Jim:
Here are our comments on the i2 Technologies insurance policy.  This is a
combination of my comments and Marcia Backus' comments, and in fact Marcia
gets the vast bulk of the credit (I found out that she has considerable
experience in this area).
(1)  This is a claims made policy.  Apparently they are all this way.
Ken should get a contractual commitment from the Company to renew the
coverage upon its expiration or obtain new coverage that covers claims made
after expiration of the policy but relating to periods when Ken served on
the board.
(2)  We didn't attempt to determine whether the amounts of coverage are
adequate in light of the company's business or whether the carriers are
solid; I suspect Jim Bouillion has far more expertise on those issues than
we do.
(3) See item E on page 23 of 26.  It appears that the effect of the
language is that the $150,000 deductible applies if there's any case where
the Company is required or permitted by law to indemnify Ken but for some
reason (other than insolvency) it does not indemnify Ken.  This appears to
be a provision designed by the insurance company to ensure that the Company
doesn't say to Ken "Hey, you'll be fine and we'll come out ahead if you
agree that we won't indemnify you; you can just collect from the insurance
company with no deductible, and we'll be better off because if we indemnify
you we'll have a deductible."  This provision may make sense from an
insurance policy standpoint, but Ken ought to make sure he has a contractual
commitment from the Company to indemnify him to the fullest extent permitted
by law.
(4)  Please note exclusion 19 on page 22 of 26.  This provision is
designed to protect the insurance company by preventing the company from
making money by suing a director and then letting the director collect from
the insurance company.  Again, this points up that Ken needs a contractual
commitment from the Company to indemnify him to the fullest extent permitted
by law.
(5)  The application for the policy is part of the policy, which
apparently means that if there was something wrong with the application the
policy itself may be void, not only against the Company that applied for the
policy but also against innocent insureds such as Ken.
(6) The policy confers on the parent company the authority to cancel the
policy on behalf of the beneficiaries at any time.  Ken should get a
contractual commitment from the Company not to cancel the policy without
obtaining substitute coverage that is at least as good.
(7)   The policy provides insurance for employees as well as officers and
directors, which dilutes the coverage somewhat.
Generally, this appears to us to be an ok policy.  I would be very
interested in knowing whether Jim Bouillion disagrees with that assessment.

Robert S. Baird
Vinson & Elkins L.L.P.
One American Center
600 Congress
Austin, Texas 78701
Telephone: (512)495-8451
When calling from Houston (713)758-2414
Fax: (512)236-3210
Email: rbaird@velaw.com
Home telephone (512)347-8066
Car phone: (512)627-8065
Home fax: (512)347-8065
Pager: 1-888-487-2651

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