
Thereafter		659,038
Total	$	1,790,642

At December 31, 2007, our U.S. federal net operating loss carryforwards for tax purposes was approximately $2.0 million greater than our net operating loss carryforwards for financial reporting purposes due to our inability to realize excess tax benefits under SFAS 123(R) until such benefits reduce income taxes payable.

In addition to the tax loss carryforwards reflected above, at December 31, 2007, we had approximately $349.3 million in future deductible expenses for tax purposes. See the table above for a description of these deferred tax assets. These tax deductible items have varying schedules of amortization and deductibility with no expiration and will reduce taxable income in the years of deduction and may create or increase tax net operating losses in the years of deduction. Utilization of these future deductible expenses will reduce or delay our ability to utilize existing tax loss carryforwards, possibly resulting in the expiration of a portion of the existing loss carryforwards. Under current tax law, tax net operating losses created or increased as a result of these future tax-deductible items will have a carryforward period of 20 years from the year in which the loss is incurred.

At December 31, 2007 and December 31, 2006, we had approximately $38.9 million and $38.8 million, respectively, of U.S. federal research and development tax credit carryforwards. These tax credits expire in the years 2008 through 2027.

F-34

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2007 and December 31, 2006, we had approximately $87.7 million and $101.7 million, respectively, of U.S. federal capital loss carryforwards. These loss carryforwards expire in the years 2008 through 2010. Capital losses may be offset only by capital gains.

We had $6.7 million and $5.4 million of foreign net operating loss carryforwards at December 31, 2007 and 2006, respectively. Foreign net operating loss carryforwards at December 31, 2007 totaling $5.4 million expire in the years 2009 through 2014, and $1.3 million expire in the years 2008 through 2010. At December 31, 2007 and 2006, we had $3.7 million and $3.6 million, respectively, of foreign research and development tax credit carryforwards. The foreign research and development tax credit carryforwards expire between 2022 and 2027.

As of December 31, 2007, we maintain a full valuation allowance against our U.S. net deferred tax assets and approximately $0.9 million valuation allowance against foreign net deferred tax assets. Each quarter, we review the necessity and amounts of the domestic and foreign valuation allowances taking into account various factors, including our financial performance. Despite the valuation allowance, the future tax-deductible benefits and tax credits related to these deferred tax assets remain available to offset future taxable income or reduce income taxes payable over the remaining useful lives of the underlying deferred tax assets.

We consider the earnings of certain foreign subsidiaries to be permanently reinvested outside the U.S. Aggregate unremitted earnings of foreign subsidiaries that are considered permanently reinvested and for which U.S. income taxes have not been provided totaled $48.1 million and $49.6 million as of December 31, 2007 and 2006, respectively.

At December 31, 2007, we have recorded approximately $8.5 million in tax contingency reserves in our taxes payable accounts relating to tax positions we have taken during tax years that remain open for examination by tax authorities.

In July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (“SFAS 109”). This interpretation, which became effective for fiscal years beginning after December 15, 2006, introduces a new approach that significantly changes how enterprises recognize and measure tax benefits associated with tax positions and how enterprises disclose uncertainties related to income tax positions in their financial statements.

This interpretation applies to all tax positions within the scope of SFAS 109 and establishes a single approach in which a recognition and measurement threshold is used to determine the amount of tax benefit that should be recognized in the financial statements. FIN 48 also provides guidance on (1) the recognition, derecognition, and measurement of uncertain tax positions in a period subsequent to that in which the tax position is taken; (2) the accounting for interest and penalties; (3) the presentation and classification of recorded amounts in the financial statements; and (4) disclosure requirements.

On January 1, 2007, we adopted the provisions of FIN 48. As a result of the implementation of FIN 48, there was no adjustment to the January 1, 2007 balance of our accumulated deficit.

Prior to the adoption of FIN 48, the company had recorded $8.5 million of tax contingency reserves, of which approximately $3.1 million related to India transfer pricing assessments had been paid. Upon adoption of FIN 48 these amounts have been reclassified as a FIN 48 liability. In addition, at December 31, 2006 we had approximately $22.5 million of deferred tax assets (subsequently recharacterized as uncertain tax positions under FIN 48) recorded for which a full valuation allowance has been provided.

F-35

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The change in unrecognized tax benefits for the twelve months ended December 31, 2007 is as follows:

Balance at January 1, 2007	$	30,965
Additions for tax positions of prior years		322
Additions for tax positions of current year		957
Reductions related to lapses of statute of limitations		(689	)
Reductions for settlements		(1,042	)
Balance at December 31, 2007	$	30,513

The additions for tax positions of prior years and the current year are related to global transfer pricing.

The total amount of unrecognized tax benefits at December 31, 2007, that would affect the company’s effective tax rate, and not be offset by our valuation allowance, if recognized is $7.0 million. Of this amount, we have paid approximately $3.5 million related to India transfer pricing as required under Indian tax law. There is a reasonable possibility that unrecognized tax benefits will increase or decrease by December 31, 2008 due to a lapse in the statute of limitations for assessing tax, settlements of prior years uncertain tax positions, additional tax assessments and accruals related to our global transfer pricing. However, it is not possible to reasonably estimate a range of such potential increase or decrease.

We account for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of January 1, 2007 was $1.2 million. The total amount of accrued interest and penalties as of December 31, 2007 was $1.9 million.

Income tax expense (benefit) for the three and twelve months ended December 31, 2007, includes $ 0.1 million and $0.7 million, respectively, of interest expense related to uncertain tax positions.

We or one of our subsidiaries file income tax returns in the United States (U.S.) federal jurisdiction and various state and foreign jurisdictions. We have open tax years for the U.S. federal return back to 1992 with respect to our net operating loss (“NOL”) carryforwards, where the IRS may not raise tax for these years, but can reduce NOLs. Otherwise, with few exceptions, we are no longer subject to federal, state, local or foreign income tax examinations for years prior to 2003.

14.    Segment Information, International Operations and Customer Concentrations

We operate our business in one segment, supply chain management solutions designed to help enterprises optimize business processes both internally and among trading partners. SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” establishes standards for the reporting of information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, who is our Chief Executive Officer (CEO), in deciding how to allocate resources and in assessing performance.

We market our software and services primarily through our worldwide sales organization augmented by other service providers, including both domestic and international systems consulting and integration firms and other industry-related partners. Our chief executive officer evaluates resource allocation decisions and our performance based on financial information, presented on a consolidated basis, accompanied by disaggregated information by geographic regions. Sales to our customers generally include products from some or all of our product suites. We have not consistently allocated revenues from such sales to individual products for internal or general-purpose financial statements.

F-36

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenues are attributable to regions based on the locations of the customers’ operations. Total revenues by geographic region, as reported to our CEO, were as follows:

	Twelve Months Ended December 31,
	2007			2006			2005
United States	$	149,613		$	159,420		$	178,633
International revenue:
Non-US Americas		6,486			11,045			10,489
Europe, Middle East and Africa		54,323			52,014			85,558
Greater Asia Pacific		49,888			57,198			62,187
Total international revenue		110,697			120,257			158,234
Total Revenue	$	260,310		$	279,677		$	336,867
International revenue as a percent of total revenue		43	%		43	%		47	%

No individual customer accounted for more than 10% of our total revenues during 2007, 2006 or 2005.

Long-lived assets by geographic region excluding deferred taxes, as reported to our CEO, were as follows:

	2007		2006
United States	$	29,251	$	30,224
Europe, Middle East, Africa		113		210
Greater Asia Pacific		2,047		2,622
Total Long Lived Assets	$	31,411	$	33,056

15.    Discontinued Operations

On July 1, 2005, we completed the sale of Trade Service Corporation (TSC), which had been operated as a part of our content and data services business, for approximately $3.0 million. This transaction led to a gain on sale, net of write-offs of associated assets and liabilities, of approximately $2.2 million. The sale was to a group of investors led by TSC’s then-current management team.

On December 1, 2005 and December 16, 2005, respectively, the company and i2 Technologies Software Private Limited, an India corporation and a subsidiary of the company, sold to IHS Parts Management, Inc. (IHS) certain assets associated with our subsidiary’s content and data services business (CDS). In addition, we agreed to license certain software and patents associated with the CDS business to IHS. IHS paid us approximately $30 million in cash and assumed certain liabilities associated with the CDS business. As part of the transaction, IHS agreed to sublease certain office space located in India from our subsidiary. In addition, we agreed to perform certain transition and hosting services for IHS to assist in the transition of CDS to IHS.

The historical operating results of TSC and CDS, including the gain on the sale of TSC, have been reported as discontinued operations in our financial statements. Income from discontinued operations was $43.9 million in 2005.

F-37

i2 TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale to be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. The following table details the amounts reclassified to discontinued operations:

	2005
Operating revenue	$	17,467
Operating expenses		7,856
Operating income		9,611
Non-operating expenses, net		(2,198	)
Gain on sale		36,471
Net income, net of taxes	$	43,884

16.    Related Party Transactions

Prior to our hiring of Mr. McGrath as our Chief Executive Officer and President on February 27, 2005, Mr. McGrath had been bound by the terms of an agreement with Integrated Development Enterprise, Inc. or IDe pursuant to which he was committed to provide approximately 52 days of service per year to IDe, through January 31, 2007. As consideration for the release of Mr. McGrath from that commitment, we entered into a preferred stock purchase agreement with IDe, dated as of February 28, 2005, pursuant to which we purchased $1.0 million of convertible preferred stock of IDe. Q Funding III, L.P., an affiliate of Q Investments and R² Investments, LDC, the holder of all of our outstanding shares of Series B preferred stock, also committed to purchase up to $1.0 million of IDe convertible preferred stock, on identical terms, pursuant to the terms of the same preferred stock purchase agreement. During 2005, both Q Funding and we purchased the preferred stock that each of us committed to acquire. Mr. McGrath was released from his service obligation to IDe upon execution and delivery of the preferred stock purchase agreement. Mr. McGrath continued as chairman of IDe. Mr. McGrath and members of his family hold less than 10% of the common stock of IDe on a fully diluted basis. At December 31, 2005, we evaluated the fair market value of the investment in IDe and determined the investment was impaired and the impairment was other-than temporary. Accordingly, we recorded an impairment charge to reduce the carrying value of the investment to zero. The impairment charge is reflected in other expense, net in the consolidated statement of operations.

On October 4, 2005, we entered into an agreement with IDe to license and implement their Phase Management and Portfolio Management solutions. We paid IDe approximately $0.4 million under this agreement.

On June 28, 2005, we sold 1,923,077 shares of our common stock to R² Investments, LDC, an affiliate of Q Investments, the holder of all of our outstanding shares of Series B preferred stock. The stock was sold at a price of $7.80 per share, the closing price on June 23, 2005 when our Board of Directors approved the transaction. We received approximately $15.0 million of net proceeds from this sale. On June 3, 2004, we sold 100,000 shares of our 2.5% Series B Convertible Preferred Stock to R² Investments, LDC, pursuant to a Preferred Stock Purchase Agreement, dated April 27, 2004. For details related to the sale and subsequent payment of dividends related to this Convertible Preferred Stock, see Note 8 — Stock Transactions.

F-38

EX-4.4

EXHIBIT 4.4

RIGHTS AGREEMENT

BY AND BETWEEN

i2 TECHNOLOGIES, INC.

AND

MELLON INVESTOR SERVICES LLC,

AS RIGHTS AGENT

DATED AS OF

JANUARY 17, 2002

TABLE OF CONTENTS

		PAGE
Certain Definitions		1
Section 2.	Appointment of Rights Agent	5
Section 3.	Issue of Rights Certificates	6
Section 4.	Form of Rights Certificates	7
Section 5.	Countersignature and Registration	8
Section 6.	Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates	9
Section 7.	Exercise of Rights; Purchase Price; Expiration Date of Rights	9
Section 8.	Cancellation and Destruction of Rights Certificates	11
Section 9.	Reservation and Availability of Preferred Stock	11
Section 10.	Preferred Stock Record Date	13
Section 11.	Adjustment of Purchase Price, Number of Shares or Number of Rights	13
Section 12.	Certificate of Adjusted Purchase Price or Number of Shares	21
Section 13.	Consolidation, Merger or Sale or Transfer of Assets or Earning Power	21
Section 14.	Fractional Rights and Fractional Shares	24
Section 15.	Rights of Action	25
Section 16.	Agreement of Rights Holders	25
Section 17.	Rights Certificate Holder Not Deemed a Stockholder	26
Section 18.	Concerning the Rights Agent	26
Section 19.	Merger or Consolidation or Change of Name of Rights Agent	27
Section 20.	Duties of Rights Agent	28
Section 21.	Change of Rights Agent	30
Section 22.	Issuance of New Rights Certificates	31
Section 23.	Redemption and Termination	31
Section 24.	Exchange	32
Section 25.	Notice of Certain Events	33
Section 26.	Notices	34
Section 27.	Supplements and Amendments	35
Section 28.	Successors	36
Section 29.	Determinations and Actions by the Board of Directors	36
Section 30.	Benefits of This Agreement	36
Section 31.	Severability	36
Section 32.	Governing Law	37
Section 33.	Counterparts	37
Section 34.	Descriptive Headings	37
EXHIBITS
Exhibit A	Form of Certificate of Designation of Series A Junior Participating Preferred Stock
Exhibit B	Form of Rights Certificate
Exhibit C	Summary of Rights to Purchase Shares of Series A Preferred Stock

ii.

RIGHTS AGREEMENT

THIS RIGHTS AGREEMENT, dated as of January 17, 2002 (the “Agreement”), is entered into by and between i2 Technologies, Inc., a Delaware corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey limited liability company (the “Rights Agent”).

RECITALS:

WHEREAS, effective January 17, 2002 (the “Rights Dividend Declaration Date”), the board of directors of the Company authorized and declared a distribution of one Right (each, a “Right”) for each share of Common Stock (as hereinafter defined) of the Company outstanding as of the Close of Business (as hereinafter defined) on January 28, 2002 (the “Record Date”), each Right initially representing the right to purchase one one-thousandth of a share (a “Unit”) of Preferred Stock (as hereinafter defined) upon the terms and subject to the conditions in this Agreement, and has further authorized and directed the issuance of one Right with respect to each share of Common Stock of the Company that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined).

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein set forth, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:

“Acquiring Person” shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the shares of Common Stock of the Company then outstanding, but shall not include the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding shares of Common Stock of the Company for or pursuant to the terms of any such plan. Notwithstanding the foregoing:

(i) no Person shall become an “Acquiring Person” as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the shares of Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding as a result of any such acquisition of shares of Common Stock by the Company and shall, after such acquisition of shares by the Company, become the Beneficial Owner of any additional shares of Common Stock of the Company (other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Stock of the Company are treated equally), then such Person shall be deemed to be an “Acquiring Person;”

1.

(ii) if the board of directors of the Company determines in good faith that a Person who would otherwise be an “Acquiring Person” as defined pursuant to the provisions of subparagraph (i), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares of Common Stock of the Company so that such Person would no longer be an “Acquiring Person,” then such Person shall not be deemed to be an “Acquiring Person” for any purpose of this Agreement; and

(iii) Sanjiv S. Sidhu, together with his spouse, lineal descendants (whether by blood or adoption) and any Persons (whether now or hereafter existing) formed primarily for Mr. Sidhu’s or his spouse’s or his lineal descendants’ estate planning purposes, shall not be deemed an Acquiring Person with respect to (x) shares beneficially owned as of the date of this Agreement or (y) additional shares as to which Mr. Sidhu, his spouse, any such lineal descendants or any other such Person acquires Beneficial Ownership after the date of this Agreement, provided that if the aggregate amount of additional shares of Common Stock of the Company acquired pursuant to clause (y) exceeds 5% of the shares of Common Stock outstanding at the first such acquisition described in clause (y) of additional shares of Common Stock of the Company (as such amount may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to shares of Common Stock of the Company), then all shares described in (x) and (y) shall be included for purposes of determining whether or not Mr. Sidhu, his spouse, any such lineal descendants or any other such Person is an Acquiring Person.

“Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.

“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act Regulations (as hereinafter defined) as in effect on the date of this Agreement.

A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own,” any securities:

(i) which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act (as hereinafter defined) and Rule 13d-3 thereunder (or any comparable or successor law or regulation); or

(ii) which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately, contingently or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing, other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, other rights, warrants or options (in each case, other than the Rights), or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by

2.

or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided further, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under this subparagraph (ii) as a result of any agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (x) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the Exchange Act Regulations, and (y) is not reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or

(iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such first-mentioned Person (or any of such first-mentioned Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing, other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to clause (B) of subparagraph (ii) above) or disposing of any securities of the Company; provided, however, that in no case shall any officer or director of the Company be deemed (A) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (B) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than such officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan.

Notwithstanding anything in this definition of “Beneficial Owner” and “beneficially own” to the contrary, the phrase “then outstanding,” when used with reference to a Person who is the Beneficial Owner of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to beneficially own hereunder.

“Business Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the States of Texas or New Jersey are authorized or obligated by law or executive order to close.

“Close of Business” on any given date shall mean 5:00 p.m., Dallas, Texas time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Dallas, Texas time, on the next succeeding Business Day.

“Common Stock” when used with reference to the Company shall mean the shares of Common Stock, par value $0.00025 per share, of the Company. “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock (or other equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.

3.

“Current Per Share Market Price” shall have the meaning set forth in Section 11(d)(i) hereof.

“Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

“Distribution Date” shall have the meaning set forth in Section 3(a) hereof.

“Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor statute.

“Exchange Act Regulations” shall mean the Rules and Regulations under the Exchange Act, as amended from time to time (including any successor rules).

“Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

“Final Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

“NASDAQ” shall have the meaning set forth in Section 11(d) hereof.

“Person” shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company, having the rights and preferences set forth in the Form of Certificate of Designation attached to this Agreement as Exhibit A.

“Preferred Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

“Principal Party” shall have the meaning set forth in Section 13(b) hereof.

“Purchase Price” shall have the meaning set forth in Section 7(b) hereof.

“Record Date” shall have the meaning set forth in the recitals to this Agreement.

“Redemption Date” shall have the meaning set forth in Section 7(a) hereof.

“Redemption Price” shall have the meaning set forth in Section 23(a) hereof.

“Right” shall have the meaning set forth in the recitals to this Agreement.

4.

“Rights Agent” shall have the meaning set forth in the forepart of this Agreement and shall include any Person that shall become a successor Rights Agent pursuant to the terms of this Agreement.

“Rights Certificate” shall have the meaning set forth in Section 3(a) hereof.

“Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii)(A), (B) or (C) hereof.

“Section 11(a)(iii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

“Section 13 Event” shall have the meaning set forth in Section 13(a) hereof.

“Section 24(a) Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended, or any successor statute.

“Share Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.

“Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

“Subsidiary” of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

“Summary of Rights” shall have the meaning set forth in Section 3(b) hereof.

“Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof.

“Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event.

“Unit” shall have the meaning set forth in the recitals to this Agreement.

Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions of this Agreement, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint co-Rights Agents as it may deem necessary or desirable upon ten days’ prior written notice to the Rights Agent and any other co-Rights Agents. The Rights Agent shall have no duty to supervise, and in no event shall be liable for, the acts or omissions of any such co-Rights Agent.

5.

Section 3. Issue of Rights Certificates.

(a) Until the earlier of (i) the Close of Business on the tenth day after the Share Acquisition Date and (ii) the Close of Business on the tenth day (or such later date as may be determined by action of the Company’s board of directors prior to such time as any Person becomes an Acquiring Person and of which later date the Company will give the Rights Agent prompt written notice) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any Person holding shares of Common Stock for or pursuant to the terms of any such plan) is commenced within the meaning of Rule 14d-2(a) of the Exchange Act Regulations or after the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any Person holding shares of Common Stock for or pursuant to the terms of any such plan) to commence a tender or exchange offer, if upon consummation thereof such Person would be the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding (the earlier to occur of the events described in (i) and (ii) above being the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for shares of Common Stock of the Company registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and not by separate Rights Certificates, and (y) the right to receive Rights Certificates will be transferable only in connection with the transfer of shares of Common Stock of the Company. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all necessary information, send) by first-class, insured, postage-prepaid mail, to each record holder of shares of Common Stock of the Company as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate, in substantially the form of Exhibit B hereto (a “Rights Certificate”), evidencing one Right for each share of Common Stock so held. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. The Company shall promptly notify the Rights Agent in writing upon the occurrence of a Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

(b) On the Record Date, or as soon as practicable thereafter, the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all necessary information, send) a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form of Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of shares of Common Stock of the Company as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of any certificate for shares of Common Stock of the Company shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.

(c) Certificates evidencing shares of Common Stock of the Company which become outstanding (whether originally issued or delivered from the Company’s treasury) or are

6.

otherwise transferred after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend (or such other legend as the Company may deem appropriate that is not inconsistent with the provisions of this Agreement but which do not affect the rights, duties or immunities of the Rights Agent):

This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between i2 Technologies, Inc. and Mellon Investor Services LLC, dated as of January 17, 2002 (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of i2 Technologies, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. i2 Technologies, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person (as defined in the Rights Agreement), whether currently held by or on behalf of such person or by any subsequent holder, may become null and void.

If the Company purchases or acquires any shares of Common Stock of the Company prior to the Distribution Date, any Rights associated with such shares of Common Stock of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with any shares of Common Stock of the Company which are no longer outstanding.

Section 4. Form of Rights Certificates.

(a) The Rights Certificates (and the forms of election to purchase Units and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties or immunities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Rights may from time to time be listed or traded, or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the Rights Certificates shall entitle the holders thereof to purchase the number of Units as shall be set forth therein at the price per Unit set forth therein, but the number of such Units and the Purchase Price shall be subject to adjustment as provided herein.

(b) Any Rights Certificate issued pursuant to this Agreement that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who

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becomes a transferee after the Acquiring Person becomes such; or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the board of directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e), shall in each case contain (to the extent the Rights Agent has notice thereof and to the extent feasible) the following legend:

The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement by and between i2 Technologies, Inc. and Mellon Investor Services LLC, as Rights Agent, dated as of January 17, 2002 (the “Rights Agreement”)). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.

Section 5. Countersignature and Registration.

(a) The Rights Certificates shall be executed on behalf of the Company by any officer of the Company, either manually or by facsimile signature, shall have affixed thereto the Company’s seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company. Any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of this Agreement any such person was not such an officer.

(b) Following the Distribution Date and receipt by the Rights Agent of notice and all other relevant information, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Rights Certificates issued under this Agreement. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

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Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

(a) Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Rights Certificates (other than Rights Certificates representing Rights that have become null and void pursuant to Section 7(e) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates evidencing exercisable Rights, entitling the registered holder to purchase a like number of Units (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate or Rights Certificates until the registered holder shall have properly completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate or Rights Certificates and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e) and 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment from the holders of Rights Certificates of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. The Rights Agent shall have no duty or obligation to take any action under any Section of this Agreement which requires the payment by a Rights holder of applicable taxes and governmental charges unless and until the Rights Agent is satisfied that all such taxes and/or charges have been paid.

(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and of indemnity or security satisfactory to them, and, at the Company’s or Rights Agent’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

(a) Prior to the Distribution Date, none of the Rights shall be exercisable. The registered holder of any Rights Certificate evidencing exercisable Rights may exercise the Rights evidenced thereby (except as otherwise provided in this Agreement) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the related certification properly completed and duly executed, to the

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Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each Right being exercised (as such amount may be reduced (including to zero) pursuant to Section 11(a)(iii)) and an amount equal to any tax or charge required to be paid by the holder of such Rights Certificate in accordance with Section 9 hereof in cash, or by certified check, wire transfer or bank draft payable to the order of the Company, at or prior to the earliest of (i) the Close of Business on January 17, 2012 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”), and (iii) the time at which such Rights are exchanged as provided in Section 24 hereof (the earliest of (i), (ii) and (iii) being the “Expiration Date”).

(b) The “Purchase Price” for each Unit of Preferred Stock pursuant to the exercise of a Right shall initially be $75.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.

(c) Upon receipt of a Rights Certificate evidencing exercisable Rights (with the form of election to purchase and certification properly completed and duly executed) accompanied by payment as provided in Section 7(a) hereof, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Stock a certificate or certificates for the number of Units to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of Units issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent a depositary receipt or depositary receipts representing such number of Units as are to be purchased (in which case certificates for the Units represented by such receipt or receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Rights Certificate. If the Company is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement.

(d) If the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing a number of Rights equivalent to the number of Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or to such registered holder’s duly authorized assigns, subject to Section 14 hereof.

(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate thereof) who becomes a transferee after the Acquiring Person

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becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate thereof) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the board of directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) or (iv) any subsequent transferee, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights or any Rights Certificate which formerly evidenced such Rights, and neither the Company nor the Rights Agent shall have any obligations whatsoever with respect to such Rights or any Rights Certificate, whether under any provision of this Agreement or otherwise. The Company shall use its best efforts to ensure that the provisions of Section 4(b) and this Section 7(e) are complied with, but neither the Company nor the Rights Agent shall have any liability to any holder of Rights Certificates or to any other Person as a result of the Company making or failing to make any determinations with respect to an Acquiring Person or any of such Acquiring Person’s Affiliates, Associates or transferees hereunder or taking or failing to take any actions with respect to any Rights or Rights Certificates of any such Person.

(f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request.

Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

Section 9. Reservation and Availability of Preferred Stock.

(a) The Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of, and to the extent of, its authorized and unissued Preferred Stock not reserved for another purpose, sufficient Preferred Stock to permit the exercise in full of all outstanding Rights in accordance with this Agreement. Upon the occurrence of any events

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resulting in an increase in the aggregate number of shares of Preferred Stock (or other equity securities of the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved.

(b) If the Units to be issued and delivered upon the exercise of the Rights are at any time listed on a national securities exchange or included for quotation on any transaction reporting system, the Company shall during the period from the Distribution Date to the Expiration Date use its best efforts to cause all shares reserved for such issuance to be listed on such exchange or included for quotation on any such transaction reporting system upon official notice of issuance upon such exercise.

(c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event in which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as reasonably practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite qualification of the offering made upon exercise of the Rights in such jurisdiction shall have been obtained, or an exemption therefrom shall be available and until a registration statement has been declared effective.

(d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Units (and, following the occurrence of a Triggering Event, any other securities that may be delivered upon exercise of Rights) shall, at the time of delivery of the certificates for such securities and subject to payment of the Purchase Price, be duly and validly authorized and issued and fully paid and non-assessable.

(e) The Company further covenants and agrees that it will pay when due and payable any and all taxes and governmental charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any Units (or any other securities that may be delivered upon exercise of Rights) upon the exercise of Rights. The Company shall not, however, be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for Units in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Units (or any other securities that may be delivered upon exercise of Rights) upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s or the Rights Agent’s reasonable satisfaction that no such tax or charge is due.

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Section 10. Preferred Stock Record Date. Each Person in whose name any certificate for Units (or, following the occurrence of a Triggering Event, other securities that may be delivered upon exercise of Rights) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Units (or, following the occurrence of a Triggering Event, other securities) represented thereby on, and such certificate shall be dated, at the Close of Business on the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes and charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or, following the occurrence of a Triggering Event, other securities) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares at the Close of Business on, and such certificate shall be dated, the next succeeding Business Day on which such transfer books are open; provided further, however, that if delivery of Units (or such other securities) is delayed pursuant to Section 9(c) hereof, such Persons shall be deemed to have become the record holders of such Units of Preferred Stock (or such other securities) only when such Units (or other securities) first become deliverable.

Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number and kinds of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

(a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares Preferred Stock, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock for which the Rights shall be exercisable, shall be proportionately adjusted so that the holder of any Rights exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of capital stock which, if such Rights had been exercised immediately prior to such date and at a time when the applicable transfer books were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition, and shall be made prior, to any adjustment required pursuant to Section 11(a)(ii) hereof.

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(ii) Subject to Section 24 of this Agreement, if:

(A) any Person shall become an Acquiring Person, unless the event causing the Person to become an Acquiring Person is a transaction to which the provisions of Section 13(a) hereof apply;

(B) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this Agreement, directly or indirectly, shall (1) merge into the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger or combination and shares of Common Stock of the Company shall remain outstanding and unchanged, (2) in one transaction or a series of transactions, transfer any assets to the Company or any of its Subsidiaries in exchange (in whole or in part) for shares of Common Stock of the Company, for other equity securities of the Company or any of its Subsidiaries, or for securities exercisable for or convertible into shares of equity securities of the Company or any of its Subsidiaries (whether shares of Common Stock of the Company or otherwise) or otherwise obtain from the Company or any of its Subsidiaries, with or without consideration, any additional shares of such equity securities or securities exercisable for or convertible into such equity securities (other than pursuant to a pro rata distribution to all holders of shares of Common Stock of the Company), (3) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity, assets (including securities) on terms and conditions less favorable to the Company or such Subsidiary, plan, trustee or fiduciary than those that could have been obtained in arm’s-length negotiations with an unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a) hereof, (4) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity (other than transactions, if any, consistent with those engaged in, as of the date hereof, by the Company and such Acquiring Person or such Associate or Affiliate thereof), assets (including securities or intangible assets) having an aggregate fair market value of more than $150,000,000, other than pursuant to a transaction set forth in Section 13(a) hereof, (5) receive, or any designee, agent or representative of such Acquiring Person or any Affiliate or Associate of such Acquiring Person shall receive, any compensation from the Company or any of its Subsidiaries other than compensation for full-time employment as a regular employee at rates in accordance with the Company’s (or its Subsidiaries’) past practices, or (6) receive the benefit, directly or indirectly (except proportionately as a holder of shares of Common Stock of the Company or as required by law or governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity; or

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(C) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a transaction or transactions to which the provisions of Section 13(a) hereof apply (whether or not with or into or otherwise involving an Acquiring Person), which has the effect, directly or indirectly, of increasing by more than one percent the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its Subsidiaries that is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person;

then promptly following the occurrence of an event described in Section 11(a)(ii)(A), (B) or (C) (each being a “Section 11(a)(ii) Event”), proper provision shall be made so that each holder of a Right, except as otherwise provided in Section 7(e) hereof, shall thereafter have the right to receive for each Right, upon exercise thereof in accordance with the terms of this Agreement and payment of the then-current Purchase Price, in lieu of the number of Units of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, such number of Units of Preferred Stock as shall equal the result obtained by multiplying the then-current Purchase Price by the then number of Units of Preferred Stock for which a Right was exercisable (or would have been exercisable if the Distribution Date had occurred) immediately prior to the first occurrence of a Triggering Event, and dividing that product by 50% of the Current Per Share Market Price for shares of Common Stock on the date of occurrence of the most recent Triggering Event (such number of Units of Preferred Stock being hereinafter referred to as the “Adjustment Shares”). Upon the occurrence of a Section 13 Event, any Rights that shall not have been previously exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only pursuant to Section 13 hereof and not pursuant to this Section 11(a)(ii). The Company shall notify the Rights Agent when this Section 11(a)(ii) applies and shall use all commercially reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but neither the Company nor the Rights Agent shall have any liability to any holder of Rights Certificates or other Person as a result of the Company’s failure to make any determinations with respect to any Acquiring Person or its Affiliates, Associates or transferees hereunder.

(iii) In the event that the number of shares of Preferred Stock which are authorized by the Company’s certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, or if any necessary regulatory approval for such issuance has not been obtained by the Company, the Company shall, in lieu of issuing Units of Preferred Stock in accordance with Section 11(a)(ii) hereof: (A) determine the excess of (1) the value of the Units of Preferred Stock issuable upon the exercise of a Right (the “Current Value”) over (2) the Purchase Price (such excess being referred to as

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the “Spread”) and (B) with respect to each Right, make adequate provision to substitute for such Units of Preferred Stock, upon exercise of the Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of the Company (including, without limitation, Common Stock of the Company or shares or units of shares of any series of preferred stock which the board of directors of the Company shall have conclusively deemed to have the same value as the Units of Preferred Stock (such shares or units of preferred stock are herein called “Preferred Stock Equivalents”)), except to the extent that the Company has not obtained any necessary regulatory approval for such issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained any necessary regulatory approval for such issuance, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, as determined by the board of directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the board of directors of the Company (which determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent, the holders of the Rights and all other persons); provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty days following the later of (x) occurrence of a Section 11(a)(ii) Event, and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) hereof expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(iii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Units of Preferred Stock (to the extent available), except to the extent that the Company has not obtained any necessary regulatory approval for such issuance, and then, if necessary, cash, having an aggregate value equal to the Spread.

(b) If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within forty five calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having the same rights, privileges and preferences as the Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per Unit of Preferred Stock or Equivalent Preferred Stock (or having a conversion price per Unit, if a security convertible into Units of Preferred Stock or Equivalent Preferred Stock) less than the then Current Per Share Market Price (as determined pursuant to Section 11(d)) of a Unit of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the sum of the number of Units of Preferred Stock outstanding on such record date plus the number of Units of Preferred Stock which the aggregate offering price of the total number of Units of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which shall be the sum of the number of Units of Preferred Stock outstanding on such record date plus the number of additional Units of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). If such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be described

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in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent and the holders of the Rights. Units of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and if such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) If the Company shall fix a record date for a distribution to all holders of Units of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend), assets (other than a dividend payable in Units of Preferred Stock or Equivalent Preferred Stock but including any dividend payable in equity securities other than Preferred Stock or Equivalent Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then Current Per Share Market Price (as determined pursuant to Section 11(d) hereof) of the Preferred Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent and the holders of the Rights) of the cash, assets or evidences of indebtedness to be distributed or of such subscription rights or warrants distributable in respect of a share of Preferred Stock, and the denominator of which shall be such Current Per Share Market Price of a share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(d) (i) For the purpose of any computation hereunder, the “Current Per Share Market Price” of any security on any date shall be deemed to be the average of the daily closing prices per share of such security for the thirty consecutive Trading Days (as such term is hereinafter defined) immediately prior to but not including such date; provided, however, that in the event that the Current Per Share Market Price of the security is determined during a period following the announcement by the issuer of such security of (A) a dividend or distribution on such security payable in shares of such security or securities convertible into such security, or (B) any subdivision, combination or reclassification of such security and prior to the expiration of thirty Trading Days after and not including the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of such security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq Stock Market (“NASDAQ”) or, if the security is not listed or admitted to trading on the NASDAQ, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the security is listed or admitted to trading or, if the security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the

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over-the-counter market, as reported by the NASDAQ or such other system then in use, or, if on any such date the security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the security selected by the board of directors of the Company. If on any such date no market maker is making a market in the security, the Current Per Share Market Price of such security on such date shall mean the fair value per share or other trading unit as determined in good faith by the board of directors of the Company as provided for above (which determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent, the holders of the Rights and all other Persons). The term “Trading Day” shall mean a day on which the principal national securities exchange on which the security is listed or admitted to trading is open for the transaction of business or, if the security is not listed or admitted to trading on any national securities exchange, a Business Day.

(i) For the purpose of any computation hereunder, the Current Per Share Market Price of the Preferred Stock shall be determined in accordance with the method set forth in Section 11(d)(i) hereof. If the Current Per Share Market Price of the Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in Section 11(d)(i) hereof, the Current Per Share Market Price of the Preferred Stock shall be conclusively deemed to be an amount equal to the product of 1,000 (as such amount may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to shares of Common Stock of the Company occurring after the date of this Agreement) multiplied by the Current Per Share Market Price of Common Stock of the Company. If no shares of the Common Stock of the Company or the Preferred Stock are publicly held or so listed or traded, “Current Per Share Market Price” of the Preferred Stock shall mean the fair value per share as determined in good faith by the board of directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent and the holders of the Rights for all purposes. For all purposes of this Agreement, the Current Per Share Market Price of a Unit of Preferred Stock shall be equal to the Current Per Share Market Price of one share of Preferred Stock divided by 1,000.

(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one-hundred-thousandth (1/100,000) of a share of Preferred Stock or one-hundredth (1/100) of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.

(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) hereof, the holder of any Rights thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Units of Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Rights and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to

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the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price shall evidence the right to purchase, at the adjusted Purchase Price, the number of Units of Preferred Stock purchasable from time to time upon exercise of the Rights, all subject to further adjustment as provided in this Agreement.

(h) Unless the Company shall have exercised its election under Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Units of Preferred Stock (calculated to the nearest one-millionth of a share of Preferred Stock) obtained by dividing (i) the product obtained by multiplying (x) the number of Units of Preferred Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, by (ii) the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of Units of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of Units of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made, and shall promptly give the Rights Agent a copy of such announcement. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

(j) Irrespective of any adjustment or change in the Purchase Price or the number of Units of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates

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theretofore and thereafter issued may continue to express the Purchase Price per Unit and the number of Units of Preferred Stock which were expressed in the initial Rights Certificates issued hereunder.

(k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value of the number of Units of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable number of Units of Preferred Stock at such adjusted Purchase Price.

(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall give prompt written notice of such election to the Rights Agent), until the occurrence of such event, the issuing to the holder of any Rights exercised after such record date of that number of Units of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Units of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such adjustment.

(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any Unit of Preferred Stock at less than the Current Per Share Market Price, (iii) issuance wholly for cash of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, (iv) dividends on Preferred Stock payable in Preferred Stock, or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of Units of its Preferred Stock shall not be taxable to such stockholders.

(n) The Company shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the Person which constitutes, or would constitute, the Principal Party (as defined in Section 13(b) hereof) shall have distributed or otherwise transferred to its stockholders or

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other persons holding an equity interest in such Person, Rights previously owned by such Person or any of its Affiliates and Associates; provided, however, this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary of the Company.

(o) After the Distribution Date, the Company shall not, except as permitted by Section 23 or Section 27 hereof, take (or permit any of its Subsidiaries to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

(p) If, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on outstanding shares of Common Stock of the Company payable in shares of Common Stock of the Company or (ii) effect a subdivision, combination or consolidation of the Common Stock of the Company (by reclassification or otherwise than by payment of dividends in shares of Common Stock of the Company) into a greater or lesser number of shares of Common Stock of the Company, then in any such case the number of Units of Preferred Stock purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of Units of Preferred Stock so purchasable immediately prior to such event by a fraction, the numerator of which shall be the number of shares of Common Stock of the Company outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such event. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the computations and facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the shares of Common Stock of the Company or Units of Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 25 hereof. Notwithstanding the foregoing sentence, the failure by the Company to make such certification or give such notice shall not affect the validity of or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement contained therein and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any adjustment or any such event unless and until it shall have received such certificate.

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.

(a) In the event that, following a Share Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with the Company, or merge with and into the Company

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and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the shares of Common Stock of the Company shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) to any Person or Persons (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), in one or more transactions, directly or indirectly, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole), (any such event being a “Section 13 Event”), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then-current Purchase Price, such number of validly authorized and issued, fully paid and non-assessable shares of Common Stock of the Principal Party, which shares shall not be subject to any liens, encumbrances, rights of first refusal, transfer restrictions or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of Units of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such Units of Preferred Stock for which a Right would be exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event by the Purchase Price which would be in effect hereunder but for such first occurrence) and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be the “Purchase Price” for all purposes of this Agreement) by 50% of the Current Per Share Market Price of the shares of Common Stock of such Principal Party on the date of consummation of such Section 13 Event, (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement, (iii) the term “Company” shall, for all purposes of this Agreement, thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event, (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions of this Agreement shall thereafter be applicable to its shares of Common Stock thereafter deliverable upon the exercise of the Rights and (v) the provisions of Section 11(a)(ii) hereof shall be of no further effect following the first occurrence of any Section 13 Event.

(b) “Principal Party” shall mean:

(i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer whose outstanding shares of Common Stock have the greatest aggregate Current Per Share Market Price and (B) if no securities are so issued, the Person that is the other party to such merger or consolidation, or, if there is more than one such Person, the Person whose outstanding shares of Common Stock have the greatest aggregate Current Per Share Market Price; and

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(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the largest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person whose outstanding shares of Common Stock have the greatest aggregate Current Per Share Market Price; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the Exchange Act (“Registered Common Stock”), or such Person is not a corporation, and such Person is a direct or indirect Subsidiary of another Person that has Registered Common Stock outstanding, “Principal Party” shall refer to such other Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is a direct or indirect Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person which has Registered Common Stock outstanding, “Principal Party” shall refer to the ultimate parent entity of such first-mentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate Current Per Share Market Price; and (4) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and none of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever ultimate parent entity is the corporation having the greatest stockholders’ equity or, if no such ultimate parent entity is a corporation, shall refer to whichever ultimate parent entity is the entity having the greatest net assets.

(c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13, and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that the Principal Party will:

(i) (A) file on an appropriate form, as soon as practicable following the execution of such agreement, a registration statement under the Securities Act with respect to the shares of Common Stock of such Principal Party that may be acquired upon exercise of the Rights, (B) cause such registration statement to remain effective (and to include a prospectus complying with the requirements of the Securities Act) until the Expiration Date, and (C) as soon as practicable following the execution of such agreement take such action as may be required to ensure that any acquisition of such shares of Common Stock of such Principal Party upon the exercise of the Rights complies with any applicable state securities or “blue sky” laws; and

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(ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.

(d) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its certificate of incorporation, bylaws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than their Current Per Share Market Price or securities exercisable for, or convertible into, shares of Common Stock of such Principal Party at less than their Current Per Share Market Price (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the shares of Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.

(e) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been exercised shall thereafter be exercisable only in the manner provided in Section 13(a) hereof.

Section 14. Fractional Rights and Fractional Shares.

(a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Current Per Share Market Price of a whole Right. For purposes of this Section 14(a), the Current Per Share Market Price of a whole Right shall be the closing price per share of a whole Right on the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.

(b) The Company shall not be required to issue fractions of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). Fractions of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, however, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial

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owners of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the Current Per Share Market Price of one share of Preferred Stock.

(c) The holder of a Right by the acceptance of the Right expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).

(d) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.

Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 and Section 20 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of certificates representing shares of Common Stock of the Company); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, a certificate representing shares of Common Stock of the Company), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of a certificate representing shares of Common Stock of the Company), may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate or, prior to the Distribution Date, in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach by the Company of this Agreement and will be entitled to specific performance of the obligations hereunder, and injunctive relief against actual or threatened violations by the Company of the obligations of any Person subject to this Agreement.

Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of shares of Common Stock of the Company;

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(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer with all required certifications completed;

(c) subject to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name the Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary;

(d) such holder expressly waives any right to receive any fractional Rights and any fractional securities upon exercise or exchange of a Right, except as otherwise provided in Section 14 hereof; and

(e) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court or by a governmental, regulatory, self regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use all commercially reasonable efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.

Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Units of Preferred Stock or any other securities of the Company which may at any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained in this Agreement or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with this Agreement.

Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it under this Agreement and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, negotiation, execution, delivery, amendment and administration of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement,

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cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence or willful misconduct on the part of the Rights Agent (which gross negligence or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered or omitted by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, including, without limitation, the costs and expenses of defending against and appealing any claim of liability arising therefrom, directly or indirectly. The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company.

The Rights Agent shall be authorized and protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with its acceptance and administration of this Agreement and the exercise and performance of its duties hereunder, in reliance upon any Rights Certificate or certificate for Units of Preferred Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith unless and until it has received such notice in writing.

Section 19. Merger or Consolidation or Change of Name of Rights Agent.

(a) Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person must be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so

27.

countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

Section 20. Duties of Rights Agent. The Rights Agent undertakes to perform only the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound, and no implied duties or obligations shall be read into this Agreement against the Rights Agent:

(a) The Rights Agent may consult with legal counsel of its choice (who may be legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of, any action taken, suffered or omitted by it in accordance with such advice or opinion.

(b) Whenever in the administration, exercise and performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any officer of the Company and delivered to the Rights Agent; and such certificate shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of, any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent under this Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not be under any responsibility or have any liability in respect of the legality, validity or enforceability of this Agreement or the execution and delivery hereof (except the due execution by the Rights Agent) or in respect of the legality, validity or enforceability or the execution of any Rights Certificate (except its countersignature thereof); nor shall it be liable or responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any

28.

change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 11(a)(ii) hereof) or any change or adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of the certificate described in Section 12 hereof, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Units of Preferred Stock or other securities to be issued upon the exercise of any Rights or as to whether any such security will, when issued, be validly authorized and issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the administration, exercise and performance of its duties hereunder from any one officer of the Company, and to apply to such officers for advice or instructions in connection with its duties under this Agreement, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall not be responsible or liable for or in respect of any action taken, suffered or omitted to be taken by it in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. The Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received by any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or suffered or such omission shall be effective. The Rights Agent shall not be liable for any action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken, suffered or omitted.

(h) The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, affiliate, director, officer or employee from acting in any other capacity for the Company or for any other Person.

(i) The Rights Agent may execute and exercise any of the rights or powers vested in it or perform any duty under this Agreement either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable

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or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence or willful misconduct (each as determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction) in the selection and continued employment thereof.

(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if the Rights Agent believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise, transfer, split up, combination or exchange, the certification on the form of assignment or the form of election to purchase, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall not take any further action with respect to such requested exercise, transfer, split up, combination or exchange, without first consulting with the Company.

Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty days’ notice in writing mailed to the Company and to each transfer agent of the Common Stock of the Company or Preferred Stock known to the Rights Agent by registered or certified mail. Following the Distribution Date, the Company shall promptly notify the holders of the Rights Certificates by first-class mail of any such resignation. The Company may remove the Rights Agent or any successor Rights Agent upon thirty days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock or Preferred Stock known to the Rights Agent by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit such holder’s Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (i) a Person organized and doing business under the laws of the United States or of any state of the United States, which is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (ii) an Affiliate of such a Person. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock or Preferred Stock, and mail a notice thereof in writing to the registered holders of the

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Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its board of directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock of the Company following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Common Stock of the Company so issued or sold pursuant to the exercise of stock options or under any employee benefit plan or arrangement or upon the exercise, conversion or exchange of securities of the Company currently outstanding or issued at any time in the future by the Company and (b) may, in any other case, if deemed necessary or appropriate by the board of directors of the Company issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued or would create a significant risk of or result in such options’ or employee plans’ or arrangements’ failing to qualify for otherwise available special tax treatment and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

Section 23. Redemption and Termination.

(a) The Company may, at its option, upon approval by the board of directors, at any time on or prior to the Close of Business (or such later date as may be determined by its board of directors) on the earlier of (i) the Distribution Date or (ii) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date of this Agreement (such redemption price being hereinafter referred to as the “Redemption Price”), and the Company may, at its option, pay the Redemption Price either in cash, shares of Common Stock of the Company (based on the Current Per Share Market Price thereof at the time of redemption), or any other form of consideration deemed appropriate by its board of directors. The redemption of the Rights by the board of directors of the Company may be made effective at such time on such basis and with such conditions as the board of directors of the Company in its sole discretion may establish. Any such redemption will be effective immediately upon the action of the board of directors of the Company ordering the same, unless such action of the board of directors of the Company expressly provides that such redemption will be effective at a subsequent time or upon the occurrence or nonoccurrence of one or more specified events (in which case such redemption will be effective in accordance with the provisions of such action of the board of directors of the Company).

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(b) Immediately upon the effectiveness of the redemption of the Rights pursuant to Section 23(a), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, any such notice shall not affect the legality or validity of such redemption. Within ten days after the effectiveness of the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in such manner shall be deemed given, whether or not the holder receives the notice. Each notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, or in connection with the purchase of shares of Common Stock prior to the Distribution Date.

(c) Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable pursuant to Section 7(a) hereof at any time when the Rights are redeemable hereunder.

Section 24. Exchange.

(a) The Company, at its option, upon approval by its board of directors, at any time after any Person becomes an Acquiring Person, may exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e) hereof) for Units of Preferred Stock at an exchange ratio equal to, subject to adjustment to reflect stock splits, stock dividends and similar transactions occurring after the date hereof, that number obtained by dividing the Purchase Price by the then Current Per Share Market Price per Unit of Preferred Stock on the earlier of (i) the date on which any Person becomes an Acquiring Person and (ii) the date on which a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity) is commenced within the meaning of Rule 14d-2(a) of the Exchange Act Regulations or any successor rule, if upon consummation thereof such Person would be the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding (such exchange ratio being hereinafter referred to as the “Section 24(a) Exchange Ratio”). Notwithstanding the foregoing, the Company may not effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the Company or any of its Subsidiaries, or any trustee or fiduciary with respect to such plan acting in such capacity), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock of the Company then outstanding.

(b) Immediately upon the action of the board of directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right

32.

thereafter of the holders of such Rights shall be to receive that number of Units of Preferred Stock equal to the number of such Rights held by such holder multiplied by the Section 24(a) Exchange Ratio. The Company shall promptly give public notice of any such exchange (as well as prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the legality or validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner provided in this Agreement shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of Units of Preferred Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.

(c) In the event that the number of shares of Preferred Stock authorized by the Company’s certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Preferred Stock for issuance upon exchange of the Rights or make adequate provision to substitute (1) cash, (2) Common Stock of the Company or other equity securities of the Company, (3) debt securities of the Company, (4) other assets, or (5) any combination of the foregoing, having an aggregate value equal to the aggregate Current Per Share Market Price of the Units of Preferred Stock that would otherwise be issuable in such exchange, all as determined by the board of directors of the Company (which determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent, the holders of the Rights and all other Persons). To the extent that the Company determines that some action need be taken pursuant to Section 24(a) hereof, the board of directors of the Company may temporarily suspend the exercisability of the Rights for a period of up to sixty days following the date on which the event described in Section 24(a) hereof shall have occurred, in order to seek any authorization of additional shares of Preferred Stock and/or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. Upon any such suspension, the Company shall promptly notify the Rights Agent in writing of such suspension and shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect (with prompt notice to the Rights Agent that such suspension is no longer in effect).

Section 25. Notice of Certain Events.

(a) In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional Units of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies

33.

with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) to declare or pay any dividend on the Common Stock of the Company payable in shares of Common Stock of the Company or to effect a subdivision, combination or consolidation of the shares of Common Stock of the Company (by reclassification or otherwise than by payment of dividends in shares of Common Stock), then, in each such case, the Company shall give to the Rights Agent and to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Common Stock of the Company and/or shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least ten days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock of the Company and/or shares of Preferred Stock, whichever shall be the earlier.

(b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. In the event any Person becomes an Acquiring Person, the Company will promptly notify the Rights Agent thereof.

Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) or by facsimile transmission as follows:

i2 Technologies, Inc.

One i2 Place

11701 Luna Road

Dallas, Texas 75234

Attention: General Counsel

Facsimile No.: (469) 357-6893

with a copy (which shall not constitute notice) to:

Brobeck, Phleger & Harrison LLP

4801 Plaza on the Lake

Austin, Texas 78746

Attention: Ronald G. Skloss

Facsimile No.: (512) 330-4001

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Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

Mellon Investor Services LLC

Plaza of the Americas

600 North Pearl Street, Suite 1010

Dallas, Texas 75201

Attention: Relationship Manager

Facsimile No.: (214) 922-4466

with a copy to:

Mellon Investor Services LLC

85 Challenger Road

Ridgefield Park, NJ 07660

Attention: General Counsel

Facsimile No.: (201) 296-4004

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

Section 27. Supplements and Amendments. The Company may from time to time supplement or amend this Agreement without the approval of any holders of Rights, by action of its board of directors in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable, including, without limitation, to change the Purchase Price, the Redemption Price, any time periods herein specified, and any other term hereof, any such supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent. Notwithstanding anything to the contrary herein, from and after the earlier of (a) such time as any Person becomes an Acquiring Person or (b) the Distribution Date, this Agreement shall not be amended in any manner which would adversely affect the interests of the holders of Rights (other than the interests of an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon receipt of a certificate from an appropriate officer of the Company and, if requested by the Rights Agent, an opinion of counsel, which states that the proposed supplement or amendment is consistent with this Section 27 and, from and after the earlier of (a) such time as any Person becomes an Acquiring Person or (b) the Distribution Date, that the proposed supplement or amendment does not adversely affect the interests of the holders of Rights, the Rights Agent shall execute such supplement or amendment, provided that the Rights Agent shall have no duty or obligation to execute any such supplement or amendment which affects the Rights Agent’s own rights, duties, obligations or immunities under this Agreement and it shall not be bound by any such supplement or amendment not executed by it.

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Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 29. Determinations and Actions by the Board of Directors. For all purposes of this Agreement, any calculation of the number of shares of Common Stock of the Company outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of the Company of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act Regulations. The board of directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the board of directors, or the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations or calculations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing), which are done or made by the board of directors of the Company in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other Persons and (y) not subject the board of directors of the Company to any liability to the holders of the Rights. The Rights Agent shall always be entitled to assume that the Board of Directors acted in good faith and shall be fully protected and incur no liability in reliance thereon.

Section 30. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, shares of Common Stock of the Company) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, shares of Common Stock of the Company).

Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the board of directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement and the right of redemption set forth in Section 23 hereof shall have expired, such right shall be reinstated and shall not expire until the tenth Business Day following the date of such determination by the board of directors of the Company.

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Section 32. Governing Law. This Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts to be made and performed entirely within such State, without regard to the choice-of-law or conflict-of-laws principles of any jurisdiction; provided, however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

Section 34. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted or convenience only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.

i2 TECHNOLOGIES, INC.
By:	/s/ WILLIAM M. BEECHER
Name:	William M. Beecher
Title:	Executive Vice President and Chief Financial Officer
MELLON INVESTOR SERVICES LLC
By:	/s/ DEODATT LAKERAM
Name:	Deodatt Lakeram
Title:	Assistant Vice President and Client Services Manager

EXHIBIT A

FORM

OF

CERTIFICATE OF DESIGNATION

OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

OF

i2 TECHNOLOGIES, INC.,

(Pursuant to Section 151 of the

Delaware General Corporation Law)

i2 Technologies, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the board of directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on January 17, 2002;

RESOLVED, that pursuant to the authority granted to and vested in the board of directors of the Corporation (the “Board”) in accordance with the provisions of the certificate of incorporation of the Corporation, as currently in effect, the Board hereby creates a series of Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 2,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

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Section 2. Dividends and Distributions.

(a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, each holder of a share of Series A Preferred Stock, in preference to the holders of shares of common stock, par value $0.00025 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when declared by the Board out of funds legally available for the purpose, dividends in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock. In the event the Corporation shall, at any time after January 17, 2002 (the “Rights Declaration Date”), declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) The Corporation shall declare a dividend or distribution on the shares of Series A Preferred Stock as provided in Section 2(a) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, however, that, in no event shall a dividend or distribution be declared by the Board on the Common Stock for which it does not declare and pay the dividend required to be declared on the Preferred Stock pursuant to Section 2(a).

(c) Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall, at any time after the

A-2

Rights Declaration Date, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(b) Except as otherwise provided herein, in the Certificate of Incorporation, in any other Certificate of Designation creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the shares of Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; provided, that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

A-3

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the certificate of incorporation, or in any other certificate of designation creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up.

(a) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received the greater of (x) $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon to the date of such payment (the “Series A Liquidation Preference”) and (y) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to the product of 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall, at any time after the Rights Declaration Date, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

A-4

(b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or converted or changed into other stock or securities, cash and/or any other property (or into the right to receive any of the foregoing), then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged, converted or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is converted, changed or exchanged. In the event the Corporation shall, at any time after the Rights Declaration Date, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the amount set forth in the preceding sentence with respect to the conversion, exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable.

Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.

Section 10. Amendment. The certificate of incorporation of the Corporation shall not be amended, including any amendment through consolidation, merger, combination or other transaction, in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding shares of Series A Preferred Stock, voting together as a single class.

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IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation as of January     , 2002.

i2 TECHNOLOGIES, INC.

By:

Name:

Title:

EXHIBIT B

Form of Rights Certificate

Certificate No. R-                  Rights

NOT EXERCISABLE AFTER JANUARY 17, 2012 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). aCCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SUCH AGREEMENT]*

Rights Certificate

i2 TECHNOLOGIES, INC.

This certifies that                     , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of January 17, 2002 (the “Rights Agreement”), between i2 Technologies, Inc., a Delaware corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey limited liability company (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m., Dallas, Texas time, on January 17, 2012, at the office of the Rights Agent designated for such purpose, or at the office of its successor as Rights Agent, one one-thousandth (a “Unit”) of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) of the Company, at a purchase price of $75.00 per Unit of Series A Preferred Stock (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and certification duly executed. The number of Rights evidenced by this Rights Certificate (and the number of Units of Series A Preferred Stock which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of January 28, 2002 based on the Series A Preferred Stock as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of Units of

* The bracketed language is to be inserted in place of the preceding sentence where applicable.

B-1

Series A Preferred Stock which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events.

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal executive offices of the Company.

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Series A Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at a redemption price of $0.01 per Right.

No fractional shares of Series A Preferred Stock will be issued upon the exercise of any Rights or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a share of Series A Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Units of Series A Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

B-2

This Rights Certificate shall not be valid or binding for any purpose until it shall have been countersigned by the Rights Agent.

WITNESS the signature of the proper officers of the Company and its corporate seal. Dated as of January     , 2002.

		i2 TECHNOLOGIES, INC.
		By:
		Name:
		Title:
Countersigned:
MELLON INVESTOR SERVICES LLC as Rights Agent
By:
	Authorized Signatory
Name:
Title:

Form of Reverse Side of Rights Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder

desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED                      hereby sells, assigns and transfers unto

(Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.

DATED:	,
		Signature

Signature Guaranteed:

Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.

CERTIFICATE

The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement).

Signature

NOTICE

The signature in the foregoing Form of Assignment must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

In the event the certification set forth above in the Form of Assignment is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement) and such Assignment will not be honored.

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise the Rights Certificate.)

To i2 TECHNOLOGIES, INC.

The undersigned hereby irrevocably elects to exercise Rights represented by this Rights Certificate to purchase the Units of Series A Preferred Stock issuable upon the exercise of such Rights and requests that certificates for such Series A Preferred Stock be issued in the name of:

Please insert social security or other identifying number
	(Please print name and address)

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:

Please insert social security or other identifying number
	(Please print name and address)

DATED:	,
		Signature

Signature Guaranteed:

Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.

CERTIFICATE

The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement).

Signature

NOTICE

The signature in the foregoing Form of Election to Purchase must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

In the event the certification set forth above in the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement) and such Election to Purchase will not be honored.

EXHIBIT C

i2 TECHNOLOGIES, INC.

SUMMARY OF RIGHTS TO PURCHASE

SHARES OF SERIES A PREFERRED STOCK

On January 17, 2002, the board of directors of i2 Technologies, Inc. (the “Company”) declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock to stockholders of record at the close of business on January 28, 2002 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.00025 per share (the “Preferred Stock”), at a purchase price of $75.00, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”) between the Company and Mellon Investor Services LLC, as Rights Agent.

Initially, the Rights will be attached to all common stock certificates representing shares then outstanding, and no separate Rights certificates will be distributed. The Rights will separate from the common stock on the distribution date (the “Distribution Date”). The Distribution Date occurs upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has (subject to certain exceptions) acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of our common stock (the “Stock Acquisition Date”), other than as a result of repurchases of stock by the Company, or (ii) ten days, or such later date that the board of directors may decide, following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of such outstanding shares of our common stock. The Rights Agreement specifically allows our Chairman, Sanjiv Sidhu, who currently owns more than 15% of the outstanding common stock, to acquire up to an additional 5% of the Company’s common stock (measured at the time he next acquires common stock) without becoming an Acquiring Person.

Until the Distribution Date, (i) the Rights will be evidenced by the common stock certificates and will be transferred with and only with such common stock certificates, (ii) new common stock certificates issued after the Record Date will contain a legend incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for common stock outstanding will also constitute the transfer of the Rights associated with the common stock represented by such certificate. Prior to the occurrence of a Triggering Event (as defined below), the Company can require that, in order to exercise Rights, a number of Rights must be exercised so that only whole shares of Preferred Stock will be issued.

The Rights cannot be exercised until the Distribution Date and will expire at the close of business on January 17, 2012, unless the Company redeems them as described below.

Shortly after the Distribution Date, Rights certificates will be mailed to holders of record of our common stock at the close of business on the Distribution Date and, after that time, the separate Rights certificates alone will represent the Rights. Unless our board of directors decides differently, only shares of our common stock issued prior to the Distribution Date will be issued with Rights.

If an Acquiring Person becomes, subject to certain exceptions, the beneficial owner of 15% or more of the then outstanding shares of common stock, other than

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through an offer for all the Company’s outstanding shares of common stock that our board decides is fair and in the best interests of the Company and its stockholders, each holder of a Right, except Rights which previously have been voided, will then have the right to receive, after exercising their Right, Preferred Stock (or, in certain circumstances, cash, property or other securities of the company) having a value equal to two times the exercise price of the Right. If, at any time after the Stock Acquisition Date, (i) we are acquired in a merger or other business combination transaction in which we are not the surviving corporation, other than a merger that results from an offer for all the outstanding shares of common stock that our board decides is fair and in the best interests of the Company and its stockholders, or (ii) 50% or more of our assets, cash flow or earning power is sold or transferred, each holder of a Right, except Rights which previously have been voided, will have the right to receive, after exercise of the Right, common stock of the company that acquires us having a value equal to two times the exercise price of the Right. The events described in this paragraph are “Triggering Events.”

For example, at an exercise price of $75 per Right, each Right other than those owned by an Acquiring Person or by certain related parties, following a Triggering Event would entitle its holder to purchase $150 worth of Preferred Stock, or other consideration, as noted above, for $75. Assuming that our common stock had a per share value of $10 at such time, the holder of each valid Right would be entitled to purchase an interest in a share of Preferred Stock that would be economically equivalent to 15 shares of common stock for $75.

All Rights that the Acquiring Person does or, under certain circumstances specified in the Rights Agreement, did own will be null and void.

At any time after a person becomes an Acquiring Person and before the acquisition by such person or group of 50% or more of the outstanding common stock, the board of directors may exchange all or some of the Rights (other than Rights owned by the person or group which have become null and void) at an exchange ratio of one share of common stock, or one one-thousandth of a share of Preferred Stock (or of a share of a class or series of our Preferred Stock having equivalent rights, preferences and privileges), per Right.

At any time until 10 days after the Stock Acquisition Date, the board of directors of the Company may redeem all, but not part of, the Rights, at a price of $0.01 per Right (payable in cash, common stock or other consideration decided upon by the board of directors). Immediately upon the action of the board of directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.01 redemption price.

Until a Right is exercised, the holder of a Right will not have the rights of a stockholder of the Company such as the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may recognize taxable income in the event that the Rights become exercisable for Preferred Stock (or other consideration) of the Company or for common stock of the acquiring company.

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The provisions of the Rights Agreement may be amended by the board of directors of the Company in any manner; however after the earlier of a person or entity becoming an Acquiring Person or the Distribution Date, the Rights Agreement cannot be amended in a manner which would adversely affect the interests of the holders of Rights.

A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights is not complete and you should refer to the Rights Agreement for further information.

C-3

EX-10.11

EXHIBIT 10.11

LEASE

Between

COLINAS CROSSING LP,

a Delaware limited partnership

Landlord,

And

i2 TECHNOLOGIES, INC.,

a Delaware corporation

Tenant

TABLE OF CONTENTS

			PAGE
ARTICLE I			1
	1.01.	INTRODUCTORY PROVISIONS AND DEFINITIONS	1
ARTICLE 2			5
	2.01.	PREMISES	5
	2.02.	IMPROVEMENTS BY LANDLORD	6
	2.03.	CONDITION OF PREMISES	6
	2.04.	PREMISES CERTIFICATE	6
	2.05	MANAGEMENT OFFICE	7
ARTICLE 3			7
	3.01.	TERM	7
	3.02.	COMMENCEMENT CERTIFICATE	7
ARTICLE 4			7
	4.01.	BASE RENT	7
	4.02.	PAYMENT OF RENT	8
	4.03.	SECURITY DEPOSIT	9
ARTICLE 5			10
	5.01.	OPERATING EXPENSE REIMBURSEMENT	10
	5.02A.	OPERATING EXPENSES	12
	5.02B.	TENANT’S ELECTRICITY CHARGE	16
	5.03.	PRORATION AND ADJUSTMENT OF OPERATING EXPENSES	17
	5.04	TAXES	18
ARTICLE 6			19
	6.01.	USE	19
ARTICLE 7			19
	7.01.	LANDLORD’S SERVICES	19
	7.02.	INTENTIONALLY DELETED	23
	7.03.	INTERRUPTION OF SERVICES	23
	7.04.	KEYS AND LOCKS	24
	7.05.	GRAPHICS AND BUILDING DIRECTORY	24
	7.06.	PROJECT NAME, IDENTITY AND SIGNS	24
	7.07.	RISER SPACE	25
	7.08.	FIBER OPTIC CABLE CARRIERS	25
	7.09.	COMMUNICATIONS EQUIPMENT	25
	7.10.	ADDITIONAL HVAC COMPRESSORS	26
ARTICLE 8			26
	8.01.	ALTERATIONS	26
	8.02.	REMOVAL OF TRADE FIXTURES AND PERSONAL PROPERTY	27
	8.03.	REPAIRS BY LANDLORD	28
	8.04.	REPAIRS BY TENANT	28
ARTICLE 9			28
	9.01.	LANDLORD’S INSURANCE	28
	9.02.	TENANT’S INSURANCE	29
	9.03.	WAIVER OF RECOVERY	29
	9.04.	INDEMNITY	30

i

ARTICLE 10			30
	10.01.	CASUALTY	30
	10.02.	END OF TERM CASUALTY	31
ARTICLE 11			31
	11.01.	CONDEMNATION	31
ARTICLE 12			32
	12.01.	ACCESS	32
ARTICLE 13			33
	13.01.	SUBORDINATION	33
	13.02.	ATTORNMENT	33
	13.03.	QUIET ENJOYMENT	33
ARTICLE 14			33
	14.01.	ASSIGNMENT	33
	14.02.	CONSENT	34
	14.03.	TRANSFER BY LANDLORD	34
ARTICLE 15			35
	15.01.	DEFAULT BY TENANT	35
	15.02.	RIGHTS UPON DEFAULT BY TENANT	35
	15.03.	EXPENSE OF REPOSSESSION	37
	15.04.	CUMULATIVE REMEDIES; WAIVER OR RELEASE	37
	15.05.	ATTORNEYS’ FEES	37
	15.06.	FINANCIAL STATEMENTS	37
	15.07.	NEGATION OF LIEN FOR RENT	37
	15.08.	DEFAULT BY LANDLORD	38
ARTICLE 16			38
	16.01.	HAZARDOUS WASTE	38
ARTICLE 17			40
	17.01.	SUBSTITUTE PREMISES	40
	17.02.	ESTOPPEL LETTERS	40
	17.03.	HOLDOVER	40
	17.04.	NOTICE	40
	17.05.	RULES AND REGULATIONS	41
	17.06.	LANDLORD’S LIABILITY	41
	17.07.	AMERICANS WITH DISABILITIES ACT AND TEXAS ARCHITECTURAL BARRIERS ACT	41
	17.08.	AUTHORIZATION	41
	17.09.	BROKERS	41
	17.10	MEMORANDUM OF LEASE	42
	17.11.	PARKING	42
	17.12.	TIME OF ESSENCE	42
	17.13.	ENTIRE AGREEMENT	42
	17.14.	AMENDMENT	42
	17.15.	SEVERABILITY	42
	17.16.	SUCCESSORS	42
	17.17.	CAPTIONS	42
	17.18.	NUMBER AND GENDER	42
	17.19.	GOVERNING LAW	42
	17.20.	CHANGES TO THE PROJECT	42
	17.21.	NO PRESUMPTION AGAINST DRAFTER	42
	17.22.	EXAMINATION OF LEASE	43
	17.23.	DEFINED TERMS AND MARGINAL HEADINGS	43

ii

17.24.	NO REPRESENTATIONS	43
17.25.	IMPROVEMENTS ON ADJACENT LAND	43
17.26.	SURVIVAL OF INDEMNITIES	43
17.27.	COMPETITORS OF TENANT	43
17.28.	RIGHT OF FIRST OFFER ON SALE	43
17.29.	ARBITRATION	44
17.30.	INTENTIONALLY DELETED	45
17.31	TAX PROTESTS	45
17.32	CONSENTS	45
17.33	CCR AMENDMENTS	45
17.34	MANAGEMENT	46
17.35	DEFAULT INTEREST	46
17.36	VACATING THE PREMISES	46

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EXHIBITS AND RIDERS

EXHIBIT “A”	-FLOOR PLAN -FIRST SPACE -SECOND SPACE -THIRD SPACE
EXHIBIT “B-1”	-LEGAL DESCRIPTION OF LAND
EXHIBIT “B-2”	-SITE PLAN
EXHIBIT “B-3”	-ADJACENT LAND
EXHIBIT “C”	-BUILDING RULES
EXHIBIT “D-1”	-WORK LETTER
EXHIBIT “D-2”	-BUILDING SHELL IMPROVEMENTS
EXHIBIT “E”	-COMMENCEMENT CERTIFICATE
EXHIBIT “F”	-PARKING GARAGE
EXHIBIT “G”	-PREMISES CERTIFICATE
EXHIBIT “H”	-JANITORIAL SPECIFICATIONS
EXHIBIT “I”	-MEMORANDUM OF LEASE
EXHIBIT “J”	-LETTER OF CREDIT
EXHIBIT “K”	-SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT “L-1”	-BUILDING SIGN PARAMETERS
EXHIBIT “L-2”	-CONTENT OF SIGNS
EXHIBIT “M”	-CONTRACTOR/VENDOR RULES AND REGULATIONS
RIDER 1	-EXTENSION OPTION

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INDEX OF DEFINED TERMS

TERM	PAGE
Actual Operating Expense Increase	11
ADA	41
Additional Electrical Equipment	22
Additional Rent	10
Adjacent Land	5
Agreement Period	Rider 1
Base Operating Expense	10
Base Rent	7
Base Rental Rate	7
Base Year	10
Basic Services Failure	23
Bidding Contractors	55
Brokers	41
Building	5
Building Operating Hours	20
Building Shell Improvements	59
Building Stairwells	54
Building Standard Rated Electrical Design Load	21
Building Standard Services	19
CCR	3
Commencement Date	56
Common Area	4
Common Facilities	6
Communications Equipment	26
Complex	5
Construction Contract	55
Construction Costs	63
Construction Manager	55
Construction Plans	54
Cost Savings Improvements	13
Credit Assignee	34
Deck	63
Default	35
Default Interest Rate	46
Delivery Punch List Items	6
Development Agreement	8
Director	44
Effective Date	1
Environmental Law	38
Estimated Operating Expense Increase	11
Estimated Tenant’s Tax Obligation	18
Exercise Notice	43
Extension Option	Rider 1
Extension Term	Rider 1
Finish Allowance	55
Finish Work	55
First Class Building Standards	17
First Space	2
Geographical Market	3
Hazardous Substances	38
Holidays	20
Land	5
Landlord	1
Landlord Delay	56
Lease	61
Lease Year	8

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Letter of Credit	9
Liens	27
Major Portion	56
Material Default	Rider 1
NEC	21
Net Worth Reduction	9
Non-Removable Improvements	28
Notice Parties	38
Operating Expense	12
Operating Expenses	12
Parking Facilities	5
Parking Garage	5
Parking Spaces	62
Premises	5
Premises Share of Taxes	18
Primary Term	7
Prime Rate	46
Pro-Rata Reduction	9
Project	5
Project Signs	25
Quarterly Assessments	13
Rebate Agreement	18
Rent	8
Rentable Area	2
Rental Commencement Date	56
Rental Commencement Punch List Items	6
Required Capital Improvements	13
ROFO	43
ROFO Terms	43
Sale Notice	43
Second Space	2
Security Account	9
Security Amount	21
Security Areas	32
Security Desk	21
Site Plan	5
Space Plan	54
Special Assessments	13
SWB	25
Tax Stop	18
Taxing Authority	45
Tenant	1
Tenant Contract	43
Tenant Contractor	55
Tenant Improvements	54
Tenant’s Electricity Charge	17
Tenant’s Notice	62
Tenant’s Tax Obligation	18
Tenant-Related Parties	4
Term	7
Third Space	2
Thirty Percent Level	13
Underlying Documents	33
Underlying Party	33
Warranty	15

vi

LEASE

THIS LEASE (“Lease”) is entered into as of the 24th day of March, 1999 (“Effective Date”), by and between COLINAS CROSSING LP, a Delaware limited partnership (“Landlord”), and i2 TECHNOLOGIES, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

ARTICLE 1.

1.01. INTRODUCTORY PROVISIONS AND DEFINITIONS. The Lease provisions and definitions set forth in this Section 1.01 in summary form are solely to facilitate convenient reference by the parties. If there is any conflict between this Section and any other provisions of this Lease, the latter shall control.

(a)	Addresses for notices due
	under this Lease (See
	Article 17)
	Landlord Name And Address	Colinas Crossing LP Eighty Eighty North Central
	Expressway
		Suite 1010 Dallas, Texas 75206 Attn: Steven A. Means
	With a copy to:	Pacific Realty Associates, L.P. 15350 S. W. Sequoia Parkway Suite 300 Portland, Oregon 97224 Attn: Legal Department
	With an additional copy to:	Management Office 11701 Luna Road Dallas, Texas 75234 Attn: Property Manager
		Prior To Commencement Date:
	Tenant Name and Address:	i2 Technologies, Inc. 909 Las Colinas Blvd., Suite 1600 Irving, Texas 75039 Attn: Bill Beecher and/or           V.P. of Operations
	With a copy to:	i2 Technologies, Inc. 909 Las Colinas Blvd., Suite 1600 Irving, Texas 75039 Attn: Adrianne Court and/or           Director of Facilities
		i2 Technologies, Inc.
		909 Las Colinas Blvd., Suite 1600
		Irving, Texas 75039
		Attn: Legal Department

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		After Commencement Date:
		i2 Technologies, Inc.
		11701 Luna Road
		Dallas, Texas 75234
		Attn: Bill Beecher and/or
		V.P. of Operations
	With a copy to:	i2 Technologies, Inc.
		11701 Luna Road
		Dallas, Texas 75234
		Attn: Adrianne Court and/or
		Director of Facilities
		i2 Technologies, Inc.
		11701 Luna Road
		Dallas, Texas 75234
		Attn: Legal Department
(b)	Building:	One Colinas Crossing
		11701 Luna Road
		Dallas, Texas 75234

containing approximately 180,754 square feet of total Rentable Area. “Rentable Area” shall be measured in accordance with 1996 BOMA National Standards ANSI Z265.

(c) Premises: Subject to the provisions of Sections 2.04 and 2.05 below, approximately 179,754 square feet of Rentable Area on floors 1-6 of the Building. The Premises is comprised of the “First Space” (being three (3) floors in the Building designated by Tenant), the “Second Space” (being two (2) floors in the Building designated by Tenant) and the “Third Space” (being one (1) floor in the Building designated by Tenant), all of which floor plans are set forth on Exhibit “A” attached hereto; provided, however, Tenant shall have the right to change such designations by furnishing written notice to Landlord within thirty (30) days after the Effective Date. The floor plans attached hereto identify the Rentable Area and Usable Area of each floor of the Premises as of the Effective Date.

(d) Parking Subject to the provisions of Section 17.11 and Exhibit “F”, as follows: A total number of spaces equal to 720 spaces. Uncovered Parking 525 Unreserved spaces @ $0.00 per month each during the Primary Term hereof (and thirty (30) of such spaces shall be marked for “i2 Visitor Parking” only) Covered Parking in the Parking Garage 195 reserved spaces @ $0.00 per month each during the Primary Term hereof.

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(e) Permitted Uses: The Premises are to be used and occupied by Tenant (and its permitted assignees and subtenants) for general business office purposes and for such other lawful purposes as are permitted by applicable zoning laws and that certain Declaration of Covenants, Conditions and Restrictions dated April 6, 1994 and recorded in Volume 94066, Page 06090, Dallas County Deed Records (the “CCR”) and consistent with uses of office space in comparable office buildings in the same geographic area in which the Building is located (“Geographical Market”). Without limiting the foregoing, Tenant may maintain in the Premises (1) accounting facilities, (2) conference and/or meeting facilities, (3) classrooms, (4) libraries, (5) coffee bars, (6) support staff facilities (including without limitation, word processing and copy facilities), (7) lunchrooms, kitchen facilities, pantries and cafeterias and/or dining rooms (including any kitchen and support thereof) for use by Tenant and its employees and business invitees, so long as such facilities are installed and maintained in accordance with applicable laws (and if alcoholic beverages are served therein, Tenant or the operator thereof, if other than Tenant, shall carry adequate liquor liability insurance), (8) storage space incidental to general business office purposes, (9) executive restrooms, including showers and lockers, (10) audio visual, closed circuit television, radio, electronic communication, and computer facilities, (11) print facilities that may require special venting, (12) photo dark room facilities, (13) health or exercise facilities, (14) restaurants (and if alcoholic beverages are served therein, Tenant or the operator thereof, if other than Tenant, shall carry adequate liquor liability insurance), (15) vending machines and snack bars for the sale of food, confections, non-alcoholic beverages, newspapers, convenience items and other such items to employees and business invitees of Tenant, (16) an ATM machine issued by a bank or other financial institution selected by Tenant, and (17) day care facility for exclusive use by Tenant’s employees and their families, which shall be operated in compliance with all applicable laws. It is the intention of Landlord and Tenant that all of the uses recited in the preceding sentence be strictly incidental to Tenant’s primary use of the Premises for business offices and that the Premises shall not be subleased to third parties for separate operations whose primary purpose is to serve the general public without Landlord’s consent.

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(f) Primary Term: Eleven (11) years and zero (0) months (See Article 3).

(g) Commencement Date: June 1, 1999 (subject to the terms of Exhibit “D-1” hereto and Section 3.01).

(h) Expiration Date: May 31, 2010 (subject to the terms of Exhibit “D-1” hereto and Section 3.01), subject to extension pursuant to Rider 1.

(i) Tenant’s Pro Rata Share: The ratio the Rentable Area of the Premises bears to the Rentable Area of the Building. As of the Effective Date, Tenant’s Pro Rata Share is 99.45%.

(j) Base Rent: See Section 4.01

(k) Base Operating Expense: Operating Expenses per square foot of Rentable Area in the Building for the calendar year 1999, subject to adjustment pursuant to Section 5.03 (excluding electricity for the Project). (See Article 5.)

(l) Security Deposit: Letter of credit in an amount equal to $4,134,342.00. (See Section 4.03)

(m) Guarantor: N/A

(n) Tenant’s Broker: Trammell Crow Company Brokerage Services Division D/FW & Baker Commercial Realty Inc. (such brokers are represented by Phil Puckett and Phil Baker, respectively)

(o) Address for Payment Funds to be wired to Landlord in Portland, Oregon on a of Base Rent: monthly basis pursuant to wiring instructions to be furnished by Landlord at least ten (10) days in advance of (i) the first payment due date and (ii) any subsequent payment due date prior to which such wiring instructions have changed.

(p) Common Area: The “Common Area” is comprised of all portions of the Project other than the Premises and the management office. Landlord shall not make any material changes to the dimensions, location, configuration or design of the Common Area (except as required by law) without Tenant’s prior written consent which shall not be unreasonably withheld. Material changes (as used herein) shall include without limitation changes which would convert any portion of the Common Area to leaseable space or reduce Common Areas by more than five percent (5%) (and, notwithstanding anything to the contrary contained in this Lease, Tenant’s consent to these specific changes may be withheld by Tenant in its sole discretion). Tenant and its assignees and subtenants and their respective employees, agents, licensees and concessionaires (the “Tenant - Related Parties”) shall have the nonexclusive right and license to use the Common Area as constituted from time to time,

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and such use to be in common with Landlord, other tenants of the Project, management office personnel and other persons permitted by Landlord to use the same, and subject to such reasonable rules and regulations governing use as Landlord may from time to time prescribe (subject to Tenant’s consent, which consent shall not be unreasonably withheld). Tenant shall not take any action which would unreasonably interfere with the rights of other persons to use the Common Area without the prior written consent of Landlord. Landlord may temporarily close any part of the Common Area for such reasonable periods of time as may be necessary to prevent the public from obtaining prescriptive rights and to make repairs or alterations, provided that Tenant’s access to the Premises shall remain available during any such period. Landlord shall provide Tenant with reasonable advance notice of any such temporary closings and shall endeavor to schedule such closings during Holidays (as defined in Section 7.01(a)) and other times outside of Building Operating Hours (as defined in Section 7.01(a) hereof).

ARTICLE 2.

2.01. PREMISES. In consideration of the obligation of Tenant to pay Rent (defined below) as herein provided and in consideration of the other terms, covenants and conditions hereof, Landlord hereby does lease, let and demise unto Tenant, and Tenant hereby does lease and rent from Landlord, upon and subject to the provisions of this Lease, the 179,754 square feet of Rentable Area (subject to the provisions of Sections 2.04 and 2.05 below) which is hereby stipulated and for all purposes hereof agreed to be as stated in 1.01(c) above and as reflected on the floor plan(s) attached hereto as Exhibit “A” and incorporated herein for all purposes (such space so leased to Tenant is herein called the “Premises”) located in the building known as One Colinas Crossing (subject to the provisions of Section 7.06(a) below) (“Building”) as set forth in Article 1.01(b) and situated on the tract of land (“Land”) described in Exhibit “B-1” attached hereto and incorporated herein for all purposes (the Building, the Land, and the parking garage [“Parking Garage”] and parking area [collectively, “Parking Facilities”] located on the Land and shown on the site plan attached hereto as Exhibit “B-2” [“Site Plan”] hereinafter collectively referred to as the “Project”), TO HAVE AND TO HOLD said Premises for the Term, subject to the provisions of this Lease. Landlord and Tenant acknowledge and agree that the Project specifically does not include the land shown on the Site Plan which is described on Exhibit “B-3” (“Adjacent Land”) and the improvements thereon, a portion of which Adjacent Land is owned by Landlord and a portion of which is subject to certain agreements between Landlord and Tenant as set forth in this Lease and in the Development Agreement (defined below). The Land and the Adjacent Land, and the improvements thereon, comprise the complex commonly referred to as Colinas Crossing (“Complex”).

Subject to the terms of this Lease, Tenant shall be entitled to the following as appurtenances to the Premises: the right to use (i) the Parking Facilities and other areas of the Project in accordance with Section 17.11 and Exhibit “F” to this Lease, (ii) the roof of the Building and/or the Parking Facilities in accordance with Sections 7.09 and 7.10 hereof, (iii) riser space in the core of the Building pursuant to Section 7.07 hereof, (iv) for Tenant’s exclusive use, the restrooms on floors leased entirely by Tenant and, for Tenant’s nonexclusive use, the restrooms on floors partly, but not entirely, leased by Tenant, (v) for Tenant’s nonexclusive use (subject to the other provisions of this Lease), the telephone and electric closets on floors leased

5

entirely by Tenant, and (vi) in common with Landlord and other tenants or occupants of the Project, their invitees and guests and others, all lobbies, driveways, sidewalks and other areas and facilities on the Land, in the Building and other portions of the Project from time to time intended for the common use of tenants in the Project, and all rights and benefits appurtenant to, or necessary or incidental to, the use and enjoyment of the Premises by Tenant for the purposes set forth in Section 1.01(e) above, including, but not limited to, the right of Tenant, its employees and invitees, in common with Landlord and other persons, to the benefits of any reciprocal easements and/or use agreements burdening and/or benefiting the Project (including without limitation, the CCR)to the extent necessary or incidental to the use and enjoyment of the Premises for the purposes permitted by Section 1.01(e), including without limitation, the right to use the “Common Facilities” (defined in the CCR) pursuant to the terms of the CCR.

2.02. IMPROVEMENTS BY LANDLORD. On the Effective Date, Landlord shall deliver the Premises to Tenant with the Building Shell Improvements (as such term is defined in Exhibit “D-2” attached hereto) completed all in accordance with Exhibit “D-2” (excluding Delivery Punch List Items [defined below]).

Construction of the Tenant Improvements (defined in Exhibit “D-1”) for the Premises will be accomplished and the cost of such construction will be paid in accordance with Exhibit “D-1” attached hereto and made a part hereof.

2.03. CONDITION OF PREMISES. Except as provided in this Lease (including without limitation, Section 2.02 and Exhibits “D-1” and “D-2” of this Lease), Tenant acknowledges that Landlord has not undertaken to perform any modification, alteration, or improvement to the Premises. Landlord represents and warrants to Tenant that (i) all Building and Project systems are new and in good working order, (ii) the Project is in accordance with all applicable laws, regulations, ordinances and codes, (iii) Landlord is the fee owner of the Land and the Adjacent Land and the Land and the Adjacent Land are not subject to any ground leases, mortgages, deeds of trust or other security instruments, (iv) the City of Farmers Branch has heretofore issued a temporary shell certificate of occupancy with respect to the Project (including without limitation, the Parking Garage and the Building) and Tenant can commence its Tenant Improvements work at any time after the Effective Date in accordance with Exhibit “D-1”, and (v) the Building Shell Improvements in the Premises have been completed except for Delivery Punch List Items. Landlord has not made any representations or warranties with respect to the Project or the Premises except for those set forth in this Lease. As used herein, “Delivery Punch List Items” shall mean incomplete work items following substantial completion of the Building Shell Improvements which do not interfere with Tenant’s construction of the Tenant Improvements. As used herein, “Rental Commencement Punch List Items” shall mean incomplete work items following substantial completion of the Building Shell Improvements which do not interfere with Tenant’s business operations.

2.04. PREMISES CERTIFICATE. Exhibit “A” sets forth the square footage of Rentable Area of each floor or portion thereof comprising the Premises. Prior to the Commencement Date, Landlord shall execute and deliver to Tenant an Exhibit “G” attached hereto, which shall contain Landlord’s calculation of the exact number of square feet of Rentable Area within each floor of the Premises as of such date, including a breakdown of Landlord’s calculations with regard to Common Areas and the Rentable Area of the Building. Tenant shall have the right to object to Exhibit “G” by delivering notice to Landlord within thirty (30) days after Landlord delivers Exhibit “G” to Tenant, failing which Tenant shall be deemed to have agreed that the information contained in Exhibit “G” is correct and Tenant shall be required to execute Exhibit “G” within five (5) days after the expiration of such 30-day period. If Tenant objects to Exhibit “G” within said thirty (30) day period, Landlord and Tenant shall work together to resolve their differences, failing which the disputes shall be submitted to arbitration under Section 17.29. After such differences have been resolved between Landlord and Tenant or by arbitration, Landlord and Tenant shall execute the corrected Exhibit “G”. Tenant shall have the right during such thirty (30) day period to have Tenant’s architect make field measurements of the Project, Premises, and common areas provided Tenant furnishes Landlord with one (1) Business Day prior notice of the date such measurements are to be made. Upon the execution of Exhibit “G” by Landlord and Tenant for all floors of the Premises and the Project, the Rentable Area of all floors in the Premises and the Project as shown on the executed Exhibit “G” shall replace the Rentable Area of the Premises and the Project as shown in Exhibit “A” and in Section 1.01(c) of this Lease and shall be deemed to be the Rentable Area of the Premises and the Project as of such date for all purposes under this Lease.

6

2.05. MANAGEMENT OFFICE. As of the date hereof, the management office for the Project consists of 1,000 square feet of Rentable Area and is located in the area shown on Exhibit “A”. If Tenant desires Landlord to relocate the management office to another area of the Building, Tenant shall forward written notice to Landlord within ten (10) business days after the Effective Date. If Tenant makes such request, Landlord and Tenant shall work together, acting reasonably and in good faith, to select another location in the Building within five (5) days of Tenant’s request which does not interfere with Tenant’s space planning needs (and in no event shall the relocated management office exceed 1,000 square feet of Rentable Area). If pursuant to this paragraph the square footage of the management office is reduced to less than 1,000 square feet, the square footage of the Premises shall be adjusted accordingly (subject to confirmation pursuant to Section 2.04) to recognize that the Premises and the management office shall aggregate 100% of the Rentable Area in the Building. Tenant shall pay for all costs of any such relocation.

ARTICLE 3

3.01. TERM. The initial term of this Lease shall be for a term of eleven (11) years (“Primary Term”) commencing as to each Major Portion (defined in Exhibit “D-1”) on the Rental Commencement Date for such portion and continuing as to all of the Premises until the day immediately preceding the eleventh (11th) anniversary of the Commencement Date (defined in Exhibit “D-1”); provided, however, if the Primary Term commences on a date other than the first day of a calendar month, Landlord and Tenant shall be deemed to have agreed that the Primary Term shall be extended through the last day of the calendar month in which the expiration date falls. The Primary Term of this Lease may be renewed and extended pursuant to Rider 1 to this Lease (the Primary Term and, to the extent renewed and extended, any such renewal terms are hereinafter called the “Term”).

3.02. COMMENCEMENT CERTIFICATE. Within five (5) days after the Commencement Date, Landlord shall submit to Tenant a certificate in the form attached hereto as Exhibit “E” to confirm the occurrence of the Commencement Date for the Premises. Tenant shall have the right to object to Exhibit “E” within thirty (30) days after Landlord delivers Exhibit “E” to Tenant, failing which Tenant shall be deemed to have agreed that all information contained in Exhibit “E” is correct. If Tenant objects to Exhibit “E” within said thirty (30) day period, Landlord and Tenant shall work together to resolve their differences, failing which the dispute may be submitted to arbitration pursuant to Section 17.29. Immediately upon resolution of such differences, Landlord and Tenant shall execute and deliver the corrected Exhibit “E”.

ARTICLE 4.

4.01. BASE RENT.

(a) Subject to the provisions of subsections (b) and (c) below, Tenant, in consideration for this Lease and the leasing of the Premises for the Term, agrees to pay to Landlord commencing on the Rental Commencement Date (defined in Exhibit “D-1”) as to each Major Portion (defined in Exhibit “D-1”) of the Premises, base rental (“Base Rent”) equal to the product of the (i) annual rate (“Base Rental Rate”) set forth below for the applicable Lease Year, multiplied by (ii) the square feet of Rentable Area comprising the Major Portion of the Premises for which the Rental Commencement Date has occurred.

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Lease Years	Base Rental Rate
1 - 5	$	23.00
6 - expiration of the Primary Term	$	24.50

As used herein, “Lease Year” shall mean a period of one (1) year; provided, however, the first (1st) Lease Year for the Premises shall commence on the Commencement Date and end on the date next preceding the first anniversary thereof; and provided further, Lease Year 2 as to the Premises shall commence upon the expiration of Lease Year 1 with respect to such space and all subsequent Lease Years shall commence upon the expiration of the prior Lease Year with respect to such space.

(b) Notwithstanding the foregoing, if the Rental Commencement Date for the First Space occurs prior to June 1, 1999, the Rental Commencement Date for the Second Space occurs prior to September 1, 1999, and/or the Rental Commencement Date for the Third Space occurs prior to December 1, 1999, then Tenant shall be obligated to pay Base Rental as to the applicable space for which the early Rental Commencement Date occurred for the period from the early Rental Commencement Date until (i) June 1, 1999, as to the First Space (if applicable), (ii) September 1, 1999, as to the Second Space (if applicable) and/or (ii) December 1, 1999, as to the Third Space (if applicable), at one-half of the Base Rental Rate set forth above.

(c) Notwithstanding the foregoing, if Tenant exercises the Building 2 Option (defined in that certain Development Agreement dated of even date herewith between Landlord and Tenant (the “Development Agreement”), the Base Rental Rate for all of the Premises shall be automatically reduced in this Lease for the period commencing at the beginning of the sixth (6th) Lease Year and continuing through the remainder of the Primary Term by 25/100 Dollars ($0.25) per square foot of Rentable Area.

4.02. PAYMENT OF RENT. As used in this Lease, “Rent” shall mean the Base Rent, the Operating Expense reimbursements pursuant to Section 5.01, Tenant’s Electricity Charge pursuant to Section 5.02B, and all other monetary obligations provided for in this Lease to be paid by Tenant, all of which shall constitute rental in consideration for this Lease and the leasing of the Premises. Tenant shall send Base Rent and other sums due hereunder in legal tender of the United States of America to Landlord. Base Rent shall be sent by wire transfer pursuant to the instructions set forth in Section 1.01(o) or to such other person or at such other address or pursuant to such different wiring instructions as Landlord may from time to time designate at least ten (10) days in advance in writing. Rent other than Base Rent shall be paid in a manner mutually agreeable to Landlord and Tenant. Landlord and Tenant may from time to time mutually agree to an alternative manner of payment of any portion of Rent. The Rent shall be paid without notice, demand, abatement, deduction, or offset except as may be expressly set forth in this Lease. Upon execution of this Lease, Tenant shall pay to Landlord an amount equal to $172,500, which shall be applied to the first month’s Base Rent due hereunder on the first Rental Commencement Date.

Tenant shall pay to Landlord a late charge equal to five percent (5%) of the amount of Rent due for all Rent which is not paid on or before the fifth (5th) day following the date such amount is due. Any payments made by Tenant to Landlord hereunder shall not be deemed a waiver by Landlord of any rights against the Tenant. The collection of such late charge by Landlord shall be in addition to and cumulative of any and all other remedies available to such party.

It is the intention of Landlord and Tenant to conform to all applicable laws concerning the contracting for, charging and receiving of interest. In the event that any payments of interest required under this Lease are ever found to exceed any applicable limits, the charging party shall credit the amount of any such excess paid by the other party against any amount owing under this Lease or if all amounts owning under this Lease have been paid, the charging party shall refund to the other party the amount of such excess. Landlord and Tenant agree that Landlord shall not be subject to any applicable penalties in connection with any such excess interest, it being agreed that any such excess interest contracted for, charged or received pursuant to this Lease shall be deemed a result of a bona fide error and a mistake. The obligation of Tenant to pay Rent is an

8

independent covenant, and no act or circumstance, whether constituting a breach of covenant by Landlord or not, shall release or modify Tenant’s obligation to pay Rent except as otherwise provided in this Lease.

4.03. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall furnish, and (except as otherwise provided in this Section 4.03) maintain in effect at all times during the Term hereof, an irrevocable standby letter of credit in the initial amount of $4,134,342.00 as security for the timely performance of Tenant’s obligations hereunder, in substantially the form set forth on Exhibit “J” hereto (the “Letter of Credit”). Landlord may draw upon the Letter of Credit in part upon any Default by Tenant (which continues beyond the notice and cure periods) to the extent necessary to cover the sums in (i) and (ii) below. In the event that Landlord draws on such letter of credit following a Default by Tenant, Landlord shall apply the proceeds thereof to the extent required (i) to the cost of curing such Default then existing and uncured, and (ii) if this Lease or Tenant’s right to possession of the Premises is terminated as the result of such Default, to any and all other damages to which Landlord may be entitled under this Lease. Tenant shall restore the Letter of Credit to the amount existing prior to such partial draft within ten (10) business days following Tenant’s receipt of notice from Landlord of such partial draft, failing which Landlord may draw the entire remaining amount available under such Letter of Credit provided Landlord complies with the provisions below. Additionally, in the event that the issuing bank notifies Landlord that it will not renew the Letter of Credit, then Tenant shall have the right to substitute a Letter of Credit from another financial institution reasonably acceptable to Landlord prior to the expiration date, failing which Landlord shall have the right to draw the balance then existing under the Letter of Credit. Additionally, Tenant may at any time replace the Letter of Credit with a Letter of Credit from another financial institution reasonably acceptable to Landlord.

Any amount so drawn by Landlord and not applied by Landlord as provided in (i) and (ii) of the preceding paragraph shall be held as an interest bearing security deposit for the timely performance of Tenant’s obligations hereunder (“Security Account”). Such amount shall be held by Landlord in trust and in a separate bank account which shall not be commingled with Landlord’s other funds. Such amount shall not constitute an advance payment of rent. Interest earned thereon shall be for Tenant’s benefit and Landlord shall arrange for interest thereon to be paid to Tenant as requested by Tenant, except to the extent used to replenish partial drafts. Payment of amounts due under this Lease from the proceeds of a draw under the Letter of Credit will not relieve Tenant of the obligation to pay such amount or prevent Tenant’s failure to make such payment from constituting a Default by Tenant, except to the extent Tenant restores the Letter of Credit to the amount existing prior to Landlord’s partial draft thereon (in which event the sums held in the Security Account shall be returned to Tenant within fifteen (15) days thereof). Landlord may assign its interest in the Letter of Credit only in connection with an assignment of this Lease, it being understood and agreed that Landlord may make an absolute or collateral assignment of the Letter of Credit in connection with a financing or refinancing of the Project. Within fifteen (15) days after the expiration or earlier termination of this Lease the Letter of Credit or sums in the Security Account (as applicable) shall be returned to Tenant.

The amount of the Letter of Credit required shall be reduced (the “Pro-Rata Reduction”) as of each anniversary of the Commencement Date by an amount equal to one-eleventh (1/11) of the full initial amount thereof; provided, however, that each such reduction shall be conditioned upon Tenant’s net worth or shareholders’ equity (as applicable) upon each anniversary of the Commencement Date being not less than Two Hundred Thirty-Five Million Dollars ($235,000,000), as reflected on the most recent Form 10K or Form 10Q filed pursuant to applicable securities laws.

In addition to the foregoing, the amount of the Letter of Credit required shall also be reduced (a “Net Worth Reduction”) to: (a) seventy-five percent (75%) of the then-existing amount thereof at such time as Tenant’s net worth or shareholders’ equity (as applicable) equals or exceeds Three Hundred fifty Million Dollars ($350,000,000); (b) fifty percent (50%) of the then-existing amount thereof at such time as Tenant’s net worth equals or exceeds Four Hundred Million Dollars ($400,000,000); and (c) twenty-five percent (25%) of the then-existing amount thereof at such time as Tenant’s net worth or shareholders’ equity (as applicable) equals or exceeds Four Hundred Fifty Million Dollars ($450,000,000). Additionally, Tenant’s obligation to

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maintain the Letter of Credit shall terminate at such time as Tenant’s net worth or shareholders’ equity (as applicable) equals or exceeds Five Hundred Million Dollars ($500,000,000), in which event Landlord shall return the Letter of Credit to Tenant within fifteen (15) days of Tenant’s request. As used in this paragraph, Tenant’s net worth or shareholders’ equity (as applicable) shall be the net worth or shareholders’ equity (as applicable) reflected in the Form 10K or Form 10Q required to be filed by applicable securities laws immediately preceding such reduction or termination, as the case may be.

It is understood and agreed that the Pro-Rata Reduction shall not be applicable if upon any anniversary of the Commencement Date the amount of the Letter of Credit has been reduced to an amount less than what the Pro-Rata Reduction would effect, by virtue of Tenant’s previously having qualified for a Net Worth Reduction.

It is also understood and agreed that if Landlord holds sums in the Security Account, the Pro Rata Reduction and the Net Worth Reduction shall also apply to the Security Account, and Landlord shall pay to Tenant the amounts which are so reduced within fifteen (15) days of the occurrence of the Pro Rata Reduction or the Net Worth Reduction (as applicable). Further, in no event shall the Letter of Credit or Security Account be increased for any reason once either has been reduced as the result of a Pro Rata Reduction or a Net Worth Reduction.

Notwithstanding anything to the contrary contained herein, in determining Tenant’s shareholders’ equity for purposes of this Section 4.03, (i) non-cash charges to Tenant’s income statement or balance sheet from mergers and/or acquisitions shall be added back to Tenant’s shareholders’ equity for purposes hereof, and (ii) any reduction to shareholders’ equity as a result of Tenant entering into a merger and/or acquisition accounted for as a pooling of interests shall be added back to Tenant’s shareholders’ equity for purposes hereof.

Upon the occurrence of a Pro Rata Reduction or a Net Worth Reduction, Tenant shall be permitted to provide Landlord with either (i) a substitute Letter of Credit for the reduced amount, in which event Landlord shall return the existing Letter of Credit to Tenant within fifteen (15) days of receipt of the new Letter of Credit, or (ii) an amendment to the Letter of Credit, in which event Landlord will sign the amendment and return it to Tenant within fifteen (15) days of receipt of the amendment.

ARTICLE 5.

5.01. OPERATING EXPENSE REIMBURSEMENT. The Base Rent payable under Section 4.01 of this Lease includes an annual allocation for operating expenses equal to the Base Operating Expense (defined below) per square foot of Rentable Area of the Premises. As used herein, “Base Operating Expense” shall mean Operating Expenses (defined in Section 5.02 hereof) for the calendar year 1999 determined in accordance with this Article 5, which calendar year 1999 shall be referred to herein as the “Base Year.” In the event that Operating Expenses (defined in Section 5.02A hereof) of the Project during any calendar year of the Term shall exceed the Base Operating Expense, Tenant shall pay to Landlord Tenant’s Pro Rata Share of the increase in such Operating Expenses over the Base Operating Expense in accordance with the procedures below (“Additional Rent”). Notwithstanding the foregoing, in no event is Tenant obligated to pay any Additional Rent with respect to calendar year 1999.

On or before January 1, 2000 and on or before the first day of each calendar year thereafter during the Term, Landlord shall provide to Tenant the Estimated Operating Expense Increase (defined below) for the upcoming year. In addition to the Base Rent, Tenant shall pay in advance on the first day of each calendar month during the Term, installments equal to 1/12th of Tenant’s Pro Rata Share of the Estimated Operating Expense Increase, if any.

Within one hundred twenty (120) days after the end of each calendar year during the Term, Landlord shall furnish to Tenant a written detailed statement, certified by Landlord’s group controller or other Project officer knowledgeable of the facts that the statement has been prepared

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in accordance with this Lease, of the Actual Operating Expense Increase (hereinafter defined) for the immediately preceding calendar year, which statement shall itemize each category of Operating Expenses and set forth Landlord’s calculations of Tenant’s Pro Rata Share of the Actual Operating Expense Increase. If Tenant’s Pro Rata Share of the Estimated Operating Expense Increase paid to Landlord during the previous calendar year exceeds Tenant’s Pro Rata Share of the Actual Operating Expense Increase, then Landlord shall refund the difference to Tenant at the time Landlord furnishes the statement of the Actual Operating Expense Increase. If Tenant’s Pro Rata Share of Estimated operating Expense Increase paid to Landlord during the previous calendar year is less than Tenant’s Pro Rata Share of the Actual Operating Expense Increase, then tenant shall pay to Landlord the amount of such underpayment. Unless Tenant takes written exception to any item within one hundred twenty (120) days after the furnishing of such annual statement to Tenant, such statement shall be considered final and accepted by Tenant (unless an error in Landlord’s statement is discovered with respect to any particular line item of Operating Expenses, in which event Tenant shall have the additional audit rights described below). Any amount due Landlord as shown on any such statement shall be paid by Tenant within thirty (30) days after it is furnished to Tenant subject to Tenant’s audit right provided below.

Tenant shall have the right to perform an annual audit at Tenant’s expense on Landlord’s books and records to the extent necessary to verify Landlord’s calculation of the Base Operating Expense and/or the Actual Operating Expense Increase for the prior calendar year, provided that such audit shall be conducted by its internal audit group or a Certified Public Accountant and further provided that the auditor’s report reflecting the results of such audit shall be promptly delivered to Landlord. Any such audit shall be conducted, if at all, (i) within one hundred eighty (180) days after the receipt of the annual statement of the Base Operating Expense or the Actual Operating Expense Increase as applicable) from Landlord (unless an error in Landlord’s statement is discovered with respect to any particular line item of Operating Expenses, in which event Tenant or such certified public accounting firm (on Tenant’s behalf) shall be allowed to examine Landlord’s books and records for the two (2) years preceding the most recently completed calendar year statements, but only with respect to the line item(s) which is/are found to be in error), (ii) during Landlord’s normal business hours, (iii) at the place in Dallas, Texas where Landlord maintains its records (or such other place in Dallas, Texas as Landlord shall deliver the appropriate records) and (iv) only after Landlord has received thirty (30) days prior written notice. Landlord agrees to cooperate in good faith with Tenant in the conduct of any such audit. If the audit report reflects an overcharge in the Actual Operating Expense Increase of more than two percent (2%) of the total Actual Operating Expense, then Landlord shall reimburse Tenant for all reasonable costs incurred by Tenant due to such audit plus interest on such overpayment at the Default Interest Rate. Interest on all overpayments or underpayments discovered by such audit shall be calculated as follows: (i) one-twelfth (1/12th) of the overpayment or underpayment shall be deemed to have been paid on the first day of each calendar month in the calendar year to which such overpayment or underpayment relates, and (ii) each such deemed payment shall bear interest at the Default Interest Rate, from the date deemed paid until the overpayment or underpayment is paid to Tenant or Landlord, as the case may be. If the audit report reflects that the Actual Operating Expense Increase was overstated or understated in the audited calendar year, Tenant shall, within twenty (20) days after receipt of such report, pay to Landlord the amount of any underpayment or, if applicable, Landlord shall pay to Tenant the amount of any overpayment. Any disputes may be resolved by arbitration pursuant to Section 17.29.

The “Estimated Operating Expense Increase” shall equal Landlord’s good faith and reasonable estimate of Operating Expenses for the applicable calendar year, less the Base Operating Expense. Landlord’s statement of the Estimated Operating Expense Increase shall control for the year specified in such statement and for each succeeding year during the Term until Landlord provides a new statement of the Estimated Operating Expense Increase. The “Actual Operating Expense Increase” shall equal the actual Operating Expenses for the applicable calendar year, less the Base Operating Expense. If Operating Expenses change during a calendar year or if the number of square feet of Rentable Area in the Premises changes, Landlord may revise the estimated Additional Rent two (2) times during such year by giving Tenant written notice to that effect and thereafter Tenant shall pay to Landlord, in each of the remaining months of such year, an amount commensurate with the change in the estimated Additional Rent divided by the number of months remaining in such year.

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5.02A. OPERATING EXPENSES. The term “Operating Expenses” shall mean and include all those reasonable amounts, expenses, and costs of whatsoever nature other than electricity for the Project) that Landlord incurs, pays or becomes obligated to pay because of or in connection with the ownership, operation, management, repair, or maintenance of the Project. Operating Expenses shall be determined on an accrual basis in accordance with generally accepted accounting principles consistently applied and shall include, without limitation, the following:

(a) Wages, salaries, fees, related taxes, insurance, benefits, and reimbursable expenses of all personnel engaged in operating, repairing, and maintaining the Project and providing traffic control about the Project; provided, however, that (i) if during the Term such personnel are also working on other projects being operated by Landlord, their wages, salaries, fees and related expenses shall be allocated by Landlord in good faith among all of such projects and only that portion of such expenses allocable to the Project shall be included as an “Operating Expense,” and (ii) such wages, salaries, fees, taxes, insurance, benefits and expenses for personnel senior to the most senior property manager responsible for the day-to-day operation of the Project and executives of Landlord or Landlord’s affiliates shall be excluded.

(b) Cost of all labor, supplies, tools, equipment and materials used in operating, repairing, and maintaining the Project (excluding costs paid by proceeds of condemnation or insurance).

(c) The actual cost of all utilities (except for electricity for the Project) for the Project, including, without limitation, water, sewer charges, gas and fuel oil, less any rebates, credits or reductions paid to Landlord by the provider of any such utilities (and in no event may Landlord charge any mark-up on such utilities).

(d) Cost of all maintenance (including specifically, without limitation, roof maintenance and maintenance of the Building systems), security (to the extent performed by Landlord rather than Tenant), window cleaning, elevator maintenance, landscaping, repair, janitorial, and other similar service agreements for the Project and the equipment and other personal property of Landlord therein and thereon used in connection with the operation, management, repair or maintenance of the Project.

(e) Cost of all insurance relating to the Project and its occupancy or operations, including but not limited to (i) the cost of casualty and liability insurance applicable to the Project or Landlord’s personal property used in connection with the operation of the Project, (ii) the cost of business interruption insurance in such amounts as will reimburse Landlord for all losses of earnings and other income attributable to the ownership and operation of the Project for one (1) year, and (iii) the cost of insurance against such perils and occurrences as are commonly insured against by prudent landlords (specifically including, without limitation, floods and earthquakes).

(f) Costs of repairs to and maintenance of the Project undertaken by Landlord, excluding any such costs as are paid by the proceeds of insurance or condemnation proceeds, by Tenant, or by other third parties, and excluding any alterations of space occupied by other tenants of the Building.

(g) A management fee for management services rendered in connection with the Project, which fee shall not exceed three percent (3%) of the gross revenues received by Landlord with respect to the Project for any calendar year (provided, however, in determining the Base Operating Expense, the management fee included shall be determined based on the annualized rent payable by Tenant in Lease Year 2 and the management fee percentage so included in Operating Expenses cannot be increased during the Primary Term and any Extension Term after the Base Year). The management fee percentage for each Extension Option shall not exceed three percent (3%) of the gross revenues received by Landlord with respect to the Project for the Base Year used for such Extension Term.

(h) Amortization of (a) Required Capital Improvements, and (b) Cost Savings Improvements to the extent of the actual savings, plus reasonable financing costs (at an annual

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rate equal to the lesser of (A) one percent (1%) over the Prime Rate, or (B) the maximum lawful rate). “Required Capital Improvements” shall mean capital improvements or replacements made in or to the Project in order to conform to any applicable laws or amendment thereto (to the extent of such amendment only) which becomes effective after the Commencement Date (including any amendments to ADA or TAS [to the extent of such amendments only] which become effective after the Commencement Date. “Cost Savings Improvements” shall mean any capital improvements or replacements which reduce Operating Expenses. The cost of Cost Savings Improvements and Required Capital Improvements will be amortized by spreading such costs on a straight line basis over its useful life using generally accepted accounting principles.

(i) Landlord’s central accounting costs, legal fees, and other such third party fees relating to the operation of the Project (but excluding accounting and legal services in connection with negotiations and disputes with specific tenants).

(j) Rent for the property manager’s office, if any, in the Building (not exceeding fair market rents for comparable space in the Geographical Market and not to exceed 1,000 square feet of Rentable Area) but excluding the rent for a pro rata portion of such office to the extent such office is not used solely for the management of the Project (e.g., if a portion of such office is used for leasing activities or development activities or for management of buildings other than the Project, a pro rata portion of such rent shall not be included based upon the percentage of activities conducted in the office other than management of the Project).

(k) The Project’s share of quarterly assessments for maintaining the “Common Facilities” (as defined in the CCR) authorized by Section 4.03 of the CCR (“Quarterly Assessments”), as such share is determined under the CCR.

(l) The Project’s share (as determined pursuant to the CCR) of all special assessments authorized by Section 4.04 of the CCR (“Special Assessments”) if the aggregate of the Project’s share of Special Assessments in any calendar year are less than thirty percent (30%) of the actual Project’s share of Quarterly Assessments included in Operating Expenses the previous calendar year pursuant to clause (k) above (“Thirty Percent Level”). If the aggregate of the Project’s share of Special Assessments in any calendar year equals or exceeds the Thirty Percent Level, then the aggregate amount of the Special Assessments in such calendar year shall be amortized to spread such costs on a straight line basis at the rate of 10% per annum over the useful life of the improvements comprising the Special Assessment and included in Operating Expenses on such basis (in lieu of 100% of such Special Assessments being included in the year of the Special Assessment).

(m) Costs incurred by Landlord in maintaining the Common Areas.

(n) All reasonable costs incurred by Landlord in connection with Landlord’s protests of real estate taxes assessed upon the Project, including, without limitation, appraisal costs, tax consultant charges and reasonable attorney’s fees.

Nothing contained in this Section 5.02 shall be construed as requiring Landlord to provide any services which are not specifically set forth in this Lease as obligations of Landlord.

Notwithstanding anything herein to the contrary, and in addition to the exclusions and limitations on Operating Expenses set forth above, the following items shall be excluded from Operating Expenses:

(1) Costs incurred in connection with the initial construction of the Project;

(2) Except to the extent provided specifically in subsection (h) above as to the Project only (and not any premises of tenants), costs of alterations or improvements of the Project, the Premises, and the premises of tenants in other areas of the Building, including any alterations and improvements necessary for any of such premises to comply with the ADA (as defined in Section 17.07) or Texas Accessibility Statute (TAS);

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(3) Interest, principal payments, and other costs of any indebtedness encumbering the Building or the Project;

(4) Costs of correcting latent defects of the construction of the Project, the improvements within the Premises, or the premises of other Building tenants.

(5) Depreciation and any other non-cash expense items;.

(6) Legal fees, space planner’s fee, architectural fees, real estate commissions, and marketing and advertising expenses incurred in connection with leasing and construction of the Project or any improvements on the Land;

(7) Costs of repairs, restoration, replacements or other work that are otherwise includable as Operating Expenses but are occasioned by (1) fire, windstorm or other casualty of an insurable nature (whether such destruction be total or partial) and (aa) payable by insurance required to be carried by Landlord under this Lease (whether or not such insurance is actually carried), or (bb) otherwise paid by insurance then in effect obtained by Landlord, (2) the exercise by a governmental authority of the right of eminent domain, whether such taking be total or partial, or (3) the act of any other tenant in the Project, or any other tenant’s agents, employees, licensees or invitees;

(8) Any bad debt losses, rent losses or losses or reserves for bad debt or rent losses;

(9) Costs associated with the operation of the business of the legal entity which constitutes Landlord as the same is distinguished from the cost and operation of the Building, including legal entity information, internal entity accounting and legal matters;

(10) Costs of defending any lawsuits with mortgagees or potential Building purchasers (except as the actions of Tenant may be an issue) now or in the future;

(11) Costs of selling, syndicating, financing, mortgaging, or hypothecating any of the Landlord’s interest in the Project or the other improvements located on the Land;

(12) Costs of disputes between Landlord and any third party not relating to the operation of the Building or Project;

(13) The wages of employees who do not directly devote the majority of their time to the Building; provided, however, the reasonable costs associated with such employees who do not devote the majority of their time to the Building may be reasonably prorated for such an amount shall be included as an Operating Expense to the extent that such employees devote their time to the Building and are not (i) senior to the most senior property manager responsible for the day-to-day operation of the Project, or (ii) executives of Landlord or Landlord’s affiliates;

(14) Unless otherwise permitted for the reduction of Operating Expenses in subsection (i) above, the cost of replacement of HVAC, mechanical, security, electrical, plumbing systems, replacement of the foundations, floors, walls, roofs, and structural elements of the Building outside the scope of routine maintenance and repair;

(15) Expenses directly relating to the gross negligence of the Landlord or its employees or agents or the cost of any claim that Landlord was required to have insured against pursuant to the terms of this Lease;

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(16) All amounts that would otherwise be included in Operating Expenses which are paid to Landlord, any affiliate of Landlord, the property management company for the Project or any affiliate of the property management company to the extent the costs of such services exceed the competitive rates in the Geographical Market for such services (it being agreed that the specific amounts set forth in this Lease which are paid to such persons and/or entities are competitive rates in the Geographical Market);

(17) The cost of utility installation and tap-in charges;

(18) leasing commissions, attorneys’ fees, costs and disbursements and other expenses incurred in connection with leasing, renovating or improving space for tenants or prospective tenants of the Project;

(19) allowances, concessions and other costs (including permit, license and inspection fees) incurred in renovating or otherwise improving or decorating, painting or redecorating space for tenants or vacant space;

(20) Landlord’s costs of any services sold to tenants for which Landlord is entitled to be reimbursed by such tenants as an additional charge or rental over and above the basic rental and operating expenses payable under the lease with such tenant or other occupant;

(21) Costs incurred due to violation by Landlord or its agents or employees of any of the terms and conditions of this Lease or any other lease relating to the Project;

(22) Attorneys’ fees, costs, disbursements and other expenses incurred in connection with, or similar costs incurred in connection with disputes with tenants, other occupants, or prospective tenants, or similar costs and expenses incurred in connection with negotiations or disputes with consultants, management agents, purchasers or mortgagees of the Project (however, such costs and expenses related to negotiations or disputes with consultants related to the management and/or operation of the Building shall be included within Operating Expenses);

(23) Costs incurred (less costs of recovery) for any items to the extent covered by a manufacturer’s, materialman’s, vendor’s or contractor’s warranty (a “Warranty”) which are paid by such manufacturer, materialman, vendor or contractor (Landlord shall pursue a breach of warranty claim for items covered by a Warranty unless Landlord determines in good faith that such action would not be in the best interest of the tenants of the Project);

(24) Rental payments made under any ground or underlying lease or leases, except to the extent that a portion of such rental payments is expressly for ad valorem/real estate taxes or insurance premiums on the Project;

(25) Costs incurred in connection with the sale, financing, refinancing, mortgaging, selling or change of ownership of the Project, including brokerage commissions, attorneys’ and accountants’ fees, closing costs, title insurance premiums, transfer taxes and interest charges;

(26) Costs, fines, interest, penalties, legal fees or costs of litigation incurred due to the late payments of taxes, utility bills and other costs incurred by Landlord’s failure to make such payments when due;

(27) Costs which are to be capitalized in accordance with generally accepted accounting principles not included under subsection (h) above;

(28) Costs and expenses of all electricity for the Project and the costs and expenses of all other utilities directly metered to tenants of the Project and payable

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separately by such tenants and costs of additional electrical equipment installed in premises of other tenants of the Project, and the costs of heating, ventilating and air-conditioning services provided to other tenants of the Project during hours other than Building Operating Hours (defined below), whether or not such costs are payable by such other tenants;

(29) Advertising, marketing, or promotional costs associated with the Project;

(30) Costs or expenses relating to another tenant’s or occupant’s space that were (i) incurred in rendering any service or benefit to such tenant that Landlord was not required, or were for a service in excess of the service that Landlord was required, to provide Tenant hereunder, or (ii) otherwise in excess of the Building Standard Services (defined in Section 7.01 below) then being provided by Landlord to all tenants of the Project on a uniform basis, whether or not such other tenant is actually charged therefor by Landlord;

(31) Costs incurred to correct violations by Landlord of any laws or amendment thereto in effect prior to the Commencement Date;

(32) The costs of acquiring, insuring (to the extent only that such items must be separately scheduled), or maintaining (including any special cleaning or security, but only to the extent such maintenance or security is in excess of Building Standard Services) art work located in the Project (whether permanently or temporarily);

(33) Costs incurred by Landlord to monitor, encapsulate or remove any asbestos, polychlorinated biphenyls or other Environmental Pollutants (unless same are caused by the Tenant-Related Parties, or any other party in contractual privity with any of them);

(34) The cost of installing, operating and maintaining any specialty service such as an observatory, broadcast facilities, luncheon club, athletic or recreational club, restaurant, delicatessen, hair salon or other retail use;

(35) The cost of any work or service performed for the benefit of any improvements other than those comprising the Project;

(36) Any lease payments for rented equipment, the cost of which equipment (1) would constitute a capital expenditure under clause 27 above if the equipment were purchased, and (2) would not qualify for inclusion under subsection (i) above;

(37) Increased insurance premiums to the extent caused by Landlord’s or any other tenant’s hazardous acts;

(38) Charitable or political contributions; and

(39) All taxes, assessments, and governmental charges and fees of whatsoever nature, whether now existing or subsequently created, attributable to the Project or its occupancy or operation, including, without limitation, (1) taxes and assessments attributable to the personal property of other tenants, (2) federal and state taxes on income, (3) death taxes, (4) any taxes imposed in connection with any change in ownership of the Building, (5) franchise taxes, and (6) any taxes imposed or measured on or by the income of Landlord from the operation of the Project, and including all such taxes whether assessed to or paid by Landlord or third parties.

5.02B. TENANT’S ELECTRICITY CHARGE. Tenant covenants and agrees to pay to Landlord as additional Rent without any setoff or deduction whatsoever except as set forth in this Lease, Tenant’s Pro Rata Share as set forth in Section 1.01(i) of all electricity consumed from and

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after the Commencement Date in the use, occupancy, and operation of the Project (hereinafter called “Tenant’s Electricity Charge”). The cost of electricity consumed from the Effective Date through the Commencement Date shall be paid in accordance with Exhibit “D-1”. Landlord shall provide a monthly written itemized bill to Tenant for Tenant’s Electricity Charge throughout the Term and Tenant shall pay same within thirty (30) days after receipt of each such bill. Landlord shall bill Tenant for Tenant’s Electricity Charge for the last month or portion thereof of the Term of this Lease as soon as practicable after the termination of this Lease and Tenant shall pay same within thirty (30) days after receipt of such bill; the Tenant’s obligation to pay such billing shall survive the termination of this Lease. All payments for Tenant’s Electricity Charge are to be predicated upon separate and specific bills by Landlord and are not to be included as part of the Base Rent payment required to be paid pursuant to Section 1.01(j) hereof. Electrical power which is separately metered or is otherwise separately assessable to tenants of the area served by such facilities and the cost of normal and after hours air conditioning supplied to tenants of the area so the area so served shall be excluded in computing Tenant’s Pro Rata Share of such costs as aforesaid. Landlord shall not be permitted to charge any mark-up on electricity actual costs and Tenant shall be entitled to a credit against Tenant’s Electricity Charge in an amount equal to Tenant’s Pro Rata Share of any credit, rebate or reduction paid or provided to Landlord by the electrical utility provider.

Notwithstanding anything to the contrary hereinbefore contained, if Tenant elects to install meters measuring electricity used in all of the Premises, Tenant shall pay the portion of Tenant’s Electricity Charge relating to the Premises directly to the utility company based on actual use as measured by such meters in lieu of paying such portion of Tenant’s Electricity Charge to Landlord. Any meters installed by Tenant shall be installed at Tenant’s cost and expense (subject to such costs being paid by the Finish Allowance pursuant to Exhibit “D-1”).

5.03. PRORATION AND ADJUSTMENT OF OPERATING EXPENSES.

(a) If this Lease commences on other than the first day of a calendar year, or if this Lease expires on other than the last day of a calendar year, then the Operating Expenses for all of such calendar year shall be prorated according to the portion of the Term that occurs during such calendar year. If at any time the Building is not fully occupied or Landlord is not supplying all services to all portions of the Building during an entire calendar year, then, Base Operating Expense, Operating Expenses, the Actual Operating Expense Increase and the Estimated Operating Expense Increase shall be adjusted as though the Building had been one hundred percent (100%) occupied and Landlord were supplying all services to all of the Building during the entire calendar year.

(b) In no event is Tenant obligated to pay Additional Rent with respect to calendar year 1999.

(c) Landlord shall use its reasonable efforts to make payments in a time and manner to avoid late payment penalty charges and to obtain the appropriate discounts to the extent such discounts are in the best interest of the Project. Landlord shall operate the Project in an efficient manner designed to minimize Operating Expenses consistent with maintaining services at a level consistent with First Class Building Standards (defined below). Landlord agrees to consult with Tenant, solicit its input, and consider Tenant’s suggestions as to how to minimize Operating Expenses.

(d) At Tenant’s request, all supply and service contracts providing for annual payments in excess of $10,000 will be competitively bid by independent third parties each year.

(e) As used herein, “First Class Building Standards” shall mean a quality that is equal to or in excess of the quality of first class office projects (including associated parking facilities) located in the Geographical Market.

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5.04. TAXES.

After calendar year 1999, Tenant shall be obligated to pay to Landlord each calendar year during the Term (subject to adjustment of the Tax Stop pursuant to Rider 1) the amount (“Tenant’s Tax Obligation”) by which (if any) (a) Tenant’s Pro Rata Share of all ad valorem taxes assessed against the Project in such calendar year (“Premises Share of Taxes”) exceeds (b) the product of Two and 88/100 Dollars ($2.88) multiplied by the number of square feet of Rentable Area comprising the Premises (“Tax Stop”), which Tenant’s Tax Obligation shall be paid as provided below.

Prior to the commencement of each calendar year during the Term after calendar year 1999, Landlord shall furnish to Tenant a statement reflecting Landlord’s reasonable and good faith estimate of Tenant’s Tax Obligation for such calendar year (“Estimated Tenant’s Tax Obligation”). Tenant shall pay to Landlord prior to the first (1st) day of each calendar month during the Term one-twelfth (1/12) of the Estimated Tenant’s Tax Obligation for such calendar year. Prior to ninety (90) days after the expiration of each calendar year during the Term, Landlord shall furnish to Tenant a statement reflecting the actual ad valorem taxes for such calendar year and the actual Tenant’s Tax Obligation for such calendar year (together with a copy of the tax bills from the applicable taxing authorities). If the Estimated Tenant’s Tax Obligation for such calendar year is less than the actual Tenant’s Tax Obligation, Tenant shall pay the difference to Landlord within thirty (30) days of receipt of such statement. If the Estimated Tenant’s Tax Obligation is more than the actual Tenant’s Tax Obligation, Landlord shall refund such excess to Tenant with the delivery of the statement to Tenant. Additionally, if the Premises Share of Taxes is less than the Tax Stop, Landlord shall pay such difference to Tenant simultaneously with delivery of the statement to Tenant. With respect to any partial calendar year during the Term, Tenant’s Tax Obligation hereunder shall be prorated based on the number of days of such calendar year in the Term. Landlord shall provide Tenant with copies of all tax assessments, appraisals and notices received by Landlord from the taxing authorities within ten (10) days of Landlord’s receipt thereof.

Landlord agrees that Tenant shall receive the benefit of all rebates which are made with respect to such taxes whenever such rebates are received, even if received by Landlord after the applicable calendar year. Within ten (10) days of Tenant’s request, Landlord shall join Tenant in entering into any tri-party agreements reasonably necessary in order to reduce the taxes on the Project.

Landlord recognizes that Tenant may enter into a bi-party agreement (“Rebate Agreement”) with a governmental entity pursuant to which such entity will rebate directly to Tenant a portion of the taxes paid by Tenant under this Lease. If Tenant enters into such Rebate Agreement, Landlord acknowledges that Tenant shall receive the full benefit of such rebate, Landlord shall not be entitled to any portion thereof and such rebate shall not affect Tenant’s obligations under this Section 5.04. Additionally, within ten (10) days of Tenant’s request, Landlord agrees to furnish each calendar year a letter to the applicable governmental authority (in a form reasonably acceptable to Tenant) which evidences that Tenant’s obligations under this Lease for the payment of Base Rent and Tenant’s Tax Obligation result in Tenant effectively paying Tenant’s Pro Rata Share of all taxes assessed against the Project (as a portion of the taxes are a component of the Base Rent), recognizing that such rebate shall apply to taxes paid by Tenant pursuant to this Lease.

It is understood and agreed that if the present method of taxation changes such that in lieu of the whole or any part of any ad valorem taxes assessed against the Project, there is levied on Landlord a capital tax directly on the rents received from the Project or another tax, assessment or charge based in whole or in part upon such rents which is a substitute for such ad valorem taxes , then all such taxes, assessments or charges, or the part thereof so based, shall be deemed to be “ad valorem taxes assessed against the Project,” as such term is used in this Section 5.04.

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ARTICLE 6.

6.01. USE. Tenant shall use and occupy the Premises only for the Permitted Uses set forth in Section 1.01(e) hereof, and for no other purposes. Tenant shall not use or permit the Premises or any portion thereof to be used for any purpose other than the Permitted Uses or for any unlawful purpose or in any unlawful manner, and shall comply with the CCR and all federal, state, and local governmental laws, ordinances, orders, rules and regulations applicable to the Premises and the occupancy thereof (except to the extent Landlord is responsible therefor pursuant to other provisions of this Lease) and Tenant shall give prompt written notice to Landlord of any notification to Tenant of any claimed violation thereof. Notwithstanding anything to the contrary contained in this Lease, Landlord agrees that Tenant may enter into contracts or subleases with third party vendors of Tenant’s choice for the purpose of operating any of the facilities referred to in the Permitted Uses in Section 1.01(e). Tenant shall not do or permit anything to be done in the Premises, nor bring or keep anything therein which will in any way cause cancellation of any insurance policy covering the Project or any part thereof or any of its contents. In the event that, by reason of any acts of Tenant or any of the Tenant-Related Parties or their conduct of business for other than the Permitted Uses, there shall be any increase in the rate of insurance on the Building or its contents, Tenant hereby agrees to pay such increase. Tenant shall not do anything in or about the Premises and/or Project which will in any way obstruct or unreasonably interfere with the rights of other tenants or occupants of the Project. Tenant shall not permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises.

ARTICLE 7.

7.01. LANDLORD’S SERVICES. Landlord shall, at Landlord’s expense, except as provided to the contrary in this Lease, furnish to Tenant the following services (“Building Standard Services”), all of which Building Standard Services shall comply with applicable laws, and the quality of such services shall be equal to or in excess of First Class Building Standards:

(a) Central heat and air conditioning in season during Building Operating Hours (defined below), so that the average indoor conditions maintained in the Premises during Building Operating Hours shall be a minimum of 72(0)F dry bulb +/-2(0) in the winter when the outdoor temperature is not lower than 22(0)F dry bulb and a maximum of 76(0)F dry bulb +/-2(0) in the summer when the outdoor temperature is not higher than 99(0)F dry bulb, assuming sustained peak loading conditions of one (1) person per 200 square feet of Rentable Area and a combined light and power demand load of eight (8) watts per square foot of Rentable Area.

Landlord will furnish air conditioning, ventilating and heating for full floor increments designated by Tenant at times other than Building Operating Hours, in which event Tenant shall pay Landlord (i) the actual costs for the provision of utilities, and (ii) during the Primary Term, $10.45 per hour for the entire Premises (and not on a floor-by-floor basis). If Landlord replaces obsolete HVAC equipment during the Term, then the hourly rate of $10.45 may be adjusted during the Extension Terms as agreed to by Landlord and Tenant (with disputes relating thereto to be resolved by arbitration pursuant to Section 17.29 hereof) to reflect current estimates of accelerated depreciation of such equipment resulting from overtime usage. Tenant shall be provided with means (via access cards or otherwise) to access air conditioning, ventilating and heating outside of Building Operating Hours. Tenant shall be charged for a minimum of two (2) hours of such after hours air conditioning, ventilating and heating, even if Tenant has requested less than two (2) hours of such services.

The condenser water system will be made available to Tenant in the core on each floor of the Premises as an alternate source of cooling for Tenant installed HVAC units. Tenant shall not be charged for the use of such condensing system water.

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As used herein, “Building Operating Hours” shall mean 7:00 a.m. through 7:00 p.m. on weekdays and 8:00 a.m. through 1:00 p.m. on Saturdays, exclusive of Holidays.

As used herein, “Holidays” shall mean New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

(b) Janitor service shall be provided to the Premises five (5) days per week, exclusive of Holidays, consistent with the janitorial specifications set forth in Exhibit “H”; provided, however, if Tenant’s leasehold improvements (including without limitation, floor coverings) require that Landlord provide special or additional cleaning in excess of the janitorial specifications in Exhibit “H” or if Tenant desires services not included in the janitorial specifications, Tenant may either (1) independently contract with individuals or entities that furnish such desired cleaning or other services, or (2) request that Landlord cause such special or additional cleaning or other services to be completed at Tenant’s sole cost and expense. Landlord specifically reserves the right to modify the janitorial services specifications set forth in Exhibit “H” as in its reasonable judgment shall from time to time be required for the safety, protection and cleanliness of the Project, the operation thereof, the preservation of good order therein or the protection and comfort of the other tenants of the Project and their agents, employees and guests (subject to Tenant’s approval, which approval shall not be unreasonably withheld). Landlord agrees to make any changes to the janitorial specifications reasonably requested by Tenant provided such changes are consistent with First Class Building Standards.

In the event that the janitorial service being provided to the Premises by Landlord consistently fails to conform with the specifications set forth in Exhibit “H” or is otherwise unsatisfactory to Tenant, then Landlord shall arrange a meeting between Tenant and the contractor providing the janitorial services to the Premises within ten (10) days of Tenant’s request so that any problems with the janitorial services being provided to the Premises can be addressed and remedied. If, within thirty (30) days after such meeting, the janitorial services shall continue to fail to conform with the specifications set forth in Exhibit “H” or remain unsatisfactory to Tenant in its reasonable judgment, then the janitorial service contract shall be terminated in accordance with its terms, and thereafter Tenant shall be entitled to participate in the process by which Landlord solicits bids for the janitorial services contract, and Tenant shall have the right to approve the contractor which is selected to provide the janitorial services for the Premises. Landlord agrees that all contracts for janitorial services shall contain a provision entitling Landlord to terminate the contract without penalty with no more than ninety (90) days prior notice.

(c) Twenty-four (24) hours per day, every day of the year, hot (i.e., thermostat set in the range of 105 to 110 Fahrenheit for comfort and energy conservation purposes) and cold domestic water in restrooms, toilets, drinking fountains and sinks in the Premises.

(d) Electric lighting service for the Parking Facilities, Common Areas (including the ground floor lobby of the Building) of the Project and the public areas of the Project at such times consistent with First Class Building Standards, including, but not limited to, lighting of the Parking Garage in accordance with First Class Building Standards twenty-four (24) hours a day, every day of the year.

(e) A security system for the Project which will permit Tenant and its employees access to the Premises twenty-four (24) hours per day every day of the year subject to reasonable rules and regulations promulgated by Landlord with respect thereto (subject to Tenant’s approval, which shall not be unreasonably withheld).

Tenant shall, at its sole cost and expense, (x) locate Tenant’s security personnel within the Premises and at the Security Desk (defined below) as Tenant shall determine desirable, and (y) install and operate such additional security systems as it shall determine desirable for the purpose of limiting access to or within the Premises subject to Landlord’s approval, which shall not be unreasonably withheld, and provided such systems are located solely within the Premises, comply with applicable laws, are coordinated with any security services which may be provided to the entire Project by Landlord and Landlord is provided with access to the Premises (excluding

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Security Areas [defined below]). Landlord and Tenant agree to consult and collaborate with one another to design and/or upgrade the Project security system to accommodate the needs of Tenant. Additionally, Landlord agrees that the operating terminal for the security system shall be located in the Premises (and not the property management office) in a location secured with a lock and Tenant shall have the sole key to such lock. Tenant and Landlord will cooperate in establishing a system to permit the property manager to access the system accompanied by a representative of Tenant. At Tenant’s option, Tenant shall either “cap” or remove any upgrades made to the original security system at Tenant’s request upon the expiration or termination of this Lease. Landlord agrees that Tenant shall be permitted to install a security desk in the ground floor lobby of the Building (“Security Desk”) subject to Landlord’s approval of the design thereof (which shall not be unreasonably withheld) and Landlord shall reimburse Tenant for the costs incurred by Tenant with respect thereto, not to exceed $10,000.00, within thirty (30) days of receipt of an invoice therefore from Tenant. The Security Desk may be staffed by Tenant or Tenant’s contractor twenty-four (24) hours a day, every day of the year, or such fewer hours as Tenant deems reasonably necessary to provide the access control service desired by Tenant under this subsection (e). On the first (1st) day of each month during each Lease Year during the Term (subject to adjustment of the Security Amount pursuant to Rider 1), Landlord shall pay to Tenant one-twelfth (1/12) of the sum of $30,000, being the amount budgeted by Landlord per year for Landlord’s furnishing security personnel during the hours from 4:00 p.m. to 11:00 p.m. Monday through Friday and 7:00 a.m. to 1:00 p.m. Saturday (“Security Amount”). In calculating the Base Operating Expense and Operating Expenses after 1999, Landlord shall not include such budgeted amount therein.

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE IN ANY MANNER FOR FAILURE OF ANY SUCH SECURITY PERSONNEL, SERVICES, PROCEDURES OR EQUIPMENT TO PREVENT, CONTROL, OR APPREHEND ANYONE SUSPECTED OF CAUSING PERSONAL INJURY OR DAMAGE IN, ON OR AROUND THE PROJECT (EXCEPT TO THE EXTENT CAUSED BY LANDLORD’S GROSS NEGLIGENCE OR INTENTIONAL TORTIOUS ACTS).

(f) Twenty-four (24) hours per day, every day of the year, sufficient dedicated electrical capacity transformed to a panel box located in the core of each floor of the Premises to operate (1) incandescent lights, typewriters, calculating machines, photocopying machines, stand alone network computers and appropriate dedicated lines, word processing equipment, personal computers, telecommunications and other machines of similar low voltage electrical consumption (120/208 volts), provided that the National Electrical Code (“NEC”) calculation for demand load for said low electrical voltage on each such floor shall not exceed three (3) watts per square foot of Rentable Area for the Premises on each floor; and (2) fluorescent lighting and equipment of high voltage electrical consumption (277/480 volts) provided that the total NEC design demand load for said lighting shall not exceed two (2) watts per square foot of Rentable Area for the Premises on such floor (each such NEC design demand load to be hereinafter referred to as the “Building Standard Rated Electrical Design Load”). In addition to the foregoing, Landlord agrees that the high voltage (277/480 volts, three phase) power available in the Building bus duct at each floor on which the Premises are located will have a total (inclusive of the above described Building Standard Rated Electrical Design Load) capacity available to Tenant of at least eight (8) watts per square foot of Rentable Area contained on such floor.

Additionally, Tenant shall have the right to install an emergency generator in the Project (or any replacement therefor) to provide emergency power only to the Premises. Tenant shall be responsible for the costs (if any) to connect the emergency generator to any portions of the Premises. The emergency generator will be located in an area of the Building approved by Landlord, which approval shall not be unreasonably withheld. Tenant shall maintain the emergency generator at Tenant’s sole cost and expense. At the expiration or earlier termination of the Lease, the emergency generator shall belong to Tenant and Tenant shall be permitted to remove it at Tenant’s cost. Tenant shall also promptly repair at Tenant’s cost any damage to the Premises or the Building caused by such removal. The cost and installation cost of the emergency generator shall not be funded out of the Finish Allowance.

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Additionally, Tenant shall have the right, at Tenant’s cost (subject to Landlord’s approval and to such costs being paid with the Finish Allowance pursuant to Exhibit “D-1”) to cause additional electrical power to be installed o provide power to the Building from a separate electrical service feed.

If Tenant’s electrical equipment and lighting require electrical circuits, transformers or other additional equipment in the Premises in excess of Tenant’s pro rata share of the Project’s electrical or HVAC systems as to the Premises (which additional equipment shall be hereinafter referred to as the “Additional Electrical Equipment”), Tenant may (at Tenant’s cost [subject to such costs being paid with the Finish Allowance pursuant to the provisions of Exhibit “D-1”], including the cost to design, install, maintain and replace the Additional Electrical Equipment) install the same. The method of design and installation of any Additional Electrical Equipment required by Tenant shall be subject to the prior written approval of Landlord (which approval shall not be unreasonably withheld).

If any of Tenant’s electrical equipment requires conditioned air in excess of Building Standard air conditioning, the same shall be installed, or the installation supervised by Landlord, on Tenant’s behalf, and Tenant shall pay all design and installation costs (subject to such costs being paid with the Finish Allowance pursuant to the provisions of Exhibit “D-1”) relating thereto.

The type, location and method of installation of any such air conditioning shall be subject to Landlord’s approval (which approval shall not be unreasonably withheld). Tenant shall maintain such air conditioning equipment at Tenant’s sole cost and expense.

(g) Replacement of Building standard halogen and/or fluorescent light bulbs and tubes and incandescent down light bulbs in the Parking Facilities and the Common Area of the Project, landscaped areas on the Land and all other public areas of the Project, and upon Tenant’s request and at Tenant’s sole cost and expense (which shall be paid separately and not included in Operating Expenses), Landlord will replace any and all light bulbs and tubes in the Premises. Landlord shall charge Tenant not more than the amount paid by Landlord for such bulbs and tubes.

(h) Non-exclusive elevator cab passenger service to the Premises shall be provided twenty-four (24) hours per day every day of the year of sufficient capacity to service the Premises, subject to temporary cessation for ordinary repair and maintenance (but as to each floor of the Premises, such temporary cessation for ordinary repair and maintenance shall not occur simultaneously for all passenger cabs serving such floor), subject to reasonable security measures or other means of controlling access imposed by Landlord after Building Operating Hours and on Holidays, and during times when life safety systems override normal operating systems.

(i) Subject to the provisions of this Lease, maintenance and cleaning of the Building, Building Shell Improvements, Parking Facilities, Common Areas, landscaped areas on the Land, and all other public areas of the Project.

(j) Shared access to and use of the loading dock for Tenant’s loading, unloading, delivery, and pick-up activities during Building Operating Hours including the right to leave vehicles standing at the loading dock for enough time to load or unload and pick up and deliver goods to and from the Premises, subject, however, to reasonable rules and regulations as are promulgated by Landlord from time to time (subject to Tenant’s approval, which approval shall not be unreasonably withheld). Tenant shall also have access to and use of the loading dock for the purposes set forth above during non-Building Operating Hours but only by contacting Landlord’s or Tenant’s security personnel, as applicable, by telephone (which security personnel shall be available for such purpose at all times and will respond promptly).

(k) Sanitary sewer service twenty-four (24) hours per day, every day of the year, subject to temporary interruption for ordinary repair and maintenance and emergencies.

(l) Trash removal from the Project at a designated location, and if requested by Tenant, collection and removal of white paper and aluminum cans for recycling.

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(m) At all times during Building Operating Hours, and subject to reasonable prior notice at all other times, non-exclusive use of the Project freight elevators to the Premises, subject to temporary cessation for ordinary repair and maintenance, and during times when life safety systems override normal Project operating systems. Landlord shall use reasonable efforts to accommodate Tenant’s scheduling needs.

(n) Cold domestic water for drinking fountains at one (1) location at the Building core on each floor comprising the Premises.

(o) Access to the Premises twenty-four (24) hours a day every day of the year.

(p) Any other services that may from time to time be reasonably necessary to ensure that the maintenance and repair of the Project are in accordance with First Class Building Standards.

7.02. INTENTIONALLY DELETED

7.03. INTERRUPTION OF SERVICES

(a) Landlord shall furnish Tenant with at least twenty-four (24) hours prior written notice of any interruption in the Building Standard Services that are scheduled by Landlord for repairs or maintenance, excluding repairs and maintenance necessitated by an emergency. Landlord shall endeavor to provide Tenant with at least seventy-two (72) hours prior written notice of such non-emergency-based repairs or maintenance.

(b) Notwithstanding anything herein to the contrary, the obligations of the Landlord to provide the services and utilities provided above shall be subject to governmental regulation (e.g., rationing, temperature, control, etc.) and any such regulation which requires Landlord to provide or not provide such services or utilities other than as herein provided, shall not constitute a default hereunder, but rather compliance with such regulation shall be deemed to be compliance by Landlord hereunder.

(c) Except as expressly provided in this Lease to the contrary, failure by Landlord to furnish the Building Standard Services, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing and except as otherwise provided in this Lease, should any of the equipment or machinery, for any cause, fail to operate or function properly, Tenant shall have no claim for a rebate of rent or for damages on account of an interruption in services occasioned thereby or resulting there from so long as Landlord uses reasonable efforts to promptly and diligently repair said equipment or machinery and to restore said services.

Notwithstanding the foregoing, in the event that (1) all or any portion of the Premises become reasonably impracticable for Tenant to use to conduct its business because Landlord for any reason (except due to the causes in subsection (b) above or as the result of Tenant’s gross negligence or willful misconduct) is unable or fails to provide any of the Building Standard Services, and (2) such failure (a “Basic Services Failure”) continues for a period in excess of the lesser of (i) three (3) business days or (ii) the number of days following such failure after which Landlord’s business interruption insurance becomes payable, Tenant shall receive a full abatement of Rent due under this Lease for such portion of the Premises so affected from the date of the Basic Services Failure until such portion of the Premises is again reasonably practicable for Tenant to use to conduct its business. Additionally, in the event a Basic Services Failure continues for a period of ninety (90) consecutive days or more or more than ninety (90) days in any twelve (12) month period, and as a result of such Basic Services Failure twenty-five percent (25%) of the Rentable Area of the Premises becomes reasonably impracticable for Tenant to use to conduct its business, Tenant, at its option, shall be entitled to terminate the Lease by delivering written notice of termination to Landlord, in which event the Lease shall terminate and neither Landlord nor Tenant shall be liable for any obligations one to the other under this Lease accruing after such termination, including without limitation, any obligations of Tenant for the payment of

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Base Rent and Additional Rent. Notwithstanding the foregoing, if the Basic Services Failure is the result of a casualty to the Building covered by Section 10.01, the provisions of Section 10.01 shall apply to such Basic Services Failure.

7.04. KEYS AND LOCKS. Prior to the Commencement Date, Landlord shall furnish to Tenant seven hundred eighty (780) access cards necessary for Tenant’s employees to access the Building and the Premises. Additional access cards will be furnished at a charge (which shall not exceed the actual cost thereof to Landlord) by Landlord on an order signed by Tenant or Tenant’s authorized representative. All such access cards shall remain the property of Landlord. Tenant shall be permitted to install additional locks or other access control devices in the Premises provided Tenant furnishes Landlord with a duplicate set of keys or a master key and/or access cards to all such locks other than those locks securing Security Areas (defined in Article 12). Landlord shall be relieved of all obligations under this Lease it cannot perform with respect to Security Areas and to areas it should have been, but was not, provided a key and/or access card and Tenant shall indemnify and defend and hold Landlord and its agents harmless from and against all liability, claims, loss, cost, damage or expense incurred by Landlord or its agents as a result thereof. In addition, with respect to Security Areas and any areas for which Landlord should have been, but was not, provided an access card, Landlord may, in an emergency situation where in Landlord’s good faith judgment immediate entry is required to prevent or minimize personal injury, death or property damage, use force to gain entry into such areas, and Landlord shall not be liable to Tenant for damages resulting from such use of force and Tenant shall indemnify and defend and hold Landlord and its agents harmless from and against all liability, claims, loss, cost, damage or expense incurred by Landlord or its agents as a result thereof. Upon termination of this Lease, Tenant shall surrender to Landlord all keys and/or access cards to the Premises, and give to Landlord an explanation of the combination of all locks for safes, safe cabinets and vault doors, if any, in the Premises.

7.05. GRAPHICS AND BUILDING DIRECTORY.

(a) Tenant may install, with Landlord’s prior approval of the method of illumination, if any, and methods of installation or attachment, which approval will not be unreasonably withheld, and at Tenant’s sole cost and expense (subject, however, to reimbursement as a portion of the Finish Allowance) graphics desired by Tenant on the walls of elevator lobbies on all floors of the Building and on the entrance doors to the Premises on all floors of the Building and a sign in the main lobby of the Building in a location designated by Tenant and subject to Landlord’s approval which shall not be unreasonably withheld. Notwithstanding the foregoing, except as specifically provided in this subsection (a) or Section 7.06 below, in no event may Tenant install any graphics that may be visible from the exterior of the Building.

(b) Tenant may install, and Landlord shall maintain to the extent so installed, a Building directory computer terminal in the lobby of the Building with a minimum capacity determined by Tenant which shall contain a computerized listing of Tenant’s name, certain officers, employees and departments of Tenant, and such other information as Tenant shall reasonably require. Landlord shall pay to Tenant the lesser of (i) $5,000 or (ii) the actual cost of the acquisition and installation of such computer terminal within thirty (30) days after Landlord’s receipt of an invoice therefor from Tenant.

7.06. PROJECT NAME, IDENTITY AND SIGNS.

(a) The Project shall initially be named “i2 Place”. After the Commencement Date and upon furnishing at least thirty (30) days prior written notice to Landlord, Tenant shall have the right to rename the Project from time to time during the Term to a name selected by Tenant and approved by Landlord; provided, however, in no event shall Tenant be permitted to change the name of the Project more than one (1) time in any one (1) Lease Year. Tenant shall pay all costs reasonably incurred in changing the Project Signs (defined below) as the result of any changes to the Project name made by Tenant after the Commencement Date. In no event shall Landlord refer to the Building or Project, or authorize any third party to refer to the Building or Project, by any name other than the name selected by Tenant and approved by Landlord pursuant to this subsection (a).

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(b) The following exterior signs (collectively, the “Project Signs”) for the Project shall be installed and maintained by Landlord at Tenant’s cost and expense (subject, however, to reimbursement for the costs of the design, acquisition and installation of such signage as a portion of the Finish Allowance in accordance with Exhibit “D-1” and except as provided in clause (i) below):

(i) Two (2) monument signs have been installed prior to the Effective Date by Landlord on the Land in the location shown on Exhibit “B-2” attached hereto at Landlord’s cost and expense (and the cost of such signs shall not be paid from the Finish Allowance). Prior to the Commencement Date, Landlord will cause the signs to identify Tenant, the name of the Project determined pursuant to Section 7.06(a) above, the address of the Project and the name of the Complex as shown on Exhibit “L-2” and in accordance with the specifications on Exhibit “L-1” and as otherwise agreed by Landlord and Tenant (and Tenant shall pay for the cost of installing such names except that Landlord shall pay for the cost of installing the Complex name and the Project address). Landlord agrees that Landlord shall not install the name of Landlord, any other tenant of the Building, or other person or entity or information on these signs.

(ii) Within sixty (60) days after delivery of signs to Landlord, signage depicting Tenant’s name and/or logo shall be prominently located by Landlord at the top of the Building on any two (2) faces of the Building selected by Tenant, the exact location of such signs to be approved by Landlord, which approval shall not be unreasonably withheld. The signage will be designed by Tenant consistent with the parameters set forth on Exhibit “L-1”. Tenant shall pay for the reasonable cost of removal of such signage and any repairs necessitated by such removal upon the expiration or earlier termination of this Lease. No part of such sign shall extend above the parapet of the Building.

(iii) Tenant shall have the right to erect temporary signs during the applicable option periods defined in Paragraphs 1, 2 and 3 of the Development Agreement on the sites for Buildings 2, 3 and 4 for the purpose of identifying future premises of Tenant.

Except for the signage described in this Section 7.06, Landlord shall not install or permit any other signs to be placed or allowed to remain on the exterior of the Project, in the main floor lobbies of the Project, and/or on the Land without Tenant’s prior written consent, which consent may be withheld in Tenant’s sole discretion, other than (1) directional and traffic control signs, or (2) signs required by legal requirements.

7.07. RISER SPACE. Tenant shall have the right to use riser space in the core of the Building, at no cost to Tenant, for cabling communications purposes.

7.08. FIBER OPTIC CABLE CARRIERS. Tenant acknowledges that Landlord is negotiating a lease with Southwestern Bell Telephone Company (“SWB”) to provide fiber optic cable service to the Building. Tenant shall be allowed to select additional fiber optic cable carriers that will service the Building provided that the terms of the lease with such additional carriers shall be no more favorable to such carriers than those of the SWB lease. So long as all installation is coordinated with Landlord, such fiber optic carriers shall be allowed to install dual feed fiber optic cabling to the Building. Landlord shall not impose any charge to Tenant for the use of such fiber optics (however, Tenant shall pay any amounts charged to Tenant by the fiber optic carriers and/or Tenant’s Pro Rata Share of any amount charged to Landlord by the fiber optic carriers). Any additional conduits necessary to accommodate service by such additional carriers shall be paid by Tenant.

7.09. COMMUNICATIONS EQUIPMENT. Tenant may, at Tenant’s sole cost and expense (except to the extent such costs are paid with the Finish Allowance as provided in Exhibit “D-1”) and without charge from Landlord, install, operate and maintain antenna and satellite

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equipment (“Communications Equipment”) on any portion of the roof area of the Building as long as Landlord approves the manner of installation and screening of the equipment (which approval shall not be unreasonably withheld). The installation and operation of such equipment must be in compliance with the CCR and all applicable laws, rules and regulations. Landlord shall not take any actions that would in any way interfere with Tenant’s use of the Communications Equipment or the transmission or reception of signal. Landlord and its representatives agree to cooperate reasonably with Tenant in connection with obtaining any permit, license, zoning variance, special use permit or other authorization. Landlord also will provide space at no expense to Tenant in the core of the Building necessary to accommodate Tenant’s conduit and other requirements related to such Communications Equipment. Any assignee or sublessee of this Lease or the Premises or a portion thereof shall have the right to use such equipment. Tenant shall have the right to sublease the rights to use such Communications Equipment to affiliates, subtenants, and assignees. Tenant shall not install any Communications Equipment which would adversely affect or compromise the structural integrity of the Building (or if so, Landlord may construct reinforcements necessary to accommodate same at Tenant’s cost and expense). Tenant shall remove all such Communication Equipment upon the expiration or earlier termination of this Lease and repair any damage caused by such removal, all at Tenant’s cost and expense. Landlord shall have the right to enter into temporary agreements which allow third parties to install, operate and maintain communications equipment on the roof of the Building provided that at such time as the location of such third party equipment or the operation thereof interferes with Tenant’s Communications Equipment or if Tenant desires to install additional Communications Equipment, Landlord shall upon request of Tenant cause such temporary agreements to be terminated and the third party communications equipment removed.

7.10. ADDITIONAL HVAC COMPRESSORS. With the prior written approval of Landlord as to location (which approval shall not be unreasonably withheld) and provided that same shall not adversely affect or compromise the structural integrity of the Building, Tenant may, as part of the Tenant Improvements, install, operate, maintain and repair additional HVAC compressors on the roof of the Building or at such other location reasonably acceptable to Landlord (and Landlord shall not charge Tenant rent therefor). At Tenant’s option and to the extent available, the cost of such compressors shall be paid out of the Finish Allowance. Tenant shall pay all applicable utility charges with respect thereto. Upon the expiration or earlier termination of the Lease, the HVAC compressors shall belong to Tenant and Tenant shall be permitted to remove them. Tenant shall promptly repair all damage caused by such removal, at Tenant’s expense.

ARTICLE 8.

8.01. ALTERATIONS. The construction and installation of Tenant Improvements is governed by Exhibit “D-1”. After the installation of the Tenant Improvements pursuant to Exhibit “D-1”, Tenant shall not make or allow to be made any alterations, installations, additions, or improvements in or to the Premises, without Landlord’s prior written consent, which consent shall not be unreasonably withheld. If Landlord fails to approve or disapprove any request within ten (10) business days after receipt of all necessary information, Landlord shall be deemed to have approved such alteration. Should Tenant desire to perform any alterations which are significant enough to require plans, Tenant shall submit such plans and specifications for same to Landlord for Landlord’s written approval before beginning such work. Upon receipt by Tenant of the written approval of Landlord of such plans and specifications, and upon payment by Tenant to Landlord of the reasonable out-of-pocket fees incurred by Landlord to have such plans and specifications reviewed, Tenant may proceed to make such approved alterations so long as they are in compliance with such approved plans and specifications and are performed by a contractor approved by Landlord, which consent shall not be unreasonably withheld. All installations shall be at Tenant’s sole cost and expense. Without in any way limiting Landlord’s consent rights, Landlord shall not be required to give its consent until (a) Landlord approves the contractor or person making such and approves such contractor’s insurance coverage to be provided in connection with the work (such approval not to be unreasonably withheld), (b) Landlord approves final and complete plans and specifications for the work to the extent plans and specifications are necessary for such work and (c) the appropriate governmental agency, if any, has approved the plans and specifications for such work to the extent plans and specifications are

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necessary for such work. All work performed by Tenant or its contractor relating to the installations shall conform to applicable governmental laws, rules and regulations, including, without limitation, the Disability Acts. If Tenant requests that Landlord perform such installations, Tenant shall pay Landlord, as additional Rent, the cost thereof, plus five percent (5%) as reimbursement for Landlord’s overhead; however, in no event shall such fee be payable with respect to the installation of Tenant Improvements pursuant to Exhibit “D-1”. Each payment shall be made to Landlord within thirty (30) days after receipt of an invoice from Landlord.

Notwithstanding anything to the contrary herein before contained, it shall not be necessary for Tenant to secure Landlord’s approval of any alterations, improvements or additions to the Premises provided such alterations cost less than $75,000, do not adversely affect the structure, HVAC system or exterior of the building or the Common Areas, and are not visible from the Common Area or the exterior of the Building. However, Tenant shall give Landlord prior written notice of all alterations, regardless of whether Landlord has the right to approve same.

All work performed by Tenant with respect to the Premises shall (a) be performed so as not to alter the exterior appearance of the Building, (b) be performed so as not to adversely affect the structure or safety of the Building, (c) comply with all laws, including without limitation all building, safety, fire, and other codes and governmental and insurance requirements, (d) be completed promptly and in a good and workmanlike manner and in a quality not less than Building Standard, (e) be performed at Tenant’s expense, and (f) be performed in such a manner that no valid mechanic’s, materialman’s, or other similar liens (collectively, the “Liens”) be attached to Tenant’s leasehold estate and in no event shall Tenant permit, or be authorized to permit, any Liens (valid or alleged) or other claims to be asserted against Landlord or Landlord’s rights, estates, and interests with respect to the Project or this Lease. Landlord will have the right, but not the obligation, to inspect periodically the work in the Premises.

If any Lien is filed against the Premises or the Project or any portion thereof, Tenant shall cause same to be discharged within forty-five (45) days after the lien is filed by paying or bonding over said Lien. If Tenant fails to comply with the foregoing sentence, Landlord shall (without limitation of its other rights or remedies) have the right, but not the obligation, to discharge said Lien and Tenant shall immediately reimburse Landlord for any sum of money expended by Landlord in connection with obtaining such discharge (together with an additional ten percent (10%) thereof to cover Landlord’s administrative costs), which amount shall be deemed to be Rent hereunder for all purposes.

Any approval by Landlord (or Landlord’s architect and/or engineers) of any of Tenant’s contractors or Tenant’s drawings, plans or specifications which are prepared in connection with any construction of improvements (including without limitation, the Tenant Improvements) in the Premises shall not in any way be construed as or constitute a representation or warranty of Landlord as to the abilities of the contractor or the adequacy or sufficiency of such drawings, plans or specifications or the improvements to which they relate, for any use, purpose or condition.

8.02. REMOVAL OF TRADE FIXTURES AND PERSONAL PROPERTY. Tenant agrees to remove all of its trade fixtures and personal property, including without limitation, all computers, generators, UPS power system, HVAC compressors, cafeteria equipment, telephones, satellite dishes and related equipment and cabling, on or before the date of expiration or termination of the Term. Upon the expiration or termination of this Lease, Tenant shall have no obligation to remove alterations, additions, or improvements or otherwise make any physical improvements to the Premises unless Landlord’s approval for the installation thereof was conditioned upon such removal upon the expiration or termination of the Lease; provided, however, Landlord shall not be permitted to require Tenant to remove any Non-Removable Improvements or any other improvements other than extraordinary improvements which will affect the leasability of the Premises after the expiration of the Term (i.e., interior stairwells, emergency generators, HVAC compressors on the roof, and communications equipment on the roof). Additionally, Tenant shall not be required to remove, and shall not remove, any of the

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following improvements: (1) wall and fixed partitioning (but not easily removable shelving), (2) wallcoverings, (3) doors (including frame and hardware), (4) floor coverings (other than area rugs), (5) Building Shell improvements, (6) ceiling and all elements thereof (including without limitation ceiling grid and ceiling tile) and any improvements above the ceiling (excluding computer, telephone or telecommunications cables; provided Tenant restores any damage caused by the removal of such items, including damage to the ceiling), (7) light fixtures (excluding chandeliers), (8) wall switches and outlets, (9) exit lights, (10) telephone wall penetrations with pullstring, (11) blinds (but not curtains), (12) automatic fire sprinkler system, (13) decorative molding, and (14) any other improvements necessary for the Premises to be a functional, integral unit (“Non-Removable Improvements”). Tenant shall have the right to remove all improvements other than Non-Removable Improvements, including all computer and telecommunications equipment and related items. Tenant shall repair all damage done to the Premises or the Project by removal of any improvements by Tenant (except to the extent caused by Landlord’s negligence) and restore any areas so affected by such removal so as to be consistent with surrounding areas. If Tenant fails to deliver the Premises in the condition aforesaid, then Landlord may restore the Premises to such a condition at Tenant’s expense including an overhead charge of ten percent (10%). All property not removed within the time period required hereunder shall thereupon be conclusively presumed to have been abandoned by Tenant and the same shall be the property of Landlord.

8.03. REPAIRS BY LANDLORD. Landlord shall repair and maintain the Land, the Building, the Parking Facilities, all utilities, the structural portions of the Project, including the roofing system, exterior walls, support beams, foundations, columns, exterior doors and windows and lateral support of the Building, the Building Shell Improvements and all Building systems, the Building service areas and other Common Areas, and all areas of the Project for the common non-exclusive use of all tenants in the Project, in a first-class condition comparable to the first-class buildings in the Geographical Market (including all structural alternations required by law) except to the extent such maintenance and repairs are caused by the act of Tenant, its agents, servants or employees (subject to Section 9.03). Additionally, Landlord agrees to exercise all remedies available to Landlord under the Declaration to cause the Adjacent Land and Common Facilities to be maintained in accordance with First Class Building Standards.

8.04. REPAIRS BY TENANT. Tenant shall, at Tenant’s sole cost and expense, keep the Premises (excluding any items Landlord is obligated to repair and maintain in Section 8.03 or to the extent caused by the act of Landlord or its agents, servants, contractors or employees) and any appliances therein in good condition and repair, reasonable wear and tear excepted. Tenant shall, upon the expiration or earlier termination of this Lease, surrender the Premises to the Landlord in good condition, ordinary wear and tear and damage caused by casualty condemnation or the actions of Landlord, its agents or employees excepted. Subject to Section 9.03, any injury or damage to the Premises or Project, or the appurtenances or fixtures thereof, caused by or resulting from the act of Tenant or any of the Tenant-Related Parties shall be repaired or replaced by Tenant. If Tenant fails to maintain the Premises or fails to repair or replace any damage to the Premises or Project resulting from the act of Tenant, or any of the Tenant-Related Parties, and such failure continues beyond the cure periods provided in Section 15.01(b) below, Landlord may, but shall not be obligated to, cause such maintenance, repair or replacement to be done, as Landlord deems necessary, and Tenant shall immediately pay to Landlord all costs related thereto, plus a charge for overhead of ten percent (10%) of such cost.

ARTICLE 9.

9.01. LANDLORD’S INSURANCE. Landlord covenants and agrees that from and after the date of delivery of the Premises from Landlord to Tenant, Landlord will carry and maintain the insurance set forth in Section 9.01(a) and (b) of this Article.

(a) General Comprehensive Public Liability Insurance insuring against claims for personal or bodily injury or death or property damage occurring upon, in or about the Project to afford protection to the limit of not less than $5,000,000.00 combined single limit in respect to

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injury or death to any number of persons and property damage arising out of any one (1) occurrence, with a reasonable deductible. Tenant shall be named as an additional insured thereunder, and Landlord shall furnish Tenant a certificate evidencing such coverage being in effect in substantially the following form: “[Insert name of Tenant] is included as an additional insured but only as to claims covered by the indemnity given Tenant by [Insert name of Landlord] in Section 9.04 of the lease of premises at 11701 Luna Road, Dallas, Texas dated March     , 1999.”

(b) Landlord shall at all times during the term hereof maintain in effect an all-risk policy (including coverage against fire, wind, tornado, earthquake, vandalism, malicious mischief, flood, water damage and sprinkler leakage) or policies covering the Project (excluding personal property of Tenant, but including the leasehold improvements in the Premises) for the full insurable value on a replacement cost basis with reasonable deductibles customary for owners of first class buildings in the Geographical Market.

Any insurance provided for in Subsections 9.01(a) and (b) above may be effected by a policy or policies of blanket insurance covering additional items or locations or assureds, provided that the requirements of Sections 9.01(a) and (b) are otherwise satisfied. Tenant shall have no rights in any policy or policies maintained by Landlord.

9.02. TENANT’S INSURANCE. Tenant covenants and agrees that from and after the date of delivery of the Premises from Landlord to Tenant, Tenant will carry and maintain, at its sole cost and expense, the insurance set forth in paragraphs (a) and (b) of this Section 9.02.

(a) General Comprehensive Public Liability Insurance against claims for personal or bodily injury or death or property damage occurring upon, in or about the Premises (including contractual indemnity and liability coverage), such insurance to insure both Tenant and its employees and to afford protection to the limit of not less than $5,000,000.00, combined single limit, in respect to injury or death to any number of persons and all property damage arising out of any one (1) occurrence, with a reasonable deductible. Landlord shall be named as an additional insured thereunder, and Tenant shall furnish Landlord a certificate evidencing such coverage being in effect in substantially the following form: “[Insert name of Landlord] is included as an additional insured but only as to claims covered by the indemnity given Landlord by [Insert name of Tenant] in Section 9.04 of the Lease of the premises at 11701 Luna Road, Dallas, Texas dated March     , 1999.”

(b) Property insurance on an all-risk basis (including coverage against fire, wind, tornado, vandalism, malicious mischief, water damage and sprinkler leakage) covering all personal property of Tenant located in the Premises, in an amount not less than one hundred percent (100%) of full replacement cost thereof. Such policy will be written in the name of Tenant. The property insurance may provide for a reasonable deductible.

(c) All such insurance in Sections 9.01 and 9.02 will be issued and underwritten by companies which are respectable and financially sound. Tenant shall deliver to Landlord and Landlord shall deliver to Tenant duly executed originals of the certificates of all policies of insurance required by Sections 9.01 and 9.02 (as applicable) evidencing in-force coverage. Further, each party shall deliver to the other renewals thereof at least thirty (30) days prior to the expiration of the respective policy terms.

9.03. WAIVER OF RECOVERY. ANYTHING IN THIS LEASE TO THE CONTRARY NOTWITHSTANDING, LANDLORD AND TENANT EACH HEREBY RELEASES THE OTHER, AND THE OTHER’S PARTNERS, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, FROM ANY AND ALL LIABILITY AND RESPONSIBILITY TO THE RELEASING PARTY AND TO ANYONE CLAIMING BY OR THROUGH IT OR UNDER IT, BY WAY OF SUBROGATION OR OTHERWISE, FOR ALL RIGHTS OF RECOVERY, ACTIONS, CAUSES OF ACTION, COSTS, EXPENSES, CLAIMS, OR DEMANDS WHATSOEVER WHICH ARISE OUT OF DAMAGE OR DESTRUCTION OF PROPERTY OCCASIONED BY PERILS WHICH CAN BE INSURED BY AN ALL RISK PROPERTY INSURANCE COVERAGE FORM INCLUDING COVERAGE FOR

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EARTHQUAKE AND FLOOD REGARDLESS OF THE AMOUNTS OF THE PROCEEDS PAYABLE UNDER SUCH INSURANCE AND THE CAUSE OR ORIGIN, INCLUDING NEGLIGENCE OF THE OTHER PARTY HERETO, OR ITS AGENTS, OFFICERS, PARTNERS, SHAREHOLDERS, SERVANTS OR EMPLOYEES. LANDLORD AND TENANT GRANT THIS RELEASE ON BEHALF OF THEMSELVES AND THEIR RESPECTIVE INSURANCE COMPANIES AND EACH REPRESENTS AND WARRANTS TO THE OTHER THAT IT IS AUTHORIZED BY ITS RESPECTIVE INSURANCE COMPANY TO GRANT THE WAIVER OF SUBROGATION CONTAINED IN THIS SECTION 9.03. THIS RELEASE AND WAIVER SHALL BE BINDING UPON THE PARTIES WHETHER OR NOT INSURANCE COVERAGE IS IN FORCE AT THE TIME OF THE LOSS OR DESTRUCTION OF PROPERTY REFERRED TO IN THIS SECTION 9.03.

9.04. INDEMNITY. Except as otherwise expressly provided in this Lease to the contrary, Landlord shall not be liable to Tenant, or to Tenant’s agents, servants, employees, assignees, subtenants, licensees or concessionaires for any damage to person or property caused by the negligence or intentional torts of Tenant, or its agents, servants, employees, assignees, subtenants, licensees or concessionaires, and Tenant agrees to indemnify and hold Landlord, and its affiliates and their respective partners, officers, directors, shareholders, employees and agents harmless from all liability and claims for any such damage. Except as otherwise expressly provided in this Lease to the contrary, Tenant shall not be liable to Landlord, or to Landlord’s agents, servants or employees for any damage to person or property caused by the negligence or intentional torts of Landlord, or its agents, servants or employees, and Landlord agrees to indemnify and hold Tenant, and its affiliates and their respective partners, officers, directors, shareholders, employees and agents harmless from all liability and claims for such damage.

ARTICLE 10.

10.01. CASUALTY. If the Project shall be damaged by fire or other casualty and (i) the risk is covered by insurance carried or required to be carried by Landlord hereunder (whether or not actually maintained by Landlord) and the cost of repairing such damage shall not be greater than fifty percent (50%) of the then full replacement cost thereof, or (ii) the damage results from a risk not covered by insurance maintained or required to be maintained (whether or not actually maintained by Landlord) pursuant to this Lease to an extent less than twenty percent (20%) of the replacement cost of the Project, or (iii) Tenant has the right to terminate this Lease as provided below and does not terminate this Lease, then, subject to the following provisions of this Article, Landlord shall repair the Project (including all leasehold improvements in the Premises) to the condition prior to the casualty. If repairs are not commenced within ninety (90) days of the casualty, diligently prosecuted thereafter, or substantially completed within two hundred seventy (270) days after the commencement of such repairs, Tenant may terminate this Lease by giving written notice to Landlord or Tenant may restore and offset the costs of restoration, plus interest at the Default Interest Rate, against Rent. The Rent required to be paid hereunder shall be abated in proportion to the portions of the Premises, if any, which are rendered untenantable by fire or other casualty hereunder until repairs of the Project are completed, or if the Project are not repaired, until the termination date hereunder. Notwithstanding the foregoing, if the Project is damaged by fire or other casualty to an extent greater than twenty percent (20%) of the then full replacement cost thereof resulting from an act of war, then Landlord shall have the right to terminate this Lease by giving written notice to Tenant. If Landlord fails to give Tenant such written notice within thirty (30) days following the occurrence of such casualty, then Landlord shall repair the Project as set forth above.

If the Project shall be damaged (a) by fire or other casualty not covered by insurance maintained or required to be maintained (whether insured or not) by this Lease to an extent greater than twenty percent (20%) of the replacement cost of the Project, or (b) the damage results from a risk covered by insurance maintained or required to be maintained by this Lease to an extent greater than fifty percent (50%) of the then full replacement cost thereof, then Tenant may terminate this Lease by giving written notice to Landlord; if Tenant fails to deliver such notice within thirty (30) days following the occurrence of such casualty, then Landlord shall

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diligently proceed to repair the Project (including all leasehold improvements in the Premises) to the condition prior to the casualty, failing which Tenant may terminate this Lease by delivering written notice thereof to Landlord or Tenant may restore and offset the costs of restoration, plus interest at the Default Interest Rate, against Rent.

If a casualty damages any portion of the Project which renders any portion of the Premises reasonably impracticable for the conduct of Tenant’s business, and if, in the reasonable determination of Landlord which shall be made within thirty (30) days following the date of the casualty, the damaged property cannot be repaired so as to make the Premises tenantable within two hundred seventy (270) days from the date of commencement of repairs, then Tenant shall have the right to terminate this Lease by notifying Landlord in writing of such termination within sixty (60) days of the casualty.

If this Lease is terminated as provided above, all Rent shall be apportioned and paid up to the termination date. Landlord shall not be required to repair or replace any personal property of Tenant.

10.02. END OF TERM CASUALTY. Notwithstanding anything to the contrary in this Article 10, Landlord and Tenant shall have the right to terminate this Lease if a casualty affecting greater than twenty percent (20%) of the Project occurs during the last twelve (12) months of the Term (as it may have been extended).

ARTICLE 11.

11.01. CONDEMNATION.

(a) If all or substantially all of the Premises, or such portion of the Premises or the Project as would render the continuance of Tenant’s business from the Premises impracticable, should be permanently taken or condemned for any public purpose, then this Lease, at the option of Tenant upon the giving of notice to Landlord within ten (10) days from the date of such condemnation or taking, shall forthwith cease and terminate as provided in subsection (c) below.

(b) If all or substantially all of the Project, or so much thereof as to cause the remainder not to be economically feasible to operate, as reasonably determined by Landlord should be permanently taken or condemned for any public purpose and Landlord demolishes the Project on account of such taking or condemnation, then Landlord shall have the option of terminating this Lease by notice to Tenant within ten (10) days from the date of such condemnation or taking

(c) If this Lease is terminated as provided in subsections (a) or (b) above, this Lease shall cease and expire as if the date of transfer of possession of the Premises, the Project, or any portion thereof, was the expiration date of this Lease.

If this Lease is not terminated by either Landlord or Tenant as aforesaid, Tenant shall pay all Rent up to the date of transfer of possession of such portion of the Premises so taken or condemned and this Lease shall thereupon cease and terminate with respect to such portion of the Premises so taken or condemned as if the date of transfer of possession of the Premises was the expiration date of the Lease Term relating to such portion of the Premises. Thereafter the Base Rent and Additional Rent shall be calculated based on the Rentable Area of the Premises not so taken or condemned. If any such condemnation or taking occurs and this Lease is not so terminated, Landlord shall immediately after the date of such condemnation, commence to repair the Premises or the Project, as the case may be, so that the remaining portion of the Premises or Project, as the case may be, shall constitute a complete architectural unit, and in the case of the Premises reasonably fit for Tenant’s occupancy and business as reasonably determined by Tenant and Landlord (with any disagreement between Tenant and Landlord to be resolved by arbitration pursuant to Section 17.29 hereof). If Landlord fails to commence such repairs within sixty (60) days after the condemnation or cause such repair to the Premises to be substantially completed

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within one hundred eighty (180) days after the date Landlord commences such restoration work, then Tenant shall have the right to terminate this Lease by notifying Landlord in writing of such termination.

(d) In the event of any condemnation or taking of the Premises, Tenant, or anyone claiming under it, at its expense may, jointly with Landlord, appear, claim and prove, in proceedings relative to such taking, (i) the value of any fixtures, furniture, furnishings, leasehold improvements and other personal property that were condemned but which under the terms of this Lease Tenant is permitted to remove at the end of the Lease Term, (ii) the unamortized cost of leasehold improvements that are not so removable by Tenant at the end of the Lease Term and that were installed solely at Tenant’s expense (i.e., not paid by Landlord or with allowances provided by Landlord), (iii) the loss of Tenant’s business as the result of such condemnation, and (iv) relocation and moving expenses as the result of such condemnation.

ARTICLE 12.

12.01. ACCESS. Tenant agrees that Landlord and its agents may enter the Premises for the purpose of inspecting and making such repairs (structural or otherwise), additions, improvements, changes or alterations to the Premises or the Project as may be permitted or required under this Lease and to exhibit the same to prospective purchasers and mortgagees or, during the last eighteen (18) months of the Lease Term, prospective tenants. Landlord’s entries in the Premises shall be preceded by reasonable notice (except in the case of an emergency) and shall not interfere with Tenant’s use and occupancy of the Premises for the Permitted Uses. Except for emergency repairs, Landlord will make all repairs in the Premises that could materially interfere with Tenant’s use and enjoyment of the Premises after Building Operating Hours. With respect to any of the aforementioned entries by Landlord into and upon any part of the Premises other than for emergencies, Tenant shall be entitled to have a representative accompany Landlord. Notwithstanding any of the foregoing, unless otherwise instructed by Tenant in writing, Landlord shall not enter areas designated by Tenant as high security areas (the “Security Areas”) (provided Tenant has furnished Landlord with prior written notice of the location of the Security Areas) unless (a) Landlord shows reasonable cause and provides twenty-four (24) hours advance notice, or (b) an emergency situation exists in respect of which emergency situation the provisions of Section 7.02 shall apply. To the extent that Landlord’s access to any portion of the Premises (including without limitation the Security Areas) is restricted or limited by Tenant, Landlord shall be relieved of its obligations to perform those covenants that require access to such space during the time Landlord is denied access to such space and Landlord shall have no liability or responsibility to Tenant for any occurrences in such space during the time Landlord is denied access to such space unless caused by Landlord or its agents or employees. Tenant shall indemnify and defend and hold Landlord and its agents harmless from and against all liability, loss, cost, damage, claim or expense incurred by Landlord or its agents in connection therewith. Landlord and its brokers shall have access to the Premises upon reasonable advance notice to Tenant for the purpose of showing same to prospective tenants of other property owned by Landlord in the Complex; subject, however to the following restrictions: (1) Landlord and such brokers must give Tenant at least 24 hours advance notice; (2) Landlord and such brokers shall not have access to Security Areas or any other area Tenant believes sensitive or confidential activities or materials are located; (3) Landlord must identify the prospective tenants and Tenant shall not be required to give access to any persons Tenant believes are competitors of Tenant’s business; (4) Landlord and such brokers cannot interfere with the conduct of Tenant’s business, (5) such access need not be granted to Landlord more than twice each calendar month, and (6) Tenant shall have the right to require that a representative of Tenant accompany Landlord, the brokers and the prospective tenants.

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ARTICLE 13.

13.01 SUBORDINATION. Provided that Landlord, Tenant and the Underlying Party (defined below) execute a subordination, non-disturbance and attornment agreement in recordable form reasonably acceptable to Tenant and the Underlying Party (and Landlord and Tenant agree that the subordination, non-disturbance and attornment agreement attached hereto as Exhibit “K” is reasonable and a subordination, non-disturbance and attornment agreement which is substantively the same as Exhibit “K” shall be reasonable) this Lease is and shall be subject and subordinate to any and all ground or similar leases which may hereafter affect the Project, all mortgages which may hereafter encumber or affect the Project and to all renewals, modifications, consolidations, replacements and extensions of any such leases and/or mortgages (the “Underlying Documents”); provided, however, that at the option of any Underlying Party, this Lease shall be superior to the lease or mortgage of such Underlying Party. Tenant shall execute promptly any subordination, non-disturbance and attornment agreement or other appropriate certificate or instrument evidencing same reasonably acceptable to Tenant that Landlord may request. In addition, as a part of any non-disturbance agreement, the applicable Underlying Party must agree that the provisions of this Lease governing the application of insurance proceeds and condemnation awards shall be prior to such Underlying Party’s ground lease or security documents. As used in this Lease, the term “Underlying Party” shall mean the holder of the Landlord’s interest under any ground or similar lease and/or the mortgagee or purchaser at foreclosure with respect to any mortgage. Tenant agrees that any Underlying Party may unilaterally subordinate its mortgage or lease to this Lease at any time by filing a notice of such subordination in the Official Public Records of Real Property of the County where the Building is located. Notwithstanding anything to the contrary contained in this Lease, the Underlying Documents shall in all events be subordinate to the terms of the Development Agreement. Without limiting the foregoing, in the event of the termination of any ground or similar lease affecting the Project or the enforcement by the trustee or the beneficiary under any mortgage or deed of trust of remedies provided by law or such deed of trust, Tenant’s rights to terminate this Lease set forth in the Development Agreement shall be binding upon any successor in interest (whether or not the events giving rise to such termination occurred prior to or after such termination or enforcement).

13.02. ATTORNMENT. Provided Landlord, Tenant and the Underlying Party execute the non-disturbance agreement in Section 13.01, in the event of the termination of any ground or similar lease affecting the Project or the enforcement by the trustee or the beneficiary under any mortgage or deed of trust of remedies provided by law or by such mortgage or deed of trust, Tenant will automatically become the Tenant of such successor in interest without change in the terms or other provisions of this Lease; provided, however, that such successor in interest shall not be bound by (a) any payment of Rent for more than one (1) month in advance, or (b) any amendment or modification of this Lease made without the written consent of such trustee or such beneficiary or such successor in interest of which Tenant has prior notice. Upon request by any such successor in interest, Tenant shall execute and deliver within ten (10) days of receipt an instrument or instruments confirming the attornment provided for herein reasonably satisfactory to Tenant.

13.03. QUIET ENJOYMENT. Provided an event of Default by Tenant is not in existence, Tenant shall and may peaceably and quietly enjoy the Premises for the Term, subject to the provisions of this Lease and Landlord agrees to defend such title to Tenant’s interest in the Premises as to any person.

ARTICLE 14.

14.01. ASSIGNMENT. Except as permitted in this Lease, Tenant shall not assign or in any manner transfer this Lease or any estate or interest herein, or sublet the Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the

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Premises without the prior written consent of Landlord, which shall not be unreasonably withheld. If Tenant desires at any time to enter into an assignment of this Lease or a sublease of the Premises or any portion thereof, Tenant shall give written notice to Landlord of its desire to do so, which notice shall contain (i) the name of the proposed assignee or subtenant, and (ii) the nature of the proposed assignee’s or subtenant’s business to be carried on in the Premises. Landlord shall give Tenant notice of either its consent or its denial of consent to the proposed assignment or sublease within fifteen (15) days of receipt of Tenant’s request and information reasonably necessary to enable Landlord to make an informed decision regarding its consent, failing which the proposed sublease or assignment shall be deemed approved. Changes in ownership of Tenant shall not be considered an assignment.

Tenant shall, despite any permitted assignment or sublease, remain directly and primarily liable for the performance of all of the covenants, duties, and obligations of Tenant hereunder and Landlord shall be permitted to enforce the provisions of this Lease against Tenant or any assignee or sublessee without demand upon or proceeding in any way against any other person; provided, however, if Tenant assigns all of its interest under this Lease to an assignee that is a Credit Assignee (defined below) as of the date of such assignment and such assignee assumes all obligation under this Lease thereafter accruing, Tenant shall be relieved of its obligations under this Lease accruing after such assignment. As used herein, a “Credit Assignee” shall mean an assignee that as of the date of such assignment has at least the minimum investment grade credit rating of Moody or Standard & Poor’s.

Notwithstanding anything to the contrary contained herein, Tenant may, without the prior written consent of Landlord, sublet the Premises or any part thereof to an affiliate, parent or subsidiary of Tenant, or assign this lease to an affiliate, parent or subsidiary of Tenant, or permit occupancy of any portion of the Premises by an affiliate, parent or subsidiary of Tenant, but only so long as such affiliate, parent or subsidiary, controls or is controlled by or is under common control with Tenant. Any such assignee hereunder shall be subject to the terms of Sections 1.01(e) and 6.01 hereof. For purposes, hereof “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities or by contract or otherwise. In addition, without the consent of Landlord, Tenant and any subsequent assignee shall have the right to assign this lease or sublet the Premises to (i) any corporate successor of Tenant by merger, dissolution, or otherwise, or (ii) purchaser of substantially all of Tenant’s assets.

If Tenant shall assign this Lease or sublet any part of the Premises for consideration in excess of the sum of (A) pro-rata portion of the Rent applicable to the space subject to the assignment or sublet, plus (B) the reasonable out-of-pocket costs and expenses incurred by Tenant under or in connection with such sublease or assignment (including without limitation, the costs for (i) broker’s commissions paid by Tenant with regard to the transfer, (ii) reasonable legal fees with regard to the transfer, (iii) expenses of finishing out or renovation of the space involved), (iv) expenses of marketing and advertising, and (v) cash rental concessions, then Tenant shall pay to Landlord as Additional Rent fifty percent (50%) of any such excess within thirty (30) days of receipt, and Tenant shall be entitled to retain the remaining fifty percent (50%) of such excess.

14.02. CONSENT. Consent by Landlord to a particular assignment or sublease shall not be deemed a consent to any other or subsequent transaction. If this Lease is assigned or if the Premises or any portion thereof are subleased without the permission of Landlord, then Landlord may nevertheless collect rent from the assignee or sublessee and apply the net amount collected to the Rent payable hereunder, but no such transaction or collection of rent or application thereof by Landlord shall be deemed a waiver of any provision hereof or a release of Tenant from the performance by Tenant of its obligations hereunder.

14.03. TRANSFER BY LANDLORD.

In the event of the transfer and assignment by Landlord of its interest in this Lease and in the Project to a person expressly assuming Landlord’s obligations under this Lease accruing before and after the transfer, Landlord shall thereby be released from any further obligations

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hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any security given by Tenant to secure performance of Tenant’s obligations hereunder may be assigned and transferred by Landlord to such successor in interest, and Landlord shall thereby be discharged of any further obligation relating thereto from the date of closing.

ARTICLE 15.

15.01 DEFAULT BY TENANT. Each of the following shall constitute a “Default” by Tenant:

(a) The failure of Tenant to pay the Base Rent, or any other installment of Rent when due, and the continuance of such failure for a period of ten (10) days after receipt of written notice thereof from Landlord; provided, however, Landlord shall not be required to give such ten (10) day notice, and Tenant shall not be entitled to same, more than two (2) times during any calendar year, and any such subsequent failure during such calendar year shall be a Default by Tenant upon the occurrence thereof without any notice whatsoever to Tenant; or

(b) Tenant shall fail to fulfill or perform, in whole or in part, any of its obligations under this Lease (other than the payment of Rent) and such failure or non-performance shall continue for a period of thirty (30) days after written notice thereof has been given by Landlord to Tenant, provided that if such failure or non-performance cannot be cured within such thirty (30) day period, such thirty (30) day period shall be extended so long as Tenant promptly commences a cure and diligently prosecutes such cure to completion; or

(c) The entry of a decree or order by a court having jurisdiction adjudging Tenant or any guarantor to be bankrupt or insolvent or approving as properly filed a petition seeking reorganization of Tenant or guarantor under the National Bankruptcy Act, or any other similar applicable Federal or State law, or a decree or order of a court having jurisdiction for the appointment of a receiver or liquidator or a trustee or assignee in bankruptcy or insolvency of Tenant or Guarantor or its property or for the winding up or liquidation of its affairs; or Tenant or guarantors shall institute proceedings to be adjudicated a voluntary bankruptcy or shall consent to the filing of any bankruptcy, reorganization, receivership or other proceeding against Tenant or guarantor, or any such proceedings shall be instituted against Tenant or guarantor and the same shall not be vacated within one hundred twenty (120) days after the same are commenced; or

(d) Tenant shall make an assignment for the benefit of Tenant’s creditors or admit in writing Tenant’s inability to pay the debts of Tenant generally as they may become due.

15.02. RIGHTS UPON DEFAULT BY TENANT.

(a) This Lease and the Term and estate hereby granted and the demise hereby made are subject to the limitation that if and whenever there shall occur any event of Default, as enumerated above, Landlord may, at Landlord’s option, without any additional notice or demand whatsoever (any such notice and demand being expressly waived by Tenant) and without judicial process, in addition to any other remedy or right given hereunder or by law or equity, do any one or more of the following:

(1) Terminate this Lease by written notice to Tenant and draw upon the Letter of Credit called for in Section 4.03 of this Lease in accordance with the terms thereof, in which event Tenant shall immediately surrender possession of the Premises to Landlord;

(2) Terminate Tenant’s right to possession of the Premises under this Lease without terminating this Lease itself, by written notice to Tenant and draw upon the Letter of Credit called for in Section 4.03 of this Lease in accordance with the terms thereof, in which event Tenant shall immediately surrender possession of the Premises to Landlord; or

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(3) Enter upon and take possession of the Premises in accordance with applicable laws and expel or remove Tenant and any other occupant therefrom and draw upon the Letter of Credit called for in Section 4.03 of this Lease in accordance with the terms thereof, with or without having terminated this Lease.

(b) Any right of Tenant, through contract, statute or otherwise, to receive notice of Landlord’s intent to exercise any of Landlord’s remedies hereunder is hereby waived by Tenant. Any right of Tenant through contract, statute, or otherwise to cure any Default before Landlord may exercise any of its remedies hereunder is hereby waived by Tenant (however, Tenant does not waive the cure periods in Section 15.01 above).

(c) In the event of any Default described in subsection (b) of Section 15.01, Landlord shall have the right to enter upon the Premises in accordance with applicable laws without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant’s obligations under this Lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action.

(d) It is hereby expressly stipulated by Landlord and Tenant that any of the above listed actions including, without limitation, termination of this Lease, termination of Tenant’s right to possession, and re-entry by Landlord, will not affect the obligations of Tenant for the unexpired Term of this Lease, including the obligations to pay unaccrued monthly rentals and other charges provided in this Lease for the remaining portion of the Term of the Lease.

(e) Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises by Tenant, whether by agreement or by operation of law, it being understood that such surrender can be effected only by the written agreement of Landlord. No such alteration of locks or other security devices and no removal or other exercise of dominion by Landlord over the property of Tenant or others at the Premises shall be deemed unauthorized or constitute a conversion, Tenant hereby consenting, after any event of Default, to the aforesaid exercise of dominion over Tenant’s property within the Premises. All claims for damages by reason of such re-entry and/or repossession and/or alteration of locks or other security devices in accordance with applicable laws are hereby waived, as are all claims for damages by reason of any distress warrant, forcible detainer proceedings, sequestration proceedings or other legal process.

Tenant agrees that any re-entry by Landlord may be pursuant to a judgment obtained in forcible detainer proceedings or other legal proceedings or without the necessity for any legal proceedings but in accordance with all applicable laws, as Landlord may elect, and Landlord shall not be liable in trespass or otherwise.

(f) In the event Landlord elects to terminate this Lease by reason of an event of Default, then notwithstanding such termination, the Tenant shall be liable for and shall pay to the Landlord, at the address specified in Section 1.01(a) above, the sum of all Rent accrued to the date of such termination, plus, as damages, the reasonable cost of recovering and reletting the Premises for its current use (not costs of renovating for a different use), and an amount equal to the total of the Rent provided in this Lease for the remaining portion of the Term of the Lease (had such Term not been terminated by Landlord prior to the Expiration Date stated in Section 3.01), less the reasonable rental value of the Premises for such period; such amount to be discounted to present value at the rate of six percent (6%) per annum. In no event shall Tenant be liable for concessions or allowances given a replacement tenant.

In the event Landlord elects to terminate this Lease by reason of an event of Default, in lieu of exercising the right of Landlord under the preceding paragraph, Landlord may instead hold Tenant liable for all Rent accrued to the date of such termination, plus such Rent as would otherwise have been required to be paid by Tenant to Landlord during the period following termination of the Term measured from the date of such termination by Landlord until the

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Expiration Date stated in Section 3.01 (had Landlord not elected to terminate the Lease on account of such event of Default) diminished by any net sums thereafter received by Landlord through reletting the Premises during said period (after deducting reasonable expenses incurred by Landlord as provided in Section 15.03 hereof). Actions to collect amounts due by Tenant as provided for in this paragraph may be brought from time to time by Landlord during the aforesaid period, on one or more occasions, without the necessity of Landlord’s waiting until expiration of such period; and in no event shall Tenant be entitled to any excess of rent obtained by reletting over and above the Rent provided for in this Lease. If Landlord elects to exercise the remedy prescribed in this paragraph, this election shall in no way prejudice Landlord’s right at any time hereafter to cancel said election in favor of the remedy prescribed in the foregoing paragraph.

(g) In the event that Landlord elects to repossess the Premises without terminating this Lease, then Tenant shall be liable for and shall pay to Landlord at the address specified in Section 1.01(a) above, all Rent accrued to the date of such repossession, plus Rent required to be paid by Tenant to Landlord during the remainder of the Term until the Expiration Date of the Term as stated in Section 3.01, diminished by any net sums thereafter received by Landlord through reletting the Premises during said period (after deducting reasonable expenses incurred by Landlord as provided in Section 15.03). Actions to collect amounts due by Tenant as provided in this paragraph may be brought from time to time by Landlord during the aforesaid period, on one or more occasions, without the necessity of Landlord’s waiting until expiration of the Term and in no event shall Tenant be entitled to any excess of any rent obtained by reletting over and above the Rent provided for in this Lease.

(h) Landlord shall exercise reasonable efforts to mitigate its damages arising from a Default of Tenant hereunder.

15.03. EXPENSE OF REPOSSESSION. It is further agreed that, in addition to payments required pursuant to Section 15.02 above, Tenant shall compensate Landlord for all expenses incurred by Landlord in repossession (including among other expenses, the total amount of any increase in insurance premiums caused by the vacancy of the Premises).

15.04. CUMULATIVE REMEDIES; WAIVER OR RELEASE. The remedies of Landlord and Tenant under this Lease shall be deemed cumulative and not exclusive of each other. No action, omission or commission by Landlord or Tenant, including specifically, the failure to exercise any right, remedy or recourse, shall be deemed a waiver or release of the same. A waiver or release shall exist and be effective only as set forth in a written document executed by Landlord and Tenant, and then only to the extent recited therein. A waiver or release with reference to any one event shall not be construed as continuing as to, or as a bar to, or as a waiver or a release of, any right, remedy or recourse as to any other or subsequent event.

15.05. ATTORNEY’S FEES. In the event of any legal action or proceeding brought by either party against the other arising out of this Lease, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs incurred in such action (including, without limitation, all costs of appeal) and such amount shall be included in any judgment rendered in such proceeding.

15.06. FINANCIAL STATEMENTS. Each party warrants and represents that all financial statements, operating statements or other financial data at any time given to the other are, or will be, as of their respective dates, true and correct in all material respects.

15.07. NEGATION OF LIEN FOR RENT. Landlord hereby expressly waives and negates any and all contractual liens and security interests, statutory liens and security interests or constitutional liens and security interests arising by operation of law to which Landlord might now or hereafter be entitled on all property of Tenant now or hereafter placed in or upon the Premises (except for judgment liens that may hereafter arise in favor of Landlord). The waiver and negation contained herein shall not waive, negate or otherwise affect any unsecured claim Landlord may have.

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15.08. DEFAULT BY LANDLORD. If Landlord fails to perform or observe any covenant, term, provision or condition of this Lease, and such default should continue beyond a period of ten (10) days as to a monetary default or thirty (30) days (or such longer period as is reasonably necessary to remedy such non-monetary default, provided Landlord shall continuously and diligently pursue such remedy at all times until such default is cured) as to a non-monetary default, after in each instance written notice thereof is given by Tenant to Landlord [and a copy of said notice is sent simultaneously therewith to any party (including without limitation a mortgagee) entitled to receive notice pursuant to Section 17.04 hereof (the “Notice Parties”)] then, in any such event Tenant shall have the right to (i) cure such default, and Landlord shall reimburse Tenant for all reasonable sums expended in so curing said default (which reimbursement Tenant may effect through the withholding of Rent), and/or (ii) commence such actions at law or in equity to which Tenant may be entitled (other than an action to terminate this Lease). Tenant shall be entitled to offset against Base Rent (provided that such offset shall be limited to twenty percent (20%) of any Base Rent installment), or to counterclaim for any amounts owed to Tenant by Landlord pursuant to this Lease, plus interest thereon at the Default Interest Rate, to the extent that such amounts remain unpaid. Notwithstanding the foregoing, Tenant may offset against all Base Rent and other Rent next coming due without limitation (and not just 20% thereof) (1) any portion of the Finish Allowance not paid by Landlord to Tenant when due in accordance with Exhibit “D-1”, (2) any portion of the Security Amount not paid by Landlord to Tenant when due in accordance with Section 7.01 (e), (3) any portion of the sums owed to Tenant under Section 5.04 not paid when due, and/or (4) any amounts determined to be Landlord’s liability pursuant to Section 17.29 or in any judgment entered by a court and to which execution has not been stayed (through appeal or bond), plus interest on all such sums in (1), (2), (3) and (4) at the Default Interest Rate. Tenant agrees that the cure of any default by any of the Notice Parties shall be deemed a cure by Landlord under this Lease. The foregoing provisions shall not limit other remedies available to Tenant under this Lease or at law or in equity.

ARTICLE 16.

16.01. HAZARDOUS WASTE.

(a) The term “Environmental Law” shall mean any federal, state or local statute, regulation or ordinance or any judicial or other governmental order pertaining to the protection of health, safety or the environment. The term “Hazardous Substance” shall mean any hazardous, toxic, infectious or radioactive substance, waste and material as defined or listed by any Environmental Law and shall include, without limitation, petroleum oil and its fractions.

(b) Tenant shall not cause or authorize any Hazardous Substance to be spilled, leaked, disposed of or otherwise released on or under the Project. Tenant may use and sell in the Project only those Hazardous Substances typically used and sold in the prudent and safe operation of the business permitted by Sections 1.01(e) and 6.01 of this Lease. Tenant may store such Hazardous Substances in the Project, but only in quantities necessary to satisfy Tenant’s reasonably anticipated needs. Tenant shall comply with all Environmental Laws and exercise the highest degree of care in the use, handling and storage of Hazardous Substances and shall take all practicable measures to minimize the quantity and toxicity of Hazardous Substances used, handled or stored on the Premises.

(c) Tenant shall immediately notify Landlord upon becoming aware of the following: (i) any spill, leak, disposal or other release of a Hazardous Substance on, under or adjacent to the Premises; (ii) any notice or communication from any governmental agency or any other person relating to any Hazardous Substance on, under or adjacent to the Premises; or (iii) any violation of any Environmental Law with respect to the Premises or Tenant’s activities on or in connection with the Premises.

(d) In the event of a spill, leak, disposal or other release of a Hazardous Substance on or under the Premises caused by Tenant or any of the Tenant-Related Parties, or the threat of the same, Tenant shall (i) immediately undertake all emergency response necessary to contain,

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cleanup and remove the released Hazardous Substance, (ii) promptly undertake all investigatory, remedial, removal and other response action necessary or appropriate to ensure that any Hazardous Substances contamination is eliminated as required by applicable Environmental Law, and (iii) provide Landlord copies of all correspondence with any governmental agency regarding the release (or threatened or suspected release) or the response action, a detailed report documenting all such response action, and a certification that any contamination has been eliminated. All such response action shall be performed, all such reports shall be prepared and all such certifications shall be made by an environmental consultant reasonably acceptable to Landlord.

(e) In the event of a spill, leak, disposal or other release of a Hazardous Substance on or under the Premises caused by Landlord, or any of its contractors, agents or employees or by Landlord’s previous tenants of the Premises, or the threat of the same, Landlord shall (i) immediately undertake all emergency response necessary to contain, cleanup and remove the released Hazardous Substance, (ii) promptly undertake all investigatory, remedial, removal and other response action necessary or appropriate to ensure that any Hazardous Substances contamination is eliminated as required by applicable Environmental Law, and (iii) provide Tenant copies of all correspondence with any governmental agency regarding the release (or threatened or suspected release) or the response action, a detailed report documenting all such response action, and a certification that any contamination has been eliminated. All such response action shall be performed, all such reports shall be prepared and all such certifications shall be made by an environmental consultant reasonably acceptable to Tenant.

(f) Upon expiration of this Lease or sooner termination of this Lease for any reason, Tenant shall remove all Hazardous Substances and facilities used for the storage or handling of Hazardous Substances from the Premises and restore the affected areas by repairing any damage caused by the installation or removal of the facilities. Following such removal, Tenant shall certify in writing to Landlord that all such removal is complete.

(g) Landlord represents and warrants to Tenant that to the best of Landlord’s actual knowledge, the Premises and Project do not presently contain any Hazardous Substance. Additionally, Landlord agrees that Landlord shall not cause or authorize any Hazardous Substance to be generated, treated, stored, released or disposed of, or otherwise placed, deposited in or located on the Premises or Project by Landlord or its agents, contractors or employees, and no activity shall be taken by Landlord or its agents or employees on the Premises or Project that would cause or contribute to (x) the Premises to become a generation, treatment, storage or disposal facility within the meaning of, or otherwise bring the Premises within the ambit of Environmental Law, (y) a release or threatened release of toxic or hazardous wastes or substances, pollutants or contaminants, from the Premises or Project within the meaning of, or otherwise result in liability in connection with the Premises within the ambit of Environmental Law, or (z) the discharge of pollutants or effluents into any water source or system, the dredging or filling of any waters, or the discharge into the air of any emissions, that would require a permit under Environmental Law.

(h) Notwithstanding the provisions of Article 14 of this Lease, it shall not be unreasonable for Landlord to withhold its consent to any assignment, sublease or other transfer of Tenant’s interest in this Lease if a proposed transferee’s anticipated use of the Premises involves the generation, storage, use, sale, treatment, release or disposal of any Hazardous Substance other than those typically used and sold in the prudent and safe operation of the businesses permitted by Sections 1.01(e) and 6.01 of this Lease.

(i) Tenant shall indemnify, defend and hold harmless Landlord, its employees and agents, any persons holding a security interest in the Premises, and the respective successors and assigns of each of them from and against any and all claims, demands, liabilities, damages, fines, losses, costs (including without limitation the cost of any investigation, remedial, removal or other response action required by Environmental Law) and expenses (including without limitation reasonable attorneys’ fees and expert fees in connection with any trial, appeal, petition for review or administrative proceedings) arising out of or in any way relating to the use, treatment, storage, generation, transport, release, leak, spill, disposal or other handling of Hazardous Substances on

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the Premises by Tenant or any Tenant-Related Parties. Tenant’s obligations under this paragraph shall survive the expiration or termination of this Lease for any reason. Landlord’s rights under this paragraph are in addition to and not in lieu of any other rights or remedies to which Landlord may be entitled under this Lease or otherwise.

(j) Landlord shall indemnify, defend and hold harmless Tenant and its employees and agents and the respective successors and assigns of each of them from and against any and all claims, demands, liabilities, damages, fines, losses, costs (including without limitation the cost of any investigation, remedial, removal or other response action required by Environmental Law) and expenses (including without limitation attorneys’ fees and expert fees in connection with any trial, appeal, petition for review or administrative proceeding) arising out of or in any way relating to the actual or alleged use, treatment, storage, generation, transport, release, leak, spill, disposal or other handling of Hazardous Substances on the Premises by Landlord, or any of its contractors, agents or employees or by Landlord’s previous tenants of the Premises. Landlord’s obligations under this paragraph shall survive the expiration or termination of this Lease for any reason. Tenant’s rights under this paragraph are in addition to and not in lieu of any other rights or remedies to which Tenant may be entitled under this Agreement or otherwise.

(k) All representations, warranties and indemnities contained in this Article 16 shall survive the termination of this Lease.

ARTICLE 17.

17.01. SUBSTITUTE PREMISES. Deleted intentionally.

17.02. ESTOPPEL LETTERS. Within ten (10) business days after the written request of either Landlord or Tenant, the other party will execute, from time to time, either an estoppel certificate or a three-party agreement among Landlord, Tenant and any third party certifying, to the best of such party’s knowledge and belief, to such facts (if true) as Landlord or Tenant, as the case may be, or such third party, may reasonably require in connection with the business dealings of the parties and the status of certain matters pertaining to this Lease.

17.03. HOLDOVER.

Subject to the provisions of subsection (b) below, if Tenant shall remain in possession of the Premises after the expiration or earlier termination of this Lease, Tenant will be deemed to be a tenant at sufferance and shall be subject to immediate eviction and removal and shall pay for each month or partial month of holdover period as rent an amount equal to the greater of (i) one hundred fifty percent (150%) of the then actual rental rate prevailing on the date of such termination or expiration, or (ii) one hundred fifty percent (150%) of the prevailing then actual market rental rate for the Premises on the date of such expiration or termination. The remaining in possession by Tenant or the acceptance by Landlord of the payment of said rent shall not be construed as an extension or renewal of this Lease unless extended by Landlord pursuant to the preceding sentence. Tenant shall indemnify Landlord against all claims for damages by any other tenant to whom Landlord may have leased all or any part of the Premises effective upon the termination of this Lease.

17.04. NOTICE. Any notice or communication required or permitted in this Lease shall be given in writing, sent by (i) personal delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States registered or certified mail, return receipt requested, addressed as provided in Section 1.01(a) or to such other address or to the attention of such other person as shall be designated from time to time in writing by the applicable party and sent in accordance herewith. Any such notice or communication shall be deemed to have been delivered, whether actually received or not, four (4) business days following deposit in the US Mail, postage paid, certified or return receipt requested at the address and in the manner provided herein, or any such notice or communication shall have been deemed to have been given as of the date so delivered and actually received at the address and in the manner provided herein in the case of personal

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delivery. Either party shall have the right to change its address to which notices shall thereafter be sent and the party to whose attention such notice shall be directed by giving the other party notice thereof in accordance with the provisions of this Section 17.04. Additionally, each of Landlord and Tenant may designate up to four (4) additional addresses to which copies of all notices shall be sent. Notwithstanding anything contained in this Section 17.04 to the contrary, any notice regarding a party’s change of address or designation of additional addressees shall become effective only upon ten (10) days prior notice thereof.

17.05. RULES AND REGULATIONS. Tenant, as well as any permitted assignee or sublessee, will comply with Building Rules adopted by Landlord, which are set forth in Exhibit “C” attached hereto and made a part hereof for all purposes. Landlord shall have the right to change such Building Rules or to amend them in any reasonable manner for the safety, care and cleanliness of the Project, and the Premises, and for preservation of good order therein, subject to Tenant’s approval (which approval shall not be unreasonably withheld) all of which changes and amendments will be sent by Landlord to Tenant in writing and shall be thereafter binding upon, carried out and observed by Tenant. Tenant shall exercise diligent efforts to cause compliance with such Building Rules by the employees, servants, agents and invitees of Tenant. If the Building Rules and the terms of this Lease conflict, the terms of this Lease shall control. Landlord shall enforce the Building Rules in a uniform manner.

17.06. LANDLORD’S LIABILITY. If Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the right, title and interest of Landlord in the Project and neither Landlord nor its partners, directors, shareholders, agents or employees shall be liable for any deficiency, it being agreed that Landlord shall never be personally liable for any such judgment. Landlord’s interest in the Project shall include all insurance proceeds, condemnation awards, and sales and refinancing proceeds.

17.07. AMERICANS WITH DISABILITIES ACT AND TEXAS ARCHITECTURAL BARRIERS ACT. Notwithstanding anything to the contrary contained in the Lease, Landlord and Tenant agree that the responsibility for compliance with the Americans with Disability Act of 1990 (“ADA”) shall be allocated as follows: (i) Landlord shall be responsible for compliance with the provisions of Title III of ADA for all exterior and interior areas of the Building not included within the Premises and for the restrooms in the Premises and all structural alternations necessary to cause the Premises to comply with the ADA; (ii) Landlord shall be responsible for the compliance with the provisions of Title III of ADA for any construction, renovations, alterations and repairs made by Landlord, its agents or contractors; (iii) Tenant shall be responsible for compliance with the provisions of Title III of the ADA in the Premises for any construction, renovations, alterations and repairs made within the Premises if such construction, renovations and repairs are made by Tenant, its employees, agents or contractors (except for the restrooms and any structural alternations in the Premises, which are Landlord’s responsibility under this Lease); and (iv) except for the restrooms and any structural alterations, which are Landlord’s responsibility under this Lease, Tenant shall be responsible for causing the interior of the Premises to comply with the provisions of Title III of the ADA.

17.08. AUTHORIZATION. If either party signs as a corporation, each of the persons executing this Lease on behalf of such party represents and warrants that it is a duly organized and existing corporation, that it has and is qualified to do business in Texas, that the corporation has full right and authority to enter into this Lease, and that all persons signing on behalf of the corporation were authorized to do so by appropriate corporate actions. If either party is a general partnership, limited partnership, trust, or other legal entity, each individual executing this Lease on behalf of said entity represents and warrants that he or she is duly authorized to execute this Lease on behalf of such entity and in accordance with such entity’s governing instruments, and that this Lease is binding upon such entity. Upon either party’s request, the other party shall furnish such party with proper proof of due authorization for its execution of this Lease.

17.09. BROKERS. Except as provided in that certain Professional Services Fee Agreement dated January 30, 1999 (as amended by that certain letter agreement dated March 11, 1999) by and between Landlord and the brokers in Section 1.10(n) (“Brokers”) pursuant to which Landlord has agreed to pay a real estate brokerage fee upon the terms described therein, Tenant

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represents that it has not engaged, and owes no fee to, any other broker, agent or similar party with respect to the transactions contemplated by this Lease. Accordingly, Tenant agrees to indemnify and hold harmless Landlord from and with respect to any other claims for a brokerage fee, finder’s fee or similar payment with respect to this Lease which is made by any party claiming by, through or under Tenant (other than the Brokers). Similarly, Landlord agrees to indemnify and hold harmless Tenant from and with respect to any claims for a brokerage fee, finder’s fee or similar payment with respect to this Lease which is made by Brokers or any party claiming by, through or under Landlord.

17.10. MEMORANDUM OF LEASE. Tenant shall not record this Lease. Notwithstanding the foregoing, Landlord and Tenant shall enter into the Memorandum of Lease attached hereto as Exhibit “I” for the purpose of recording the same, and Tenant may, at Tenant’s expense, record the same.

17.11. PARKING. Exhibit “F” attached hereto sets forth the agreements between Landlord and Tenant relating to the Parking Facilities.

17.12. TIME OF ESSENCE. Time is of the essence of this Lease and all of its provisions in which performance is a factor.

17.13. ENTIRE AGREEMENT. This Lease, including the Exhibits and Riders attached hereto (which Exhibits and Riders are hereby incorporated herein and shall constitute a portion hereof) and the Development Agreement, contain the entire agreements between Landlord and Tenant with respect to the subject matters hereof. Landlord acknowledges that Tenant has certain rights in the Development Agreement to terminate this Lease and the Development Agreement does contain restrictions on sale or conveyance of the Project, which rights and restrictions are binding on Landlord and any successors and assigns of Landlord.

17.14. AMENDMENT. Any agreement hereafter made between Landlord and Tenant shall be ineffective to modify, release or otherwise affect this Lease, in whole or in part, unless such agreement is in writing and signed by the party to be bound thereby.

17.15. SEVERABILITY. If any term or provision of this Lease shall, to any extent, be held invalid or unenforceable by a final judgment of a court of competent jurisdiction, the remainder of this Lease shall not be affected thereby.

17.16. SUCCESSORS. This Lease shall bind and inure to the benefit of the respective heirs, legal representatives, successors, and assigns of the parties hereto.

17.17. CAPTIONS. The captions in this Lease are inserted only as a matter of convenience and for reference only and they in no way define, limit, or describe the scope of this Lease or the intent of any provisions hereof.

17.18. NUMBER AND GENDER. All genders used in this Lease shall include the other genders, the singular shall include the plural, and the plural shall include the singular, whenever and as often as may be appropriate.

17.19. GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State of Texas.

17.20. CHANGES TO THE PROJECT. No material changes shall be made to the location, configuration, layout or design of the Building, Common Areas, Parking Facilities, the Premises or any aspect of the Project without Tenant’s prior written consent which shall not be unreasonably withheld, conditioned or delayed (except as they relate to the Premises or as otherwise provided in Section 1.01(p), which may be withheld in Tenant’s sole discretion)

17.21. NO PRESUMPTION AGAINST DRAFTER. Landlord and Tenant understand, agree and acknowledge that: (i) this lease has been freely negotiated by both parties; and (ii) that in any controversy, dispute, or contest over the meaning, interpretation, validity, or enforceability

42

of this lease or any of its terms or conditions, there shall be no inference, presumption or conclusion drawn whatsoever against either party by virtue of that party having drafted this lease or any portion thereof.

17.22. EXAMINATION OF LEASE. Submission by Landlord of this instrument to Tenant for examination or signature does not constitute a reservation of or option for lease. This Lease will be effective as a lease or otherwise only upon execution by and delivery to both Landlord and Tenant.

17.23. DEFINED TERMS AND MARGINAL HEADINGS. The words “Landlord” and “Tenant” as used herein shall include the plural as well as singular. If more than one person is named as Tenant, the obligations of such persons are joint and several. The headings and titles to the articles, sections and subsections of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part of this Lease.

17.24. NO REPRESENTATIONS. Landlord and Landlord’s agents have made no warranties, representations or Promises (express or implied) with respect to the Premises, the Building or any other part of the Property (including, without limitation, the condition, use or suitability of the Premises, the Building or the Property), except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease.

17.25. IMPROVEMENTS ON ADJACENT LAND. In no event may any improvements be located on the portion of Adjacent Land which is owned by Landlord or any affiliate of Landlord closer to the Building or any subsequent building leased by Tenant on the Adjacent Land than the improvements shown on the site plan attached hereto as Exhibit “B-2”.

17.26 SURVIVAL OF INDEMNITIES. Each indemnity agreement and hold harmless agreement contained herein shall survive the expiration or termination of this Lease with respect to events which occurred prior to such termination or expiration of this Lease.

17.27. COMPETITORS OF TENANT. Except in the exercise of Landlord’s remedy to repossess the entire Premises upon the default of Tenant hereunder, Landlord shall not lease or grant any rights to occupy any space in the Project to any person or entity other than Tenant and the management company for the Building which shall be permitted to lease only the management office (which may only be used and occupied for such purpose). The foregoing does not limit Tenant’s rights under Section 14.01 of this Lease.

17.28. FIRST OFFER ON SALE.

(a) If at any time during the Term, Landlord desires to sell all or any portion of the Project, Landlord shall notify Tenant in writing (the “Sale Notice”) of the terms upon which Landlord is willing to sell such portion of the Project. Tenant shall thereupon have the prior right and option to purchase such portion of the Project (“ROFO”) at the price and on the terms and conditions stated in the Sale Notice. Nothing contained herein shall prohibit Landlord from having discussions with other prospective purchasers of such portion of the Project. Tenant may exercise the ROFO by giving Landlord written notice thereof (the “Exercise Notice”) within fifteen (15) calendar days after the date of receipt by Tenant of the Sale Notice.

(b) In the event Tenant effectively exercises its ROFO under Section 17.28(a) hereof, Tenant and Landlord shall, within twenty (20) business days following Landlord’s receipt of the Exercise Notice, execute a contract of sale (the “Tenant Contract”) at the same price and upon the same terms and conditions as stated in the Sale Notice.

(c) Should Tenant fail to deliver the Exercise Notice pursuant to Section 17.28(a) hereof, Tenant’s ROFO shall be deemed waived, and Landlord shall thereafter be entitled to sell such portion of the Project to any third party upon the ROFO Terms (hereinafter defined). “ROFO Terms” shall mean terms no less favorable to Landlord than the terms and conditions contained in the Sale Notice, however, the purchase price may be up to five percent (5%) less than that set forth in the Sale Notice.

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(d) Notwithstanding the provisions of subparagraph (c) hereof, if Landlord does not subsequently enter into a contract of sale with a third party on the ROFO Terms within two hundred seventy (270) days after the Sale Notice, or consummate the sale of such portion of the Project to such third party upon ROFO Terms within three hundred sixty (360) days after the Sale Notice, then Landlord may not sell such portion of the Project unless it again offers such portion of the Project to Tenant pursuant to this Section 17.28.

(e) Notwithstanding any other provision of this Section 17.28, Tenant’s ROFO shall not apply to any of the following transactions: (i) any sale or transfer of all or any portion of the Project or any interest therein to any affiliate of the Landlord; (ii) any sale or transfer in connection with permanent or interim financing for the Project, including any sale/leaseback, joint venture or other similar arrangement; and (iii) the granting of any mortgage or other lien, or any conveyance with respect thereto by foreclosure, deed in lieu of foreclosure or the like. Any of the above mentioned transactions shall not terminate Tenant’s ROFO, but such ROFO shall thereafter continue to bind the transferee.

(f) Tenant’s ROFO is not continuing in nature, and Landlord shall have no obligation to re-offer to Tenant except as set forth in subparagraph (d) above.

17.29 ARBITRATION.

(a) Either Landlord or Tenant may require that any dispute under this Lease be submitted to arbitration pursuant to this Section 17.29. All arbitrations shall occur at a location in Dallas, Texas chosen by the arbitrators and shall be conducted pursuant to the Arbitration Rules for the Real Estate Industry (effective on May 1, 1994, and as subsequently amended) of the American Arbitration Association (or the successor organization, or if no such successor organization exists, then from an organization composed of persons of similar professional qualifications). To the extent the provisions of this Section 17.29 vary from or are inconsistent with the Arbitration Rules for the Real Estate Industry (effective on May 1, 1994, and as subsequently amended) of the American Arbitration Association or any other arbitration tribunal, the provisions of this Section 17.29 shall govern. All arbitrations will be governed by the provisions of this Section 17.29, the Arbitration Rules for the Real Estate Industry (effective on May 1, 1994, and as subsequently amended) of the American Arbitration Association (to the extent not inconsistent with this Section 17.29), and the laws of the State of Texas (to the extent not inconsistent with any of the foregoing). The party desiring such arbitration shall give notice to that effect to the other party and simultaneously therewith also shall give notice to the director (the “Director”) of the Dallas, Texas regional office of the American Arbitration Association (or the successor organization, or if no such successor organization exists, then from an organization composed of persons of similar professional qualifications), requesting such organization to select, as soon as possible but in any event within the next thirty (30) days, three neutral arbitrators with, if reasonably possible, recognized expertise in the subject matter of the arbitration. At the request of either party, the arbitrators shall authorize the service of subpoenas for the production of documents or attendance of witnesses. Within thirty (30) days after their appointment, the arbitrators so chosen shall hold a hearing at which each party may submit evidence, be heard and cross-examine witnesses, with each party having at least ten (10) days’ advance notice of the hearing. The hearing shall be conducted such that each of Landlord and Tenant shall have reasonably adequate time to present oral evidence or argument, but either party may present whatever written evidence it deems appropriate prior to the hearing (with copies of any such written evidence being sent to the other party). In the event of the failure, refusal or inability of any arbitrator to act, a new arbitrator shall be appointed in his stead, which appointment shall be made in the same manner as hereinbefore provided. The decision of the arbitrators so chosen shall be given within a period of thirty (30) days after the conclusion of such hearing and shall be accompanied by conclusions of law and findings of fact. The decision in which any two arbitrators so appointed and acting hereunder concur shall in all cases be binding and conclusive upon the parties and shall be the basis for a judgment entered in any court of competent jurisdiction. The fees and expenses of arbitration under this Section 17.29 shall be

44

apportioned to Landlord and Tenant in such a manner as decided by the arbitrators. Landlord and Tenant may at any time by mutual written agreement discontinue arbitration proceedings and themselves agree upon any such matter submitted to arbitration.

(b) Notwithstanding anything to the contrary contained in subsection (a) above, if the purpose of the arbitration is to determine the Extension Rental Rate under Rider 1, then the provisions of Rider 1 shall apply.

17.30. EXTENSION AND ADDITIONAL RIGHTS AND OPTIONS. Deleted Intentionally.

17.31 TAX PROTESTS. Tenant has no right to protest the real estate tax rate assessed against the Project and/or the appraised value of the Project determined by any appraisal review board or other taxing entity with authority to determine tax rates and/or appraised values (each a “Taxing Authority”). Tenant hereby knowingly, voluntarily and intentionally waives and releases any right, whether created by law or otherwise, to (a) file or otherwise protest before any Taxing Authority any such rate or value determination even though Landlord may elect not to file any such protest; (b) receive, or otherwise require Landlord to deliver, a copy of any reappraisal notice received by Landlord from any Taxing Authority; and (c) appeal any order of a Taxing Authority which determines any such protest. The foregoing waiver and release covers and includes any and all rights, remedies and recourse of Tenant, now or at any time hereafter, under Section 41.413 and Section 42.015 of the Texas Tax Code (as currently enacted or hereafter modified) together with any other or further laws, rules or regulations covering the subject matter thereof. Tenant acknowledges and agrees that the foregoing waiver and release was bargained for by Landlord and Landlord would not have agreed to enter into this Lease in the absence of this waiver and release. Notwithstanding any such waiver and release, if Tenant files or otherwise appeals any such protest, then Tenant will be in breach under this Lease.

Landlord shall have the exclusive right to protest the real estate tax rate assessed against the Project and/or the appraised value of the Project determined by any Taxing Authority. However, notwithstanding anything to the contrary contained in this Lease, Landlord shall upon the request of Tenant to do so from time to time, make such a protest. Landlord shall diligently monitor the taxes assessed against the Project as well as the assessed valuation thereof and shall seek such abatements or other tax benefits or relief for the Project in the exercise of Landlord’s prudent business judgment, subject to the rights of Tenant under the preceding sentence. Nothing contained herein shall restrict Tenant from negotiating with tax authorities to effect tax savings on property owned by Tenant or tax rebates with respect to the Project.

17.32 CONSENTS. Except as stated to the contrary elsewhere in this Lease, in every instance in which either Landlord or Tenant is required to give its consent or approval, such consent or approval shall not be unreasonably withheld or delayed.

17.33 CCR AMENDMENTS. So long as Landlord or an affiliate of Landlord is Declarant under the CCR, and so long as Tenant either retains or has exercised its option to rent Building 2, Landlord shall not, without Tenant’s prior written consent, vote for an action or an amendment to the CCR or authorize or take action (or if Landlord or an affiliate of Landlord is no longer Declarant under the CCR, vote for an action or an amendment to the CCR) under the CCR which will result in:

(a) An increase in Quarterly Assessments or Special Assessments passed through to Tenant as an Operating Expense Increase resulting from:

(i) Increase in the size in land area of the Common Facilities.

(ii) A change in method of allocation of assessments resulting from a modification of the CCR.

(b) A material degradation of the appearance, usefulness or First Class Building Standards of the Common Facilities.

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(c) an increase in the Quarterly Assessments passed through to Tenant as an Operating Expense Increase in any calendar year by more than ten percent (10%) of the Quarterly Assessments for the prior calendar year resulting from construction of additional improvements or modification of existing improvements within the Common Facilities (except as may be required by governmental or judicial decision or governmental law).

(d) the construction of any improvements between the Building and the lake comprising a part of the Common Facilities.

Additionally, Landlord agrees to consult with Tenant in good faith regarding all matters related to the CCR or Common Facilities. Further, if Tenant requests that any particular Common Facilities be installed from time to time, Landlord will consider such request in good faith.

Nothing contained in this Section 17.33 shall be construed so as to prevent Declarant from initiating or supporting a modification of the Zoning Ordinance, as defined in the CCR, to allow the development of attached residential and mixed use commercial/residential buildings and/or retail/commercial free standing buildings.

17.34 MANAGEMENT. Landlord agrees to consider in good faith (i) any complaints of Tenant regarding the individual who is the on-site property management representative and (ii) any request by the Tenant to replace such individual. Landlord and Tenant shall establish a reasonably detailed protocol between Tenant’s facilities manager and the on-site property management representative which protocol should include the office, home, fax and “beeper” numbers for such people and additional people and telephone numbers to contact in the event such managers are unavailable. Such protocol shall be updated upon the request of either Landlord or Tenant.

17.35 DEFAULT INTEREST. All sums owed by Landlord to Tenant under this Lease and not paid on or prior to the date due thereof shall bear interest from the date due thereof until payment is received at a per annum rate (the “Default Interest Rate”) equal to the lesser of (i) the prime rate announced by Chase Manhattan Bank, New York, New York, or its successor (the “Prime Rate”), from time to time (or if the Prime Rate is discontinued, the rate announced as that being charged to said bank’s most creditworthy commercial borrowers) plus three percent (3%), or (ii) the maximum contract interest rate per annum allowed by law; provided, however, with respect to the first three (3) times per calendar year that such sum is not paid on or prior to the date due by Landlord, no interest shall be payable with respect to such late payments by such party unless such payments are more than five (5) days late and then such past due payments shall bear interest from the sixth (6th) day after the due date thereof until payment is received.

17.36 VACATING THE PREMISES. If none of the Premises are occupied by Tenant or its permitted assignee or sublessees (or any combination thereof) after the Commencement Date (i.e., the Premise are 100% vacant) for longer than 180 consecutive days, even though Tenant continues to pay the stipulated Rent and is not otherwise in default under this Lease, and Tenant or its permitted assignee or subtenants (or any combination thereof) fails to re-occupy a portion of the same (Tenant not being obligated to re-occupy all of the Premises) within 90 days after notice from Landlord (which notice may only be furnished by Landlord after the expiration of the aforementioned 180 day period), then from and after the expiration of said 90 day notice period Landlord may terminate this Lease as to (and only as to) all of the Premises without declaring Tenant in default under this Lease (and Section 15.01 shall not be applicable thereto), by delivering written notice to Tenant. Space which is vacated on account of bona fide remodeling or due to force majeure shall not be deemed unoccupied for purposes of this Section 17.36.

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IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this Lease as of the day and year first above written.

LANDLORD:			TENANT:
COLINAS CROSSING LP, a Delaware limited partnership			i2 Technologies, Inc., a Delaware corporation
By:	Steven A. Means Interests, Inc.,		By:	/s/ W. M. Beecher
	a Texas corporation,		Name:	W. M. Beecher
	a general partner		Title:	Vice President
	By:	/s/ Steven A. Means
	Name:	Steven A. Means
	Title:	President

EX-21.1

EXHIBIT 21.1

i2 TECHNOLOGIES, INC.

LIST OF SUBSIDIARIES

i2 Technologies Pty Ltd	Australia
i2 Technologies N.V.	Belgium
i2 Technologies (Canada), Inc.	Canada
Beijing i2 Technologies Company Ltd.	China
i2 Technologies A/S	Denmark
i2 Technologies Finland Oy Ltd.	Finland
i2 Technologies SARL	France
Aspect Development Germany GmbH	Germany
i2 Technologies, GmbH	Germany
i2 Technologies India Private Limited	India
i2 Technologies S.r.l.	Italy
i2 Technologies Japan, Inc.	Japan
i2 Technologies Korea, Ltd.	Korea
i2 Technologies (Malaysia) Sdn Bhd	Malaysia
i2 de Mexico S. de R.L.C.V.	Mexico
i2 Technologies (Netherlands) B.V.	Netherlands
FreightMatrix.com Europe B.V.	Netherlands
i2 Technologies PTE Ltd.	Singapore
MStar SA (Pty) Ltd.	South Africa
i2 Technologies SL	Spain
i2 Technologies (Schweiz) GmbH	Switzerland
i2 Technologies Taiwan, Inc.	Taiwan
i2 Technologies Limited	United Kingdom
ec-Content, Inc.	California
RightWorks Corporation	California
Aspect Development International, Inc.	Delaware
i2 Technologies International Services, Inc.	Delaware
FreightMatrix.com, Inc.	Delaware
i2 Federal, Inc.	Delaware
i2 Technologies US, Inc.	Nevada

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated March 14, 2008 accompanying the consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting included in the Annual Report of i2 Technologies, Inc. on Form 10-K for the year ended December 31, 2007. We hereby consent to the incorporation by reference of said reports in the Registration Statements on Form S-8 (Nos. 333-03703, 333-27009, 333-28147, 333-53667, 333-85791, 333-36478, 333-40038, 333-43838, 333-67868, 333-85884, 333-109314, 333-115143 and 333-132473), on Form S-3 (Nos. 333-132663, 333-96341, 333-31342, 333-127722 333-59106 and 333-49180), on Amendment No. 1 to Registration Statement Nos. 333-132663, 333-96341, 333-31342, 333-127722 and 333-59106, and on Amendments No. 2 and No. 3 to Registration Statement No. 333-59106.

/s/  Grant Thornton LLP

Dallas, Texas

March 14, 2008

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-03703, 333-27009, 333-28147, 333-53667, 333-85791, 333-36478, 333-40038, 333-43838, 333-67868, 333-85884, 333-109314, 333-115143 and 333-132473) on Form S-3 (Nos. 333-132663, 333-96341, 333-31342, 333-127722 333-59106 and 333-49180) on Amendment No. 1 to Registration Statement Nos. 333-132663, 333-96341, 333-31342, 333-127722 and 333-59106, and on Amendments No. 2 and No. 3 to Registration Statement No. 333-59106, of our report dated March 30, 2007 relating to the 2006 and 2005 consolidated financial statements of i2 Technologies, Inc. and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the 2006 change in the method of accounting for stock based payments to conform to FASB Statement No. 123(R), Share-Based Payment) appearing in this Annual Report on Form 10-K of i2.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas

March 14, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Pallab K. Chatterjee, certify that:

1. I have reviewed this annual report on Form 10-K of i2 Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 14, 2008	By:	/s/ Pallab K. Chatterjee
	Name:	Pallab K. Chatterjee
	Title:	Interim Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Michael J. Berry, certify that:

1. I have reviewed this annual report on Form 10-K of i2 Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 14, 2008	By:	/s/ Michael J. Berry
	Name:	Michael J. Berry
	Title:	Executive Vice President, Finance and Accounting, and Chief Financial Officer (principal financial and accounting officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of i2 Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pallab K. Chatterjee, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ Pallab K. Chatterjee

Pallab K. Chatterjee

Interim Chief Executive Officer

March 14, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of i2 Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on date hereof (the “Report”), I, Michael J. Berry, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ Michael J. Berry

Michael J. Berry

Executive Vice President, Finance and Accounting,

and Chief Financial Officer

(principal financial and accounting officer)

March 14, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by Company and furnished to the Securities and Exchange Commission or its staff upon request.