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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1999
REGISTRATION NO. 333-71369
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SAGENT TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 94-3225290
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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800 W. EL CAMINO REAL, SUITE 300
MOUNTAIN VIEW, CA 94040
(650) 815-3100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH C. GARDNER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SAGENT TECHNOLOGY, INC.
800 W. EL CAMINO REAL, SUITE 300
MOUNTAIN VIEW, CA 94040
(650) 815-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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ARTHUR F. SCHNEIDERMAN THOMAS A. BEVILACQUA
HERBERT P. FOCKLER DAVID A. MAKARECHIAN
STEPHEN E. KIM KIMBERLEY E. HENNINGSEN
WILSON SONSINI GOODRICH & ROSATI BROBECK, PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION TWO EMBARCADERO PLACE
650 PAGE MILL ROAD 2200 GENG ROAD
PALO ALTO, CA 94304 PALO ALTO, CA 94303
(650) 493-9300 (650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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Common stock, $0.001 par value..... 5,750,000 $9.00 $51,750,000 $14,387(2)
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
(2) The Registrant previously paid a fee in the amount of $11,120.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION -- MARCH 10, 1999
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PROSPECTUS
, 1999
LOGO
5,000,000 SHARES OF COMMON STOCK
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SAGENT TECHNOLOGY, INC.:
- - We develop and sell software designed to address organizations' rapidly
growing, Web-based information access, analysis and delivery needs.
- - Sagent Technology, Inc.
800 W. El Camino Real
Suite 300
Mountain View, CA 94040
(650) 815-3100
PROPOSED SYMBOL & MARKET:
- - SGNT/NASDAQ
THE OFFERING:
- - We are offering 5,000,000 shares of our common stock.
- - The underwriters have an option to purchase an additional 750,000 shares from
us to cover over-allotments.
- - This is our initial public offering, and no public market currently exists for
our shares. We anticipate that the initial public offering price will be
between $7.00 and $9.00.
- - We plan to use the proceeds from this offering for working capital, potential
acquisitions, repayment of long-term indebtedness and other general corporate
purposes.
- - Closing: , 1999.
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PER SHARE TOTAL
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Public offering price: $ $
Underwriting fees:
Proceeds to Sagent:
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
The undersigned is facilitating Internet distribution.
DLJDIRECT INC.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
TABLE OF CONTENTS
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Page
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Prospectus Summary............... 3
Risk Factors..................... 6
Use of Proceeds.................. 16
Dividend Policy.................. 16
Corporate Information............ 16
Capitalization................... 17
Dilution......................... 18
Selected Consolidated Financial
Data........................... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 20
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Page
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Business......................... 30
Management....................... 44
Certain Transactions............. 53
Principal Stockholders........... 57
Description of Capital Stock..... 60
Shares Eligible for Future
Sale........................... 63
Underwriting..................... 65
Legal Matters.................... 67
Experts.......................... 67
Available Information............ 68
Index to Financial Statements.... F-1
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<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights only selected information contained elsewhere in
this prospectus. The other information is important, so please read this entire
prospectus carefully. Unless stated otherwise, the information contained in this
prospectus assumes that the underwriters' over-allotment option to purchase an
additional 750,000 shares of common stock from us is not exercised.
SAGENT TECHNOLOGY, INC.
We develop, market and support software products that gather, analyze, and
deliver information throughout an organization. Our products provide a way for
an organization's employees, customers and partners to access and examine
important corporate information using the World Wide Web. We refer to our
products as "Enterprise Intelligence" software because they enable organizations
to use software to help them make more informed, intelligent decisions and to
spread that ability across the enterprise.
Today, information about an organization's customers, products and
operations is one of its most important strategic assets. In particular, as
organizations have begun to pursue more complex operational strategies, their
need for timely information has increased. In addition, as businesses continue
to streamline their organizational structures to improve time to market and
responsiveness to rapidly changing market conditions, decision making authority
is expected to become more distributed, thus heightening the need for broader
dissemination of information throughout the enterprise. Most recently, the rapid
adoption of the Internet and the Web has given organizations the ability to
share information internally and externally on a cost-effective basis and has
dramatically increased the number of people who can receive and access
information.
Our main product, the Sagent Data Mart Solution, or DMS product suite,
gathers data from a variety of sources, such as relational databases, mainframe
databases, and the Internet, and organizes that data into a common structure or
repository known as a data mart. A data mart is used to more efficiently manage
a subset of corporate data focused on the needs of a specific group of users.
Once data is organized into our data mart, the Sagent DMS product suite allows
organizations to more efficiently analyze the data and provides access to the
information through personal computers, reports, and, importantly, through Web
browsers over the Internet. We also provide design, systems engineering and
education services to facilitate successful customer implementations.
Customers purchase the Sagent DMS product suite for three primary reasons.
First, it combines in one integrated product key functions that a customer
requires, such as extracting information from multiple data sources. This saves
time and money otherwise spent combining many different products from many
different vendors. Second, the Sagent DMS product suite can handle a very large
number of users and a very large amount of data. This allows our Sagent DMS
product suite to scale to the increasing numbers of employees or customers who
need access to information from inside organizations or through the Internet.
Third, the Sagent DMS product suite is designed for the Internet. Sagent has
invested significant resources in technology to rapidly distribute information
over the Web.
3
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We intend to be a leading provider of Enterprise Intelligence software
solutions. Key elements of our strategy include:
- Focusing on the demand for Web-based Enterprise Intelligence solutions
- Extending our product functionality and technology leadership
- Offering pre-built Enterprise Intelligence applications for specific
industries
- Providing high quality services to our customers through our Professional
Services Group
- Continuing development of products that leverage Microsoft's Windows NT
computer technology
We currently have more than 200 customers worldwide in a variety of
industries, including financial services, telecommunications, technology, health
care, retail and others. Our customers include Barnesandnoble.com, Bell
Communications Research, Inc., BellSouth Cellular Corp., J.P. Morgan & Co.,
Incorporated, Jiffy Lube International, Inc., MCI WorldCom, Inc., and Nordstrom,
Inc. We market our software and services through our direct sales force, and
through resellers and international distributors. We also sell our software
through strategic partnerships with Automatic Data Processing, Inc., Advent
Software Inc. and Siebel Systems, Inc., each of which has integrated our product
suite into its software applications.
THE OFFERING
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Common stock offered by us............ 5,000,000 shares
Common stock to be outstanding after
the offering........................ 23,669,377 shares
Working capital, potential
acquisitions, repayment of long term
indebtedness and other general
corporate purposes.
Use of proceeds.......................
Proposed Nasdaq National Market
symbol.............................. SGNT
</TABLE>
This table is based on shares outstanding as of December 31, 1998. This
table excludes:
- 4,534,835 shares of our common stock that have been set aside under our
amended 1995 stock option plan and 1998 stock option plan
- 150,000 shares of our common stock that have been set aside under our
1999 director option plan
- 450,000 shares of our common stock that have been set aside under our
1999 employee stock purchase plan
- 235,623 shares of our common stock that have been set aside for issuance
upon exercise of outstanding warrants
Options to purchase 2,313,735 shares at a weighted average exercise price
of $3.38 per share were outstanding as of December 31, 1998.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
You should read the following summary consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements and Notes thereto included
elsewhere in this prospectus.
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THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31,
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1996 1997 1998 1997 1998
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STATEMENT OF OPERATIONS DATA:
Revenues, net:
Licenses................................ $ 240 $ 5,728 $ 10,459 $ 1,842 $ 3,618
Services................................ 39 1,350 6,584 583 2,128
------- ------- -------- ------- -------
Total revenues, net................... 279 7,078 17,043 2,425 5,746
Gross profit............................... 32 6,205 11,977 1,957 4,385
Loss from operations....................... (7,231) (6,908) (13,684) (2,235) (1,943)
Net loss................................... $(7,039) $(6,900) $(13,701) $(2,214) $(1,988)
Historical basic net loss per share........ $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per share...... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation at
historical basic net loss per share..... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per share... 2,637 2,860 3,722
Pro forma net loss per share, basic........ $ (0.74)
========
Pro forma net loss per share, diluted...... $ (0.75)
========
Shares used in calculation of pro forma net
loss per share, basic................... 18,495
Shares used in calculation of net loss per
share, diluted.......................... 18,266
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AS OF DECEMBER 31, 1998
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 3,093 $ 37,843
Working capital........................................... 1,122 35,872
Total assets.............................................. 13,196 47,946
Long-term obligations, net of current portion............. 3,346 1,596
Total stockholders' equity................................ 1,671 38,171
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of shares used in computing pro forma net loss per
share.
Pro forma as adjusted reflects the conversion of our outstanding preferred
stock to common stock, which will occur upon the closing of the offering, the
sale of 5,000,000 shares of common stock in the offering and the application of
the net proceeds from the offering, after deducting underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."
5
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RISK FACTORS
Before you invest in our common stock, you should become aware of various
risks, including those described below. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
before you decide whether to purchase shares of our common stock. The risks set
out below may not be exhaustive.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
It is difficult to evaluate our business and our prospects because our
revenue and income potential is unproven. We commenced operations in June 1995
but we did not begin selling our first products until the fourth quarter of
1996, and a number of new products and new versions of existing products were
introduced in 1997. As a result, we have experienced the risks and difficulties
frequently encountered by early stage companies, particularly companies in new
and rapidly evolving markets.
We incurred net losses and losses from operations for the period ended
December 31, 1995 and each of the years ended December 31, 1996, 1997 and 1998.
As of December 31, 1998, we had an accumulated deficit of approximately $28.6
million. Since inception, we have funded our business primarily by borrowing
funds and from the sale of our stock, not from cash generated by our business.
Although revenues grew significantly in recent periods, you should not rely on
past performance as any indication of future growth rates or operating results.
We expect to continue to incur significant sales and marketing, research and
development and general and administrative expenses. As a result, we may
experience losses and negative cash flows. If we do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual
basis in the future.
OUR FUTURE OPERATING RESULTS MAY NOT FOLLOW PAST TRENDS DUE TO MANY FACTORS AND
ANY OF THESE COULD CAUSE OUR STOCK PRICE TO FALL
We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of future performance. Although our operating results have
generally improved from quarter to quarter in the past, our future operating
results may not follow any past trends. It is likely that in some future quarter
our operating results may be below the expectation of public market analysts and
investors due to factors beyond our control, and as a result, the price of our
common stock may fall.
Factors which may adversely affect our future operating results include:
- The demand for and acceptance of our products, product enhancements and
services
- The maintenance and development of our strategic relationships with
enterprise application vendors, resellers and distributors
- The introduction, timing and competitive pricing of our products and
services and those of our competitors
- The expansion and rate of success of our direct sales force and indirect
distribution channels both domestically and internationally
- The attraction and retention of key personnel, particularly in our sales,
services and support groups
- The commercialization of our products incorporating advanced technologies
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<PAGE> 8
- The growth of the market for Enterprise Intelligence solutions
- The timing and successful integration of and costs related to
technologies and businesses we may acquire in the future
We plan to significantly increase our operating expenses to expand our
administration, consulting and training, maintenance and technical support,
research and development and sales and marketing groups. Our operating expenses
are based on our expectations of future revenues and are relatively fixed in the
short term. If revenues fall below our expectations in any quarter and we are
not able to quickly reduce our spending in response, our operating results would
be adversely affected and our stock price may fall.
OUR BUSINESS WILL SUFFER IF WE DO NOT DEVELOP NEW PRODUCTS AS REQUIRED
Our business will suffer if we are not able to maintain and improve our
product line and develop new products that keep pace with competitive product
introductions and technological developments, satisfy diverse and evolving
customer requirements and achieve market acceptance. For example, we are
developing the next version of the Sagent DMS product suite, which is scheduled
for release in the first half of 1999. We may not be successful in developing
and marketing this new version, other product enhancements or new products that
respond to technological advances by others on a timely or cost-effective basis,
or that these products, if developed, will achieve market acceptance.
We have experienced delays in releasing new products and product
enhancements and may experience similar delays in the future. These delays or
problems in the installation or implementation of our new releases may cause
customers to forego purchases of our products to purchase those of our
competitors. Delays in product development or introduction may materially and
adversely affect our business, financial condition and operating results.
CHANGES IN INTERNET TECHNOLOGY AND OPERATING SYSTEM STANDARDS MAY ADVERSELY
IMPACT THE MARKET FOR OUR PRODUCTS
Rapidly changing Internet technology and operating system standards may
adversely affect the market for our products. We have a software application
known as WebLink that allows users to query, analyze and report business
information from a Web browser. This product has been designed based upon
prevailing Internet technology. If new Web technologies emerge that are
incompatible with deployment of our WebLink applications, our WebLink product
may become obsolete. We may not be able to quickly adapt our products to any new
Internet technology. Additionally, our products allow connectivity to databases
on a variety of operating systems, including mainframes, AS/400, UNIX and
Windows NT. However, our application server component currently runs only on the
Windows NT operating system. Therefore, our ability to increase sales of our
products will depend on the continued acceptance of the Windows NT operating
system. To the extent that potential customers use UNIX operating systems as
their application server, we would need to develop a UNIX product. The
development of a UNIX product would require us to commit a substantial
investment of resources, and we may not successfully introduce such a product on
a timely or cost-effective basis, or at all.
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OUR BUSINESS WILL SUFFER IF THE MARKET FOR ENTERPRISE INTELLIGENCE SOFTWARE DOES
NOT GROW
Since all of our revenues are attributable to the sale of Enterprise
Intelligence software and related maintenance, consulting and training services,
if the market for Enterprise Intelligence software does not grow, our business
will suffer. We expect Enterprise Intelligence software and services to account
for substantially all of our revenues for the foreseeable future. Although
demand for Enterprise Intelligence software has grown in recent years, the
market may not continue to grow or, even if the market does grow, businesses may
not adopt our products.
We are focusing our selling efforts on large, enterprise-wide
implementations of our products, and we expect such sales to constitute an
increasing portion of any future revenue growth. While we have devoted
significant resources to promoting market awareness of our products and the
problems such products address, we do not know whether these efforts will be
sufficient to support significant growth in the market for Enterprise
Intelligence products. If such growth does not materialize, our business,
financial condition and operating results would be materially and adversely
affected.
OUR BUSINESS WILL SUFFER IF OUR RELATIONSHIPS WITH CHANNEL PARTNERS ARE NOT
SUCCESSFUL AND IF WE CANNOT RECRUIT ADDITIONAL CHANNEL PARTNERS
In addition to our direct sales force, we rely on successful relationships
with a variety of channel partners, such as enterprise application vendors,
resellers and distributors, for licensing and support of our products in the
United States and internationally. If we cannot maintain successful
relationships with these partners and cannot recruit additional strategic
partners, we believe that we will have difficulty expanding the sales of our
products. Our enterprise application vendor partners resell our products
incorporated in their own software application. In addition, our channel
partners offer products of several different companies, including, in some
cases, products that compete with our products. These strategic partners may not
develop or customize our applications to their needs or devote adequate
resources to selling our products.
We intend to expand our relationships with strategic partners and to
increase the proportion of our customers licensed through these indirect
channels. We may not be able to maintain strategic partnerships and attract
additional strategic partners that will market our products effectively and will
be qualified to provide timely and cost-effective customer support and service.
Further, our relationships with our strategic partners may not generate enough
royalty revenue to offset the significant resources used to develop these
channels. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Sales and Marketing."
WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND CONTROLS TO SUPPORT OUR ANTICIPATED
GROWTH
Our growth has placed, and our anticipated future growth will continue to
place a significant strain on our management systems and controls. If we cannot
effectively establish and improve our processes as we grow, our business may
suffer.
We have grown rapidly and will need to continue to grow in all areas of
operation in order to execute our business strategy. Our total number of
employees grew from 87 on December 31, 1997 to 152 on December 31, 1998, and we
anticipate further significant
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<PAGE> 10
increases in the number of employees. Sustaining our growth has placed
significant demands on management as well as on our administrative, operational
and financial resources and controls. In particular, we need to substantially
upgrade our enterprise resource planning functions, including accounting, order
entry and customer entry, which will become insufficient as we grow. We also
will need to institute new systems such as human resource management and time
and billing. If we cannot upgrade our current systems or institute new ones
effectively, our business may be disrupted. We may not be able to manage our
growth successfully, sustain and manage the growth rates that we have
experienced in the past. See "Business-- Sales and Marketing."
WE INTEND TO EXPAND INTERNATIONAL OPERATIONS AND UNCERTAINTY OF INTERNATIONAL
SALES EFFORTS COULD ADVERSELY AFFECT OUR BUSINESS
We may not be able to successfully market, sell, deliver and support our
products and services internationally. Our failure to manage our international
operations effectively could harm our business. International sales represented
approximately 8.4% of our total revenue for the year ended December 31, 1998. We
conduct our international sales through local subsidiaries in Japan and Canada
and through distributor relationships in France, Germany, Japan, South Africa
and the United Kingdom. The expansion of our existing international operations
and entry into additional international markets will require significant
management attention and financial resources to open additional international
offices and hire international sales personnel. Localizing our products is
difficult and may take longer than we anticipate due to difficulties in
translation and delays we may experience in recruiting and training
international staff. In addition, we currently have limited experience in
developing local versions of our products, as well as marketing, selling and
supporting our products and services as overseas. See "Business -- Sales and
Marketing."
OUR MARKETS ARE HIGHLY COMPETITIVE AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY,
OUR BUSINESS WILL BE ADVERSELY AFFECTED
Competition could seriously harm our ability to sell additional software
and maintenance and support renewals on terms favorable to us. Competitive
pressures could also reduce our market share or require us to reduce the price
of our products, either of which could harm our business. The markets for our
products are intensely competitive and subject to rapidly changing technology.
We compete against providers of decision support software, data warehousing
software and enterprise application software. We also compete with providers of
e-Business software, which allows for the electronic delivery of products and
services that enable commerce among businesses and end users. Companies in each
of these areas may expand their technologies or acquire companies to support
greater Enterprise Intelligence functionality and capability, particularly in
the areas of query response time and the ability to support large numbers of
users. If we are unable to compete effectively in these areas, our business will
suffer. We may also face competition from vendors of products and turn-key
solutions for e-Business applications that include Internet based information
functionality.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly than
we can to new or emerging technologies and changes in customer requirements. See
"Business -- Competition."
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OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO OUR LENGTHY SALES AND
IMPLEMENTATION CYCLES FOR OUR PRODUCTS WHICH COULD CAUSE OUR STOCK PRICE TO FALL
Because our products and services have lengthy sales and implementation
cycles, it is difficult for us to forecast the timing and recognition of
revenues from sales of our products and services. Since we are unable to control
many of the factors that will influence our customers' buying decisions, the
lengthy sales cycle could cause our operating results to be below the
expectations of analysts and investors, which could cause our stock price to
fall.
A key element of our strategy is to market our products and services to
large organizations with significant data management and access needs. These
customers take an extended time evaluating our products before purchasing them.
The period of time between initial customer contact and a purchase order may
span six months or more. Our products have had, and we expect them to continue
to have, an even longer sales cycle in international markets than in the United
States and Canada. During the evaluation period, a variety of factors may lead
customers to not purchase or scale down orders of, our products including:
- Reductions in demand for Enterprise Intelligence solutions
- Introduction of new products by competitors or pricing pressures
- Changes in our customers' budgets and purchasing priorities
- Diversion of resources and management's attention to other information
technology issues, such as year 2000 issues
In addition, we often must provide a significant level of education to our
prospective customers regarding the use and benefit of our products, which may
cause additional delays during the evaluation and acceptance process. See
"Business -- Sales and Marketing."
OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS AND THESE
OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE
Our future success depends upon the continued service of our executive
officers and other key employees as well as our ability to hire a significant
number of new employees. We are particularly dependent on the continued services
of employees in our professional services and sales groups. Competition for
these individuals is intense, and we may not be able to attract, assimilate or
retain additional highly qualified personnel in the future, which would
adversely affect our business.
In particular, it would be difficult for us to replace the services of
Kenneth C. Gardner, our co-founder, President and Chief Executive Officer, John
E. Zicker, our co-founder, Executive Vice President, Technology, and Chief
Technology Officer, Thomas M. Lounibos, our Executive Vice President, Sales and
Marketing, and W. Virginia Walker, our Executive Vice President, Finance and
Administration and Chief Financial Officer. We do not maintain "key-person" life
insurance policies covering any of our employees.
OUR ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE
STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS
We intend to make investments in or acquire complementary companies,
products and technologies. We have limited organizational experience in these
matters and will need to
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develop the relevant skills if we are to be successful in any such endeavor. Any
development of these skills could consume management's time and other resources.
If we buy a company, we could have difficulty in assimilating that company's
operations. In addition, we may be unsuccessful in retaining the key personnel
of the acquired company. Moreover, we currently do not know and cannot predict
the accounting treatment of any such acquisition, in part because we cannot be
certain what accounting regulations, conventions or interpretations may prevail
in the future. If we acquire complementary technologies or products, we could
experience difficulties assimilating the acquired technology or products into
our operations. These difficulties could disrupt our ongoing business, distract
our management and employees and increase our expenses. Furthermore, we may have
to incur debt or issue equity securities to pay for any future acquisitions, the
issuance of which could be dilutive to our existing stockholders, adversely
affect the price of our common stock or negatively affect our financial
condition and operating results.
OUR BUSINESS WILL SUFFER IF COMMERCIAL USERS DO NOT ACCEPT INTERNET SOLUTIONS
A key element of our strategy is to offer users the ability to access,
analyze and report information from a data server through a Web browser. If
businesses do not accept Internet solutions or perceive them to be
cost-effective, our business could suffer dramatically. Continued viability of
the Internet depends on several factors, including:
- Third parties' abilities to develop new enabling technologies in a timely
manner
- The Internet's ability to handle increased activity
- The Internet's ability to operate as a fast, reliable and secure network
- Potential changes in government regulation
Moreover, critical issues concerning the commercial use of the Internet,
including data corruption, cost, ease of use, accessibility and quality of
service, remain unresolved and may negatively affect commerce and communication
on the Internet. These issues will need to be addressed in order for the market
for our products and services to grow.
OUR PROPRIETARY TECHNOLOGY MAY BE SUBJECTED TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON
Our intellectual property is important to our business. We expect that we
could be subject to intellectual property infringement claims as the number of
our competitors grows and the functionality of our applications overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
and divert our attention from operating our company. If we become liable to
third parties for infringing their intellectual property rights, we would be
required to pay a substantial damage award and to develop noninfringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property. We may be unable to develop noninfringing
technology or obtain a license on commercially reasonable terms, or at all. In
addition, we may not be able to protect against misappropriation of our
intellectual property. Third parties may infringe upon our intellectual property
rights, we may not detect this unauthorized use and we may be unable to enforce
our rights. See "Business -- Intellectual Property."
11
<PAGE> 13
IF WE LOSE KEY LICENSES WE MAY BE REQUIRED TO DEVELOP OR LICENSE ALTERNATIVES
WHICH MAY CAUSE DELAYS OR REDUCTIONS IN SALES
We rely on software that we have licensed from Opalis S.A. to perform key
functions of our Sagent Automation product which automates common tasks in
managing data. We also rely on software we have licensed from Microsoft
Corporation to allow users to be able to customize the user interface provided
by our Sagent Design Studio product. These licenses may not continue to be
available to us on commercially reasonable terms. The loss of either of these
licenses could result in delays or reductions of shipments of our product suite
until equivalent software could be developed, identified, licensed and
integrated. If customers require the automation and/or the user interface
customization features when licenses for either of those is not available, they
may delay or decline to purchase our product suite, which could harm our
business.
IF WE DISCOVER SOFTWARE DEFECTS, OUR BUSINESS MAY SUFFER AND WE MAY HAVE
PRODUCT-RELATED LIABILITIES
Our software products are internally complex and may contain errors,
defects or failures, especially when first introduced or when new versions are
released. We test our products extensively prior to releasing them; however, in
the past we have discovered software errors in some of our products after their
introduction. Despite extensive testing, we may not be able to detect and
correct errors in products or releases before commencing commercial shipments,
which may result in loss of revenue or delay in market acceptance.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. All
domestic and international jurisdictions may not enforce these limitations.
Although we have not experienced any product liability claims to date, we may
encounter such claims in the future. Product liability claims, whether or not
successful, brought against us could materially and adversely affect our
business, financial condition and operating results.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR PRODUCTS OR INTERNAL SYSTEMS COULD
ADVERSELY AFFECT OUR BUSINESS
Many currently installed computer systems and software products store dates
using only the last two digits of the calendar year. As a result, such systems
may not be able to distinguish whether "00" means 1900 or 2000, which may cause
system failures or erroneous results. Year 2000 problems could subject us to
liability claims and disrupt our customers' purchasing patterns, either of which
could harm our business.
Our products operate in complex network environments and directly or
indirectly interact with a number of other hardware and software systems that we
cannot adequately evaluate for year 2000 compliance. We may face claims based on
year 2000 problems in other companies' products, or issues arising from the
integration of multiple products within an overall system. Although we have not
been a party to any litigation or arbitration proceeding involving our products
or services related to year 2000 compliance issues, we may in the future be
required to defend our products or services in such proceedings, or to negotiate
resolutions of claims based on year 2000 issues. The costs of defending and
resolving year 2000-related disputes, regardless of the merits of such disputes,
and any liability we have for year 2000-related damages, including consequential
damages, could adversely affect our business. In addition, we believe that the
purchasing patterns of customers and potential customers may be affected by year
2000 issues as companies
12
<PAGE> 14
expend significant resources to correct or upgrade their current software
systems for year 2000 compliance. These expenditures may result in reduced funds
available to purchase our products. To the extent year 2000 issues cause a
significant delay in, or cancellation of, decisions to purchase our products or
services, our business would suffer. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES WILL HAVE SIGNIFICANT CONTROL
OVER SAGENT AND MAY APPROVE OR REJECT MATTERS CONTRARY TO YOUR VOTE
We anticipate that our executive officers and directors, together with
their affiliates, will beneficially own an aggregate of approximately 48.5% of
our outstanding common stock following the completion of the offering. These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or similar transactions even if other
stockholders disagree. See "Principal Stockholders."
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY
Provisions of our certificate of incorporation, bylaws, other agreements
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock."
OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS FOR US
AND MAY ADVERSELY AFFECT THE MARKET PRICE FOR SAGENT COMMON STOCK AND THE VOTING
RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
The market price of our common stock and the voting and other rights of the
holders of our common stock may be adversely affected by the issuance of
preferred stock. Sagent's board of directors has the authority to issue up to
5,000,000 shares of preferred stock in one or more series. The board of
directors can fix the price, rights, preferences, privileges and restrictions of
the preferred stock without any further vote or action by our stockholders.
However, the issuance of shares of preferred stock may delay or prevent an
acquisition of Sagent without further action by Sagent's stockholders. Sagent
has no current plans to issue any shares of preferred stock.
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
We intend to use the proceeds from the offering for general corporate
purposes, including working capital, capital expenditures and repayment of long
term indebtedness, and may use a portion of proceeds to acquire other
businesses, products or technologies. Our management may spend the proceeds from
the offering in ways with which the stockholders may not agree. Pending any such
uses, we plan to invest the net proceeds of the offering in investment-grade,
interest-bearing securities. We cannot predict that such investments will yield
a favorable return. See "Use of Proceeds."
13
<PAGE> 15
OUR SECURITIES HAVE NO PRIOR MARKET AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after completion of
the offering. We are negotiating the initial offering price of the common stock
with the underwriters. However, the initial offering price may not be indicative
of the prices that will prevail in the public market after the offering, and the
market price of the common stock could fall below the initial public offering
price. In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
computer software companies and which have often been unrelated to the operating
performance of such companies. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
If our stockholders sell substantial amounts of our common stock in the
public market following the offering, the market price of our common stock could
fall. Such sales also might make it more difficult for Sagent to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate.
Based upon the number of our shares outstanding as of December 31, 1998,
upon completion of the offering, we will have outstanding 23,669,377 shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants after December 31, 1998. Of
these shares, the 5,000,000 shares sold in the offering will be freely tradable.
18,404,766 shares of common stock will be available for sale in the public 180
days after the date of this prospectus or afterwards.
After the offering, the holders of approximately 14.5 million shares of
common stock and warrants to purchase common stock, which represent 61.4% of our
outstanding stock after completion of the offering, will be entitled to certain
rights to have the resale of their shares registered under the Securities Act of
1933. If these holders, by exercising their registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could materially and adversely affect the market price for our common stock. In
addition, if we were to include in a registration statement shares held by these
holders pursuant to the exercise of their registration rights, such sales may
have a material and adverse effect on our ability to raise needed capital. See
"Shares Eligible for Future Sale" and "Underwriting."
WE DO NOT INTEND TO PAY DIVIDENDS AND YOU MAY NOT EXPERIENCE A RETURN ON
INVESTMENT WITHOUT SELLING SHARES
We have never declared or paid any cash dividends on our capital stock.
Therefore, you will not experience a return on your investment in our common
stock without selling your shares since we currently intend on retaining future
earnings to fund our growth and do not expect to pay dividends in the
foreseeable future. See "Dividend Policy."
14
<PAGE> 16
NEW INVESTORS IN SAGENT COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION
If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value. If the holders of
outstanding options or warrants exercise those options or warrants, you will
suffer further dilution. See "Dilution."
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
You should not rely on forward-looking statements in this prospectus. This
prospectus also contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described below and elsewhere in this prospectus.
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to Sagent from the sale of 5,000,000 shares of common
stock in the offering at an estimated initial public offering price of $8.00 per
share, after deducting estimated expenses of $700,000 and underwriting discounts
and commissions of $2,800,000, are estimated to be approximately $36,500,000 and
approximately $42,080,000 if the underwriters' over-allotment option is
exercised in full. Sagent expects to use the net proceeds from this offering for
general corporate purposes, including working capital, capital expenditures and
repayment of $1,750,000 of outstanding long-term indebtedness. The outstanding
long-term indebtedness is under an accounts receivable credit facility with
Venture Banking Group, which matures on January 15, 2000. Interest under the
credit facility is payable at the prime rate on the average daily balance under
the credit facility. A portion of the proceeds may also be used to acquire,
license or invest in complementary businesses or products, although there are no
current plans, negotiations or discussions relating to any such transactions.
Pending use of the net proceeds for the above purposes, Sagent intends to invest
such funds in short-term, interest-bearing, investment grade obligations.
DIVIDEND POLICY
Sagent has never declared or paid any cash dividends on its common stock or
other securities. Sagent currently anticipates that it will retain all of its
future earnings for use in the expansion and operation of its business and does
not anticipate paying any cash dividends in the foreseeable future.
CORPORATE INFORMATION
Sagent was incorporated in California in April 1995 under the name Savant
Software, Inc. In June 1995, Sagent changed its name to Sagent Technology, Inc.
Sagent was reincorporated in Delaware in September 1998. References in this
prospectus to "Sagent," "we," "our" and "us" refer to Sagent Technology, Inc.
and its subsidiaries, unless the context otherwise requires. Sagent's principal
executive office is located at 800 W. El Camino Real, Suite 300, Mountain View,
California 94040, and Sagent's telephone number at that office is (650)
815-3100. Sagent's World Wide Web address is www.sagent.com. Information
contained in Sagent's Web site does not constitute part of this prospectus.
SAGENT and INFORMATION STUDIO are registered trademarks of Sagent. Sagent
is in the process of registering SAGENT DESIGN STUDIO as a trademark. Any
trademark, trade name or service mark of another company appearing in this
prospectus belongs to its holder.
16
<PAGE> 18
CAPITALIZATION
The table below sets forth the actual capitalization of Sagent as of
December 31, 1998. The pro forma column gives effect to the conversion of all
outstanding shares of preferred stock into shares of common stock. The pro forma
as adjusted column gives effect to the sale of 5,000,000 shares of common stock
at an assumed initial public offering price of $8.00 per share in this offering,
less underwriting discounts and commissions and estimated offering expenses
payable by Sagent.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................... $ 3,093 $ 3,093 $ 37,843
======== ======== ========
Current portion of capital lease
obligations............................... $ 1,181 $ 1,181 $ 1,811
======== ======== ========
Long-term portion of capital lease
obligations............................... $ 3,346 $ 3,346 $ 1,596
Stockholders' equity:
Preferred stock, $0.001 par value,
15,555,555 authorized, 14,544,258
issued and outstanding, actual;
5,000,000 shares authorized, no shares
outstanding, pro forma and as
adjusted............................... 15 -- --
Common stock, $0.001 par value, 25,000,000
shares authorized; 4,125,119 shares
outstanding, actual; 18,669,377 shares
outstanding, pro forma; 23,669,377
shares outstanding, as adjusted........ 4 19 24
Additional paid-in capital................ 30,699 30,699 67,194
Notes receivable from stockholder......... (522) (522) (522)
Cumulative translation adjustment......... 101 101 101
Accumulated deficit....................... (28,626) (28,626) (28,626)
-------- -------- --------
Total stockholders' equity............. 1,671 1,671 38,171
-------- -------- --------
Total capitalization................. $ 5,017 $ 5,017 $ 39,767
======== ======== ========
</TABLE>
This table excludes the following shares:
- 4,534,835 shares of common stock reserved for issuance under Sagent's
non-plan options and stock option plans, of which options to purchase
2,313,735 shares of common stock at a weighted average exercise price of
$3.38 per share were outstanding as of December 31, 1998
- 150,000 shares that have been set aside under Sagent's director stock
option plan
- 450,000 shares of common stock that have been set aside under the
employees' stock purchase plan
- 235,623 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $3.33 per share
See "Management -- Employee Benefit Plans."
17
<PAGE> 19
DILUTION
The pro forma net tangible book value of Sagent as of December 31, 1998 was
$1.4 million or $0.08 per share of common stock, after giving effect to the
conversion of Sagent's outstanding preferred stock. Pro forma net tangible book
value per share total tangible assets less total liabilities, divided by the
number of outstanding shares of common stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of Sagent's common
stock in this offering and the net tangible book value per share of Sagent's
common stock immediately afterwards. After giving effect to our sale of the
5,000,000 shares of common stock offered by this prospectus and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by Sagent, Sagent's net tangible book value at December 31, 1998 would
have been $37,903,271 or $1.60 per share. This represents an immediate increase
in net tangible book value to existing stockholders of $1.52 per share to
existing stockholders and an immediate dilution to new public investors of $6.40
per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...... $ 8.00
Pro forma net tangible book value per share as of
December 31, 1998............................... $ 0.08
Increase per share attributable to new public
investors....................................... 1.52
--------
Pro forma net tangible book value per share after
offering........................................... 1.60
--------
Dilution per share to new public investors........... $ 6.40
========
</TABLE>
The following table sets forth on a pro forma basis as of December 31, 1998
the difference between the number of shares of common stock purchased from
Sagent, the total price paid, and the average price per share paid by existing
stockholders and new public investors before deducting estimated underwriting
discounts and commissions and offering expenses payable by Sagent, using an
annual initial public offering price of $8.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing 18,669,377 78.9% $30,769,753 43.3% $1.65
stockholders.......
New public 5,000,000 21.1 40,000,000 56.5 8.00
investors..........
---------- ----- ----------- -----
Total...... 23,669,377 100.0% $70,769,753 100.0%
========== ===== =========== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to 5,750,000, or 23.5%, of the
total shares of common stock outstanding after the offering.
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data are qualified by
reference to, and should be read in conjunction with, Sagent's Consolidated
Financial Statements and related notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this prospectus. The selected consolidated balance sheet data as of December 31,
1997 and 1998 and selected consolidated statement of operations data for the
years ended December 31, 1996, 1997 and 1998 have been derived from the audited
consolidated financial statements of Sagent and the notes included elsewhere in
this prospectus. The consolidated balance sheet data as of December 31, 1995 and
1996 and selected consolidated statements of operations data for the period from
April 12, 1995 (inception) through December 31, 1995 have been derived from the
audited consolidated financial statements of Sagent not included.
<TABLE>
<CAPTION>
PERIOD FROM APRIL 12, 1995 YEARS ENDED DECEMBER 31,
(INCEPTION) THROUGH ------------------------------
DECEMBER 31, 1995 1996 1997 1998
-------------------------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Licenses............................ -- $ 240 $ 5,728 $ 10,459
Services............................ -- 39 1,350 6,584
------- ------- ------- --------
Total revenues, net............... -- 279 7,078 17,043
Cost of revenues:
Licenses............................ -- 120 194 143
Services............................ -- 127 679 4,923
------- ------- ------- --------
Total cost of revenues............ -- 247 873 5,066
------- ------- ------- --------
Gross profit........................... -- 32 6,205 11,977
Operating expenses:
Sales and marketing................. $ 198 2,727 5,929 12,037
Research and development............ 469 3,425 4,969 6,013
General and administrative.......... 363 1,111 2,215 5,186
Acquired in-process technology...... -- -- -- 2,425
------- ------- ------- --------
Total operating expenses.......... 1,030 7,263 13,113 25,661
------- ------- ------- --------
Loss from operations................... (1,030) (7,231) (6,908) (13,684)
Other income (expense), net............ 44 192 8 (17)
------- ------- ------- --------
Net loss............................... $ (986) $(7,039) $(6,900) $(13,701)
======= ======= ======= ========
Historical basic net loss per share.... $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per
share............................... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation of
historical basic net loss per
share............................... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per
share............................... 2,637 2,860 3,722
Pro forma net loss per share, basic.... $ (0.74)
========
Pro forma net loss per share,
diluted............................. $ (0.75)
========
Shares used in calculation of pro forma
net loss per share, basic........... 18,495
Shares used in calculation of pro forma
net loss per share, diluted......... 18,266
--------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------
1995 1996 1997 1998
------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $5,026 $4,575 $3,813 $ 3,093
Working capital...................................... 4,927 3,715 2,201 1,122
Total assets......................................... 5,453 6,326 7,185 13,196
Long-term obligations, net of current portion........ 114 544 627 3,346
Total stockholders' equity........................... 5,160 4,649 3,123 1,671
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of shares used in computing pro forma net loss per
share.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in the
following discussion relative to markets for Sagent's products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend" and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks and uncertainties, and Sagent's actual results of operations may
differ materially from those contained in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" as well as other risks and
uncertainties referenced in this prospectus.
OVERVIEW
Sagent develops, markets and supports Enterprise Intelligence software
designed to address organizations' rapidly growing information access, analysis
and delivery needs. Sagent also provides design, systems engineering and
education services to facilitate the successful implementation of its Sagent DMS
product suite. Sagent was incorporated in April 1995, commenced operations in
June 1995 and began selling the first products of the Sagent DMS product suite
during the fourth quarter of 1996. Sagent's revenues increased from $279,000 in
1996, to $7.1 million in 1997, the first full year of product shipments, and to
$17.0 million in 1998. Sagent had net losses of $7.0 million, $6.9 million and
$13.7 million in 1996, 1997 and 1998, respectively, and had an accumulated
deficit of approximately $28.6 million as of December 31, 1998. Although
Sagent's revenues have grown significantly during these periods, there can be no
assurance that such growth will continue, nor that Sagent can achieve or sustain
profitability in the future.
Sagent's revenues are derived from two sources, product license revenues
and service revenues. License revenues are derived from product sales to end
users, resellers, distributors and enterprise application vendors as well as
royalties from enterprise application vendors. License revenues are based upon
the number and capacity of servers on which a product is installed, as well as
on a per user basis. Service revenues are derived from providing consulting and
training, maintenance and support services to end users.
Sagent recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position No. 97-2. License revenues
from sales to end users are recognized upon shipment of the product, if a signed
contract exists, the fee is fixed and determinable and collection is deemed
probable. If an acceptance period is provided, revenue is recognized upon the
earlier of customer acceptance or the expiration of that period. Sagent
recognizes royalties as revenues based on an enterprise application vendor's
sell-through of Sagent's products. Fees for services are charged separately from
licenses. Service revenues from consulting and training are recognized upon
completion of the work to be performed. Revenues from maintenance and support
agreements which includes product updates are deferred and recognized on a
straight-line basis as service revenues over the term of the related agreement,
which is typically one year.
Sagent sells its products outside of the United States through distributors
located in France, Germany, Japan, South Africa and the United Kingdom. In
December 1997, Sagent established a subsidiary, Sagent Technology Japan KK, to
address the Asia Pacific market. Revenues from licenses and services to
customers outside the United States were insignificant prior to 1998 and
represented approximately $1.4 million in 1998. Historically,
20
<PAGE> 22
as a result of the relatively small amount of international sales, fluctuations
in foreign currency exchange rates have not had a material effect on Sagent's
business, financial condition and operating results. Sagent has agreements with
its United Kingdom distributor and the parent company of its French and German
distributors, under each of which the Sagent has an option to acquire such
distributors. In the event of a change of control of Sagent, Sagent could be
required to acquire the German distributor. Any such acquisition may have the
effect of diluting existing stockholders, reducing Sagent's available cash for
working capital and other purposes, requiring substantial management attention,
increasing annual amortization expense or imposing costs on Sagent associated
with integrating the acquired entity.
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company that has significant experience in the design and implementation of
Enterprise Intelligence applications. The total purchase price was $3.5 million,
and the acquisition was recorded under the purchase method of accounting. In
connection with the acquisition, Sagent expensed $2.4 million of in-process
technology in the quarter ended March 31, 1998. In addition, Sagent recorded
other intangible assets of $587,000 which are being amortized on a straight-line
basis over the six months to three years following the acquisition. See
"-- Acquired In-Process Technology" and Note 7 of Notes to Consolidated
Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997 1998
-------- ----- -----
<S> <C> <C> <C>
Revenues, net:
Licenses.......................................... 86.0% 80.9% 61.4%
Services.......................................... 14.0 19.1 38.6
-------- ----- -----
Total revenues, net............................ 100.0 100.0 100.0
-------- ----- -----
Cost of revenues:
Licenses.......................................... 43.0 2.7 0.8
Services.......................................... 45.5 9.6 28.9
-------- ----- -----
Total cost of revenues......................... 88.5 12.3 29.7
-------- ----- -----
Gross profit........................................ 11.5 87.7 70.3
Operating expenses:
Sales and marketing............................... 977.4 83.8 70.6
Research and development.......................... 1,227.6 70.2 35.3
General and administrative........................ 398.2 31.3 30.4
Acquired in-process technology.................... -- -- 14.2
-------- ----- -----
Total operating expenses....................... 2,603.2 185.3 150.6
-------- ----- -----
Loss from operations................................ (2,591.8) (97.6) (80.3)
Other income (expense), net......................... 68.8 0.1 (0.1)
-------- ----- -----
Net loss............................................ (2,522.9)% (97.5)% (80.4)%
======== ===== =====
</TABLE>
21
<PAGE> 23
FISCAL YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
REVENUES
Total revenues. Sagent's revenues were $279,000, $7.1 million and $17.0
million in 1996, 1997 and 1998, respectively, representing increases of $6.8
million from 1996 to 1997 and $9.9 million, or 141%, from 1997 to 1998. This
increase of $9.9 million was due to a $4.7 million increase in product revenue
and a $5.2 million increase in services revenues as a result of the acquisition
of Talus, Incorporated. Two of Sagent's customers each represented 10.0% of
Sagent's revenues in 1997. Sagent had no customer that accounted for more than
10.0% of its revenues in 1996 or 1998.
License revenues. Sagent's license revenues were $240,000, $5.7 million and
$10.5 million in 1996, 1997 and 1998 respectively, representing increases of
$5.5 million from 1996 to 1997 and $4.7 million, or 83.0%, from 1997 to 1998.
The increase from 1996 to 1997 was due to the recognition of a full year of
revenues from license sales in 1997, compared to the recognition of revenues
from license sales during the fourth quarter in 1996. The increase from 1997 to
1998 was primarily due to an increase in license sales of the Sagent DMS product
suite resulting from additions to Sagent's direct sales and marketing staff.
Sagent anticipates that license revenues, which have represented a significant
portion of Sagent's total revenues in 1998, will continue to represent the
substantial majority of its revenues for the foreseeable future.
Service revenues. Service revenues were $39,000, $1.4 million and $6.6
million in 1996, 1997 and 1998, respectively, representing increases of $1.4
million from 1996 to 1997 and $5.2 million, or 388%, from 1997 to 1998. The
increase from 1996 to 1997 was primarily due to the addition of training and
consulting services. Such services generated $778,000 in revenue during 1997. In
1996, no training and consulting work was performed, and service revenues
represented only maintenance and support fees. The increase in service revenues
from 1997 to 1998 was primarily due to additional growth in training and
consulting services as a result of the Talus, Incorporated acquisition. Such
services generated $4.8 million, or a 440% increase, in service revenues in
1998.
COST OF REVENUES
Cost of licenses. Cost of revenues from license sales consists primarily of
royalties, product packaging, shipping, media and documentation. Cost of
revenues from license sales was $120,000, $194,000 and $143,000 in 1996, 1997
and 1998, respectively, representing 50.0%, 3.0% and 1.0% of license revenue in
the respective periods. The dollar increase from 1996 to 1997 was primarily due
to increased costs for documentation and royalties related to the increased
volume of licenses sold. The dollar decrease from 1997 to 1998 was due to
reductions achieved in per unit packaging costs. The percentage decreases
resulted from spreading these relatively fixed costs over an increased volume of
product licenses sold.
Cost of services. Cost of services consists primarily of personnel costs
and third-party consulting fees associated with providing software maintenance
and support and training and consulting services. Cost of services revenues was
$127,000, $679,000 and $4.9 million, in 1996, 1997 and 1998, respectively,
representing 326%, 50.0% and 75.0% of services revenue in the respective
periods. The dollar increases were primarily due to the increase in the number
of technical support staff, the increase in the number of consultants in 1997
required to support introduction of training and consulting services and the
increase in the number of consultants in 1998 providing consulting services as a
result of the Talus,
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<PAGE> 24
Incorporated acquisition. The percentage decrease from 1996 to 1997 was
primarily due to the introduction of higher margin consulting services. The
percentage increase from 1997 to 1998 was due to the increased infrastructure
costs associated with supporting the Talus, Incorporated consultant staff.
OPERATING EXPENSES
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, commissions, bonuses and travel expenses for sales and
marketing personnel as well as marketing programs and other promotion costs.
Sales and marketing expenses were $2.7 million, $5.9 million and $12.0 million
in 1996, 1997 and 1998, respectively, representing 976%, 84.0% and 71.0% of
total revenue in the respective periods. The dollar increases resulted primarily
from a $1.7 million increase in 1997 and a $3.5 million increase in 1998 in
employee-related expenses, principally due to the hiring of additional sales
personnel and to higher commissions paid as a result of Sagent's revenue growth.
In addition, during 1998 expenses related to marketing programs increased $1.7
million as a result of Sagent conducting its first user conference, expanding
its advertising campaigns and beginning its Enterprise Intelligence seminar
series. The percentage decreases were attributable to Sagent's increased
revenues. Sagent believes that as it continues to expand its direct sales and
presales support organization, its third-party partnering relationships and its
indirect channel sales organization on a worldwide basis, sales and marketing
expenses will continue to increase in absolute dollars, although such expenses
may vary as a percentage of total revenues.
Research and development. Research and development expenses consist
primarily of personnel and related costs associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses were $3.4 million, $5.0
million and $6.0 million in 1996, 1997 and 1998, respectively, representing
1,226%, 70.0% and 34.0% of total revenues in the respective periods. The dollar
increases were primarily due to a $1.2 million increase in compensation costs in
1997 resulting from the hiring of additional developers and an $800,000 increase
in contractor costs in 1998 for the localization of Sagent's software for use in
Japan. The percentage decreases were attributable to Sagent's increased
revenues. Sagent anticipates that research and development expenditures will
continue to increase in absolute dollars, although such expenses may vary as a
percentage of total revenues.
General and administrative. General and administrative expenses consist
primarily of personnel costs for Sagent's finance, human resources, information
systems and other management departments. General and administrative expenses
were $1.1 million, $2.2 million and $5.2 million for 1996, 1997 and 1998,
respectively, representing 398%, 31.0% and 30.0% of total revenues in the
respective periods. The dollar increases were primarily due to employee-related
expenses associated with the addition of staff in senior managerial positions
and professional fees necessary to manage and support Sagent's growth. The
percentage decreases were attributable to Sagent's increased revenues. In
addition, during 1998, Sagent recorded significant legal fees associated with
two litigation matters which have both been settled. See "Risk Factors--Our
Proprietary Technology May Be Subjected to Infringement Claims or May Be
Infringed Upon" and "Business--Legal Proceedings."
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<PAGE> 25
Income Tax. As of December 31, 1998, Sagent had available net operating
loss carryforwards for federal and state income tax purposes of approximately
$20.8 and $17.8 million, respectively, which expire from 2003 to 2018. See Note
14 of Notes to the Financial Statements. The Tax Reform Act of 1986 imposes
limitations on the use of net operating loss carryforwards if certain stock
ownership changes have occurred or could occur in the future.
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<PAGE> 26
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited consolidated statements of
operations data for the eight quarters ended December 31, 1998, as well as the
percentage of Sagent's revenues represented by each item. These data have been
derived from unaudited interim consolidated financial statements prepared on the
same basis as the audited consolidated financial statements and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, considered necessary for a full presentation of such information
when read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net:
Licenses.......................... $ 776 $ 1,326 $ 1,784 $ 1,842 $ 1,798 $ 2,111 $ 2,932 $ 3,618
Services.......................... 224 159 384 583 1,199 1,568 1,689 2,128
------- ------- ------- ------- ------- ------- ------- -------
Total revenues, net............. 1,000 1,485 2,168 2,425 2,997 3,679 4,621 5,746
Cost of revenues:
Licenses.......................... 30 22 26 116 36 25 61 21
Services.......................... 133 89 105 352 729 1,386 1,468 1,340
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues.......... 163 111 131 468 765 1,411 1,529 1,361
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 837 1,374 2,037 1,957 2,232 2,268 3,092 4,385
Operating expenses:
Sales and marketing............... 1,343 1,184 1,494 1,908 2,203 3,007 3,188 3,639
Research and development.......... 1,191 1,122 1,217 1,439 1,516 1,401 1,649 1,447
General and administrative........ 403 540 427 845 1,199 1,321 1,424 1,242
Acquired in-process technology.... -- -- -- -- 2,425 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 2,937 2,846 3,138 4,192 7,343 5,729 6,261 6,328
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations................ (2,100) (1,472) (1,101) (2,235) (5,111) (3,461) (3,169) (1,943)
Other income(expense), net.......... 1 (24) 10 21 22 32 (26) (45)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............................ $(2,099) $(1,496) $(1,091) $(2,214) $(5,089) $(3,429) $(3,195) $(1,988)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net:
Licenses.......................... 77.6% 89.3% 82.3% 76.0% 60.0% 57.4% 63.4% 63.0%
Services.......................... 22.4 10.7 17.7 24.0 40.0 42.6 36.6 37.0
------- ------- ------- ------- ------- ------- ------- -------
Total revenues, net............. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Licenses.......................... 3.0 1.5 1.2 4.8 1.2 0.7 1.3 0.4
Services.......................... 13.3 6.0 4.8 14.5 24.3 37.7 31.8 23.3
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues.......... 16.3 7.5 6.0 19.3 25.5 38.4 33.1 23.7
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 83.7 92.5 94.0 80.7 74.5 61.6 66.9 76.3
Operating expenses:
Sales and marketing............... 134.3 79.7 68.9 78.7 73.5 81.7 69.0 63.3
Research and development.......... 119.1 75.6 56.1 59.3 50.6 38.1 35.7 25.2
General and administrative........ 40.3 36.4 19.7 34.9 40.0 35.9 30.8 21.6
Acquired in-process technology.... -- -- -- -- 80.9 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 293.7 191.7 144.7 172.9 245.0 155.7 135.5 110.1
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations................ (210.0) (99.2) (50.8) (92.2) (170.5) (94.1) (68.6) (33.8)
Other income(expense), net.......... 0.1 (1.6) 0.5 0.9 0.7 0.9 (0.6) (0.8)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............................ (209.9)% (100.8)% (50.3)% (91.3)% (169.8)% (93.2)% (69.2)% (34.6)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE> 27
Sagent's operating expenses for the three months ended March 31, 1998
exceeded levels that Sagent has historically experienced due primarily to
acquired in-process technology expense recorded in connection with the
acquisition of Talus, Incorporated. In addition, operating expenses for the
three months ended June 30, 1998 exceeded levels that Sagent has historically
experienced due to the addition of several sales personnel and increased
advertising expenses. Sagent's quarterly operating results may vary
significantly from quarter to quarter. The timing of Sagent's revenues are
unpredictable due to several factors, including the effect of delays in customer
orders, the lack of software order backlog, the potential effect of seasonality
as international operations expand and the degree to which customers engage
Sagent's professional services. Additionally Sagent cannot predict expenses with
significant certainty given planned expansion of its business. Due to
uncertainty surrounding revenues and expenses, Sagent believes that quarter to
quarter comparison of its operating results are not a good indication of future
performance.
ACQUIRED IN-PROCESS TECHNOLOGY
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company with experience in the design and implementation of Enterprise
Intelligence applications. At the time of the acquisition, Talus' revenue was
associated with implementation services of outside vendor solutions. The total
purchase price was $3.5 million, consisting of approximately $1.2 million in
cash, 259,000 shares of preferred stock valued at $1.4 million and the
assumption of liabilities of $0.9 million. The acquisition was recorded under
the purchase method of accounting.
Prior to the acquisition, Talus was in the process of developing analytical
software applications to complement its design and implementation business. The
four projects under development consisted of analytical software applications
for manufacturing, food, service and hospitality, and high technology
industries. These projects are unique and complex because they integrate the
industry knowledge of Talus' consultants with advanced data mart and business
intelligence software to develop analytical software applications for specific
industries. These analytical software applications allow organizations to model
decision processes unique to their industry, such as decisions on products,
sales and distribution channels, and customers. Sagent anticipates that these
analytical software applications can be sold on a stand alone basis with
implementation assistance.
In connection with the acquisition of Talus, Sagent identified two key
intangible assets, the analytical software applications under development and an
existing assembled workforce. The method used to estimate the fair value of the
analytical software applications was a discounted cash flow model, similar to
the traditional income approach, adjusted for cost to complete and stage of
completion. Sagent first estimated revenue, cost of goods sold, and operating
expense for the analytical software applications. Since it is uncertain whether
the estimates may be achieved, the estimated earnings associated with the
analytical software applications under development were discounted at a rate of
35%. In addition, using a cost of completion method, Sagent estimated that
development was on average 55% complete at the date of acquisition. Development
is expected to be completed during 1999 through 2000, with initial revenue
expected in 1999. At the time of the acquisition Talus had incurred
approximately $2.0 million of research and development expense on development of
the analytical software applications. Sagent has incurred approximately $1.0
million of research and development expense since the date of acquisition
through December 31, 1998 and estimates that $0.8 million will be required to
complete the remaining development projects. Based on these methods, estimates,
and calculations and since the analytical software applications have not
achieved technological
26
<PAGE> 28
feasibility and since there was no alternative future use for this technology,
Sagent expensed $2.4 million of in-process technology in the quarter ended March
31, 1998. The classification of acquired in-process technology was made in
accordance with the guidance of SFAS 2, "Accounting for Research and Development
Costs", SFAS 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed", and FIN 4, "Applicability of FASB Statement No.
2 to Business Combinations Accounted for by the Purchase Method, an
Interpretation of FASB Statement No. 2".
Sagent recorded other intangible assets of $587,000, which included the
value assigned to the Talus assembled workforce. These assets are being
amortized on a straight-line basis over periods which vary from six months to
three years following the acquisition. The method used to estimate the fair
value of the workforce was based on the estimated cost to recreate the
workforce.
The efforts required to develop the acquired in-process technology into
commercially viable products principally relate to the completion of all
planning, designing, and testing activities that are necessary to establish that
the products can meet their design requirements, including function, features,
and technical performance requirements. Sagent currently expects that the
acquired in-process technology will be successfully developed. However, these
products may not achieve commercial viability. Furthermore, future developments
in the industry, changes in technology, changes in other product offerings or
other developments may cause Sagent to alter or abandon these plans. Failure to
complete the development of these projects in their entirety, or in a timely
manner, could have an adverse impact on Sagent's business.
Sagent based its determination of the acquired in-process technology
allocation on recently issued guidance by the Securities and Exchange Commission
and considered such factors as degree of completion, technological
uncertainties, costs incurred, and projected costs to complete.
Acquired in-process technology projects continue to progress, in all
material respects, consistent with management's original assumptions used to
value the acquired in-process technology. See Note 7 to Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, Sagent had cash and cash equivalents totaling $3.1
million, a decrease of $720,000 from December 31, 1997. Since inception, Sagent
has funded its operations primarily through private sales of equity securities,
the use of equipment leases and a bank line of credit, not from cash generated
by the business. As of December 31, 1998, Sagent had raised approximately $28.6
million, net of offering costs, from the issuance of preferred stock and the
exercise of stock options, had financed equipment purchases totaling
approximately $3.3 million, and had borrowed $1.7 million under its line of
credit with a bank. Approximately $300,000 of available borrowings remain under
the line of credit at December 31, 1998.
Net cash used in operating activities was $6.3 million, $5.4 million and
$11.0 million in 1996, 1997 and 1998, respectively. For such periods, net cash
used in operating activities was primarily a result of funding ongoing
operations.
Sagent's investing activities have primarily consisted of annual purchases
of property and equipment. Capital expenditures, including those under capital
leases, totaled $1.1 million, $1.1 million and $1.2 million in 1996, 1997 and
1998, respectively. Capital leases have been used to finance the acquisition of
property and equipment, primarily
27
<PAGE> 29
computer hardware and software, and leasehold improvements and furniture
associated with Sagent's recent move into a larger facility to accommodate its
increasing employee base. In 1998, investing activities included $2.7 million
associated with the acquisition of Talus. Sagent anticipates that it will
experience an increase in its capital expenditures and lease commitments
consistent with its anticipated growth in operations, infrastructure and
personnel.
Sagent's financing activities have primarily included sales of preferred
stock and use of its equipment lease lines. Proceeds from the issuance of
preferred stock totaled $6.5 million, $5.2 million and $10.4 million in 1996,
1997 and 1998 respectively. The proceeds from equipment financing, net of
principal payments, totaled $600,000, $294,000 and $3.4 million in 1996, 1997
and 1998 respectively.
At December 31, 1998, Sagent had a line of credit with a bank for $2.0
million, which bears interest at the lending bank's prime rate. Borrowings are
limited to the lesser of 80.0% of eligible accounts receivable or $2.0 million
and are secured by substantially all of Sagent's non-leased assets. The line of
credit contains certain financial restrictions and covenants. At December 31,
1998, total borrowings available under this line were approximately $300,000.
This credit facility expires in January 2000, and Sagent expects to extend the
credit facility, although there can be no assurance that it will be able to do
so on terms acceptable to Sagent or at all. The credit line was subsequently
increased to $4.0 million effective from January 1999. Sagent was not in
compliance with certain financial covenants under its line of credit as of
December 31, 1998, and received a waiver from its lender for non-compliance
prior to December 31, 1998. Sagent is currently in compliance with its financial
covenants under such line of credit.
Sagent believes that the net proceeds from the offering, together with
existing sources of liquidity, will be sufficient to meet its working capital
and anticipated capital expenditure requirements for at least the next 12
months. Thereafter, Sagent may require additional funds to support its working
capital requirements or for other purposes, and may seek, even before such time,
to raise additional funds through public or private equity financing or from
other sources. There can be no assurance that additional financing will be
available at all, or that if available, such financing will be obtainable on
terms acceptable to Sagent or that are not dilutive to its stockholders.
RECENT ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use," which provides guidance on
accounting for the cost of computer software developed or obtained for internal
use. Statement of Position No. 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Sagent does not expect that the
adoption of Statement of Position No. 98-1 will have a material effect on its
business, financial condition and operating results.
YEAR 2000 ISSUES
Sagent has completed its initial assessment of the potential overall impact
of the impending century change on Sagent's business, financial condition and
operating results. Based on Sagent's current assessment, Sagent believes the
current versions of its products are year 2000 compliant -- that is, they are
capable of adequately distinguishing 21st century dates from 20th century dates.
However, Sagent's products operate in complex network environments and directly
or indirectly interact with a number of other hardware and software systems that
Sagent cannot adequately evaluate for year 2000 compliance.
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<PAGE> 30
Sagent may face claims based on year 2000 problems in other companies' products,
or issues arising from the integration of multiple products within an overall
system. Sagent has not been a party to any litigation or arbitration proceeding
involving Sagent's products or services related to year 2000 compliance issues.
Sagent may in the future be required to defend its products or services in such
proceedings, or to negotiate resolutions of claims based on year 2000 issues.
The costs of defending and resolving year 2000-related disputes, regardless of
the merits of such disputes, and any liability Sagent has for year 2000-related
damages, including consequential damages, could harm Sagent's business. In
addition, Sagent believes that the purchasing patterns of customers and
potential customers may be affected by year 2000 issues as companies expend
significant resources to correct or upgrade their current software systems for
year 2000 compliance. These expenditures may result in reduced funds available
to purchase products like those Sagent offers. To the extent year 2000 issues
cause a significant delay in, or cancellation of, decisions to purchase Sagent's
products or services, Sagent's business would suffer.
Sagent has reviewed its internal management information and other critical
business systems to identify any year 2000 problems. Sagent also has
communicated with the external vendors that supply it with material software and
information systems and with significant suppliers to determine their year 2000
readiness. Based on Sagent's vendors' representations, Sagent believes that the
third-party hardware and software Sagent uses is year 2000 compliant except for
an application Sagent uses to track technical support requests. The application
vendor is currently undertaking modification of this application for Sagent, and
Sagent estimates that the modification will be complete in the second quarter of
1999 and will cost approximately $20,000. Although Sagent does not believe that
the cost of such modifications will materially affect its operating results, if
Sagent is not able to modify the technical support application in a timely and
successful manner Sagent may not be able to process technical support reports
effectively, which may adversely affect Sagent's business. Sagent currently
anticipates conducting additional year 2000 testing in mid-1999 when it replaces
servers in its internal network.
To date, Sagent has not incurred any material costs directly associated
with year 2000 compliance efforts, except for compensation expense associated
with salaried employees who have devoted some of their time to year 2000
assessment and remediation efforts. As discussed above, Sagent does not expect
the total cost of year 2000 problems to be material to its business, financial
condition and operating results. However, during the months prior to the century
change, Sagent will continue to evaluate new versions of its products, new
software and information systems provided by third parties and any new
infrastructure systems that Sagent acquires, to determine whether they are year
2000 compliant. Despite Sagent's current assessment, Sagent may not identify and
correct all significant year 2000 problems on a timely basis. Year 2000
compliance efforts may involve significant time and expense and unremediated
problems could harm Sagent's business, financial condition and operating
results. Sagent currently has no contingency plans to address the risks
associated with unremediated year 2000 problems.
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<PAGE> 31
BUSINESS
The following description of Sagent's business should be read in
conjunction with the information included elsewhere in this prospectus. This
description contains certain forward-looking statements that are based largely
on Sagent's current expectations and are subject to a number of risks and
uncertainties. Actual results and events could differ significantly from those
discussed in the forward-looking statements as a result of certain of the
factors set forth below and elsewhere in this prospectus.
OVERVIEW
Sagent develops, markets and supports Enterprise Intelligence software
designed to address organizations' rapidly growing information access, analysis
and delivery needs. The Sagent DMS product suite gathers data from a variety of
sources, such as relational databases, mainframe databases, and the Internet,
and organizes that data into a common structure or repository known as a data
mart. A data mart is implemented to more efficiently manage a subset of
corporate data focused on the needs of a specific group of users. Once data is
organized into a Sagent data mart, the Sagent DMS product suite allows
organizations to more efficiently analyze the data and provides access to the
information through personal computers, reports, and importantly, through Web
browsers over the Internet. Sagent also provides design, systems engineering and
education services to facilitate successful customer implementations. Sagent's
products and services have been adopted in a variety of industries, including
financial services, telecommunications, technology, health care, retail, and
others. Sagent currently has more than 200 customers worldwide. Sagent markets
its software and services through its direct sales, resellers and international
distributors. Sagent also sells its software through strategic partnerships with
other software companies, each of which has integrated its product suite into
their software applications.
INDUSTRY BACKGROUND
Today, information about an organization's customers, products and
operations is one of its most important strategic assets. An organization's
ability to maximize revenues and efficiently manage operations increasingly
depends upon its ability to rapidly collect, organize, analyze and distribute
information. In particular, as organizations have begun to pursue more complex
operational strategies, their need for timely information has increased. For
example, businesses engaged in total customer management must synthesize
information regarding past purchases, service history, payment status and sales
contacts. Similarly, businesses engaged in supply chain management must manage
the information exchanged among multiple plants, sales locations, suppliers and
distribution facilities. Furthermore, as businesses continue to streamline their
organizational structures to improve time to market and responsiveness to
rapidly changing market conditions, decision making authority is expected to
become more distributed, thus heightening the need for broader dissemination of
information throughout the enterprise. Most recently, the rapid adoption of the
Internet and the World Wide Web has given organizations the ability to share
information internally and externally on a cost-effective basis and has
dramatically increased the number of people who can receive and access
information.
To meet these challenges, many organizations have purchased and implemented
data warehousing systems and decision support software. These systems were
designed to assist organizations in answering fundamental business questions
such as "Who are our best customers?" or "What are our most profitable
products?" Early data warehousing systems
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<PAGE> 32
aggregated an organization's enterprise data into a single location and
reorganized it into contextual, business-related terms. The single location has
enabled the use of query tools or other decision support software to explore and
analyze the data. The need for data warehousing and decision support software
has also been driven by the proliferation of online transaction processing
systems. These systems include packaged applications or custom and semi-custom
systems, which automate business processes such as manufacturing planning,
customer support, billing, accounting, human resources and financial services
transactions. While these multiple online transaction processing systems have
provided greater business efficiency, they have also created massive amounts of
new data, typically maintained in the form of proprietary, complex and
incompatible data models.
The demand for more useful information and the proliferation of new data
sources and data types has led to an active market for data warehousing and
decision support software. International Data Corporation estimates that the
size of the data warehouse market will grow from over $2.8 billion in 1997 to
over $8.0 billion in 2001. Forrester Research projects that the decision support
segment of the data warehouse market will grow from $1.1 billion in 1997 to $3.6
billion by 2001.
As corporate data warehouses have grown in size and complexity, Sagent
believes that several challenges have prevented organizations from realizing the
promise of data warehousing systems and decision support solutions. The first
challenge has been integration. Traditional solutions have utilized discrete
data warehousing and decision support software purchased from many different
vendors, including separate data extraction tools, data cleansing tools, data
sorting packages, relational database management systems, report writers,
analysis tools and distribution packages. Integrating these point products is
difficult and often limits the capability of the overall solution. The second
challenge has been user scalability. Traditional solutions were designed to
handle a small number of users and were not designed to meet the needs of a
large number of simultaneous users with diverse, individual requirements. The
third challenge has been performance. Discrete data warehousing and decision
support software applications often have difficulty aggregating complex
enterprise data into a single business view of information, which is critical
for processing information requests efficiently. The fourth challenge has been
cost and complexity. Many large data warehousing projects cost several million
dollars and take a year or more to implement.
Most importantly, the emergence of the Internet has challenged the
continued viability of traditional data warehousing and decision support
software as the best approach to enterprise-wide information access, analysis
and delivery. The Internet provides organizations with a low-cost infrastructure
to connect their customers, suppliers, partners and employees directly with the
information they need. Organizations are using the Internet to streamline their
marketing, sales and support processes and offer enhanced customer service
capabilities. Examples of these initiatives include enabling customers to use
the Internet to research product features, order products, check order status
and obtain on-line service and support. Organizations are also using the
Internet to track key business information regarding sales, customers,
suppliers, distributors, assets and resources, and to make that information
widely available to employees when and where they need it. As the number of
Internet users continues to grow, Sagent believes that the demand for Web-based
information access, analysis and delivery will increase significantly.
International Data Corporation forecasts that total commerce on the Internet
will grow from an estimated $12.4 billion in 1997 to $237.2 billion in 2001,
with the business commerce segment of the market growing from 47% in 1997 to 60%
in 2001.
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NEED FOR A NEW SOLUTION
Sagent believes that new demands for high performance information access,
analysis and delivery, particularly through the Internet, have stretched the
capabilities of traditional data warehousing and decision support systems. Many
organizations now require a new generation of Enterprise Intelligence solutions
that can leverage Internet technologies and accommodate the rapidly growing
number of internal and external users who need to access business-critical
information. To be most effective, Sagent believes that these solutions should
satisfy four critical requirements:
- First, solutions must be capable of accessing and assembling increasing
amounts of data from multiple, disparate and complex sources into a
single business view of information for the end user.
- Second, solutions must be capable of scaling to hundreds and thousands of
concurrent users and delivering information through the bandwidth of many
Internet connections, as well as through new access devices such as
hand-held computers and alphanumeric pagers.
- Third, solutions must deliver information fast enough to meet the demands
of the new business environment, particularly the performance
requirements of e-Business and Internet applications.
- Fourth, solutions should be delivered by a single vendor that can provide
a complete, integrated product and the professional services required to
implement a working, timely solution.
THE SAGENT SOLUTION
Sagent offers a new generation of Enterprise Intelligence software
solutions designed to address organizations' rapidly growing information access,
analysis and delivery needs. The Sagent DMS product suite provides end-to-end,
fully integrated data movement, access, analysis and presentation capabilities
on all major database platforms and is specifically designed to deliver
information over the Internet. The Sagent DMS product suite utilizes a
multi-dimensional data structure known as a Star Schema and advanced dataflow
technology to construct and provide access to data marts capable of handling
some of the most complex and demanding Enterprise Intelligence requirements.
Sagent's data marts, which are data warehouses that contain a subset of specific
corporate data, provide a more detailed, single business view of information
that is focused on the needs of a specific group of users. Sagent's Web
technology enables the distribution of information throughout the organization
and gives end users the ability to access and analyze data through common Web
browsers. Sagent also offers Sagent Professional Services, which include system
and application design, and education services, to facilitate the successful
implementation of the Sagent DMS product suite.
Sagent believes its solution provides the following key benefits:
High Performance Internet Access. The Sagent DMS product suite is designed
to provide customers with the ability to access, analyze and deliver critical
information easily and rapidly over the Web. The Sagent architecture utilizes
Internet based processing capabilities to minimize the bandwidth required for
the delivery of information over the Web and other new access technologies. This
technology significantly reduces the waiting time for Web-page processing and
information delivery, thus increasing user productivity.
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Single Business View of Information. The Sagent DMS product suite utilizes
a 32-bit application server, a proprietary dataflow model and Star Schema data
structure to create a single business view of information from complex,
disparate data sources. Sagent believes this consolidated view of information
allows Sagent users to access and analyze complex data more easily and rapidly
than with traditional solutions. This approach also allows Sagent's customers to
manage the rapidly growing levels of data within their organizations.
Highly Scalable. Sagent's use of advanced bandwidth management technology,
combined with its core Star Schema data structure, enables the Sagent DMS
product suite to provide Web-based information access and data analysis
capabilities to thousands of users without degrading application performance and
availability.
Low Total Cost of Ownership. The Sagent DMS product suite is designed to
deliver low total cost of ownership by leveraging industry standards such as the
Windows NT operating system and other Microsoft technology, by providing an
integrated product suite to lower implementation time and cost, and by providing
extensive administrative functionality to reduce ongoing systems management
burdens.
STRATEGY
Sagent's objective is to become a leading provider of Enterprise
Intelligence software solutions to address organizations' rapidly growing
information access, analysis and delivery needs.
The following are key elements of Sagent's strategy:
Focus on Internet Market Opportunity. Sagent believes that the growing
global use of the Internet is driving widespread implementation of new
e-Business applications. These applications depend on the efficient access,
analysis and presentation of enterprise data. By providing a product that
delivers large amounts of highly complex data through the Web to large numbers
of simultaneous users, Sagent believes that its products can be a foundation and
enabler of Web-based Enterprise Intelligence and e-Business applications.
Extend Product Functionality and Technology Leadership. Sagent believes it
provides the first fully integrated, end-to-end Enterprise Intelligence software
solution capable of meeting the performance demanded by the emerging e-Business
environment. Sagent is currently developing the next version of the Sagent DMS
product suite, which is being designed to significantly enhance user
scalability, and which is currently scheduled for release in the first half of
1999. Sagent plans to add capabilities that broaden and complement the Sagent
DMS product suite, such as data analysis, which includes data mining,
forecasting and modeling, data visualization, data sorting, Web querying,
extraction of data from SAP applications and information broadcasting. In
addition, Sagent may introduce new international versions of its products and
may port its products to additional UNIX platforms as opportunities arise.
Although Sagent expects that certain of its new products will be developed
internally, Sagent may, based on timing and cost considerations, acquire
technology or products from third parties.
Offer Pre-Built Enterprise Intelligence Applications. Sagent believes there
is a large market for pre-built applications that utilize the underlying
analytical capabilities of the Sagent DMS product suite and offer "out of the
box" functionality in targeted vertical markets. To date, Sagent has designed,
developed and marketed such applications in conjunction with strategic partners,
including Siebel Systems, Advent Software, Inc. and Automatic Data Processing,
Inc. In the future, Sagent plans to leverage the vertical and functional
knowledge gained through these relationships and through implementations by
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<PAGE> 35
its Professional Services Group to develop other pre-built Enterprise
Intelligence applications.
Broaden Distribution and Strategic Relationships. Sagent believes that it
can continue to expand its market penetration and build its brand recognition by
aggressively expanding its direct sales force; pursuing strategic relationships
with selected enterprise application vendors, consulting firms, system
integrators and development partners; and expanding its network of resellers and
distributors. To date, Sagent has entered into relationships with companies such
as Microsoft Corporation, Oracle Corporation, Siebel Systems, Automatic Data
Processing, Inc., Advent Software, and USinternetworking, Inc. Sagent also
believes that a significant opportunity exists to sell its products
internationally and intends to leverage its existing distributor relationships
in Europe and Japan and expand its direct and indirect international sales
efforts to exploit this opportunity.
Provide High Quality Services to Customers. Sagent provides comprehensive
implementation, support and training services to help customers adopt Sagent
products and build customer satisfaction, strong references and long-term
relationships. Sagent plans to continue to expand its professional services
capabilities and infrastructure. In addition, Sagent intends to expand the
education and training services it offers to its strategic partners and
resellers to help these companies market Sagent products more effectively.
Exploit Rapid Growth of Microsoft Windows NT. Sagent will continue to focus
its development efforts on the Microsoft Windows NT platform. Sagent believes
Windows NT is rapidly gaining share in the enterprise computing market due to
its ease of maintenance and cost effectiveness. International Data Corporation
projects that the installed base of Windows NT-based servers will increase from
1.6 million in 1997 to 5.9 million in 2002. Sagent Company believes that the
Sagent DMS product suite has a competitive advantage in leveraging the growth of
the Windows NT platform because it was designed to optimize Microsoft
technology.
PRODUCTS
The Sagent DMS product suite is comprised of software application servers
that handle the core components of an end-to-end solution, as well as end user
analysis applications.
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LOGO
As illustrated above, the Sagent DMS product suite consists of three core
functional areas: Data Load and Management, Data Access and Analysis, and
Administration and Design.
DATA LOAD AND MANAGEMENT
Sagent Data Load Server. The Sagent Data Load Server extracts data from
multiple client/server and mainframe databases, transforms that data into a Star
Schema data structure, and then loads that data into a Sagent data mart. The
server relies upon a 32-bit multithreaded architecture to achieve its high level
of performance.
DATA ACCESS AND ANALYSIS
Sagent Data Access Server. The Sagent Data Access Server delivers the data
loaded into a Sagent data mart to end users. The server is designed to allow
large numbers of users to access and analyze data stored in Star Schema
structures. The server relies upon a 32-bit multithreaded architecture to
achieve its high level of performance.
Sagent WebLink Server. The Sagent WebLink Server is a high performance,
scalable application server that delivers information from the Sagent Data
Access Server, allowing end users to query, analyze and report business
information from a Web browser. The server also provides management capabilities
that maintain the security and availability of Internet connections.
Sagent Statistical Calculator. The Sagent Statistical Calculator adds
advanced statistical analysis capabilities to the Sagent Data Access Server. The
calculator allows organizations to automate statistical analyses of large,
complex data sets, thereby improving the single business view of information
distributed to end users.
Sagent Information Studio. Sagent Information Studio enables users to
access and analyze an organization's information in client/server environments.
Information Studio, as well as WebLink Server, can be integrated with Microsoft
Excel to aid in exporting result sets to spreadsheets for further analysis.
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<PAGE> 37
The following reporting and analysis products can be integrated with the
Sagent DMS product suite:
Sagent Reports. Sagent Reports allows end users to create, publish and view
graphically rich presentations of corporate information.
Sagent Analysis. Sagent Analysis provides a wide range of analytical
capabilities for business data, such as rankings, deciles, periodic and
exception reporting. The product's drill down analysis capabilities allow users
to view information in either cross-tabular or chart format.
StatView for Sagent. StatView for Sagent provides an end user with the
ability to create, publish and view complex statistical analyses of corporate
data in client/server environments.
ADMINISTRATION AND DESIGN
Sagent Design Studio. Sagent Design Studio provides a visual environment
for describing data and designing the flow of data for both loading and
accessing a data mart. Sagent Design Studio minimizes the requirement that users
have in-depth knowledge of databases, networks and operating systems and allows
them to concentrate on the business purpose of accessing, analyzing and
delivering information.
Sagent Admin. Sagent Admin enables administrators to manage and control one
or more Sagent DMS servers from a single location. In addition, Sagent Admin
manages user security and access privileges.
Sagent Automation. Sagent Automation automates common tasks within the
Sagent DMS product suite, such as data loading, error recovery and quality
assurance. Tasks can be initiated by events such as a pre-determined time of day
or date, reaching disk storage capacity or the availability of new data.
PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
The Sagent Professional Services Group offers an extensive set of
consulting and education services to Sagent's customers. The Sagent Professional
Services Group has significant experience in the design and implementation of
Enterprise Intelligence applications using a Star Schema data architecture.
Sagent's customers are able to select an appropriate level of support for their
implementations, including project planning, design and implementation
assistance.
In addition to consulting services, the Sagent Professional Services Group
offers design and product training classes to facilitate customer success in
initial implementations and provide a foundation for expanding the use of Sagent
products in customer organizations. The Sagent Professional Services Group also
offers to third party consultants product certification training, which Sagent
believes helps develop market awareness of its product offerings.
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CUSTOMERS
The following is a representative list of Sagent's customers that have
purchased more than $75,000 in product licenses or services from Sagent since
January 1, 1997:
<TABLE>
<S> <C> <C>
ARINC DiaLogos Mashantucket Pequot Tribal
Automatic Data Processing Eddie Bauer Nation
AT&T Ernst & Young MCI WorldCom
Barnesandnoble.com Express Scripts/ValueRx Miller Freeman
Bell Communications Research Farm Credit Services NationsBanc
BellSouth Cellular General American NETCOM On-Line
BellSouth Entertainment Transportation Communication Services
CEISS/BC Ministry of Education Hoechst Marion Roussel Nordstrom
CellStar GPU Energy Nycomed
Ceridian J.P. Morgan & Co. PairGain Technologies
City of Santa Clara Jiffy Lube International Pharmaceutical Care Network
Cohn & Wells John Hopkins University Prudential Insurance
Deutsche Financial Services Kaufman & Broad Home Rohm & Haas
Kawasaki Steel Systems R&D The Application Group
</TABLE>
In 1997, Sagent received in excess of 10% of its total revenues from each
of Oracle Corporation and Automated Data Processing.
CASE STUDIES
The following case studies illustrate how certain of Sagent's customers
have utilized the Sagent DMS product suite:
PHARMACEUTICAL CARE NETWORK
Pharmaceutical Care Network is a pharmacy benefits management and
healthcare information services company.
Business Challenge. Pharmaceutical Care Network was one of the first
pharmacy benefit management companies to institute on-line, real-time claim
processing for a nationwide network of participating pharmacies. When a plan
participant presents a prescription at a Pharmaceutical Care Network
participating pharmacy, the applicable plan guidelines are referenced on-line
instantly, ensuring that a customer pays for appropriate and eligible
prescriptions at the contracted price. Pharmaceutical Care Network wanted to
leverage the information it was gathering through its nationwide network of
pharmacies to improve the level of service across its pharmaceutical care value
chain, including plan members, health care providers and plan sponsors and
affiliated pharmacies. To provide this service, Pharmaceutical Care Network
wanted to install an Enterprise Intelligence solution that would allow customers
to access and analyze the vast amounts patient care information through a Web
browser.
Solution. Pharmaceutical Care Network established MedIntelligence, a family
of information-based products for its pharmaceutical care value chain, to screen
and review prescription data, initiate notifications that identify drug therapy
problems and recommend action to improve the quality and cost of patient care.
Pharmaceutical Care Network selected the Sagent DMS product suite as the core of
MedIntelligence to integrate large amounts of disparate information within the
Pharmaceutical Care Network and to rapidly deliver MedIntelligence products over
the Web. The MedIntelligence products and the Sagent DMS product suite furnishes
healthcare providers with access to a more complete view of patient drug
regimens, which reduce the risk of harmful drug interactions, and provide health
care payers and plan administrators with the ability to monitor pharmacy related
plan costs and usage trends.
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CELLSTAR CORPORATION
CellStar Corporation is an integrated wholesaler and retailer of wireless
handsets and other wireless communication products, with operations in the
United States, Asia/Pacific, Latin America and the United Kingdom.
Business Challenge. CellStar Corporation required a solution to provide its
global sales force and key customers access to sales data for analysis and
presentation. In particular Cellstar Corporation wanted to provide it's
employees with the ability to monitor sell through, perform customer rankings
and identify high margin products. In addition CellStar Corporation wished to
provide it's key customers and vendors with worldwide data on the most popular
products by volume to maximize their revenue opportunity.
Solution. CellStar Corporation uses the Sagent DMS product suite to manage
and access CellStar Corporation data. The Sagent Analysis desktop module with
Sagent's WebLink lets users perform multidimensional analysis on the data mart
to gain sales data information either from a client/server environment for their
internal employees or through a Web browser for their global sales force,
customers and vendors. While the WebLink product is used to provide access to
data mart information to general users, Sagent's Information Studio with the
analysis module is generally utilized by internal business analysts. This
Enterprise Intelligence solution provides CellStar Corporation's manufacturers
and key customers with the ability to analyze sell-through data so that they can
determine which products are selling at acceptable margins to make better
informed channel marketing decisions.
TECHNOLOGY
Sagent has invested significant resources in developing leading
technologies and believes that utilizing a Star Schema data architecture and
Sagent's advanced dataflow technology to construct and provide access to data
marts gives it a competitive advantage over traditional solutions. Sagent also
believes that its technology maximizes the advantages of an Internet based
architecture to provide one of the most scalable solutions currently offered in
the market. The following are the key underlying technologies of the Sagent DMS
product suite:
Dataflow Technology. Sagent's dataflow technology is the foundation for the
Sagent DMS product suite load and access servers. Dataflow technology allows
users to rapidly construct processes that load and access a data mart without
writing code. These services relieve the need for users to have in-depth
knowledge of databases, networks and multithreaded operating systems and allow
them to concentrate on the application they are building. The dataflow engine
executes the processes that are visually designed by the user. The dataflow
technology is implemented using the Component Object Model standard, known as
COM, developed by Microsoft Corporation. The utilization of a modular,
language-independent component technology allows customers and resellers to
incorporate new functionality into the product via a transform software
development kit. This same development kit provides Sagent with the ability to
add new functionality to the server rapidly and send it to the customer
electronically without requiring a complete upgrade of the system.
Star Schema Design. Sagent has implemented a set of dataflow components to
support the loading and accessing of Star Schemas. Star Schemas are a database
design technique used to provide high performance for ad hoc data analysis
within a relational database by minimizing the number of relations to process in
a query. By combining query
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generation with the dataflow engine's processing capability, Sagent provides
power and speed to users accessing Star Schema structured data. In addition, the
Sagent DMS product suite provides a set of specialized dataflow components for
loading Star Schemas that significantly lowers the implementation time for the
Sagent DMS product suite.
Internet-Based Architecture. Sagent has developed an architecture that
utilizes the network of computing tiers that comprise the Web. These tiers
include browsers, Internet servers, data access servers, data load servers and
database servers. The efficient usage of CPU cycles and memory provided by these
tiers enables the Sagent DMS product suite to achieve a high degree of
scalability and performance. In addition, on-demand data delivery minimizes
bandwidth usage, improving the rate at which information is delivered to users.
SALES AND MARKETING
Sales. Sagent sells its products and services in North America primarily
through its direct sales and services organization. Sagent has domestic sales
offices in eleven states.
The direct sales process involves the generation of sales leads through
direct mail, seminars, telemarketing, advertising and the Web. Sagent's field
sales force typically conducts demonstrations and presentations of Sagent's
products to developers and management at customer sites as part of its direct
sales effort. The time between initial customer contact and an actual sales
order may span six months or more. See "Risk Factors--Our Operating Results May
Vary Significantly Due to our Lengthy Sales and Implementation Cycles for our
Products Which Could Cause our Stock Price to Fall."
Within Sagent's direct sales group, a separate group targets strategic
partnerships with industry-leading application software providers such as Siebel
Systems, Advent Software, Automatic Data Processing and Oracle Corporation.
These vendors embed all or a portion of Sagent's products within their own
applications and then sell the integrated products to their customers. Siebel
Systems, for example, embeds a portion of our product suite in Siebel Marketing
Enterprise to integrate and analyze customer interaction in sales, service and
all center environments. The enterprise application vendor's customer receives a
license to use Sagent's products solely in conjunction with the vendor's
application with which Sagent DMS products are integrated. Enterprise
application vendors provide the first level of post-sales support to customers.
Sagent also utilizes a limited number of resellers, such as Unisys Corporation,
USinternetworking, Inc. and Cap Gemini Group, that remarket Sagent's products to
their customer base. Resellers are offered discounts on Sagent's products and
sell a full use license of the product. Sagent's resellers do not provide
post-sales support. Sagent's ability to achieve revenue growth in the future
will depend in large part on its success in expanding its direct sales force and
in further establishing and maintaining relationships with enterprise
application vendors and resellers. See "Risk Factors--Our Business Will Suffer
if our Relationships with Channel Partners are Not Successful and if We Cannot
Recruit Additional Channel Partners."
Sagent also sells its products internationally through distributors located
in France, Germany, Japan, South Africa and the United Kingdom. These
distributors perform some or all of sales and marketing, systems integration,
software development, and ongoing consulting training and customer support
functions. In exchange for providing such services, Sagent offers its
distributors discounts on products. International sales are subject to certain
risks, including, but not limited to, costs of localizing products for foreign
countries, dependence on local vendors, currency fluctuations and greater
difficulty or delay in accounts receivable collection.
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We have agreements with our United Kingdom distributor and the parent
company of our French and German distributors, under each of which we have the
option to acquire the distributor. In the event of a change of control of
Sagent, we could be required to acquire the German distributor. In connection
with any such acquisition, we would be required to pay a purchase price. The
purchase price would be equal to the greater of a multiple of such distributor's
last 12 months' revenues as of the date of the acquisition or a minimum purchase
price specified in each agreement in cash or a combination of cash and
registered shares of our common stock. See "Risk Factors--We Intend to Expand
International Operations and Uncertainty of International Sales Efforts Could
Adversely Affect our Business."
Marketing. Sagent has a comprehensive marketing strategy which includes
public relations, user group meetings, programs to work closely with analysts
and other influential third parties, and direct mail campaigns. Sagent also
utilizes the Web for advertising campaigns on frequently visited Web sites
including those of its strategic partners. Sagent uses its Web site,
www.sagenttech.com, to establish its market presence, generate leads and extend
its program offerings to customers and strategic partners. A key element of
Sagent's marketing strategy is to leverage its relationship with Dr. Ralph
Kimball, one of Sagent's consultants and strategic partners, by sponsoring his
data mart design courses. Sagent has also invested in building a partner and
channel marketing function to recruit, train, support and offer co-marketing
opportunities to technology partners and resellers.
RESEARCH AND PRODUCT DEVELOPMENT
Sagent's research and development group is organized by product teams,
which consist of product managers, software engineers, quality assurance
engineers and technical documentation specialists. The teams are encouraged to
maintain consistent architectural standards, engineering practices, quality
goals and documentation standards across a broad product line. The product teams
use a phased development approach that monitors cost, schedule, quality, time,
functionality and customer satisfaction. Sagent has established an executive
product steering committee which reviews the progress of individual product
teams at each phase of development. In order to incorporate customer needs in
product releases, the product teams actively solicit requirements from
customers, user groups, professional services, industry analysts and technical
support.
Sagent's total expenses for research and development for the year ended
December 31, 1996, 1997 and 1998 were $3.4 million, $5.0 million and $6.0
million respectively. Sagent believes that research and development expenses
will continue to increase in the future. To date, Sagent's development efforts
have not resulted in any capitalized software development costs.
Sagent has made substantial investments in research and development. Sagent
is currently developing the next version of the Sagent DMS product suite, which
is being designed to significantly enhance user scalability, and is currently
scheduled for release in the first half of 1999. Sagent plans to add
capabilities that broaden and complement the Sagent DMS product suite, such as
data analysis, which includes data mining, forecasting and modeling, data
visualization, data sorting, Web querying, extraction of data from SAP
applications and information broadcasting. In addition, Sagent may introduce new
international versions of its products and may port its products to additional
UNIX platforms as opportunities arise. Although Sagent expects that certain of
its new products will be developed internally, Sagent may, based on timing and
cost considerations, acquire technology or products from third parties.
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Sagent believes that its future performance will depend in large part on
its ability to maintain and enhance its current product line, develop new
products that achieve market acceptance, maintain technological competitiveness
and meet an expanding range of customer requirements. Sagent's inability to
enhance its existing products and develop new ones in a timely and effective
manner, could have a material adverse effect upon Sagent's business, financial
condition and operating results. See "Risk Factors--Our Business Will Suffer if
We Do Not Develop New Products as Required," "--Changes in Internet Technology
and Operating System Standards May Adversely Impact the Market for our Products"
and "--If We Discover Software Defects, our Business May Suffer and We May Have
Product-Related Liabilities."
COMPETITION
The markets for Sagent's products are intensely competitive and subject to
rapidly changing technology. Sagent competes against providers of decision
support software, data warehousing software, enterprise application software and
e-Business software. The primary bases of competition in this market include
performance, scalability, ease of use, operating platform and cost of ownership.
Sagent's competitors providing traditional decision support software
include Brio Technology, Inc., Business Objects S.A., Cognos Incorporated,
Information Advantage, Inc. and MicroStrategy, Inc. Sagent's competitors
providing data warehousing software include Ardent Software, Inc., Informatica
Corporation, Information Builders, Oracle, PLATINUM Technology, Inc. and SAS
Institute, Inc. In addition, enterprise application software vendors such as
Baan Company N.V., J.D. Edwards & Company, PeopleSoft, Incorporated and SAP AG
are beginning to offer decision support and analytical modules, although each
tends to support the analysis of data only from its own operational systems. One
or more of these companies may expand its technologies to support greater
Enterprise Intelligence functionality. Sagent may also face competition from
vendors of products and turn-key solutions for e-Business applications that
could include Internet based information functionality.
Many of Sagent's competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Sagent's competitors may be able to respond more quickly
than Sagent can to new or emerging technologies and changes in customer
requirements. Competition could seriously harm Sagent's ability to sell
additional software and maintenance and support renewals on terms favorable to
Sagent. Competitive pressures could reduce Sagent's market share or require it
to reduce the price of products, either of which could materially and adversely
affect Sagent's business, financial condition and operating results.
INTELLECTUAL PROPERTY
Sagent seeks to protect its software, documentation and other written
materials primarily through a combination of patent, trade secret, trademark and
copyright laws, confidentiality procedures and contractual provisions. For
example, Sagent licenses rather than sells its software and requires licensees
to enter into license agreements that impose certain restrictions on the
licensees' ability to utilize the software. In addition, Sagent seeks to avoid
disclosure of its trade secrets, by, among other things, requiring those persons
with access to Sagent's proprietary information to execute confidentiality
agreements with Sagent and restricting access to Sagent's source code.
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Sagent has two patent applications pending and one patent application
allowed in the United States with respect to certain aspects of its software.
None of these patents have been issued, and there can be no assurance that any
patents will be issued pursuant to these applications or that, if granted, such
patent would survive a legal challenge to its validity or provide significant
protection to Sagent. Despite Sagent's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of Sagent's products or
obtain and use information that Sagent regards as proprietary. Policing
unauthorized use of Sagent's products is difficult. While Sagent is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem, particularly in foreign
countries where the laws may not protect Sagent's proprietary rights as fully as
in the United States. There can be no assurance that Sagent's means of
protecting its proprietary rights will be adequate or that Sagent's competitors
will not independently develop similar technology.
From time to time, Sagent may be involved in intellectual property
disputes. In May 1998, Acta Technology, Inc. filed suit against Sagent alleging,
among other things, copyright infringement, and Sagent filed suit against Acta
Technology, Inc. alleging misappropriation of Sagent trade secrets. The parties
settled the dispute in February 1998. Other than Acta Technology, Inc., Sagent
has not been notified that Sagent's products infringe the proprietary rights of
third parties. However, third parties in the future may claim infringement
against Sagent with respect to current or future products. Sagent expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in Sagent's industry segment grows and
the functionality of products in different industry segments overlaps. See "Risk
Factors--Our Proprietary Technology May Be Subjected to Infringement Claims or
May Be Infringed Upon."
Sagent relies upon certain software it has licensed from Opalis S.A. to
perform key functions of its Sagent Automation product which automates common
tasks in managing data. This license may not continue to be available to Sagent
on commercially reasonable terms. The loss of this license could result in
delays or reductions of shipments of the Sagent Automation product until
equivalent software could be developed, identified, licensed and integrated. If
customers require the automation features provided by this product, they may
delay or decline to purchase Sagent's product suite, which could materially
adversely affect Sagent's business, financial condition and operating results.
EMPLOYEES
As of December 31, 1998, Sagent had a total of 152 employees, of whom 147
were based in the United States and 4 were based internationally. Sagent's
employees were employed as follows:
- 60 were engaged in sales and marketing
- 43 in research and development
- 32 in professional services and customer support
- 17 in finance, administration and corporate operations
Sagent's future performance depends in significant part on its continuing
ability to attract, train and retain highly qualified technical, sales, service,
marketing and managerial personnel. None of Sagent's employees is represented by
a labor union. Sagent has not experienced any work stoppages and considers its
relations with its employees to be good. See "Risk Factors--Our Executive
Officers and Key Personnel are Critical to our Business and These Officers and
Key Personnel May Not Remain With Us in the Future."
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FACILITIES
Sagent's principal offices currently occupy approximately 34,000 square
feet in Mountain View, California pursuant to a lease which expires in October
2003. In addition, Sagent also leases executive suites on a short-term basis for
North American offices in:
- Englewood, Colorado
- Atlanta, Georgia
- Orlando, Florida
- Plantation, Florida
- Chicago, Illinois
- - Wellesley, Massachusetts
- - New York, New York
- - Bala Cynwyd, Pennsylvania
- - Houston, Texas
- - Alexandria, Virginia
- - Toronto, Ontario
Sagent believes that its facilities are adequate for the next 12 months and
that, if required, suitable additional space will be available on commercially
reasonable terms to accommodate expansion of Sagent's operations.
LEGAL PROCEEDINGS
Sagent is not currently a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Sagent as of January 29, 1999 are
set forth below. The board of directors has appointed Mr. Luft to the board of
directors, and Mr. Luft has agreed to join, effective as of the first meeting of
the board of directors following completion of the offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth C. Gardner........................ 48 President, Chief Executive Officer and
Director
John E. Zicker............................ 42 Executive Vice President, Technology,
Chief Technology Officer and Director
W. Virginia Walker........................ 53 Executive Vice President, Finance and
Administration, and Chief Financial
Officer
Thomas M. Lounibos........................ 42 Executive Vice President, Sales and
Marketing
Kenneth C. Holcomb........................ 49 Vice President, Operations
Michael P. Venerable...................... 36 Vice President, Professional Services
Shanda Bahles (a)(b)...................... 43 Director
Richard W. Shapero(a)(b).................. 51 Director
Jeffrey T. Webber......................... 46 Director
Klaus S. Luft............................. 57 Director designee
</TABLE>
- -------------------------
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
Kenneth C. Gardner. Mr. Gardner has been President, Chief Executive Officer
and a director since commencement of operations in June 1995. From March 1994
until March 1995, Mr. Gardner was Vice President of Products at Borland
International, Inc., which has since changed its name to Inprise Corporation, an
enterprise applications company. From February 1992 until March 1994, Mr.
Gardner was President, Chief Executive Officer and a co-founder of ReportSmith,
Inc., a database report applications company, which was purchased by Borland in
1994. Mr. Gardner is a director of ObjectSwitch Corp., Data Sage, Inc. and
CommerceOne Inc., which are privately held companies. Mr. Gardner received his
B.S.C. degree in Finance from the University of Louisville.
John E. Zicker. Mr. Zicker has been Executive Vice President, Technology,
Chief Technology Officer and a director since Sagent's commencement of
operations in June 1995. From March 1994 until May 1995, Mr. Zicker was Director
of Client/Server Development at Borland International, Inc. From February 1992
until March 1994, Mr. Zicker was Vice President of Technology and a co-founder
of ReportSmith, Inc. Mr. Zicker has 13 years experience in software development
and image processing at NASA Ames Research Center, Lawrence Livermore
Laboratories and the Stanford Linear Accelerator Center. Mr. Zicker received his
B.S. degree in Electrical Engineering at the University of California at Davis
and his M.S. degree in Electrical Engineering from the University of Wisconsin
at Madison.
W. Virginia Walker. Ms. Walker has been Executive Vice President, Finance
and Administration, and Chief Financial Officer since January 1998. From June
1996 to January 1998, Ms. Walker pursued personal interests. From November 1995
until June 1996, Ms. Walker was Executive Vice President of Finance and
Administration, Chief
44
<PAGE> 46
Financial Officer and Secretary of JTS Corporation, a publicly traded disk drive
manufacturer. From May 1985 until September 1995, Ms. Walker worked at Scios
Nova, Inc., a publicly traded biopharmaceutical company, where she held the
positions of Vice President of Finance and Administration and Chief Financial
Officer. Ms. Walker received her B.S. degree in Business Administration,
Accounting from San Jose State University.
Thomas M. Lounibos. Mr. Lounibos has been Executive Vice President, Sales
and Marketing since January 1999. Mr. Lounibos was Sagent's Executive Vice
President, Worldwide Sales, from October 1998 until January 1999 and was
Sagent's Vice President, Sales from March 1996 until October 1998. From October
1995 until March 1996, Mr. Lounibos was Vice President of Sales for
ParcPlace-DigiTalk Incorporated, an object-oriented programming tools company,
and from November 1993 until October 1995 Mr. Lounibos was Vice President of
Sales for DigiTalk, Incorporated, which was acquired by ParcPlace Incorporated.
Prior to joining DigiTalk, Incorporated, Mr. Lounibos worked for Knowledgeware,
Incorporated, a software company, where he served as Vice President of
Sales--Western United States and Vice President of Marketing. Mr. Lounibos
received his B.S. degree in Business Economics from the University of San
Francisco.
Kenneth C. Holcomb. Mr. Holcomb has been Vice President, Operations since
March 1998. From March 1997 until February 1998, Mr. Holcomb was Vice President,
Operations of Pilot Network Services, Inc., a publicly-traded network security
company. From May 1996 until February 1997, Mr. Holcomb was Vice President,
Systems Integration of WorldCom, Inc., a publicly traded telecommunications
company. From January 1996 until May 1996, Mr. Holcomb was Vice President,
Internet Development of MFS Communications Company, Inc., a telecommunications
company. From January 1992 until December 1996, Mr. Holcomb was Senior Vice
President, Customer Service and Operations of MFS Datanet, Inc., and subsidiary
of MFS Communications, Inc. a data communications company. Mr. Holcomb received
his B.A. degree in Business Administration, Finance, from the University of
Notre Dame.
Michael P. Venerable. Mr. Venerable has been Vice President, Sagent
Professional Services since March 1998. In March 1992, Mr. Venerable founded
Talus, Incorporated, a privately held company with significant experience in the
design and implementation of Enterprise Intelligence applications, and served as
its President until February 1998, when Sagent acquired Talus, Incorporated. Mr.
Venerable received his B.S. degree in Criminal Justice from the University of
Dayton.
Shanda Bahles. Ms. Bahles has been a director of Sagent since May 1995.
Since May 1991, Ms. Bahles has been a General Partner of El Dorado Ventures, a
venture capital firm. Ms. Bahles joined El Dorado Ventures as an associate in
June 1987. From 1979 to 1985, Ms. Bahles held various engineering, marketing and
management positions with Millennium Systems, Inc., a systems integration
company, and Fortune Systems Corporation, a workstation manufacturer. Ms. Bahles
is a director of Pilot Network Services, Inc., a publicly traded company, and
Women.com Networks, Inc., Poet Holdings, Inc. and MS2, Inc., which are privately
held companies. Ms. Bahles received her B.S.E.E. and M.B.A. degrees from
Stanford University.
Richard W. Shapero. Mr. Shapero has been a director of Sagent since May
1995. Since April 1993, Mr. Shapero has been a General Partner of Crosspoint
Venture Partners, a venture capital firm. From January until June 1992, Mr.
Shapero was Chief Operating Officer of Shiva Corporation, a networking company.
Previously, he was a Vice President of Sun Microsystems, Inc., Senior Director
of Marketing of AST Research, Inc. and held marketing and sales positions at
Informatics General Corporation and UNIVAC's Communications Division. Mr.
Shapero is a director of Covad Communications Group,
45
<PAGE> 47
Inc., a publicly traded company, and Digital Island, Inc., Diamond Lane
Communications Corporation, NetBoost Corporation, Fabrik Communications, Inc.,
ObjectSwitch Corp., Jetstream Communications, Inc., AristaSoft Corporation and
iBeam Broadcasting Corporation, which are privately held companies. Mr. Shapero
received his B.A. degree in English from the University of California at
Berkeley.
Jeffrey T. Webber. Mr. Webber has been a director of Sagent since September
1995. Mr. Webber founded, and since January 1991 has served as President of,
R.B. Webber & Company, Inc., a management consulting firm. From 1987 to January
1991, he was a partner of Edgar, Dunn & Company, a management consulting firm.
Mr. Webber serves as a director of Sybase, Inc., a publicly traded company, and
CommerceOne, Inc., enCommerce, Inc., Persistence Software, Inc., Spear
Technologies, Inc. and Workwise Software, Inc., which are privately held
companies. Mr. Webber received his B.A. degree in American Studies from Yale
University.
Klaus S. Luft. Mr. Luft is the founder and President of MATCH -- Market
Access for Technology Services GmbH, a provider of sales and marketing services
to high technology companies, since February 1994. Mr. Luft is also the founder,
owner and President of ISAR-Vermogensverwaltung GbR mbH. Since August 1990, Mr.
Luft has served as an International Advisor and Vice-Chairman of Goldman Sachs
Europe Limited, an investment bank. From March 1986 to November 1989, Mr. Luft
was Chief Executive Officer of Nixdorf Computer AG, a manufacturer of computer
systems in Paderborn, Germany, where he also held various other executive
positions in marketing, manufacturing and finance for more than 17 years. Mr.
Luft is a director of Dell Computer Corporation, a publicly traded company. Mr.
Luft received his German Arbitur in Bruchsal, Germany.
BOARD OF DIRECTORS AND COMMITTEES
Following the offering, Sagent's board of directors will consist of six
directors divided into three classes with each class serving for a term of three
years. At each annual meeting of stockholders, directors will be elected by the
holders of the common stock to succeed those directors whose terms are expiring.
Mr. Shapero and Ms. Bahles are Class I directors whose terms will expire in
2000. Mr. Webber is a Class II director whose term will expire in 2001. Messrs.
Gardner and Zicker are Class III directors whose terms will expire in 2002.
The board of directors has a compensation committee and an audit committee.
The compensation committee, which is comprised of Ms. Bahles and Mr. Shapero,
administers the amended 1995 stock option plan, the 1998 stock option plan and
the 1999 employee stock purchase plan and all matters concerning executive
compensation. The audit committee, which is comprised of Ms. Bahles and Mr.
Shapero, approves Sagent's independent auditors, reviews the results and scope
of annual audits and other accounting related services, and evaluates Sagent's
internal audit and control functions. Each of these committees was established
in February 1997.
DIRECTOR COMPENSATION
Sagent does not pay any compensation to directors for serving in that
capacity, nor does it reimburse directors for expenses incurred in attending
board meetings. The board has the discretion to grant options to non-employee
directors pursuant to the director option plan. See "Management--1999 Director
Option Plan."
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<PAGE> 48
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Ms. Bahles and Mr.
Shapero. Neither of these individuals has at any time been an officer or
employee of Sagent. Prior to formation of the compensation committee, all
decisions regarding executive compensation were made by the full board of
directors. No interlocking relationship exists between Sagent's board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Sagent's certificate of incorporation limits the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation shall not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for:
- Any breach of the director's duty of loyalty to Sagent or its
stockholders
- Acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
- Unlawful payments of dividends or unlawful stock repurchases, redemptions
or other distributions
- Any transaction from which the director derived an improper personal
benefit
These provisions are permitted under Delaware law.
Sagent's bylaws provide that Sagent shall indemnify its directors and
executive officers and may indemnify its other officers and employees and agents
and other agents to the fullest extent permitted by law. Sagent believes that
indemnification under its bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Sagent's bylaws also permit Sagent to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
Sagent has entered into agreements to indemnify its directors and officers,
in addition to indemnification provided for in Sagent's bylaws. These
agreements, among other things, indemnify Sagent's directors and officers for
certain expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by any such person in any action or proceeding, including any
action by or in the right of Sagent, arising out of such person's services as a
director or officer of Sagent, any subsidiary of Sagent or any other company or
enterprise to which the person provides services at the request of Sagent. In
addition, Sagent intends to obtain directors' and officers' insurance providing
indemnification for certain of Sagent's directors, officers and employees for
certain liabilities. Sagent believes that these provisions, agreements and
insurance are necessary to attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of Sagent where indemnification will be
required or permitted. Sagent is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
47
<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation that
Sagent paid during the year ended December 31, 1998 to Sagent's Chief Executive
Officer and each of Sagent's other four most highly compensated executive
officers whose salary and bonus exceeded $100,000 during such fiscal year. These
officers are referred to as Named Officers elsewhere in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION(A)
--------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Kenneth C. Gardner................ $225,000 $ 90,000 -- $366
President and Chief Executive
Officer
John E. Zicker.................... 150,000 60,000 -- 120
Executive Vice President,
Technology and Chief Technology
Officer
W. Virginia Walker................ 173,965 69,586 180,000 240
Executive Vice President,
Finance and Administration and
Chief Financial Officer
Thomas M. Lounibos................ 164,590 124,420(b) 90,000 120
Executive Vice President, Sales
and Marketing
Perry S. Mizota(c)................ 140,000 35,000 -- 72
Former Vice President, Marketing
</TABLE>
- -------------------------
(a) Consists of premiums paid on term life insurance.
(b) Consists of commissions calculated based on Sagent's revenues.
(c) Perry S. Mizota resigned from his position as Vice President, Marketing of
Sagent effective January 29, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Officers in 1998, including the potential
realizable value over the ten-year term of the options, based on assumed rates
of stock appreciation of 5% and 10%, compounded annually. These assumed rates of
appreciation comply with the rules of the Securities and Exchange Commission and
do not represent Sagent's estimate of future
48
<PAGE> 50
stock price. Actual gains, if any, on stock option exercises will be dependent
on the future performance of Sagent's common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER ANNUAL RATES OF STOCK
OF SECURITIES % OF PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ------------- ------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth C. Gardner......... -- -- -- -- -- --
John E. Zicker............. -- -- -- -- -- --
W. Virginia Walker......... 180,000 13.12% $2.90 01/20/08 $328,283 $ 831,934
Thomas M. Lounibos......... 90,000 6.56% 7.00 12/28/08 396,204 1,004,058
Perry S. Mizota............ -- -- -- -- -- --
</TABLE>
In 1998, Sagent granted options to purchase up to an aggregate of 1,367,400
shares to employees, directors and consultants. All options were granted under
Sagent's amended 1995 stock option plan and 1998 stock option plan at exercise
prices at the fair market value of Sagent's common stock on the date of grant,
as determined in good faith by the board of directors. All options are
immediately exercisable upon grant; however, any unvested shares are subject to
repurchase by Sagent at their cost in the event of the optionee's termination of
employment. One-forty-eighth of the shares subject to Ms. Walker's option vest
monthly after January 5, 1998. One-twenty-fourth of the shares subject to Mr.
Lounibos' option vest on each monthly anniversary after July 1, 1999.
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Officers information
concerning exercisable and unexercisable options held as of December 31, 1998.
The value of in-the-money options is based on a value of $7.00 per share, the
fair market value of the common stock at December 31, 1998, as determined by the
board, and net of the option exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
SHARES VALUE 1998 AT DECEMBER 31, 1998
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth C. Gardner... -- -- 100,000 -- $450,000 --
John E. Zicker....... -- -- 80,000 -- 360,000 --
W. Virginia Walker... 180,000 -- -- -- -- --
Thomas M. Lounibos... 230,000 $1,244,300 208,255 51,745 624,342 $232,853
Perry S. Mizota...... -- -- 50,000 -- 225,000 --
</TABLE>
The $1,244,300 value realized by Mr. Lounibos on the exercise of options as
set forth in the table above is based on a value of $5.50 per share, the fair
market value of the common stock on the date of exercises as determined by the
board of directors, minus the exercise price. Except in the case of Mr.
Lounibos, all options were granted under the amended 1995 stock option plan. Mr.
Lounibos was granted a non plan option to purchase 268,255 shares, of which
38,255 remain unexercised and outstanding, an option to purchase 131,745 shares
under the amended 1995 stock option plan and an option to purchase 90,000 shares
under the 1998 stock option plan.
49
<PAGE> 51
EMPLOYMENT AGREEMENTS
Sagent requires each of its employees to enter into confidentiality
agreements prohibiting the employee from disclosing any confidential or
proprietary information of Sagent. In addition, the agreements generally provide
that upon termination such employee will not work for a competitor and will not
solicit Sagent customers and employees. At the time of commencement of
employment, Sagent's employees also generally sign offer letters specifying
basic terms and conditions of employment. In general, employees of Sagent are
not subject to written employment agreements. However, in connection with
Sagent's acquisition of Talus, Incorporated. Michael Venerable entered into an
employment agreement with Sagent. See "Certain Transactions--Acquisition of
Talus, Incorporated."
EMPLOYEE BENEFIT PLANS
1998 Stock Option Plan. Sagent's 1998 stock option plan provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and for the granting to employees and
consultants of nonstatutory stock options. The stock option plan was approved by
the board of directors and the stockholders in December 1998. Unless terminated
sooner, the stock option plan will terminate automatically in December 2008. A
total of 2,440,000 shares of common stock is reserved for issuance plus annual
increases, beginning in May 2000, equal to the lesser of:
- 1,500,000 shares
- 5% of the outstanding shares on the designated date in May or
- A lesser amount determined by the board
The stock option plan may be administered by the board of directors or a
committee of the board. The administrator has the power to determine the terms
of the options granted, including the exercise price, the number of shares
subject to each option, the exercisability thereof, and the form of
consideration payable upon exercise.
The stock option plan provides that in the event of a merger of Sagent with
or into another corporation, or the sale of substantially all of Sagent's
assets, each outstanding option will be assumed or substituted for by the
successor corporation. If the outstanding options are not assumed or substituted
for, each outstanding option will vest and become exercisable, including the
options that would not have been vested or exercisable. As of December 31, 1998,
no shares had been issued upon the exercise of stock options under the 1998
stock option plan and 218,900 shares were subject to outstanding options.
Amended 1995 Stock Option Plan. Sagent's amended 1995 stock option plan
provides for the granting to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code and for the granting to
employees and consultants of nonstatutory stock options. The amended 1995 stock
option plan was approved by the board of directors in July 1998 and the
stockholders in September 1998. The terms of the amended 1995 stock option plan
are substantially similar to those of the 1998 stock option plan. The board of
directors terminated the amended 1995 stock option plan as to new option grants
in December 1998. As of December 31, 1998, 1,214,443 shares had been issued upon
the exercise of stock options granted under the amended 1995 stock option plan
and 2,056,580 shares were subject to outstanding options.
50
<PAGE> 52
1999 DIRECTOR OPTION PLAN
Non-employee directors are entitled to participate in the 1999 director
option plan. The director option plan was adopted by the board of directors in
January 1999 and approved by the stockholders in February 1999, but it will not
become effective until the date of this offering. The director option plan has a
term of ten years, unless terminated sooner by the board. A total of 150,000
shares of common stock have been reserved for issuance under the director option
plan.
The board has the discretion to grant options to non-employee directors
pursuant to the director option plan. The exercise price of all options is
required to be 100% of the fair market value per share of the common stock,
determined with reference to the closing price of the common stock as reported
on the Nasdaq National Market on the date of grant.
In the event of a merger of Sagent or the sale of substantially all of the
assets of Sagent, if the option is not assumed or substituted, each option shall
become fully vested and exercisable for a period of fifteen days from the date
the board notifies the optionee of the option's full exercisability. If an
option is assumed or substituted and the optionee's service as a director is
terminated, other than upon a voluntary resignation, the option becomes fully
vested. Options granted under the director option plan must be exercised within
thirty days of the end of the optionee's termination of service to Sagent as a
director, employee or consultant, within six months after such director's
termination by death, or within twelve months after such director's termination
by death or disability, but not later than the expiration of the option's ten
year term.
1999 EMPLOYEE STOCK PURCHASE PLAN
Sagent's 1999 employee stock purchase plan was adopted by the board of
directors in January 1999 and by the stockholders in February 1999. A total of
450,000 shares of common stock has been reserved for issuance under the employee
stock purchase plan, plus annual increases every January equal to the lesser of:
- The number of shares optioned during the prior year or
- A lesser amount determined by the board
The employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains successive twenty-four month
offering periods. The offering periods generally start on the first trading day
on or after May 1 and November 1 of each year, except for the first such
offering period which commences on the first trading day on or after the
effective date of this offering and ends on the last trading day on or before
October 31, 1999.
Employees are eligible to participate if they are employed by Sagent or any
participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, the following employees may not be granted
options to purchase stock under the employee stock purchase plan:
- Any employee who immediately after grant owns stock possessing 5% or more
of the total combined voting power or value of all classes of the capital
stock of Sagent or
- Any employee whose rights to purchase stock under all employee stock
purchase plans of Sagent accrues at a rate which exceeds $25,000 worth of
stock for each calendar year
51
<PAGE> 53
Participants may purchase common stock through payroll deductions of up to
20% of the participant's compensation. The maximum number of shares a
participant may purchase during a single offering period is 10,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the purchase plan is 85% of the lower of the fair market value
of the common stock at the beginning of the offering period and the end of each
purchase period.
The purchase plan provides that, in the event of a merger of Sagent with or
into another corporation or a sale of substantially all of Sagent's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be shortened
and a new exercise date will be set, which will occur before the proposed sale
or merger.
The purchase plan will terminate in February 2009. The board of directors
has the authority to amend or terminate the purchase plan, except that no such
action may adversely affect any outstanding rights to purchase stock.
401(K) PLAN
Sagent has a 401(k) plan covering Sagent's full-time employees located in
the United States who are at least 21 years of age. The 401(k) plan is intended
to qualify under Section 401(k) of the Internal Revenue Code. Consequently,
contributions to the 401(k) plan by employees or by Sagent, and the investment
earnings thereon, are not taxable to employees until withdrawn from the 401(k)
plan. Employees may elect to reduce up to 25% of their pre-tax earnings up to
the statutorily prescribed annual limit, which was $10,000 in 1998, and to have
the amount of such reduction contributed to the 401(k) plan. The 401(k) plan
permits, but does not require, additional matching contributions to the 401(k)
plan by Sagent on behalf of all participants in the 401(k) plan. To date, Sagent
has not made any contributions to the 401(k) plan.
52
<PAGE> 54
CERTAIN TRANSACTIONS
Since April 1995, Sagent's inception, there has not been nor is there
currently proposed any transaction or series of similar transactions to which
Sagent or any of its subsidiaries was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than 5% of the common stock of Sagent or any member of the immediate family
of any of the foregoing persons had or will have a direct or indirect material
interest other than (1) compensation agreements and other arrangements, which
are described where required in "Management," and (2) the transactions described
below.
EQUITY INVESTMENT TRANSACTIONS
In July, August and September 1996, Sagent sold 2,615,680 shares of its
Series C preferred stock for $2.50 per share. In August and September 1997 and
January 1998, Sagent sold 1,572,327 shares of its Series D preferred stock for
$3.18 per share. In February and March 1998, Sagent sold 1,895,370 shares of its
Series E preferred stock for $5.40 per share. Listed below are those directors,
executive officers and stockholders who beneficially own five percent or more of
Sagent's securities who participated in the above financings. Sagent believes
that the shares issued in these transactions were sold at the then fair market
value and that the terms of these transactions were no less favorable than
Sagent could have obtained from unaffiliated third parties.
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E AGGREGATE CASH
STOCKHOLDER PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK CONSOLIDATION
----------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Entities affiliated with
Crosspoint Venture
Partners................ 531,708 411,130 925,926 $7,636,664
Entities Affiliated with
El Dorado Ventures...... 531,708 411,130 485,185 5,256,662
Greylock Equity Limited
Partnership............. 480,584 371,599 437,963 4,748,145
Entities affiliated with
U.S. Venture Partners... 1,040,000 150,405 -- 3,078,288
Jeffrey T. Webber......... 6,000 58,262 46,296 450,272
Thomas M. Lounibos........ -- 45,785 -- 145,596
</TABLE>
The Crosspoint Venture Partners shares include shares purchased by
Crosspoint 1993 Entrepreneurs Fund, Crosspoint Venture Partners LS 1997 and with
Crosspoint Venture Partners 1993 which are affiliated entities. Crosspoint 1993
Entrepreneurs Fund has four general partners: Bob Hoff, Don Milder, John Mumford
and Richard W. Shapero, a director of Sagent. Each of these general partners
shares voting and investment power over the shares held by Crosspoint 1993
Entrepreneurs Fund. Crosspoint Venture Partners LS 1997 has one general partner,
Crosspoint Associates 1997, which has six general partners: Mr. Hoff, Mr.
Milder, Mr. Mumford, Mr. Shapero, Barbara Lubash and Seth Neiman. Each of these
general partners shares voting and investment power over the shares held by
Crosspoint Associates 1997. Crosspoint Venture Partners 1993 has one general
partner, Crosspoint Associates 1993, which has four general partners: Mr. Hoff,
Mr. Milder, Mr. Mumford and Mr. Shapero. Each of these general partners shares
voting and investment power over the shares held by Crosspoint Associates 1993.
Mr. Shapero disclaims beneficial ownership of the securities held by such
entities except for his proportional interest in the entities.
The El Dorado Ventures shares include shares purchased by El Dorado
Technology IV, L.P., El Dorado Ventures III, L.P., El Dorado Ventures IV, L.P.
and El Dorado Technology '98, L.P. which are affiliated entities. El Dorado
Ventures III is the general
53
<PAGE> 55
partner of El Dorado Technology IV, L.P. and El Dorado Ventures III, L.P. El
Dorado Ventures III has three general partners: Gary Kalbach, Tom Peterson and
Shanda Bahles, a director of Sagent. Each of these general partners shares
voting and investment power over the shares held by El Dorado Ventures III. El
Dorado Ventures Partners IV, LLC is the general partner of El Dorado Ventures
IV, L.P. and El Dorado Technology '98, L.P. Mr. Kalbach, Mr. Peterson and Ms.
Bahles are the managing directors of El Dorado Ventures IV, L.P. Ms. Bahles
disclaims beneficial ownership of the securities held by such entities except
for her proportional interest in the entities.
The Jeffrey Webber shares include shares purchased by The Enterpreneurs'
Fund, RBW Investments, LLC, individually, his IRA account and his wife. Jeffrey
T. Webber, a director of Sagent, is one of the managing directors of BW
Management LLC, the general partner of The Entrepreneurs' Fund, L.P. Mr. Webber
disclaims beneficial ownership of the shares held by The Entrepreneurs' Fund,
L.P., except to the extent of his proportionate interest in the entity. Mr.
Webber is the managing director of RBW Investments, LLC. Mr. Webber disclaims
beneficial ownership of the shares held by RBW Investments, LLC, except to the
extent of his proportionate interest in the entity.
RESTRICTED STOCK PURCHASE AGREEMENTS
In February 1998, Ms. Walker, Sagent's Executive Vice President, Finance
and Administration, and Chief Financial Officer, exercised two options to
purchase an aggregate of 180,000 shares of common stock and entered into
restricted stock purchase agreements regarding the shares. Ms. Walker paid the
$522,000 aggregate exercise price by delivering three year full-recourse
promissory notes at a 5.47% per annum interest rate. The notes are secured by
the shares of common stock purchased by Ms. Walker. As of February 28, 1999,
$553,465 in unpaid principal and interest was outstanding in the aggregate under
the notes.
In February 1999, Mr. Lounibos, Sagent's Executive Vice President, Sales
and Marketing, exercised three options to purchase an aggregate of 248,255
shares of common stock and entered into restricted stock purchase agreements
regarding the shares. Mr. Lounibos paid the $933,442 aggregate exercise price by
delivering three year full-recourse promissory notes bearing interest at the
rate of 4.66% per annum. The notes are secured by the shares of common stock
purchased by Mr. Lounibos. As of February 28, 1999, $933,442 in unpaid principal
and interest was outstanding in the aggregate under the notes.
ACQUISITION OF TALUS, INCORPORATED
In February 1998, Sagent and Talus, Incorporated entered into an agreement
and plan of reorganization in which Sagent acquired Talus, Incorporated for
total consideration of $1,170,000 in cash and 259,258 shares of Series E
preferred stock. Michael P. Venerable, Sagent's Vice President, Professional
Services, was President of Talus, Incorporated at the time of the acquisition.
As consideration for his shares of Talus, Incorporated, Mr. Venerable received:
- $571,051 in cash
- 109,919 shares of Series E preferred stock
- An employment agreement with Sagent
54
<PAGE> 56
As part of the employment agreement, Mr. Venerable received:
- A salary of $123,000
- A bonus based upon performance milestones
- An option to purchase 150,000 shares of common stock at an exercise price
of $4.30 per share
The vesting of his option is as follows:
- 20% on the first anniversary of the agreement
- 20% on the second anniversary of the agreement
- 60% on the third anniversary of the agreement
In the event of a change of control of Sagent, the option will accelerate
and become immediately exercisable if such options are not assumed. If Mr.
Venerable's options are assumed and he is terminated for any reason other than
for cause or if he voluntarily terminates his employment for good reason, after
the change of control, the unvested portion of the option will accelerate and
become immediately exercisable. If Mr. Venerable's employment is terminated for
cause or if he resigns for any reason other than good reason, he has agreed not
to engage in a restricted business or solicit any of Sagent's employees for
three years.
EXECUTIVE CHANGE OF CONTROL POLICY
The board has adopted an executive change of control policy applicable to
key executives of Sagent. The policy provides that options granted to key
executives will be assumed upon a change of control of Sagent. Furthermore, if a
key executive remains an employee at the time of the change of control, the
vesting of that individual's key executive options will accelerate, and Sagent's
right to repurchase will lapse, as to 50% of the unvested portion of such
options. If a key executive is terminated for any reason other than for cause or
terminates employment for good reason during the one-year period after the date
of the change of control, then the remaining unvested portion of such key
executive options will accelerate and become immediately exerciseable, and
Sagent's right to repurchase the applicable portion of such shares will lapse.
TRANSACTIONS WITH ISAR
Klaus S. Luft, who has agreed to join the board as of the first meeting of
the board following completion of the offering, is a general partner of ISAR.
Sagent has entered into an agreement with ISAR, pursuant to which ISAR
established a German company, Magnolia II, to distribute and support Sagent's
products in Germany, Austria and Switzerland. Sagent has entered into an
agreement with Magnolia II pursuant to which Magnolia II has the exclusive
right, other than with respect to value added resellers who have been or will be
granted worldwide distribution rights, to distribute Sagent's products in
Germany, Austria and Switzerland. Magnolia II has agreed to pay Sagent royalties
on sales and maintenance of Sagent's products. Sagent has a call option to
acquire Magnolia II with cash, registrable securities or a combination of cash
and registrable securities, with the acquisition price determined according to
the date of the acquisition and Magnolia II's revenues.
In May 1998, Sagent and ISAR entered into a common stock purchase agreement
in which ISAR purchased 28,000 shares of Sagent's common stock for an aggregate
purchase price of $120,960. In May 1998, Sagent granted ISAR a warrant to
purchase 22,000 shares of Sagent's common stock at an exercise price of $5.40
per share. Mr. Luft disclaims
55
<PAGE> 57
beneficial ownership of the shares and warrant held by ISAR except to the extent
of his proportionate interest in ISAR.
OTHER TRANSACTIONS
Sagent has entered into indemnification agreements with each of its
executive officers and directors.
Sagent has granted options to certain of its executive officers. See
"Management--Option Grants in Last Fiscal Year."
Holders of preferred stock are entitled to certain registration rights with
respect to the common stock issued or issuable upon conversion thereof. See
"Description of Capital Stock--Registration Rights."
Sagent believes that all related-party transactions described above were on
terms no less favorable than could have been otherwise obtained from unrelated
third parties. All future transactions between Sagent and its principal
officers, directors and affiliates will be approved by a majority of the
independent and disinterested members of the board and will be on terms no less
favorable that could be obtained from unrelated third parties.
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<PAGE> 58
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership
of Sagent's common stock as of December 31, 1998, by the following individuals
or groups:
- - Each person or entity who is known by Sagent to own beneficially more than 5%
of Sagent's outstanding stock
- - Each of the Named Executive Officers
- - Each director of Sagent
- - All directors and executive officers as a group
Applicable percentage ownership in the following table is based on
18,669,377 shares of common stock outstanding as of December 31, 1998, as
adjusted to reflect the conversion of all outstanding shares of preferred stock
upon the closing of this offering, treating as outstanding all shares of common
stock issuable upon exercise of options exercisable within 60 days of December
31, 1998 held by the particular stockholder and that are included in the first
column. The numbers shown in the table below assume no exercise by the
underwriters of their over-allotment option.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Sagent Technology, Inc., 800 W. El Camino Real, Suite
300, Mountain View, California 94040. Except as otherwise indicated, and subject
to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.
<TABLE>
<CAPTION>
PERCENTAGE
OWNED
SHARES OWNED -------------------
PRIOR TO THE BEFORE AFTER
OFFERING OFFERING OFFERING
------------ -------- --------
<S> <C> <C> <C>
5% STOCKHOLDERS:
Entities affiliated with Crosspoint Venture
Partners(a).............................. 4,179,876 22.4% 17.7%
Entities affiliated with El Dorado
Ventures(b).............................. 3,739,135 20.0 15.8
Greylock Equity Limited Partnership(c)...... 3,379,034 18.1 14.3
Entities affiliated with U.S. Venture
Partners(d).............................. 1,190,405 6.4 5.0
DIRECTORS AND OFFICERS:
Kenneth C. Gardner(e)....................... 1,200,000 6.4 5.1
Jeffrey T. Webber(f)........................ 341,884 1.8 1.4
John E. Zicker(g)........................... 968,000 5.2 4.1
W. Virginia Walker(h)....................... 180,000 * *
Perry S. Mizota(i).......................... 320,000 1.7 1.4
Thomas M. Lounibos(j)....................... 434,040 2.8 2.2
Richard W. Shapero(a)....................... 4,179,876 22.4 17.7
Shanda Bahles(b)............................ 3,739,135 20.0 15.8
All directors and officers as a group
(10 persons)(k).......................... 11,809,364 61.0 48.5
</TABLE>
- -------------------------
* Represents less than one percent of the total
(a) Principal address is The Pioneer Hotel Building, 2925 Woodside Road,
Woodside, CA 94062. Number of shares includes 3,155,547 shares held by
Crosspoint Venture Partners 1993, 925,926 shares held by Crosspoint Venture
Partners LS 1997 and 98,403 shares held by Crosspoint 1993 Entrepreneurs
Fund. Crosspoint 1993 Entrepreneurs Fund has four general partners: Bob
Hoff, Don Milder, John Mumford and Richard W. Shapero, a director of
Sagent. Each of these general partners shares voting and investment power
over the shares held by Crosspoint 1993 Entrepreneurs Fund. Crosspoint
Venture Partners LS 1997 has one general partner, Crosspoint Associates
1997,
57
<PAGE> 59
which has six general partners: Mr. Hoff, Mr. Milder, Mr. Mumford, Mr.
Shapero, Barbara Lubash and Seth Neiman. Each of these general partners
shares voting and investment power over the shares held by Crosspoint
Associates 1997. Crosspoint Venture Partners 1993 has one general partner,
Crosspoint Associates 1993, which has four general partners: Mr. Hoff, Mr.
Milder, Mr. Mumford and Mr. Shapero. Each of these general partners shares
voting and investment power over the shares held by Crosspoint Associates
1993. Mr. Shapero disclaims beneficial ownership of the securities held by
such entities except for his proportional interest in the entities.
(b) Principal address is 2400 Sand Hill Road, Suite 100, Menlo Park, CA 94025.
Number of shares includes 3,172,773 shares held by El Dorado Ventures III
L.P., 478,658 shares held by El Dorado Ventures IV, L.P., 81,177 shares
held by El Dorado Technology IV, L.P. and 6,527 shares held by El Dorado
Technology '98, L.P. El Dorado Ventures III is the general partner of El
Dorado Technology IV, L.P. and El Dorado Ventures III, L.P. El Dorado
Ventures III has three general partners: Gary Kalbach, Tom Peterson and
Shanda Bahles, a director of Sagent. Each of these general partners shares
voting and investment power over the shares held by El Dorado Ventures III.
El Dorado Venture Partners IV, LLC is the general partner of El Dorado
Ventures IV, L.P. and El Dorado Technology '98, L.P. Mr. Kalbach, Mr.
Peterson and Ms. Bahles are the managing directors of El Dorado Ventures
IV, L.P. Ms. Bahles disclaims beneficial ownership of the securities held
by such entities except for her proportional interest in the entities.
(c) Principal address is 755 Page Mill Road, Suite A-100, Palo Alto, CA 94304.
(d) Principal address is 2180 Sand Hill Road, Suite 300, Menlo Park, CA 94025.
Number of shares includes 1,026,129 shares held by U.S. Venture Partners
IV, L.P., 124,993 shares held by Second Ventures II, L.P., 35,712 shares
held by U.S.V.P. Entrepreneur Partners II, L.P. and 3,571 shares held by
2180 Associates Fund. 2180 Associates Fund, Second Ventures II, L.P., U.S.
Venture Partners IV, L.P. and U.S.V.P. Entrepreneur Partners II, L.P. are
affiliated entities. Presidio Management Group IV, L.P. is the general
partner of Second Ventures II, L.P., U.S. Venture Partners IV, L.P. and
U.S.V.P. Entrepreneur Partners II, L.P. Presidio Management Group IV, L.P.
has eight general partners: Irwin Federman, Marc Friend, Jason Green, Steve
Krausz, Lucio Lanza, Stuart Phillips, Jonathan Root, M.D. and Phil Young.
Each of these general partners shares voting and investment power over the
shares held by Presidio Management Group IV, L.P. 2180 Associates Fund has
three general partners: Mr. Friend, Mr. Root and Jeff Kanin. Each of these
general partners shares voting and investment power over the shares held by
2180 Associates Fund.
(e) Includes 925,000 shares registered in the name of Kenneth C. Gardner and
Patricia T. Gardner, Trustees of the Gardner Family Trust u/d/t dated
September 6, 1996, 100,000 shares registered in the name of Delaware
Charter Guarantee & Trust Co., Trustee fbo Kenneth C. Gardner, IRA and
75,000 shares registered in the name of trusts. Also includes an option
granted to Kenneth C. Gardner to purchase 100,000 shares exercisable within
60 days of December 31, 1998.
(f) Includes 207,692 shares registered in the name of Jeffrey T. Webber, 91,325
shares registered in the name of The Entrepreneurs' Fund, L.P., 32,778
shares registered in the name of Mr. Webber's wife, 6,944 shares registered
in the name of RBW Investments, LLC and 3,145 shares registered in the name
of First Trust Corporation fbo Jeffrey T. Webber. Jeffrey T. Webber, a
director of Sagent, is one of the managing directors of BW Management, LLC,
the general partner of The Entrepreneurs' Fund, L.P. Mr. Webber disclaims
beneficial ownership of the shares held by The Entrepreneurs' Fund, L.P.,
except to the extent of his proportionate interest in the entity. Mr.
Webber is the managing director of RBW Investments, LLC. Mr. Webber
disclaims beneficial ownership of the shares held by RBW Investments, LLC,
except to the extent of his proportionate interest in the entity. Mr.
Webber holds shares directly, holds shares through his IRA account, First
Trust Corporation fbo Jeffrey T. Webber, and shares are held by his wife.
(g) Includes 788,000 shares registered in the name of John E. Zicker and
100,000 shares registered in the name of Delaware Charter Guarantee & Trust
Co., Trustee fbo John E. Zicker, IRA. Also includes an option granted to
John E. Zicker to purchase 80,000 shares, exercisable within 60 days of
December 31, 1998.
(h) Includes 138,750 shares which are subject to a repurchase option held by
Sagent as of December 31, 1998.
(i) Includes an option to purchase 50,000 shares, exercisable within 60 days of
December 31, 1998.
58
<PAGE> 60
(j) Includes an option to purchase an aggregate of 248,255 shares exercisable
within 60 days of December 31, 1998 and 45,575 shares which are subject to
a repurchase option held by Sagent as of December 31, 1998.
(k) Includes all shares described in the above footnotes and includes shares,
of which 137,919 were outstanding as of December 31, 1998 and 218,510
shares are subject to options and warrants that are exercisable within 60
days of December 31, 1998, held by other executive officers and an
affiliate of Klaus Luft, a director designee.
59
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of Sagent
will consist of 70,000,000 shares of common stock, $0.001 par value, and
5,000,000 shares of preferred stock, $0.001 par value.
The following summary of provisions of the common stock and preferred stock
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of Sagent's certificate of incorporation, which is included
as an exhibit to the registration statement of which this prospectus is a part,
and by the provisions of Delaware law.
COMMON STOCK
After giving effect to the conversion of all previously outstanding
preferred stock into shares of common stock, as of December 31, 1998, there were
18,669,377 shares of common stock outstanding held of record by approximately
144 stockholders. There will be 23,669,377 shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option and no exercise
of certain outstanding options or warrants, after giving effect to the sale of
common stock in the offering.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
the holders of common stock are entitled to receive ratably any dividends
declared by the board of directors out of funds legally available for the
payment of dividends. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of Sagent, the holders of common stock are entitled to
share ratably in all assets, subject to prior distribution rights of the
preferred stock, if any, then outstanding. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock to be issued in the offering will
be fully paid and non-assessable.
PREFERRED STOCK
Upon the consummation of the offering of Sagent's common stock, each
outstanding share of preferred stock will automatically convert into one share
of common stock. Pursuant to Sagent's certificate of incorporation, the board of
directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of preferred stock in one or more series and to fix
the designations, powers, preferences, privileges, which may be greater than the
rights of the common stock. The board, without stockholder approval, can issue
preferred stock with voting, conversion or other rights that could adversely
affect the voting power and other rights of the holders of common stock.
Preferred stock could thus be issued quickly with terms calculated to delay or
prevent a change in control of Sagent or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock. At present, there are no shares
of preferred stock outstanding, and Sagent has no plans to issue any preferred
stock.
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<PAGE> 62
COMMON STOCK WARRANTS
Upon completion of the offering, Sagent will have three warrants
outstanding to purchase an aggregate of 18,306 shares of common stock,
exerciseable as follows:
- 5,539 shares at an exercise price of $6.50 per share
- 9,433 shares at an exercise price of $3.18 per share
- 3,334 shares at an exercise price of $5.40 per share
These warrants expire 10 years from the date of execution or five years from the
effective date of the offering, whichever is later.
REGISTRATION RIGHTS
Upon completion of the offering, the holders of an aggregate of
approximately 14.5 million shares of common stock will be entitled to certain
rights with respect to the registration of such shares under the Securities Act
of 1933. Under the terms of the registration rights agreements, if Sagent
proposes to register any of its securities under the Securities Act of 1933,
either for its own account or for the account of other security holders
exercising registration rights, these holders are entitled to notice of such
registration and are entitled to include shares of common stock in the
registration. The rights are subject to conditions and limitations, among them
the right of the underwriters of an offering subject to the registration to
limit the number of shares included in such registration. Holders of these
rights may also require Sagent to file a registration statement under the
Securities Act of 1933 at its expense with respect to their shares of common
stock, and Sagent is required to use its best efforts to effect such
registration, subject to conditions and limitations. Furthermore, stockholders
with registration rights may require Sagent to file additional registration
statements on Form S-3, subject to conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAWS PROVISIONS
Delaware Anti-Takeover Statute. Sagent is subject to Section 203 of the
Delaware General Corporation Law. In general, these provisions prohibit a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless the transaction in which
the person became an interested stockholder is approved in a manner presented in
Section 203 of the Delaware General Corporation Law.
Generally, a "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years, did own, 15% or more of a
corporation's voting stock.
Certificate of Incorporation. In February 1999, Sagent's stockholders
approved amendments to its certificate of incorporation, to provide:
- That the board of directors may issue, without further action by the
stockholders, up to 5,000,000 shares of undesignated preferred stock
- That any action to be taken by stockholders of Sagent must be effected at
a duly called annual or special meeting and not by a consent in writing
- For the division of the board of directors into three classes, with each
class serving for a term of three years
61
<PAGE> 63
- That vacancies on the board, including newly created directorships, can
be filled only by a majority of the directors then in office
- That directors of Sagent may be removed only for cause
- For the elimination of cumulative voting
Bylaws. In January 1999, the board approved amendments to the bylaws to
provide that special meetings of stockholders of Sagent may be called only by
the chairman of the board, the president or the board.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board and in the policies formulated by the
board and to discourage certain types transactions that may involve an actual or
threatened change of control of Sagent. These provisions also are designed to
reduce the vulnerability of Sagent to an unsolicited proposal for a takeover of
Sagent that does not contemplate the acquisition of all of its outstanding
shares or an unsolicited proposal for the restructuring or sale of all or part
of Sagent. These provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of Sagent. They may
also have the effect of preventing changes in the management of Sagent.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Sagent's common stock is ChaseMellon
Shareholder Services L.L.C.
LISTING
Sagent has applied to list its common stock on the Nasdaq National Market
under the trading symbol "SGNT". Sagent has not applied to list its common stock
on any other exchange or quotation system.
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering, because of contractual and legal restrictions on resale, sales of
substantial amounts of common stock in the public market after the restrictions
lapse could cause the prevailing market price of Sagent's common stock to fall
and impede Sagent's ability to raise equity capital in the future.
Upon completion of the offering, Sagent will have outstanding an aggregate
of 23,669,377 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or outstanding
warrants after December 31, 1998. Of these outstanding shares, the 5,000,000
shares sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act, of 1933 unless purchased by
"affiliates" of Sagent as that term is defined in Rule 144 under the Securities
Act of 1933. The remaining 18,669,377 shares of common stock outstanding upon
completion of the offering and held by existing stockholders will be "restricted
shares," as that term is defined in Rule 144 under the Securities Act of 1933.
Restricted shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act of 1933, which rules are summarized below,
or another exemption therefrom. Sales of the restricted shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of the common stock.
All officers, directors and certain other holders of common stock have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of shares of common stock owned by them or that could be purchased by
them through the exercise of options for a period of 180 days after the date of
this prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
- No shares of common stock will be eligible for sale as of the effective
date of this offering
- No additional shares will be eligible for sale beginning 90 days after
the effective date of this offering
- 18,404,766 additional shares will be eligible for sale beginning 180 days
after the effective date of this offering, subject in some cases to
certain volume limitations
Of the 264,611 remaining restricted shares,
- 236,611 shares are subject to a repurchase option of Sagent in the event
of termination of employment
- 28,000 shares will not be eligible for sale pursuant to Rule 144 until
the expiration of a one-year holding period in December 1999
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed to be
63
<PAGE> 65
affiliates of Sagent, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- One percent of the number of shares of common stock then outstanding,
which will equal approximately 236,694 shares immediately after this
offering or
- The average weekly trading volume of the common stock as reported through
the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions and notice requirements
and to the availability of current public information about Sagent. Under
Rule 144(k), a person who is not deemed to have been an affiliate of
Sagent at any time during the 90 days preceding a sale, and who has
beneficially owned for at least two years the restricted shares proposed
to be sold, including the holding period of any prior owner except an
affiliate, is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice
provisions of Rule 144.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 permits resales of shares issued prior to the date an
issuer becomes subject to the reporting requirements of the Securities Exchange
Act of 1934, pursuant to compensatory benefit plans and contracts which meant
the requirements of Rule 701. Such resales may be made commencing 90 days after
the issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, in reliance upon rule 144 but without compliance with
certain restrictions, including the holding period requirements. In addition,
the Securities and Exchange Commission has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, along with the
shares acquired upon exercise of such options, including exercises after the
date the issuer becomes so subject. Securities issued in reliance on Rule 701
are restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144, and by affiliates under Rule 144 without compliance with its one-year
minimum holding period requirement.
Sagent has agreed not to sell or otherwise dispose of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the common stock, for a
period of 180 days after the date of this prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Sagent intends to file a registration statement under the Securities Act of
1933 covering the shares of common stock subject to outstanding options or
reserved for issuance under the amended 1995 stock option plan, 1998 stock
option plan, 1999 employee stock purchase plan and the director option plan.
Such registration statement is expected to be filed as early as the
effectiveness of the registration statement covering the shares of common stock
offered in this offering and will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to affiliates and the expiration of a
180-day lockup period, be available for sale in the open market, except to the
extent that such shares are subject to vesting restrictions with Sagent or the
contractual restrictions described above.
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<PAGE> 66
UNDERWRITING
Subject to the terms and subject to conditions contained in an underwriting
agreement dated , 1999, the underwriters named
below, who are represented by Donaldson, Lufkin & Jenrette Securities
Corporation, Hambrecht & Quist LLC and U.S. Bancorp Piper Jaffray Inc., have
severally agreed to purchase from Sagent the respective number of shares of
common stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................
U.S. Bancorp Piper Jaffray Inc. ............................
-------
Total....................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares of common stock offered hereby, other than
those shares covered by the over-allotment option described below, if any are
purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers, including the
underwriters, at such price less a concession not in excess of $ per share.
The underwriters may allow, and such dealers may re-allow, to other dealers a
concession not in excess of $ per share. After the initial offering of the
common stock, the public offering price and other selling terms may be changed
by the Representatives at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in the offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJdirect Inc. for sale to its
brokerage account holders.
Sagent has granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of 750,000 additional shares of common stock at the
initial public offering price less underwriting discounts and commission. The
underwriters may exercise such option solely to cover over-allotments, if any,
made in connection with the offering. To the extent that the underwriters
exercise such option, each underwriter will become obligated, subject to certain
conditions, to purchase its pro rata portion of such additional shares based on
such underwriters' percentage underwriting commitment as indicated in the above
table.
65
<PAGE> 67
Sagent has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act or 1933, or to
contribute to payments that the underwriters may be required to make in respect
thereof.
Each of Sagent, its executive officers, directors, stockholders and option
holders has agreed, subject to certain exceptions, not to:
- Offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock
- Enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash or
otherwise
Donaldson, Lufkin & Jenrette Securities Corporation may choose to release
some of these shares from such restrictions prior to the expiration of the
180-day period lock-up period, although it has no current intention of doing so.
In addition, during such 180-day period, Sagent has also agreed not to file
any registration statement with respect to, and each of its executive officers,
directors and certain stockholders of Sagent has agreed not to make any demand
for, or exercise any right with respect to, the registration of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price of the shares of common stock
offered will be determined by negotiation among Sagent and the underwriters. The
factors to be considered in determining the initial public offering price
include:
- The history of and the prospects for the industry in which Sagent
competes
- The past and present operations of Sagent
- The historical results of operations of Sagent
- The prospects for future earnings of Sagent
- The recent market prices of securities of generally comparable companies
- The general condition of the securities markets at the time of the
offering
Other than in the United States, no action has been taken by Sagent or the
underwriters that would permit a public offering of the shares of common stock
offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a
66
<PAGE> 68
solicitation of an offer to buy any shares of common stock offered in any
jurisdiction in which such an offer or a solicitation is unlawful.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot the offering,
creating a syndicate short position. The underwriters may bid for and stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Sagent by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Arthur F. Schneiderman, a member of Wilson Sonsini
Goodrich & Rosati, is Secretary of Sagent. Mr. Schneiderman and investment
partnerships, of which certain members of Wilson Sonsini Goodrich & Rosati are
general partners, beneficially own an aggregate of 180,445 shares of Sagent's
common stock. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Brobeck Phleger & Harrison LLP, Palo Alto,
California.
EXPERTS
The consolidated balance sheets as of December 31, 1998 and 1997 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998 for Sagent
Technology, Inc. included in this prospectus and registration statement, have
been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of such firm as experts in
accounting and auditing.
The balance sheets as of December 31, 1997 and 1996 and the statements of
operations and retained earnings and cash flows for the two years in the period
ended December 31, 1997 for Talus, Incorporated included in this prospectus and
registration statement, have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
such firm as experts in accounting and auditing.
67
<PAGE> 69
AVAILABLE INFORMATION
We have filed with the SEC, Washington, D.C. 20549, under the Securities
Act of 1933, a registration statement on Form S-1 relating to the common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules thereto. For
further information with respect to Sagent and the shares we are offering
pursuant to this prospectus you should refer to the registration statement,
including the exhibits and schedules thereto. You may inspect a copy of the
registration statement without charge at the Public Reference Section of the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at the SEC's
regional offices at 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California
90036. The SEC maintains an Internet site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The SEC's World Wide Web address is www.sec.gov.
Sagent intends to furnish holders of the common stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing unaudited
condensed financial information for the first three quarters of each fiscal
year. Sagent intends to furnish such other reports as it may determine or as may
be required by law.
68
<PAGE> 70
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAGENT TECHNOLOGY, INC. PAGE
<S> <C>
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998....................... F-4
Consolidated Statements of Stockholders' Equity as of
December 31, 1995, 1996, 1997 and 1998................. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998....................... F-6
Notes to Consolidated Financial Statements................ F-7
TALUS, INCORPORATED
Report of Independent Accountants......................... F-25
Balance Sheets as of December 31, 1996 and 1997........... F-26
Statements of Operations and Retained Earnings for the
years ended December 31, 1996 and 1997................. F-27
Statements of Cash Flows for the years ended December 31,
1996 and 1997.......................................... F-28
Notes to Financial Statements............................. F-29
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Consolidated Financial Statements (unaudited)... F-34
Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1998 (unaudited)............... F-35
Notes to Pro Forma Consolidated Financial Statements
(unaudited)............................................ F-36
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Sagent Technology, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related statements of operations and stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Sagent Technology,
Inc. and its subsidiaries at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
San Jose, California
January 27, 1999
F-2
<PAGE> 72
SAGENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Assets
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
AS OF DECEMBER 31, EQUITY AS OF
------------------- DECEMBER 31,
1997 1998 1998
-------- -------- -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................... $ 3,813 $ 3,093
Accounts receivable, net of allowance for
doubtful accounts of $450 in 1997 and $508
in 1998................................... 1,603 5,376
Prepaid assets............................... 220 832
-------- --------
Total current assets...................... 5,636 9,301
Property and equipment, net.................. 1,396 3,044
Other assets................................. 153 851
-------- --------
Total assets.............................. $ 7,185 $ 13,196
======== ========
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable............................. $ 512 $ 1,478
Accrued liabilities.......................... 1,383 4,216
Deferred revenue............................. 1,077 1,304
Current portion of capital lease
obligations............................... 463 1,181
-------- --------
Total current liabilities................. 3,435 8,179
Long-term portion of capital lease
obligations............................... 627 3,346
-------- --------
Total liabilities......................... 4,062 11,525
-------- --------
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.001
per share:
Authorized: 13,056 shares in 1997 and
15,556 in 1998;
Issued and outstanding: 12,390 shares in
1997 and 14,544 shares in 1998 and no
pro forma shares (unaudited)
(Liquidation value of $29,554 at
December 31, 1998)...................... 12 15 $ --
Common stock, par value $.001 per share:
Authorized: 20,000 shares in 1997 and
25,000 shares in 1998;
Issued and outstanding: 3,249 shares in
1997, 4,125 shares in 1998 and 18,669
pro forma shares (unaudited)............ 3 4 19
Additional paid-in capital................... 18,033 30,699 30,699
Notes receivable from stockholder............ (522) (522)
Cumulative translation adjustment............ 101 101
Accumulated deficit.......................... (14,925) (28,626) (28,626)
-------- -------- --------
Total stockholders' equity................ 3,123 1,671 $ 1,671
-------- -------- --------
Total liabilities and stockholders'
equity.................................. $ 7,185 $ 13,196
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 73
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
REVENUES, NET:
Licenses...................................... $ 240 $ 5,728 $ 10,459
Services...................................... 39 1,350 6,584
------- ------- --------
Total revenues, net........................ 279 7,078 17,043
------- ------- --------
COST OF REVENUES:
Licenses...................................... 120 194 143
Services...................................... 127 679 4,923
------- ------- --------
Total cost of revenues..................... 247 873 5,066
------- ------- --------
Gross profit.................................... 32 6,205 11,977
------- ------- --------
OPERATING EXPENSES:
Sales and marketing........................... 2,727 5,929 12,037
Research and development...................... 3,425 4,969 6,013
General and administrative.................... 1,111 2,215 5,186
Acquired in-process technology (Note 7)....... 2,425
------- ------- --------
Total operating expenses................... 7,263 13,113 25,661
------- ------- --------
Loss from operations............................ (7,231) (6,908) (13,684)
Interest expense................................ (65) (191) (207)
Other income.................................... 257 199 190
------- ------- --------
Net loss........................................ $(7,039) $(6,900) $(13,701)
======= ======= ========
Historical basic net loss per share............. $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per share........... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation of
historical basic net loss per share........... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per share......... 2,637 2,860 3,722
Pro forma net loss per share, basic
(unaudited)................................... $ (0.74)
========
Pro forma net loss per share, diluted
(unaudited)................................... $ (0.75)
========
Shares used in computing pro forma net loss per
share, basic (unaudited)...................... 18,495
Shares used in computing pro forma net loss per
share, diluted (unaudited).................... 18,266
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 74
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE STOCKHOLDERS
--------------- --------------- PAID-IN TRANSLATION NOTE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT RECEIVABLE DEFICIT
------ ------ ------ ------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1995............. 8,122 $ 8 2,625 $2 $ 6,136 $ $ $ (986)
Issuance of common stock at $.09
per share........................... 13 1
Issuance of Series C preferred stock
at $2.50 per share for cash, net of
issuance costs of $16............... 2,616 3 6,525
Repurchase of common stock at $.045
per share........................... (18) (1)
Stock options exercised............... 14 1
Net loss.............................. (7,039)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1996............. 10,738 11 2,634 2 12,662 -- -- (8,025)
Issuance of Series C preferred stock
at $2.50 per share for cash......... 79 198
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $15............... 1,573 1 4,983
Stock options exercised............... 615 1 67
Issuance of Series C preferred stock
warrant............................. 23
Issuance of common stock warrant...... 100
Net loss.............................. (6,900)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1997............. 12,390 12 3,249 3 18,033 -- -- (14,925)
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $13............... 45 132
Issuance of Series E preferred stock
at $5.40 per share for cash, net of
issuance costs of $7................ 1,896 3 10,225
Issuance of Series E preferred stock
at $5.40 per share in connection
with Talus, Incorporated
Acquisition, net of issuance costs
of $1............................... 259 1,400
Stock options exercised............... 715 1 235
Repurchase of Series C preferred stock
at $2.50 per share.................. (40) (100)
Repurchase of Series D preferred stock
at $3.18 per share.................. (6) (18)
Repurchase of common stock............ (57) (20)
Issuance of Series E preferred stock
warrant............................. 18
Issuance of common stock warrants..... 96
Exercise of common stock options at
$5.50 per share..................... 10 55
Cumulative translation adjustment..... 101
Issuance of notes receivable for
common stock........................ 180 522 (522)
Exercise of stock purchase right...... 28 121
Net loss.............................. (13,701)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1998............. 14,544 $15 4,125 $4 $30,699 $101 $(522) $(28,626)
====== === ===== == ======= ==== ===== ========
<CAPTION>
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCES, DECEMBER 31, 1995............. $ 5,160
Issuance of common stock at $.09
per share........................... 1
Issuance of Series C preferred stock
at $2.50 per share for cash, net of
issuance costs of $16............... 6,527
Repurchase of common stock at $.045
per share........................... (1)
Stock options exercised............... 1
Net loss.............................. (7,039)
--------
BALANCES, DECEMBER 31, 1996............. 4,649
Issuance of Series C preferred stock
at $2.50 per share for cash......... 198
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $15............... 4,984
Stock options exercised............... 68
Issuance of Series C preferred stock
warrant............................. 23
Issuance of common stock warrant...... 100
Net loss.............................. (6,899)
--------
BALANCES, DECEMBER 31, 1997............. 3,123
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $13............... 132
Issuance of Series E preferred stock
at $5.40 per share for cash, net of
issuance costs of $7................ 10,228
Issuance of Series E preferred stock
at $5.40 per share in connection
with Talus, Incorporated
Acquisition, net of issuance costs
of $1............................... 1,400
Stock options exercised............... 236
Repurchase of Series C preferred stock
at $2.50 per share.................. (100)
Repurchase of Series D preferred stock
at $3.18 per share.................. (18)
Repurchase of common stock............ (20)
Issuance of Series E preferred stock
warrant............................. 18
Issuance of common stock warrants..... 96
Exercise of common stock options at
$5.50 per share..................... 55
Cumulative translation adjustment..... 101
Issuance of notes receivable for
common stock........................ --
Exercise of stock purchase right...... 121
Net loss.............................. (13,701)
--------
BALANCES, DECEMBER 31, 1998............. $ 1,671
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 75
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net loss.......................................... $(7,039) $(6,900) $(13,701)
Adjustments to reconcile net loss to net cash used
in operating activities:
Acquired in-process technology................. -- -- 2,425
Depreciation and amortization.................. 268 835 1,445
Fair value of stock warrants issued............ 123 114
Change in operating assets and liabilities, net
of acquisition:
Accounts receivable.......................... (152) (1,451) (3,773)
Prepaid assets............................... (67) (99) (550)
Other assets................................. (105) 16 (1,011)
Accounts payable............................. 513 (72) 966
Accrued liabilities.......................... 221 1,136 2,833
Deferred revenue............................. 51 1,027 227
------- ------- --------
Net cash used in operating activities............... (6,310) (5,385) (11,025)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of restricted investments................ 26 150 --
Purchase of restricted investments................ (150) --
Purchase of property and equipment................ (1,143) (1,072) (1,170)
Acquisition of Talus, Incorporated................ -- -- (2,696)
------- ------- --------
Net cash used in investing activities............... (1,267) (922) (3,866)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital lease financings............ 738 650 4,103
Payments of principal under capital lease
obligations.................................... (139) (356) (666)
Proceeds from issuance of preferred stock, net of
issuance costs................................. 6,527 5,183 10,360
Repurchase of common stock........................ (1) -- (20)
Repurchase of preferred stock..................... -- -- (118)
Proceeds from issuance of common stock............ 2 68 411
------- ------- --------
Net cash provided by financing activities........... 7,127 5,545 14,070
Effect of exchange rate changes in cash........ -- -- 101
------- ------- --------
Net decrease in cash and cash equivalents........... (450) (762) (720)
Cash and cash equivalents, beginning of year........ 5,025 4,575 3,813
------- ------- --------
Cash and cash equivalents, end of year.............. $ 4,575 $ 3,813 $ 3,093
======= ======= ========
Supplemental disclosure of cash flow information:
Cash payments for interest........................ $ 65 $ 184 $ 191
Supplemental non-cash financing activities:
Issuance of preferred stock warrants.............. -- 23 18
Issuance of common stock warrants................. -- 100 96
Issuance of common stock for notes and interest
receivable..................................... -- -- 522
Liabilities assumed in connection with acquisition
of Talus, Incorporated:
Fair value of assets acquired..................... 3,526
Cash paid......................................... (1,170)
Preferred stock issued............................ (1,400)
--------
Liabilities assumed............................ $ 956
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 76
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. FORMATION AND BUSINESS OF SAGENT
Sagent Technology, Inc. develops, markets and supports software designed to
address organizations' information access, analysis and delivery needs.
Sagent was incorporated under the laws of the State of California in April
1995 under the name of Savant Software, Inc. In June 1995, Sagent changed its
name to Sagent Technology, Inc. Sagent was reincorporated under the laws of the
State of Delaware in September 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Sagent
Technology, Inc. and its wholly-owned subsidiaries, Sagent Technology Japan KK
and Sagent Technology (Canada), Inc. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The functional currency of Sagent's subsidiaries is the local currency.
Accordingly, Sagent applies the current rate method to translate the
subsidiaries' financial statements into U.S. dollars. Translation adjustments
are included as a separate component of stockholders' equity in the accompanying
consolidated financial statements.
CASH AND CASH EQUIVALENTS
Sagent considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be cash
equivalents.
BUSINESS RISK AND CONCENTRATION OF CREDIT RISK
Sagent operates in one segment and its revenue is attributable to the sale
of one product line and related maintenance, consulting and training services.
Sagent's future success will depend upon its ability to continue to improve its
product and to develop new products to meet diverse and evolving customer
demands.
Financial instruments which potentially subject Sagent to concentrations of
credit risk consist primarily of temporary cash investments, including money
market accounts. Sagent places its temporary cash investments with two major
financial institutions. Sagent maintains allowances for potential credit losses
and such losses to date have been within
F-7
<PAGE> 77
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
management's expectations. There were no customers with balances due to Sagent
in excess of 10% of aggregate accounts receivable at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of Sagent's financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other liabilities, approximate fair value due to their short
maturities. Based upon borrowing rates currently available to Sagent for loans
with similar terms, the carrying value of capital lease obligations approximates
fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis over the estimated useful lives of the related assets,
generally two to five years. Leased assets are amortized on a straight-line
basis over the lesser of the estimated useful life or the lease term. Gains and
losses upon asset disposal are taken into income in the year of disposition.
REVENUE RECOGNITION
Sagent's revenues are derived from two sources, product license revenues
and service revenues. License revenues are derived from product sales to end
users, resellers and distributors and enterprise application vendors as well as
royalties from enterprise application vendors. For enterprise application
vendors, Sagent receives quarterly reports from these vendors on sell-through of
Sagent products to end users. The reports also indicate the amount of royalty
revenue the enterprise application vendor owes to Sagent. License revenues are
based upon the number and capacity of servers on which a product is installed,
as well as on a per user basis. Service revenues are derived from providing
consulting and training, maintenance and support services to end users.
Sagent recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition." License revenues from sales to end users are recognized upon
shipment of the product, if a signed contract exists, the fee is fixed and
determinable and collection is deemed probable. If an acceptance period is
provided, revenue is recognized upon the earlier of customer acceptance or the
expiration of that period. Sagent recognizes royalty as revenues based on an
enterprise application vendor's sell-through of Sagent's products. Fees for
services are charged separately from licenses. Service revenues from consulting
and training are recognized upon completion of the work to be performed.
Revenues from maintenance and support agreements which includes product updates
are deferred and recognized on a straight-line basis as service revenues over
the term of the related agreement, which is typically one year.
Sagent performs ongoing credit evaluations of its customers' financial
condition and does not require collateral. Sagent maintains allowances for
potential credit losses and the amount of such losses have been within
management's expectations.
F-8
<PAGE> 78
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ADVERTISING
Sagent expenses advertising costs as incurred. Advertising costs amounted
to $137, $50, and $532 for 1996, 1997 and 1998, respectively.
INCOME TAXES
Sagent accounts for income taxes in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This statement prescribes the use of the liability method
whereby deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and measured at tax rates that will be in effect when the differences are
expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets where it is more likely than not the deferred tax
asset will not be realized.
STOCK-BASED COMPENSATION
In 1997, Sagent adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-based Compensation." The Company has elected to continue
accounting for stock-based compensation issued to employees using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, pro forma disclosures required under SFAS No. 123 have been
presented (See Note 9). Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant, between the fair value of Sagent's
common stock and the exercise price. Additionally, pursuant to SFAS No. 123,
stock issued to non-employees is accounted for at the fair value of the equity
instruments issued, or at the fair value of the consideration received,
whichever is more reliably measurable.
RESEARCH AND DEVELOPMENT EXPENSES
Costs related to research, design and development of products are charged
to research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. To date, completing a working model of Sagent's products and general
release have substantially coincided. As a result, Sagent has not capitalized
any software development costs.
RECLASSIFICATION
Sagent has reclassified the presentation of certain prior year information
to conform to the current year presentation. These changes had no effect on
previously reported financial position or results of operations.
NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
Sagent computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share," and Securities and Exchange Commission Staff Accounting
Bulletin No. 98. Under the provisions of SFAS No. 128 and SAB 98, basic net loss
per share is computed
F-9
<PAGE> 79
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
by dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Options, warrants and convertible preferred stock were not
included in the computation of diluted net loss per share because the effect
would be antidilutive.
Pro forma net loss per share has been computed as described above and also
gives effect, even if antidilutive, to common equivalent shares from preferred
stock that will automatically convert upon the closing of Sagent's initial
public offering, under the as-if-converted method. Upon consummation of the
offering, all of the convertible preferred stock outstanding, as of the closing
date will automatically be converted into an aggregate of approximately 14,544
shares of common stock based on the shares of convertible preferred stock
outstanding at December 31, 1998. Unaudited pro forma stockholders' equity at
December 31, 1998, as adjusted for the conversion of preferred stock, is
disclosed on the balance sheet.
F-10
<PAGE> 80
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
A reconciliation of shares used in the calculation of historical and pro
forma basic and diluted net loss per share follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
HISTORICAL NET LOSS PER SHARE, BASIC AND
DILUTED:
Net loss................................. $(7,039) $(6,900) $(13,701)
======= ======= ========
Shares used in computing net loss per
share, basic.......................... 2,637 2,860 3,951
======= ======= ========
Net loss per share, basic................ $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Shares used in computing net loss per
share, diluted........................ 2,637 2,860 3,722
======= ======= ========
Net loss per share, diluted.............. $ (2,67) $ (2,41) $ (3.68)
======= ======= ========
Antidilutive securities including
options, warrants and preferred stock
not included in historical net loss
per share calculations................ 12,006 14,350 17,055
======= ======= ========
PRO FORMA NET LOSS PER SHARE:
Net loss................................. $(13,701)
========
Shares used in computing net loss per
share, basic and diluted.............. 3,951
Adjustment to reflect assumed conversion
of convertible preferred stock........ 14,544
--------
Shares used in computing pro forma net
loss per share, basic................. 18,495
Adjustment to reflect share subject to
repurchase............................ (335)
Adjustment to reflect reverse treasury
stock method.......................... 106
--------
Shares used in computing pro forma net
loss per share, diluted............... 18,266
========
Pro forma net loss per share, basic
(unaudited)........................... $ (0.74)
========
Pro forma net loss per share, diluted
(unaudited)........................... $ (0.75)
========
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use" which provides guidance on
accounting for the cost of computer software developed or obtained for internal
use. Statement of Position No. 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Sagent does not expect that the
adoption of Statement of Position No. 98-1 will have a material impact on its
financial statements.
F-11
<PAGE> 81
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. There was no difference between Sagent's net loss and its total
comprehensive loss for the years ended December 31, 1996 and 1997. The only
component of comprehensive income for the year ended December 31, 1998 related
to a cumulative translation adjustment and amounted to $101.
During June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" SFAS No. 131 replaces SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise" and changes the way
the public companies report segment information. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997 and has been adopted by Sagent
for the year ending December 31, 1998. Sagent markets and sells its services
primarily in North America and operates in one business segment.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." This standard requires companies to expense
the costs of start-up activities and organization costs as incurred. In general,
Statement of Position 98-5 is effective for fiscal years beginning after
December 15, 1998. Sagent believes the adoption of Statement of Position 98-5
will not have a material impact on its results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1998
------- -------
<S> <C> <C>
Office equipment................................. $ 612 $ 2,166
Computer software and equipment.................. 1,847 2,996
Leasehold improvements........................... 73 83
------- -------
2,532 5,245
Less accumulated depreciation and amortization... (1,136) (2,201)
------- -------
$ 1,396 $ 3,044
======= =======
</TABLE>
Property and equipment under capital leases consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1997 1998
------- --------
<S> <C> <C>
Computer equipment.................................. $1,594 $ 2,208
Office equipment.................................... 447 1,527
------ -------
2,041 3,735
Less accumulated amortization....................... (811) (1,662)
------ -------
$1,230 $ 2,073
====== =======
</TABLE>
F-12
<PAGE> 82
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
4. ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Accrued employee compensation........................ $ 530 $1,198
Sales returns and allowances......................... -- 830
Accrued taxes........................................ -- 622
Accrued other........................................ 853 1,566
------ ------
$1,383 $4,216
====== ======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Sagent has entered into a line of credit with a leasing company and a bank.
See Note 6 of Notes to Consolidated Financial Statements. The capital lease
obligations, which expire through January 2002 are collateralized by the related
assets. Under the terms of the capital lease obligations, Sagent is responsible
for taxes, insurance and maintenance costs. Sagent also leases various
facilities under noncancelable operating leases expiring through August 2003.
Future minimum lease payments under these leases at December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- -------
<S> <C> <C>
1999............................................... $1,771 $1,404
2000............................................... 1,623 2,831
2001............................................... 1,491 628
2002............................................... 1,536 8
2003............................................... 1,312 --
------ ------
Total minimum lease payments....................... $7,733 4,871
======
Less amount representing interest.................. (344)
------
Present value of minimum lease payments............ 4,527
Current portion.................................... 1,181
------
$3,346
======
</TABLE>
Rent expense for the years ended December 31, 1996, 1997, and 1998 was
$241, $606, and $1,112, respectively.
6. LINE OF CREDIT
During 1997, Sagent entered into a loan and security agreement with a bank
under which Sagent can borrow up to an aggregate amount of $4.8 million as at
December 31, 1998. The agreement is used to finance various leased assets and
(see also Note 3) includes a revolving line of credit for up to $2 million and
an equipment line of credit for up to $2.8 million. Both lines are
collateralized by all assets of Sagent, including receivables, equipment and
intellectual property. Effective January 1999 Sagent can borrow
F-13
<PAGE> 83
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
up to an aggregate amount of $7.2 million which includes a revolving line of
credit of up to $4.0 million and an equipment line of credit of up to $3.2
million.
The revolving credit line consists of advances against eligible accounts
receivable in an aggregate amount not to exceed the lesser of, the committed
revolving line or the borrowing base, less any outstanding letters of credit.
Advances against the revolving line bear interest at the bank's prime rate,
7.75% at December 31, 1998, and are due no later than January 15, 2000. During
1998 advances totaled $1.75 million.
The equipment line of credit consists of advances for the acquisition of
equipment through May 5, 1999. Each advance bears interest at the bank's prime
rate, 7.75% at December 31, 1998, and is due in 36 monthly principal and
interest payments. The equipment line matures on May 7, 2002.
Under these agreements, Sagent is required to comply with certain
covenants, among which are minimum quick ratios, debt to net worth ratios,
tangible net worth ratios and profitability. As of December 31, 1998, Sagent was
not in compliance with certain of these covenants. Subsequent to December 31,
1998, the loan and security agreement was amended to waive the aforementioned
covenant violations through the period ending December 31, 1998.
7. ACQUISITION OF BUSINESS
In February 1998, Sagent acquired Talus, Incorporated for cash of
approximately $1.2 million, 259 shares of preferred stock amounting to $1.4
million and the assumption of certain liabilities for an aggregate purchase
price of $3.5 million. Sagent accounted for the acquisition under the purchase
method and, accordingly, the purchase price was allocated to the fair value of
tangible and intangible assets acquired and liabilities assumed.
Sagent has allocated approximately $2.4 million of the purchase price to
acquired in-process technology. Prior to the acquisition, Talus was in the
process of developing analytical software applications to complement its design
and implementation business. These projects are unique and complex because they
integrate the industry knowledge of Talus' consultants with advanced data mart
and business intelligence software to develop analytical software applications
for specific industries. These analytical software applications allow
organizations to model decision processes unique to their industry, such as
decisions on products, sales and distribution channels, and customers. The
method used to estimate the fair value of the analytical software applications
under development was a discounted cash flow model, similar to the traditional
income approach, adjusted for cost to complete and stage of completion. The
analytical software applications under development had not reached technological
feasibility as of the acquisition date and there was no alternative future use
for this technology. The classification of analytical software applications as
under development was made in accordance with the guidelines of SFAS 2,
"Accounting for Research and Development Costs," SFAS 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," and FIN
4, "Applicability of FASB Statement No. 2 to Business Combinations Accounted for
by the Purchase Method, an Interpretation of FASB Statement No. 2." Sagent
anticipates that these analytical software applications can be sold on a stand
alone basis with implementation assistance.
F-14
<PAGE> 84
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The determination of the acquired in-process technology allocation was
based upon recently issued guidance issued by the Securities and Exchange
Commission to the AICPA SEC Regulations Committee and considered such factors as
degree of completion, technological uncertainties, costs incurred and projected
costs to complete. The value assigned to the acquired workforce was based on the
cost to recreate the assembled work force. The allocation of the purchase price
resulted in additional intangible assets, primarily non-compete agreements and
the value of an assembled workforce of $587, which has been capitalized and is
being amortized on a straight line basis over six months to three years.
Amortization expense for the year ended December 31, 1998 was $102.
As of the date of acquisition, the Talus, Incorporated development projects
consisted of ongoing research and development efforts on four analytical
software applications for manufacturing, food service and hospitality, and high
technology. Based on management's estimates, the remaining research and
development efforts relating to the completion of the technology were expected
to be completed during 1999 through 2000, with initial revenue expected in 1999.
Accordingly, the cost to complete the in-process technology was estimated based
on the number of man months required to reach technological feasibility for the
technology, the type of professional and engineering staff involved in the
completion process and their fully burdened months' salaries.
The allocation of Sagent's aggregate purchase price to the tangible and
identifiable intangible assets acquired and liabilities assumed in connection
with this acquisition were based primarily on estimates by independent
appraisers of fair values. The allocation is summarized below:
<TABLE>
<CAPTION>
TALUS, INCORPORATED
-------------------
<S> <C>
Acquired in-process technology............ $2,425
Current assets............................ 494
Other intangibles......................... 587
Other assets.............................. 11
Goodwill.................................. 9
------
Total purchase price.................... $3,526
======
</TABLE>
The excess of the purchase price over the fair value of the net tangibles
and identifiable intangible assets acquired has been recorded as goodwill, which
is being amortized on a straight-line basis over a period of three years.
8. CONVERTIBLE PREFERRED STOCK
Holders of Series A, B, C, D and E preferred stock are entitled to
preferential noncumulative dividends at the rate of $0.04, $0.07, $0.20, $0.25
and $0.43 per share, respectively, if and when declared by the board of
directors. No dividends have been declared as of December 31, 1998. The holders
of Series A, B, C, D and E preferred stock have liquidation preferences of
$0.45, $0.90, $2.50, $3.18 and $5.40 per share, respectively, plus an amount
equal to all declared but unpaid dividends. In the event of liquidation, if the
assets of Sagent are insufficient to pay the entirety of such amounts to the
preferred stockholders, the assets shall be distributed ratably among the
preferred stockholders in proportion to their preferential amounts. Preferred
stockholders are entitled to one vote for each share of common stock into which
their preferred stock is convertible. After payment
F-15
<PAGE> 85
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
to the preferred stockholders of the full preferential amounts specified above,
the remaining assets will be distributed ratably among the holders of the common
stock.
At the option of the holder, and at any time after the date of issuance of
such share, each share of Series A, B, C, D and E preferred stock is convertible
on a one-for-one basis into shares of common stock subject to adjustment for
stock splits and certain dilutive issuances of securities. The shares will
automatically convert into common stock upon the closing of an underwritten
public offering of common stock under the Securities Act of 1933, as amended,
with minimum proceeds of $10.0 million. As of December 31, 1998, Sagent has
reserved 14,544 shares of its common stock in the event of conversion of all
preferred stock. The holders of preferred stock have certain registration
rights.
At December 31, 1998, preferred stock consists of the following:
<TABLE>
<CAPTION>
COMMON
SHARES STOCK
SHARES ISSUED AND RESERVED FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING PROCEEDS (NET) CONVERSION VALUE
------ ---------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
A.................. 2,800 2,567 $ 1,138 2,567 $ 1,155
B.................. 5,656 5,555 4,981 5,555 5,000
C.................. 2,800 2,655 6,625 2,655 6,637
D.................. 1,800 1,612 5,100 1,612 5,127
E.................. 2,500 2,155 11,627 2,155 11,635
------ ------ ------- ------ -------
15,556 14,544 $29,471 14,544 $29,554
====== ====== ======= ====== =======
</TABLE>
9. RESTRICTED STOCK PURCHASE AGREEMENT:
Sagent has sold shares of its common stock to founders and employees of
Sagent under agreements which provide for repurchase of the shares by Sagent at
the stock's original purchase price upon termination of employment of such
persons. Sagent's right to repurchase shares generally lapses as to 1/48 of the
total shares on the date of purchase and 1/48 on the first day of each
subsequent month thereafter until the founder or employee is fully vested. At
December 31, 1998, 335 shares of common stock were subject to repurchase.
10. STOCK OPTION PLAN:
Under the 1995 stock option plan, Sagent initially reserved 1,200 shares of
common stock for issuance to employees, officers, directors and consultants of
Sagent. Sagent amended the 1995 stock option plan in 1996, 1997 and 1998 to
increase the number of shares reserved under the 1995 stock option plan to, in
the aggregate, 1,800 shares, 2,800 shares and 3,276 shares, respectively.
Under the terms of the 1995 stock option plan, incentive stock options may
be granted at prices not lower than fair market value at the date of grant,
while nonqualified options may be granted at prices not lower than 85.0% of fair
market value at the date of grant, each as determined by the board of directors.
However, if an employee or other person who, at the time of the grant of such
stock option, owns stock representing more than 10.0% of the voting power of all
classes of stock in Sagent, the exercise price may be
F-16
<PAGE> 86
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
no less than 110% of the fair market value per share on the date of grant.
Options granted under the 1995 stock option plan are exercisable immediately,
conditioned upon the optionee entering into a restricted stock purchase
agreement, and generally vest to the extent of 25.0% of the shares granted 12
months from the vesting commencement date and the remainder to the extent of
1/48 of the options granted each month thereafter, such that all options granted
will be vested four years from the vesting commencement date. Options granted
expire 10 years from the date of grant.
In December 1998, the board of directors approved the 1998 stock option
plan which authorized 2,440 shares of common stock as available for issuance to
employees, officers, directors and consultants of Sagent.
Under the terms of the 1998 stock option plan, incentive options may be
granted at prices not lower than fair market value at the date of grant, while
nonqualified options may be granted at prices as determined by the administrator
at the date of grant. However, if an employee or other person who, at the time
of the grant of such stock option, owns stock representing more than 10.0% of
the voting power of all classes of stock in Sagent, the exercise price may be no
less than 110% of the fair market value per share on the date of grant. In the
case of nonqualified options intended to qualify as performance-based
compensation, the exercise price shall be no less than 100% of fair market value
on the date of grant.
Options granted under the 1998 stock option plan are generally exercisable
one year after the vesting commencement date. Upon exercise of an option, the
optionee shall enter into a restricted stock purchase agreement. Options
generally vest to the extent of 25% of the shares granted 12 months from the
vesting commencement date and the remainder to the extent of 1/48 of the shares
granted each month thereafter, such that all options granted will be vested four
years from the vesting commencement date. Options generally expire 10 years from
the date of grant.
Upon adoption of the 1998 stock option plan, the board of directors
approved the cessation of grants under the 1995 stock option plan and determined
that all shares of common stock then reserved under the 1995 stock option plan
for the future grant of stock options were no longer reserved for issuance.
At December 31, 1998, 1,158 shares were no longer subject to repurchase. Of
the stock options exercised, 879 shares were no longer subject to repurchase.
F-17
<PAGE> 87
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes activity under the amended 1995 stock option
plan and 1998 stock option plan for the years ended December 31, 1996, 1997 and
1998:
<TABLE>
<CAPTION>
WEIGHTED
AGGREGATE AVERAGE
NUMBER OF EXERCISE PRICE EXERCISE EXERCISE
SHARES PER SHARE PRICE PRICE
--------- -------------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding at January 1,
1996............................... 625 $0.05 - $0.09 $ 35 $0.06
Options granted under the amended
1995 stock option plan.......... 558 0.09 - 0.25 72 0.13
Options canceled under the amended
1995 stock option plan.......... (13) 0.09 - 0.25 (2) 0.13
Options exercised under the amended
1995 stock option plan.......... (14) 0.05 (1) 0.05
----- ------------- ------- -----
Options outstanding at December 31,
1996............................... 1,156 0.05 - 0.25 104 0.09
Options granted under the amended
1995 stock option plan.......... 1,280 0.25 - 2.80 2,309 1.80
Options canceled under the amended
1995 stock option plan.......... (146) 0.09 - 2.50 (32) 0.22
Options exercised under the amended
1995 stock option plan.......... (535) 0.05 - 0.50 (47) 0.09
----- ------------- ------- -----
Options outstanding at December 31,
1997............................... 1,755 0.05 - 2.80 2,334 1.33
Options granted under the amended
1995 stock option plan.......... 1,148 2.90 - 6.50 5,094 4.43
Options granted under the 1998
stock option plan............... 219 7.00 1,532 7.00
Options canceled under the amended
1995 stock option plan.......... (182) 0.09 - 5.50 (418) 2.30
Options exercised under the amended
1995 stock option plan.......... (665) 0.05 - 5.50 (737) 1.11
----- ------------- ------- -----
Options outstanding at December 31,
1998............................... 2,275 $0.05 - $7.00 $ 7,805 $3.43
===== ============= ======= =====
</TABLE>
At December 31, 1997 and 1998, 496 shares and 2,221 shares, respectively,
remained available for issuance.
F-18
<PAGE> 88
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OF SHARES CONTRACTUAL EXERCISE OF SHARES EXERCISE
EXERCISE PRICE OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.04 - $0.09 259 7.01 $ 0.07 259 $ 0.07
0.25 - 0.50 112 7.87 0.27 112 0.27
2.00 - 4.60 1,448 8.96 3.34 1,448 3.34
5.50 - 7.00 456 9.85 6.42 237 5.89
----- -----
$0.04 - $7.00 2,275 2,056
===== =====
</TABLE>
The following information concerning Sagent's stock option plans is
provided in accordance with SFAS No. 123. Sagent accounts for such plans in
accordance with APB No. 25.
The fair value of each option grant has been estimated on the date of grant
using the minimum value method with the following weighted average assumptions
used for grants:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998
------------- -------------
<S> <C> <C>
Risk-free interest rate................. 5.31% - 6.54% 5.14% - 5.94%
Expected life........................... 4 years 4 years
Dividends............................... -- --
</TABLE>
The weighted average fair value per option granted in 1996, 1997 and 1998
was $0.15, $1.20 and $4.94, respectively.
The following pro forma net loss and net loss per share information has
been prepared as if Sagent had followed the provisions of SFAS No. 123:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Net loss
As reported........................... $(7,039) $(6,900) $(13,701)
Pro forma............................. (7,042) (6,940) (13,999)
Basic and diluted net loss per share
As reported........................... $ (2.67) $ (2.41) $ (3.47)
Pro forma............................. (2.67) (2.43) (3.54)
Diluted net loss per share
As reported........................... $ (2.67) $ (2.41) $ (3.68)
Pro forma............................. (2.67) (2.43) (3.76)
</TABLE>
F-19
<PAGE> 89
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
11. NON-PLAN STOCK OPTIONS:
During 1996, Sagent granted options to purchase 268,255 shares to an
officer of Sagent outside of the amended 1995 stock option plan. These options
are exercisable at $0.09 per share and vest at the rate of 1/48 per month over a
four-year period. In addition, these options have certain accelerated vesting
requirements in the event of a change of control in Sagent, as defined in the
option grant agreement.
At December 31, 1998 and 1997, 38,255 and 268,255 shares of common stock,
respectively, were reserved for the exercise of non-plan stock options.
At December 31, 1998, of the non-plan stock options exercised, 45,575
shares are subject to repurchase.
The following table summarizes activity under the non-plan stock options
for the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AGGREGATE AVERAGE
NUMBER OF PRICE EXERCISE EXERCISE
SHARES PER SHARE PRICE PRICE
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding at January 1,
1996............................... -- -- -- --
Options granted.................... 268 $0.09 $ 24 $0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1996............... 268 0.09 24 0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1997............... 268 0.09 24 0.09
Options exercised.................. (230) 0.09 (21) 0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1998............... 38 $0.09 $ 3 $0.09
==== ===== ==== =====
</TABLE>
At December 31, 1998, the remaining contractual life of these options was
7.2 years.
Sagent accounts for the fair value of its non-plan stock option grants in
accordance with APB 25. Accordingly, no compensation expense has been recognized
for these non-plan stock options.
The fair value of the options is estimated using the minimum value option
pricing method allowable for non-public companies and using the following
assumptions; dividend yield of 0.0%, volatility of 0.0%, risk-free interest rate
of 6.45% at the date of grant, and an expected term of four years.
12. STOCKHOLDER NOTES RECEIVABLE
Stockholder notes receivable represents amounts due from a stockholder in
exchange for the issuance of common stock together with interest. The notes bear
interest at a rate of 5.47% and are due February 1, 2001 but may be repaid
earlier. The notes are collateralized by a pledge of a portion of the underlying
common stock issued.
F-20
<PAGE> 90
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
13. WARRANTS
In connection with equipment leasing activity under a master lease
agreement with a leasing company, Sagent has issued warrants to the leasing
company to purchase up to 42 shares of Series A preferred stock at a price of
$0.45 per share, 61 shares of Series B preferred stock at a price of $0.90 per
share and 22 shares of Series C preferred stock at a price of $2.50 per share.
Each warrant has a seven year life and can be exercised at any time prior to
expiration, except that the warrants will immediately expire on the effective
date of an initial public offering if not exercised. The estimate fair value of
these warrants of $23 has been recorded as debt issuance costs.
In connection with a reseller and technology license agreement with another
software company, Sagent issued a warrant to purchase up to 70 shares of
Sagent's common stock. The warrant can be exercised at any time prior to
expiration. The exercise price will be equal to $7.20 per share. The warrant
expires on December 22, 2002. The estimate fair value of the warrant of $100 has
been recorded as cost of sales.
Sagent issued warrants to purchase common stock and preferred stock to
establish and increase a line of credit with a financial institution. Each
warrant can be exercised at any time prior to expiration. At December 31, 1998
such warrants were as follows.
<TABLE>
<CAPTION>
SHARES OF EXERCISE
COMMON PRICE
STOCK PER SHARE EXPIRATION DATE
--------- --------- ---------------------------
<S> <C> <C> <C>
Series D preferred stock... 93 $3.18 Later of July 16, 2007 or
five years after the
closing of an initial
public offering
Series E preferred stock... 3 5.40 Later of May 7, 2008 or
five years after the
closing of an initial
public offering
Common stock............... 6 6.50 Later of September 30, 2008
or five years after the
closing of an initial
public offering
</TABLE>
The estimate fair value of these warrants of $54 has been recorded as debt
issuance costs. In 1998, in connection with a joint venture to conduct business
in a foreign country, Sagent issued a warrant to purchase 22 shares of common
stock at a price of $5.40 per share. The warrant is immediately exercisable and
expires on the later of May 21, 2003, the closing of a business combination or
the closing of Sagent's initial public offering. The estimate fair value of the
warrant of $60 has been recorded as general and administrative expense.
The estimated fair value of these warrants has been determined based on a
Black Scholes fair value model.
F-21
<PAGE> 91
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
14. INCOME TAXES
Sagent's effective tax rate differs from the U.S. Federal statutory tax
rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Tax benefit at statutory rate................ $(2,393) $(2,346) $(4,652)
State taxes, net of federal benefit.......... -- -- (744)
Nonrecognition of tax benefits............... 2,481 2,554 5,885
Tax credits.................................. (100) (240) (420)
Other........................................ 12 32 (69)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1997 1998
------- --------
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forwards............... $ 4,083 $ 7,588
Capitalized research and development costs...... 958 1,796
Research and development credit................. 516 1,080
Depreciation and amortization................... 73 68
Other........................................... 460 1,457
------- --------
6,090 11,989
Valuation allowance............................... (6,090) (11,989)
------- --------
$ -- $ --
======= ========
</TABLE>
Due to the uncertainty surrounding the realization of the deferred tax
asset in future tax returns, Sagent has placed a valuation allowance against its
net deferred tax assets. The valuation allowance increased by $2,739 and $5,899
during 1997 and 1998, respectively.
The difference between the statutory rate of approximately 40.0% (34.0%
federal and 6.0% state, net of federal benefits) and the tax benefit of zero
recorded by Sagent is primarily due to Sagent's full valuation allowance against
its net deferred tax assets.
At December 31, 1998, Sagent had available net operating loss carryforwards
for federal and state income tax purposes of approximately $20,775 and $17,819,
respectively. These carryforwards expire from 2003 to 2018. Although a
significant portion of the state net operating losses expire in 2003. At
December 31, 1998, Sagent also had available research and development credit
carryforwards for federal and state income tax purposes of approximately $741
and $514 respectively. These carryforwards expire from 2010 to 2013.
For federal and state tax purposes, a portion of Sagent's net operating
loss carryforwards may be subject to certain limitation on annual utilization in
case of a change in ownership, as defined by federal and state tax law.
F-22
<PAGE> 92
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
15. EMPLOYEE BENEFIT PLANS
Sagent maintains a Profit Sharing Salary Deferral 401(k) plan for all of
its employees. This 401(k) plan allows eligible employees to defer up to 15%,
but no greater than the stated limitation in any plan year, of their pretax
compensation in certain investments at the discretion of the employee. Under the
401(k) plan, Sagent was not required to and has not made a contribution to the
401(k) plan for 1996, 1997 or 1998.
Sagent Professional Services maintained a separate profit sharing salary
deferral 401(k) plan for eligible employees until January 1, 1999. This plan
allowed eligible employees to defer up to 15.0%, but no greater than the stated
limitation in any plan year, of their pretax compensation in certain investments
at the discretion of the employee. Under the plan Sagent was required to make
matching contributions to the plan. Sagent could elect to make additional
contributions on the basis of (a) a percentage of the employee deferral and (b)
profit sharing. Costs related to matching contributions amounted to $0, $50 and
$51 for 1996, 1997 and 1998, respectively.
Effective January 1, 1999, all employees, including those formerly covered
by the separate profit sharing salary deferral 401(k) plan, will be included in
the Sagent plan.
16. SUBSEQUENT EVENTS
In January 1999, the board of directors adopted the director plan, which
was approved by Sagent's stockholders in February 1999, which allows Sagent to
grant up to 150 shares of common stock to non-employee directors. The exercise
price of any option granted under the director plan will be equal to the fair
market value per share of common stock on the date of grant. Each option granted
will have a term of ten years and the shares subject to the option will become
exercisable in four equal annual installments subject to the optionee's
completion of each year of board service.
In January 1999 the board of directors approved the 1999 employee stock
purchase plan, which was approved by Sagent's stockholders in February 1999. A
total of 450 shares of common stock has been reserved for issuance under the
1999 employee stock purchase plan. The number of shares reserved will be subject
to an annual increase every January equal to the lesser of the number of shares
optioned during the prior year or lesser amount determined by the board of
directors. The 1999 employee stock purchase plan permits eligible employees to
purchase common stock through payroll deductions at a price equal to 85% of the
lower of the fair market value of the common stock at the beginning or end of
each six-month offering period.
Upon the closing of Sagent's initial public offering the authorized capital
stock will be 70,000 shares of common stock, $0.001 par value per share, and
5,000 shares of preferred stock, $0.001 par value per share.
F-23
<PAGE> 93
TALUS, INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-25
Balance Sheets.............................................. F-26
Statements of Operations and Retained Earnings.............. F-27
Statements of Cash Flows.................................... F-28
Notes to Financial Statements............................... F-29
</TABLE>
F-24
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Sagent Technology, Inc.
and Talus, Incorporated Stockholders:
We have audited the accompanying balance sheets of Talus, Incorporated
(formerly known as InCASE Corporation) as of December 31, 1996 and 1997, and the
related statements of operations and retained earnings and cash flows for each
of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Talus, Incorporated as of
December 31, 1996 and 1997, and the results of operations and its cash flows for
each of the two years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
McLean, VA
February 20, 1998
F-25
<PAGE> 95
TALUS, INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash...................................................... $ 13 $ 1
Accounts receivable, net.................................. 511 361
Prepaid expenses.......................................... 7 35
---- ----
Total current assets................................... 531 397
Property and equipment, net............................... 111 76
Deposits and other noncurrent assets...................... 19 8
---- ----
Total assets........................................... $661 $481
==== ====
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Borrowings under line of credit........................... $299 $ 90
Note payable.............................................. -- 90
Accounts payable and accrued expenses..................... 97 63
Accrued vacation.......................................... 41 36
Accrued retirement contributions.......................... 49 50
Due to stockholders....................................... 17 --
---- ----
Total current liabilities.............................. 503 329
Accrued bonus to stockholders............................. 105 105
---- ----
Total liabilities...................................... 608 434
---- ----
Commitments (Note 5)
STOCKHOLDERS' EQUITY:
Common stock; par value $.01 per share; authorized 200
shares; issued and outstanding 102 shares.............. 1 1
Additional paid-in capital................................ 4 4
Retained earnings......................................... 48 42
---- ----
Total stockholders' equity............................. 53 47
---- ----
Total liabilities and stockholders' equity............. $661 $481
==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 96
TALUS, INCORPORATED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Gross revenue............................................... $2,667 $2,830
Cost of revenues............................................ 1,238 1,178
------ ------
Gross profit................................................ 1,429 1,652
Operating expenses:
Sales and marketing....................................... 161 140
Research and development.................................. 573 627
General and administrative................................ 686 857
------ ------
Total operating expenses............................... 1,420 1,624
------ ------
Income from operations...................................... 9 28
Interest expense............................................ (22) (30)
Loss on investment.......................................... (2) --
Loss on disposal of property and equipment.................. -- (4)
------ ------
Net loss.................................................... (15) (6)
Retained earnings, beginning of year........................ 63 48
------ ------
Retained earnings, end of year.............................. $ 48 $ 42
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 97
TALUS, INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1997
------ -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (15) $ (6)
Adjustments to reconcile net losses to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 43 40
Provision for doubtful accounts and writeoff of
uncollectible accounts............................... 40 41
Loss on sale of property and equipment................. -- 4
Changes in operating assets and liabilities:
Accounts receivable.................................. (176) 109
Prepaid expenses..................................... -- (28)
Deposits............................................. (10) 10
Accounts payable and accrued expenses................ (14) (34)
Accrued vacation..................................... -- 1
Accrued retirement contributions..................... 7 (4)
Accrued stockholders bonus........................... (45) --
------ -----
Net cash provided by (used in) operating activities......... (170) 133
------ -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (12) (9)
Sales of property and equipment........................... -- 1
------ -----
Net cash used in investing activities....................... (12) (8)
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit........................... 1,112 769
Repayments on line of credit.............................. (940) (978)
Proceeds from issuance of stockholder note................ 17 --
Repayment of stockholder note............................. -- (17)
Proceeds from note payable................................ -- 100
Repayments of note payable................................ -- (11)
Distributions to stockholders............................. -- --
------ -----
Net cash (used in) provided by financing activities......... 189 (137)
------ -----
Net increase (decrease) in cash............................. 7 (12)
Cash at beginning of year................................... 6 13
------ -----
Cash at end of year......................................... $ 13 $ 1
====== =====
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 21 $ 30
Write-off of investment received in exchange for
services............................................... 2 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 98
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
Talus, Incorporated, previously known as InCASE Corporation, was formed to
provide advanced information technology services to both governmental and
commercial customers. Talus, Incorporated was incorporated in Virginia in 1992
and is owned by two stockholders. The primary activities of Talus, Incorporated
consist of design and implementation of Enterprise Intelligence applications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
ACCOUNTS RECEIVABLE
Accounts receivable include amounts billed and unbilled costs and fees
recoverable under contracts. Included in unbilled costs and fees at December 31,
1997 and 1996 are amounts currently billable in accordance with specified
contract terms. Of the stated amounts, $224 and $331 were billed by December 31,
1997 and 1996, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets as
follows:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Furniture and fixtures...................................... 7
Software.................................................... 3
Office equipment............................................ 5
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred. The costs of major improvements are capitalized and depreciated over
their estimated useful lives. The cost and related accumulated depreciation of
property and equipment are removed from the accounts upon disposition and any
resulting gain or loss is reflected in operations at that time.
REVENUE RECOGNITION
Talus, Incorporated's revenue is derived primarily from time and materials
contracts. Revenue on time and material contracts is recognized based on actual
hours performed at the contracted hourly rate plus the costs of any direct
materials provided.
INCOME TAXES
The Company has elected to be treated as an "S" Corporation under the
Internal Revenue Code of 1986. Accordingly, the income or loss of Talus,
Incorporated is taxable to the stockholders and Talus, Incorporated is not
liable for federal and state income taxes.
F-29
<PAGE> 99
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
MAJOR CUSTOMERS
During 1997 and 1996, Talus, Incorporated's revenue was primarily derived
from three major customers, each of which contributed more than 10.0% of total
revenues. These customers accounted for 55.0% and 48.0% of gross revenue for
1997 and 1996, respectively. As of December 31, 1997 and 1996, these customers
had accounts receivable balances totalling $147 and $140, respectively.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EMPLOYEE BONUSES
Talus, Incorporated adopted a bonus plan in 1994 which provided that 83.0%
of Talus, Incorporated's income before bonuses be allocated to a bonus pool. Of
this amount, 40.0% was allocated to employee performance, 40.0% to sales
performance and 20.0% to the two stockholders of Talus, Incorporated. In 1994
the two stockholders earned $63 in sales performance bonuses, approximately
50.0% of the total sales performance bonuses, and $25 in direct stockholder
bonuses, and in 1995 they earned $17 in direct stockholder bonuses. The two
stockholders have agreed to defer collection of these bonuses, totaling $105,
until Talus, Incorporated is able to operate with less debt. It is not
anticipated that these bonuses will be paid during 1998.
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Billed and unbilled receivables......................... $537 $389
Allowance for doubtful accounts......................... (26) (28)
---- ----
Accounts receivable, net................................ $511 $361
==== ====
</TABLE>
F-30
<PAGE> 100
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Furniture and fixtures.................................. $ 33 $ 23
Computers and equipment................................. 158 163
Computer software....................................... 22 27
---- ----
213 213
Less accumulated depreciation........................... 102 137
---- ----
Property and equipment, net............................. $111 $ 76
==== ====
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was $40
and $42, respectively.
5. COMMITMENTS
LEASE OBLIGATIONS
Talus, Incorporated leases its office space and various equipment under
noncancelable operating leases with original terms in excess of the year. Future
minimum payments on noncancelable operating leases were as follows at December
31, 1997:
<TABLE>
<S> <C>
1998.................................................... $120
1999.................................................... 113
2000.................................................... 85
----
Total......................................... $318
====
</TABLE>
Rental expense was $116 and $126 for the years ended December 31, 1997 and
1996, respectively.
6. LINE OF CREDIT AND NOTE PAYABLE
In March 1995, Talus, Incorporated entered into a revolving credit facility
agreement with maximum borrowings of $150 subject to certain borrowing base
restrictions which matured on March 24, 1996. Interest was at the prime rate
plus 1.5% per annum, a total of 10.15% at December 31, 1995. Borrowings were
collateralized by Talus, Incorporated's eligible accounts receivable. Talus,
Incorporated's two principal stockholders and one other member of management
were guarantors on the credit facility.
In March 1996, Talus, Incorporated entered a credit facility agreement with
maximum borrowing of $300 subject to certain borrowing base restrictions.
Interest was at the prime rate plus 1.5% per annum, a total of 9.75% at December
31, 1996. In April 1997, the agreement was amended to decrease the maximum
borrowings to $200, amended to increase the interest rate to prime rate plus
2.0% per annum, a total of 10.5% at December 31, 1997, and extended through May
1998.
F-31
<PAGE> 101
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
In July 1997, Talus, Incorporated entered into a term loan agreement with
the same financial institution of $100 due July 24, 2001. Interest is at the
prime rate plus 2.0% per annum, a total of 10.5% at December 31, 1997.
These agreements contain certain restrictive terms and covenants, the most
restrictive of which requires Talus, Incorporated to maintain a specified
liabilities to tangible net worth ratio. Talus, Incorporated was not in
compliance with this restrictive covenant as of December 31, 1997. Accordingly,
the entire balance of the note payable as of December 31, 1997 has been
classified as current. Borrowings are collateralized by Talus, Incorporated's
eligible accounts receivable. Talus, Incorporated's two principal stockholders
and one other member of management are guarantors on the loan agreement.
In 1996, majority stockholders loaned Talus, Incorporated $17 bearing
interest at 10.0%. The loans were repaid during 1997.
7. RETIREMENT PLAN
In 1995, Talus, Incorporated established a qualified salary reduction
simplified employee pension plan (SARSEP) for all eligible employees. Talus,
Incorporated was required to contribute 3.0% of eligible salaries to the SARSEP
each year. Because of restrictions imposed by the Internal Revenue Code of 1986,
the 3.0% contribution for the highly compensated employees could not be made to
the SARSEP. Accordingly, Talus, Incorporated adopted a policy that any amount
that could not be funded to the SARSEP due to these restrictions would be paid
directly to those highly compensated employees as additional compensation. As of
December 31, 1996, six employees were deemed to be highly compensated. The
compensation provided for such employees was $17. The total Talus, Incorporated
contributions for 1996 for all eligible employees, as defined by the Internal
Revenue Code of 1986, were $32. The SARSEP was terminated during 1997.
During 1997 Talus, Incorporated established a 401(k) plan for the benefit
of all eligible employees. Employees may make contributions to the plan, subject
to certain limitations contained in the Internal Revenue Code of 1986. Talus,
Incorporated matches up to 50.0% of the first 6.0% of compensation deferred
under the plan. Employees vest 50.0% in the employer contributions after one
year and 100% after two years of employment at Talus, Incorporated Employer
contributions to the plan were $50 for the year ended December 31, 1997.
8. COMMON STOCK, ADDITIONAL PAID-IN CAPITAL AND STOCK OPTIONS
At Talus, Incorporated's inception in 1992, 25 shares of common stock with
$0.10 par value per share were authorized and 10 shares were issued. In 1996,
the Articles of Incorporation were amended to authorize 200 shares of common
stock with a $0.01 par value per share. A stock split was effective in 1996
increasing the number of issued and outstanding shares to 102.
A stock option plan, which was adopted in 1996, provides for the granting
of stock options to employees. The agreements provide the participants an option
to purchase shares of Talus, Incorporated's common stock generally based on
certain time vesting requirements. On June 21, 1996, Talus, Incorporated granted
7 options with an exercise
F-32
<PAGE> 102
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
price of $1.00 per share. On May 31, 1997, Talus, Incorporated granted 11
options with an exercise price of $4.77 per share. As of December 1997, options
for 7 shares are exercisable.
The effects of applying SFAS No. 123 are immaterial as the application of
SFAS No. 123 would not result in a significant difference from reported net
loss. Accordingly, the following disclosures are omitted: (1) pro forma net
income, (2) weighted-average grant date fair value of options granted during the
year and (3) description of method and assumptions used to estimate fair value
of options.
9. SUBSEQUENT EVENTS
Talus, Incorporated is currently negotiating a merger agreement with Sagent
Technology, Inc.
F-33
<PAGE> 103
SAGENT TECHNOLOGY, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following financial statements present the Sagent Technology, Inc. pro
forma consolidated statements of operations for the year ended December 31,
1998.
Sagent's acquisition of Talus, Incorporated has been accounted for under
the "purchase" method of accounting, which requires the purchase price to be
allocated to the acquired assets and liabilities of Talus, Incorporated on the
basis of their estimated fair values as of the date of acquisition. The
following pro forma consolidated statements of operations for the year ended
December 31, 1998 give effect to the acquisition of Talus, Incorporated as if it
occurred on January 1, 1998, and include adjustments directly attributable to
the acquisition of Talus, Incorporated and expected to have a continuing impact
on the combined company.
The pro forma information is based on historical financial statements. The
pro forma results of operations for the year ended December 31, 1998 includes
the results of operations of Talus, Incorporated from January 1, 1998 to
February 28, 1998. The assumptions give effect to the business combination with
Talus, Incorporated under the purchase method of accounting. The information has
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and is provided for comparative purposes only. The pro forma
information does not purport to be indicative of the results that actually would
have occurred had the combination been effected at the beginning of the periods
presented.
F-34
<PAGE> 104
SAGENT TECHNOLOGY, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------
PURCHASE PRO FORMA
SAGENT TALUS ADJUSTMENTS CONSOLIDATED
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenues, net....................... $ 17,043 $ 452 $ -- $ 17,495
Cost of revenues.......................... 5,066 167 (102) 5,131
-------- -------- -------- --------
Gross profit.............................. 11,977 285 102 12,364
Operating expenses:
Sales and marketing..................... 12,037 383 12,420
Research and development................ 6,013 283 6,296
General and administrative.............. 5,186 342 5,528
Acquired in-process technology.......... 2,425 (2,425) --
-------- -------- -------- --------
Total operating expense.............. 25,661 1,008 (2,425) 24,244
-------- -------- -------- --------
Loss from operations...................... (13,684) (723) (2,527) (11,880)
Interest expense.......................... (207) (207)
Other income.............................. 190 190
-------- -------- -------- --------
Net loss.................................. $(13,701) $ (723) $ (2,527) $(11,897)
======== ======== ======== ========
Pro forma net loss per share.............. $ (0.75) $ (0.66)
======== ========
Weighted average shares used in
computation of pro forma net loss per
share................................... 18,160 18,160
</TABLE>
See accompanying notes.
F-35
<PAGE> 105
SAGENT TECHNOLOGY, INC.
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company that has experience in the design and implementation of Enterprise
Intelligence applications.
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of Sagent or the consolidated
results of operations that would have resulted had the acquisition taken place
on January 1, 1998. The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1998 reflect the effects of the
acquisition, assuming the related events occurred as of January 1, 1998 for the
purposes of the unaudited pro forma consolidated statements of operations.
2. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect a total
purchase price of $3.5 million, and the acquisition was recorded under the
purchase method of accounting. In connection with the acquisition, Sagent
expensed $2.4 million of in-process technology in the quarter ended March 31,
1998. In addition, Sagent recorded other intangibles of $587, which are being
amortized on a straight-line basis over six months to three years following the
acquisition. The determination of the acquired in-process technology allocation
was based upon recently issued guidance issued by the Securities and Exchange
Commission and considered such factors as degree of completion, technological
uncertainties, costs incurred and projected costs to complete. In-process
technology charges have not been reflected in the pro forma consolidated
financial statements of operations for the year ended December 31, 1998 as they
are considered a non-recurring charge.
3. UNAUDITED PRO FORMA CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1998 is based upon the historical weighted
average common shares outstanding. The Sagent common stock issuable upon the
exercise of the stock options and warrants have been excluded as the effect
would be antidilutive. In addition to the shares used in computing the net loss
per share above, pro forma net loss per share is calculated using the
convertible preferred stock outstanding as if such shares were converted to
common stock at the time of issuance.
4. PURCHASE ADJUSTMENTS
Pro forma adjustments have been prepared to reflect the elimination of the
non-recurring one-time charge for acquired in-process technology and to reflect
the amortization of capitalized technology and other intangible assets.
F-36
<PAGE> 106
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors of
Sagent Technology, Inc.:
In connection with our audits of the consolidated financial statements of
Sagent Technology, Inc. as of December 31, 1997 and 1998, and for each of the
three years in the period ended December 31, 1998, which financial statements
are included in the Prospectus, we have also audited the financial statement
schedule listed in Item 16(b) herein. In our opinion, this financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 27, 1999
F-37
<PAGE> 107
[SAGENT LOGO OVER GRAPHIC OF GLOBE APPEARS HERE]
CAPTION: A Leading Provider of Enterprise Intelligence Software Solutions
[Logo]
[SIDEBAR]
The Sagent DMS Product Suite gathers data from a variety of sources and
organizes that data into a repository known as a data mart. The Sagent DMS
Product Suite allows organizations to more efficiently analyze the data and
provides access to the information through personal computers, reports and
importantly, through the Internet.
[Schematic depicting the Sagent Data Mart and its components: Input into Sagent
Data Load Server: Data Sources and Mainframe. Input into Data Mart: Sagent Data
Load Server, Data Mart: Sagent Design Studio, Sagent Automation and Sagent
Admin. Output from Data Mart: Sagent Data Access Server to Sagent Web Link
Server and Sagent Information Studio. Output from Sagent Web Link Server:
Analysis, Reports and Excel. Output from Sagent Information Studio: StatView,
Analysis, Reports and Excel.]
[GRAPHIC DEPICTING A SCREEN SHOT OF A BALANCE SHEET REPORT] Caption: Sagent
Reports allows end users to create, publish and view graphically rich
presentations of corporate information.
[GRAPHIC DEPICTING A SCREEN SHOT OF A Z ANALYSIS VS GOAL REPORT] Caption: Sagent
Analysis provides a wide range of analytical capabilities for business data.
[GRAPHIC DEPICTING A SCREEN SHOT OF A DATA FLOW REPORT] Caption: Sagent Design
Studio provides a visual environment for describing data and designing the flow
of data for both loading and accessing a data mart.
[GRAPHIC DEPICTING A SCREEN SHOT OF A STATISTICS REPORT] Caption: StatView
provides an end user with the ability to create, publish and view complex
statistical analysis of corporate data in client/server environments.
[Logo]
<PAGE> 108
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
LOGO
5,000,000 SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
------------------------
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made pursuant to this prospectus after the date of this prospectus shall
create an implication that the information contained in this prospectus or the
affairs of Sagent have not changed since the date of this prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID
--------
<S> <C>
Registration Fee............................................ $ 11,120
NASD Fee.................................................... 5,100
Nasdaq Listing Fee.......................................... 90,000
Legal Fees and Expenses..................................... 325,000
Accounting Fees and Expenses................................ 150,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent Fees......................................... 10,000
Miscellaneous............................................... 98,780
--------
Total............................................. $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
registrant's certificate of incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach or
alleged breach of their duty of care. In addition, as permitted by Section 145
of the Delaware General Corporation Law, the bylaws of the registrant provide
that: (1) the registrant is required to indemnify its directors and executive
officers and persons serving in such capacities in other business enterprises at
the registrant's request to the fullest extent permitted by Delaware law,
including in those circumstances in which indemnification would otherwise be
discretionary; (2) the registrant may, in its discretion, indemnify employees
and agents in those circumstances where indemnification is not required by law;
(3) the registrant is required to advance expenses, as incurred, to its
directors and executive officers in connection with defending a proceeding
(except that it is not required to advance expenses to a person against whom the
registrant brings a claim for breach of the duty of loyalty, failure to act in
good faith, intentional misconduct, knowing violation of law or deriving an
improper personal benefit; (4) the rights conferred in the bylaws are not
exclusive, and the registrant is authorized to enter into indemnification
agreements with its directors, executive officers and employees; and (5) the
registrant may not retroactively amend the bylaw provisions in a way that it
adverse to such directors, executive officers and employees in these matters.
The registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum indemnity
allowed to directors and executive officers by Section 145 of the Delaware
General Corporation Law and the bylaws, as well as certain additional procedural
protections. In addition, such indemnification agreements provide that the
registrant directors and executive officers will be indemnified to the fullest
possible extent not prohibited by law against all expenses (including attorney's
fees) and settlement amounts paid or incurred by them in any action
II-1
<PAGE> 110
or proceeding, including any derivative action by or in the right of the
registrant, on account of their services as directors or executive officers of
the registrant or as directors or officers of any other company or enterprise
when they are serving in such capacities at the request of the registrant. The
registrant will not be obligated pursuant to the indemnification agreements to
indemnify or advance expenses to an indemnified party with respect to
proceedings or claims initiated by the indemnified party and not by way of
defense, except with respect to proceedings specifically authorized by Sagent's
board of directors or brought to enforce a right to indemnification under the
indemnification agreement, the registrant's bylaws or any statute or law. Under
the agreements, the registrant is not obligated to indemnify the indemnified
party (1) for any expenses incurred by the indemnified party with respect to any
proceeding instituted by the indemnified party to enforce or interpret the
agreement, if a court of competent jurisdiction determines that each of the
material assertions made by the indemnified party in such proceeding was not
made in good faith or was frivolous; (2) for any amounts paid in settlement of a
proceedings unless the registrant consents to such settlement; (3) with respect
to any proceeding brought by the registrant against the indemnified party for
willful misconduct, unless a court determines that each of such claims was not
made in good faith or was frivolous; (4) on account of any suit in which
judgment is rendered against the indemnified party for an accounting of profits
made from the purchase or sale by the indemnified party of securities of the
registrant pursuant to the provisions of sec.16(b) of the Securities Exchange
Act of 1934 and related laws; (5) on account of conduct by the indemnified party
that is finally adjudged to have been knowingly fraudulent or deliberately
dishonest, or to constitute willful misconduct or a knowing violation of the
law; (6) on account of any conduct from which the indemnified party derived an
improper personal benefit; (7) on account of conduct the indemnified party
believed to be contrary to the best interests of the registrant or its
stockholders; (8) on account of conduct that constituted a breach of the
indemnified party's duty of loyalty to the registrant or its stockholders; or
(9) if a final decision by a court having jurisdiction in the matter determines
that such indemnification is not lawful.
The indemnification provision in the bylaws and the indemnification
agreements entered into between the registrant and its directors and executive
officers may be sufficiently broad to permit indemnification of the registrant's
officers and directors for liabilities arising under the Securities Act of 1933.
Reference is made to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1.1
Certificate of Incorporation of Registrant, as amended...... 3.1
Form of Amended and Restated Certificate of Incorporation of
Registrant, to be filed prior to closing of the
offering.................................................. 3.2
Bylaws of Registrant........................................ 3.3
Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.................................................. 10.1
</TABLE>
II-2
<PAGE> 111
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1996, the registrant has issued and sold the following
securities:
(a) From January 1, 1996 to December 31, 1998, the registrant sold in the
aggregate of 1,444,443 shares of unregistered common stock to 55 directors,
officers, employees, former employees and consultants at prices ranging from
$0.045 to $5.50 per share, for aggregate cash consideration of $805,831.
Such shares were sold pursuant to the exercise of options granted by the
board. As to each director, officer, employee, former employee and
consultant of the registrant who was issued such securities, the registrant
relied upon Rule 701 of the Securities Act of 1933. Each such person
purchased securities of the registrant pursuant to a written contract
between such person and the registrant. In addition, the registrant met the
conditions imposed under Rule 701(b).
(b) On January 17, 1996 and February 25, 1997, the registrant sold in the
aggregate 92,500 shares of unregistered common stock at a price per share of
$0.09 to a director and a price per share of $0.25 to a group of investors,
respectively, for aggregate cash consideration of $21,125. These shares were
sold pursuant to restricted stock purchase agreements between the registrant
and the director and such stockholders. As to each person issued such
securities, the registrant relied upon section 4(2) of the Securities Act of
1933.
(c) In July, August and September 1996, the registrant sold in the aggregate
2,615,680 shares of unregistered Series C preferred stock at a price per
share of $2.50 to certain investors for aggregate cash consideration of
$6,539,200. The registrant relied upon Section 4(2) of the Securities Act of
1933 and Regulation D, Rule 506, thereunder in connection with the sale of
these shares. The sale of Series C preferred stock was made in compliance
with all of the terms of Rules 501 and 502 of Regulation D, there were no
more than 35 investors (as calculated pursuant to Rule 501(e) of Regulation
D), and each investor who was not an accredited investor represented to the
registrant that he or she had such knowledge and experience in financial and
business matters that he or she was capable of evaluating the merits and
risks of the investment.
(d) On March 17, 1997, the registrant issued and sold in the aggregate 40,000
shares of unregistered Series C preferred stock at a price per share of
$2.50 to a director for aggregate cash consideration of $100,000. These
shares were sold pursuant to a Series C preferred stock purchase agreement
between the registrant and the director. Such issuance was made in reliance
upon Section 4(2) of the Securities Act of 1933. The registrant repurchased
the shares at a price per share of $2.50 in April 1998.
(e) On June 16, 1997, the registrant issued and sold in the aggregate 39,178
shares of unregistered Series C preferred stock at a price per share of
$2.50 to a consultant for aggregate cash consideration of $97,945. These
shares were sold pursuant to a Series C preferred stock purchase agreement
between the registrant and the consultant. Such issuance was made in
reliance upon Section 4(2) of the Securities Act of 1933.
(f) In August and September 1997, the registrant sold in the aggregate 1,572,327
shares of unregistered Series D preferred stock at a price per share of
$3.18 to certain investors for aggregate cash consideration of $5,000,000.
The registrant relied upon Section 4(2) of the Securities Act of 1933 and
Regulation D, Rule 506, thereunder in connection with the sale of these
shares. The sale of Series D preferred stock was
II-3
<PAGE> 112
made in compliance with all of the terms of Rules 501 and 502 of Regulation
D, there were no more than 35 investors (as calculated pursuant to Rule
501(e) of Regulation D), and each investor who was not an accredited
investor represented to the Registrant that he or she had such knowledge and
experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment.
(g) In January 1998, the registrant sold in the aggregate 45,785 shares of
unregistered Series D preferred stock at a price per share of $3.18 to an
officer of the registrant for aggregate cash consideration of $145,596.
These shares were sold pursuant to a Series D preferred stock purchase
agreement between the registrant and the officer. Such issuance was made in
reliance upon Section 4(2) of the Securities Act of 1933.
(h) In February and March 1998, the registrant sold in the aggregate 1,895,370
shares of unregistered Series E preferred stock at a price per share of
$5.40 to certain investors for aggregate cash consideration of $10,234,998.
The registrant relied upon Section 4(2) of the Securities Act of 1933 and
Regulation D, Rule 506, thereunder in connection with the sale of these
shares. The sale of Series E preferred stock was made in compliance with all
of the terms of Rules 501 and 502 of Regulation D, there were no more than
35 investors (as calculated pursuant to Rule 501(e) of Regulation D), and
each investor who was not an accredited investor represented to the
registrant that he or she had such knowledge and experience in financial and
business matters that he or she was capable of evaluating the merits and
risks of the investment.
(i) On May 21, 1998, the registrant sold in the aggregate 28,000 shares of
unregistered common stock at a price per share of $4.32 to a distributor of
the registrant's products for aggregate cash consideration of $120,960.
These shares were sold pursuant to a stock purchase agreement between the
registrant and the distributor. Such issuance was made in reliance upon
Section 4(2) of the Securities Act of 1933.
(j) On September 14, 1998, the registrant sold in the aggregate 10,000 shares of
unregistered common stock at a price per share of $5.50 to a consultant for
aggregate cash consideration of $55,000. These shares were sold pursuant to
a stock purchase agreement between the registrant and the consultant. Such
issuance was made in reliance upon Section 4(2) of the Securities Act of
1933.
Appropriate legends were affixed to the share certificates issued in the
transactions described above. All recipients had adequate access, through their
relationships with the registrant, to information about the registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed prior to the closing of the offering
made under the Registration Statement.
3.3+ Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
</TABLE>
II-4
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.2+ Sixth Amended and Restated Registration Rights Agreement,
dated as of February 24, 1998, between the Registrant and
the parties named therein.
4.3+ Common Stock Registration Rights Agreement, dated as of
September 14, 1998, between the Registrant and Robert Hawk.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1+ Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2+ Amended and Restated 1995 Stock Plan and related agreements.
10.3+ 1998 Stock Plan and related agreements.
10.4+ 1999 Employee Stock Purchase Plan and related agreements.
10.5+ 1999 Director Option Plan and related agreements.
10.6+ Master Equipment Lease Agreement, dated August 7, 1995,
between the Registrant and Lighthouse Capital Partners, L.P.
10.7+ Master Lease Agreement, dated as of September 26, 1998,
between the Registrant and Dell Financial Services L.P.
10.8+ Loan and Security Agreement, dated as of July 16, 1997,
between the Registrant and Venture Banking Group, a division
of Cupertino National Bank, and amendments thereto.
10.9+ Standard Office Lease, dated June 1, 1998, by and between
the Registrant and Asset Growth Partners, Ltd., and the
First Amendment thereto.
10.10**+ Development and Licensing Agreement, dated January 22, 1997,
between the Registrant and Abacus Concepts, Inc.
10.11**+ Microsoft License and Distribution Agreement, dated August
23, 1996, between the Registrant and Microsoft Corporation.
10.12**+ Value-Added Reseller Agreement, effective June 26, 1997,
between the Registrant and Automatic Data Processing, Inc.
10.13**+ Sagent KK Non-Exclusive Japanese Distribution Agreement,
dated as of December 17, 1997, between Sagent KK Japan and
Kawasaki Steel Systems R&D Corporation.
10.14**+ Exclusive Distribution Agreement, effective as of January 1,
1998, by and between the Registrant and Sagent U.K. Ltd.
10.15**+ Joint Venture Agreement, entered into as of April 8, 1998,
between the Registrant and ISAR-Vermogensverwaltung GbR mbH
and related agreements.
10.16**+ Exclusive Concession Agreement, effective as of November 21,
1997, by and between the Registrant and Sagent France S.A.
10.17**+ Value-Added Reseller/OEM Agreement, effective December 30,
1997, between the Registrant and Advent Software, Inc.
10.18+ Form of Sagent Technology, Inc. End User Software License
Agreement.
10.19**+ OEM Software License Agreement, effective March 31, 1998,
between the Registrant and Siebel Systems, Inc.
10.20+ Form of Sagent Technology, Inc. Software Maintenance and
Technical Support Agreement.
10.21+ Form of Sagent Technology, Inc. Agreement for Consulting
Services.
10.22+ Form of Sagent Technology, Inc. Agreement for Subcontractor
Consulting Services.
10.23+ Form of Evaluation Agreement.
10.24+ Note, dated February 1, 1998, of W. Virginia Walker.
</TABLE>
II-5
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.25+ Note, dated February 1, 1998, of W. Virginia Walker.
10.26**+ Solution Provider Agreement, effective June 27, 1997,
between the Registrant and Unisys Corporation.
10.27+ Consulting Agreement, dated as of April 7, 1997, between the
Registrant and Ralph Kimball.
10.28+ Executive Change of Control Policy.
10.29+ Agreement and Plan of Reorganization, dated as of February
27, 1998, by and among Sagent Technology, Inc., Talus
Acquisition Corp., Talus, Incorporated and Certain
Shareholders of Talus, Incorporated.
10.30+ Employment and Non-Competition Agreement, dated as of
February 27, 1998, between the Registrant and Michael P.
Venerable.
10.31** Software License and Services Agreement, dated March 31,
1998, between the Registrant and Siebel Systems, Inc.
10.32 Common Stock Purchase Agreement, dated February 28, 1999,
between the Registrant and Klaus Luft.
10.33 Notes, dated February 5, 1999, between the Registrant and
Tom Lounibos.
21.1+ Subsidiaries of the Registrant.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.4 Consent of Klaus S. Luft.
24.1+ Power of Attorney (See page II-8).
27.1+ Financial Data Schedule (available in EDGAR format only).
</TABLE>
- -------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II. Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of this registration
statement or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
II-6
<PAGE> 115
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Mountain View, State of California, on this 9th day of March 1999.
SAGENT TECHNOLOGY, INC.
By: /s/ KENNETH C. GARDNER
-----------------------------------
Kenneth C. Gardner
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President and Chief Executive March 9, 1999
- --------------------------------------------- Officer (Principal Executive
Kenneth C. Gardner Officer)
/s/ W. VIRGINIA WALKER Vice President of Finance and March 9, 1999
- --------------------------------------------- Administration, Chief
W. Virginia Walker Financial Officer (Principal
Financial and Accounting
Officer)
* Director March 9, 1999
- ---------------------------------------------
John E. Zicker
* Director March 9, 1999
- ---------------------------------------------
Shanda Bahles
* Director March 9, 1999
- ---------------------------------------------
Richard W. Shapero
* Director March 9, 1999
- ---------------------------------------------
Jeffrey T. Webber
*By: /s/ W. VIRGINIA WALKER
- ---------------------------------------------
W. Virginia Walker
Attorney-in-fact
</TABLE>
II-8
<PAGE> 117
SCHEDULE II
SAGENT TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT (REDUCTIONS) BALANCE AT
BEGINNING IN COSTS END OF
OF PERIOD AND EXPENSES WRITE-OFFS PERIOD
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31,
1996.. $ -- $ -- $-- $ --
1997.. -- 450 -- 450
1998.. 450 58 -- 508
Valuation allowances for deferred
tax assets:
Year ended December 31,
1996.. $ -- $3,351 $-- $ 3,351
1997.. 3,351 2,739 -- 6,090
1998.. 6,090 5,899 -- 11,989
</TABLE>
<PAGE> 118
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1+ Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made
under the Registration Statement.
3.3+ Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2+ Sixth Amended and Restated Registration Rights Agreement,
dated as of February 24, 1998, between the Registrant and
the parties named therein.
4.3+ Common Stock Registration Rights Agreement, dated as of
September 14, 1998, between the Registrant and Robert Hawk.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1+ Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2+ Amended and Restated 1995 Stock Plan and related agreements.
10.3+ 1998 Stock Plan and related agreements.
10.4+ 1999 Employee Stock Purchase Plan and related agreements.
10.5+ 1999 Director Option Plan and related agreements.
10.6+ Master Equipment Lease Agreement, dated August 7, 1995,
between the Registrant and Lighthouse Capital Partners, L.P.
10.7+ Master Lease Agreement, dated as of September 26, 1998,
between the Registrant and Dell Financial Services L.P.
10.8+ Loan and Security Agreement, dated as of July 16, 1997,
between the Registrant and Venture Banking Group, a division
of Cupertino National Bank, and amendments thereto.
10.9+ Standard Office Lease, dated June 1, 1998, by and between
the Registrant and Asset Growth Partners, Ltd., and the
First Amendment thereto.
10.10**+ Development and Licensing Agreement, dated January 22, 1997,
between the Registrant and Abacus Concepts, Inc.
10.11**+ Microsoft License and Distribution Agreement, dated August
23, 1996, between the Registrant and Microsoft Corporation.
10.12**+ Value-Added Reseller Agreement, effective June 26, 1997,
between the Registrant and Automatic Data Processing, Inc.
10.13**+ Sagent KK Non-Exclusive Japanese Distribution Agreement,
dated as of December 17, 1997, between Sagent KK Japan and
Kawasaki Steel Systems R&D Corporation.
10.14**+ Exclusive Distribution Agreement, effective as of January 1,
1998, by and between the Registrant and Sagent U.K. Ltd.
10.15**+ Joint Venture Agreement, entered into as of April 8, 1998,
between the Registrant and ISAR- Vermongensverwaltung GbR
mbH and related agreements.
10.16**+ Exclusive Concession Agreement, effective as of November 21,
1997, by and between the Registrant and Sagent France S.A.
10.17**+ Value-Added Reseller/OEM Agreement, effective December 30,
1997, between the Registrant and Advent Software, Inc.
10.18+ Form of Sagent Technology, Inc. End User Software License
Agreement.
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.19**+ OEM Software License Agreement, effective March 31, 1998,
between the Registrant and Siebel Systems, Inc.
10.20+ Form of Sagent Technology, Inc. Software Maintenance and
Technical Support Agreement.
10.21+ Form of Sagent Technology, Inc. Agreement for Consulting
Services.
10.22+ Form of Sagent Technology, Inc. Agreement for Subcontractor
Consulting Services.
10.23+ Form of Evaluation Agreement.
10.24+ Note, dated February 1, 1998, of W. Virginia Walker.
10.25+ Note, dated February 1, 1998, of W. Virginia Walker.
10.26**+ Solution Provider Agreement, effective June 27, 1997,
between the Registrant and Unisys Corporation.
10.27+ Consulting Agreement, dated as of April 7, 1997, between the
Registrant and Ralph Kimball.
10.28+ Executive Change of Control Policy.
10.29+ Agreement and Plan Reorganization, dated as of February 27,
1998, by and among Sagent Technology, Inc., Talus
Acquisition Corp., Talus, Incorporated and Certain
Shareholders of Talus, Incorporated
10.30+ Employment and Non-Competition Agreement, dated as of
February 27, 1998 between Registrant and Michael P.
Venerable.
10.31** Software License and Services Agreement, dated March 31,
1998, between Registrant and Siebel Systems, Inc.
10.32 Common Stock Purchase Agreement, dated February 28, 1999,
between the Registrant and Klaus Luft.
10.33 Notes, dated February 5, 1999, between the Registrant and
Tom Lounibos.
21.1+ Subsidiaries of the Registrant.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.4 Consent of Klaus S. Luft.
24.1+ Power of Attorney (See page II-8).
27.1+ Financial Data Schedule (available in EDGAR format only).
</TABLE>
- ------------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SAGENT TECHNOLOGY, INC.
Ken Gardner and Arthur F. Schneiderman hereby certify that:
1. They are the President and Secretary of Sagent Technology, Inc., a
Delaware corporation (the "Corporation") respectively.
2. The Certificate of Incorporation of the Corporation, filed with the
Secretary of State of Delaware on September 29, 1998, is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this Corporation is Sagent Technology, Inc. (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the General Corporation
Law of Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of stock, designated
Common Stock, par value $0.001 per share ("Common Stock") and Preferred Stock,
par value $0.001 per share ("Preferred Stock"). The number of shares of Common
Stock which this Corporation is authorized to issue is 70,000,000. The number of
shares of Preferred Stock which this Corporation is authorized to issue is
20,555,555, 2,800,000 of which shall be designated "Series A Preferred,"
5,655,555 of which shall be designated "Series B Preferred", 2,800,000 of which
shall be designated "Series C Preferred", 1,800,000 of which shall be designated
"Series D Preferred", and 2,500,000 of which shall be designated "Series E
Preferred" (Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred are referred to collectively as the "Preferred
Stock").
<PAGE> 2
The undesignated 5,000,000 shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is authorized to
determine the number of shares of any such series. The Board of Directors is
also authorized to determine or alter the powers, designations, preferences,
rights and restrictions to be imposed upon any wholly unissued series of
Preferred Stock and, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase (but not above the total number of
authorized shares of the class) or decrease (but not below the number of shares
of such series then outstanding) the number of shares of any series subsequent
to the issue of shares of that series.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes of Common Stock and Preferred Stock or
the holders thereof are as follows:
SECTION 1. DIVIDENDS.
The holders of the outstanding Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available therefor, dividends at the rate of $0.036 per share of Series A
Preferred per annum, $0.072 per share of Series B Preferred per annum, $0.20 per
share of Series C Preferred per annum, $0.25 per share of Series D Preferred per
annum, and $0.43 per share of Series E Preferred per annum, payable in
preference and priority to any payment of any dividend on Common Stock of the
Corporation. Such dividends shall not be cumulative, and no right to such
dividends shall accrue to holders of Preferred Stock or to the holders of Common
Stock unless declared by the Board of Directors. No dividends or other
distributions shall be made with respect to the Common Stock in any fiscal year,
other than dividends payable solely in Common Stock, until a dividend has been
paid to or declared and set apart upon all shares of Preferred Stock at the
annual rates set forth above during that fiscal year. After the holders of the
Preferred Stock have received their dividend preference as set forth above, any
dividends declared by the Board of Directors out of funds legally available
therefor shall be shared equally among all outstanding shares on an as-converted
basis.
(a) For purposes of this Section 1, unless the context otherwise
requires, a "distribution" shall mean the transfer of cash or other property
without consideration whether by way of dividend or otherwise, payable other
than in Common Stock, or the purchase or redemption of shares of the Corporation
(other than repurchases of Common Stock issued to or held by employees,
officers, directors or consultants of the Corporation or its subsidiaries upon
termination of their employment or services pursuant to agreements providing for
the right of said repurchase) for cash or property.
(b) As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchases by the Corporation of shares of
Common Stock issued to or held by employees, officers,
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<PAGE> 3
directors or consultants of the Corporation or its subsidiaries upon termination
of their employment or services pursuant to agreements providing for the right
of said repurchase.
SECTION 2. LIQUIDATION PREFERENCE.
In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, distributions to the shareholders
of the Corporation shall be made in the following manner:
(a) The holders of the Series A Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership of such stock, the amount of $0.45 per share for each share of
Series A Preferred then held by them (adjusted for any subdivisions,
combinations, consolidations,, or stock distributions or stock dividends with
respect to such shares effected after the date these Amended and Restated
Articles were filed with the Secretary of State) plus an amount equal to all
declared but unpaid dividends on the Series A Preferred held by them, the
holders of the Series B Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock by reason of their ownership of such
stock, the amount of $0.90 per share for each share of Series B Preferred then
held by them(adjusted for any subdivisions, combinations, consolidations or
stock distributions or stock dividends with respect to such shares effected
after the date these Amended and Restated Articles were filed with the Secretary
of State) plus an amount equal to all declared and unpaid dividends on the
Series B Preferred shares then held by them, the holders of the Series C
Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of Common Stock by reason of their ownership of such stock, the amount
of $2.50 per share for each share of Series C Preferred then held by them
(adjusted for any subdivisions, combinations, consolidations or stock
distributions or stock dividends with respect to such shares effected after the
date these Amended and Restated Articles were filed with the Secretary of State)
plus an amount equal to all declared and unpaid dividends on the Series C
Preferred shares then held by them, and the holders of the Series D Preferred
shall be entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of Common Stock
by reason of their ownership of such stock, the amount of $3.18 per share for
each share of Series D Preferred then held by them (adjusted for any
subdivisions, combinations, consolidations or stock distributions or stock
dividends with respect to such shares effected after the date these Amended and
Restated Articles were filed with the Secretary of State) plus an amount equal
to all declared and unpaid dividends on the Series D Preferred shares then held
by them. The holders of the Series E Preferred shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of Common Stock by reason of their
ownership of such stock, the amount of $5.40 per share for each share of Series
E Preferred then held by them (adjusted for any subdivisions, combinations,
consolidations or stock distributions or stock dividends with respect to such
shares effected after the date these Amended and Restated Articles were filed
with the Secretary of State) plus an amount equal to all declared and unpaid
dividends on the Series E Preferred shares then held by them. If the assets and
funds thus distributed among the holders of the Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation
-3-
<PAGE> 4
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the full aforesaid preferential
amounts to which each such holder is entitled.
(b) After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled as set forth in
Section 2(a) above, then the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed
ratably among the holders of the Common Stock in a manner such that the amount
distributed to each holder of Common Stock shall equal the amount obtained by
multiplying the entire remaining assets and funds of the Corporation legally
available for distribution hereunder by a fraction, the numerator of which shall
be the number of shares of Common Stock then held by such holder, and the
denominator of which shall be the total number of shares of Common Stock then
outstanding.
(c) For purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or a merger of
any other corporation or corporations into the Corporation, unless the
shareholders of the Corporation immediately following such transaction directly
or indirectly own greater than fifty percent (50%) of the total voting power of
the surviving or acquiring corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall be treated as a
liquidation, dissolution or winding up of the Corporation.
(d) Notwithstanding Sections 2(a) and 2(b) hereof, the Corporation
may at any time, out of funds legally available therefor, repurchase shares of
Common Stock of the Corporation issued to or held by employees, officers,
directors or consultants of the Corporation or its subsidiaries upon termination
of their employment or services, pursuant to any agreement providing for such
right of repurchase.
SECTION 3. CONVERSION.
The holders of the Preferred Stock shall have conversion rights as follows
(the "CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series A Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for the Series A Preferred, into such number of fully paid and non assessable
shares of Common Stock as is determined by dividing $0.45 by the applicable
Conversion Price, determined as hereinafter provided, in effect at the time of
conversion. Each share of Series B Preferred shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of the Corporation or any transfer agent for the Series B Preferred,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $0.90 by the applicable Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. Each share of Series
C Preferred shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share, at the office of the Corporation
or any transfer agent for the Series C Preferred, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $2.50 by
the applicable Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. Each share of Series D Preferred shall be
convertible, at the option of the holder
-4-
<PAGE> 5
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for the Series D Preferred, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing $3.18 by the applicable Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Each share of Series E Preferred
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for the Series E Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $5.40 by the
applicable Conversion Price, determined as hereinafter provided, in effect at
the time of conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of Preferred Stock (the "Conversion
Price") shall initially be $0.45 with respect to the Series A Preferred, $0.90
with respect to the Series B Preferred, $2.50 with respect to the Series C
Preferred, $3.18 with respect to the Series D Preferred, and $5.40 with respect
to the Series E Preferred per share of Common Stock. Such initial Conversion
Price shall be subject to adjustment as hereinafter provided.
Upon conversion, all declared and unpaid dividends on the Preferred Stock
shall be paid either in cash or in shares of Common Stock of the Corporation, at
the election of the Company, wherein the shares of Common Stock shall be valued
at the fair market value at the time of such conversion, as determined by the
Board of Directors of the Corporation.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
applicable Conversion Price upon either (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public with gross
proceeds to the Company (prior to underwriter commissions and offering expenses)
of not less than $10 million, or (ii) the receipt by the Corporation of the
affirmative vote at a duly noticed shareholders meeting or pursuant to a duly
solicited written consent of the holders of more than sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of Preferred Stock in favor of
the conversion of all of the shares of Preferred Stock. In the event of the
automatic conversion of the Preferred Stock upon a public offering as set forth
in subsection (i) hereof, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
(after aggregating all shares into which shares of Preferred Stock held by each
holder could be converted) pay cash equal to such fraction multiplied by the
then-effective Conversion Price. Before any holder of Preferred Stock shall be
entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Preferred Stock, and shall give written notice to the Corporation
at such office that he elects to convert the same; provided, however, that in
the event of an automatic conversion pursuant to Section 3(b), the outstanding
shares of Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the
-5-
<PAGE> 6
Corporation or its transfer agent, and provided further that the Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such automatic conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Corporation or its
transfer agent as provided above, or the holder notifies the Corporation or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
The Corporation shall, as soon as practicable after such delivery, or such
agreement and indemnification in the case of a lost certificate, issue and
deliver at such office to such holder of Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, or in the case of automatic conversion
immediately prior to the closing of the offering or on the effective date of
such written consent, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price.
(i) Adjustments for Subdivisions, Stock Dividends,
Combinations or Consolidations of Common Stock. In the event the Corporation
effects a subdivision or combination of its outstanding shares of Common Stock
into a greater or smaller number of shares without a proportionate and
corresponding subdivision or combination of its outstanding shares of Preferred
Stock, then and in each such event the Conversion Price shall be proportionally
decreased or increased, respectively.
(ii) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive, any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section 3, then and in
each such event provision shall be made so that the holders of Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Corporation
which they would have received had their shares of Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the date of
conversion, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 3 with respect to the rights of the holders of the Preferred Stock.
(iii) Adjustments for Reclassification, Exchange and
Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock or other securities or property, whether by
capital reorganization, reclassification or otherwise, the Conversion Price then
in effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock
-6-
<PAGE> 7
which the holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock or other securities or property
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Preferred Stock immediately
before that change and, in any such case, appropriate adjustment (as determined
by the Board) shall be made in the application of the provisions herein set
forth with respect to the rights and interest thereafter of the holders of the
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to change in and other adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Preferred Stock.
(e) No Impairment. Except as provided in Section 5, the Corporation
will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 3,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event that this Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this Corporation shall send to the holders of the Preferred Stock:
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<PAGE> 8
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and
(iv) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or by messenger or
given by express or first class mail, postage prepaid, addressed to the holders
of Preferred Stock at the address for each such holder as shown on the books of
this Corporation.
SECTION 4. VOTING RIGHTS.
Except as otherwise required by law or by Section 5 hereof, the holder of
each share of Common Stock issued and outstanding shall have one vote with
respect to such share and the holder of each share of Preferred Stock shall be
entitled with respect to such share to a number of votes equal to the number of
shares of Common Stock into which such share of Preferred Stock could be
converted at the record date for determination of the shareholders entitled to
vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited, such
votes to be counted together with all other shares of stock of the Company
having general voting power and not separately as a class. Holders of Common
Stock and Preferred Stock shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of the Corporation. Fractional votes by
the holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights shall (after aggregating all shares into which shares
of Preferred Stock held by each holder could be converted) be rounded to the
nearest whole number.
SECTION 5. COVENANTS.
In addition to any other rights provided by law, so long as any Preferred
Stock shall be outstanding, this Corporation shall not, without first obtaining
the affirmative vote or written consent of the holders of not less than a
majority of such outstanding shares of Preferred Stock, voting together as a
single class:
(a) amend or repeal any provision of, or add any provision to, this
Corporation's Amended and Restated Articles of Incorporation if such action
would materially and adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, any
Preferred Stock;
(b) authorize, issue or obligate itself to issue shares of any
class of stock or any other security convertible into or exchangeable for shares
of any class of stock having any preference or
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<PAGE> 9
priority as to dividends or assets superior to or on a parity with any such
preference or priority of any Preferred Stock;
(c) reclassify any Common Stock or any other shares of this
Corporation other than the Preferred Stock into shares having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Preferred Stock;
(d) increase the authorized number of shares of Preferred Stock; or
(e) authorize a liquidation, dissolution, recapitalization or
reorganization of the Corporation, or a sale or transfer of all or substantially
all of the assets of the Corporation or a merger or consolidation of the
Corporation if, as a result of such merger or consolidation, the shareholders of
the Corporation shall own less than 50% of the voting securities of the
surviving corporation.
SECTION 6. NO REISSUANCE OF PREFERRED STOCK.
No share or shares of Preferred Stock acquired by this Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be canceled, retired and eliminated from the shares which
the Corporation shall be authorized to issue.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE VII
The exact number of directors shall be as set forth in the Bylaws of the
Corporation.
ARTICLE VIII
Vacancies existing in the Board of Directors for any reason, and any
directorships resulting from any increase in the authorized number of directors,
may be filled between annual meetings of stockholders only by the Board of
Directors acting according to the procedures for the filling of vacancies set
forth in the Bylaws of the Corporation.
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<PAGE> 10
ARTICLE IX
This Article shall become effective immediately upon the Corporation's no
longer being subject to Section 2115 of the California Corporations Code. Upon
the effectiveness of this Article, the Board of Directors shall be divided into
three classes consisting of as nearly equal numbers of directors as possible,
and designated Class A, Class B, and Class C. The term of office of Class A
shall expire at the first annual meeting of stockholders following the
effectiveness of this Article, and each third annual meeting of stockholders
thereafter; the term of office of Class B shall expire at the second annual
meeting of stockholders following the effectiveness of this Article, and each
third annual meeting of stockholders thereafter; and the term of office of Class
C shall expire at the third annual meeting of stockholders following the
effectiveness of this Article, and each third annual meeting of stockholders
thereafter. If Section 2115 of the California Corporations Code becomes
inapplicable to the Corporation upon the occurrence of an annual stockholders
meeting, then the election of directors at such meeting shall be in accordance
with the terms set forth in this Article IX. If Section 2115 of the California
Corporations Code becomes inapplicable to the Corporation between annual
meetings of stockholders, then as soon as practicable following the
effectiveness of this Article, the directors then in office shall by resolution
of the Board of Directors select which of such directors shall be Class A
directors, Class B directors and Class C directors. Directors added to the board
of directors between annual meetings of stockholders by reason of an increase in
the authorized number of directors shall belong to the class designated by the
Board of Directors; provided however that the number of board seats designated
to belong to Class A, Class B and Class C must be as nearly equal in number as
possible. Following the effectiveness of this Article, stockholders may effect
the removal of a director only for cause. This provision shall supersede any
provision to the contrary in the Corporation's Bylaws.
ARTICLE X
At all elections of directors of the Corporation, if any holder of stock
of this Corporation entitled to vote at an election of directors shall have
given the Corporation notice in accordance with the manner therefor set forth in
the Corporation's Bylaws of such holder's intention to cumulate his or her votes
for the election of directors, then each holder of stock or of any class or
classes or of a series or series thereof shall be entitled to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his or her shares of stock multiplied by the number of
directors to be elected, and the holder may cast all of such votes for a single
director or may distribute them among the number of directors to be voted for,
or for any two or more of them as such holder may see fit.
ARTICLE XI
Article X of this Amended and Restated Certificate of Incorporation,
providing for cumulative voting, shall cease to be effective immediately upon
the Corporation's no longer being subject to Section 2115 of the California
Corporations Code, and any provision to the contrary in the Bylaws of the
Corporation shall then be null and void.
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<PAGE> 11
ARTICLE XII
Anything in this Amended and Restated Certificate of Incorporation to the
contrary notwithstanding, neither the provisions of this Article nor the
provisions of Article XI (elimination of cumulative voting), Article IX
(classification of the Board of Directors) or Article VII (authorized number of
directors) of this Amended and Restated Certificate of Incorporation nor the
provisions of Section 2.3 (special meeting), Section 2.5 (advance notice of
stockholder nominees and stockholder business), or Section 9.2 (supermajority
vote) of the Bylaws shall be repealed or amended, nor shall any provision
inconsistent with the aforementioned provisions be adopted and added to this
Amended and Restated Certificate of Incorporation or the Bylaws except upon the
affirmative vote of not less than two-thirds of the shares of the Corporation
issued and outstanding.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. No action that is required or permitted to
be taken by the stockholders of the Corporation at any annual or special meeting
of stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders. The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation.
ARTICLE XIV
To the fullest extent permitted by the Delaware General Corporation Law,
a director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exception from liability or limitation
thereof is not permitted under the Delaware Corporation Law as the same exists
or may hereafter be amended. Neither any amendment nor repeal of this Article
XIV, nor the adoption of any provision of this Amended and Restated Certificate
of Incorporation inconsistent with this Article XIV, shall eliminate or reduce
the effect of this Article XIV in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Article XIV, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XV
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation. Election of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
-11-
<PAGE> 12
ARTICLE XVI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE XVII
Any amendment, repeal or modification of the foregoing provisions of this
Article XVII shall not adversely affect any right of indemnification or
limitation of liability of an agent of this Corporation relating to acts or
omissions occurring prior to such amendment, repeal or modification."
3. The foregoing Amended and Restated Certificate of Incorporation has
been duly approved by the required vote of the stockholders in accordance with
the Certificate of Incorporation and the provisions of Section 242 and 245 of
the Delaware General Corporation Law.
The undersigned parties hereby acknowledge that the foregoing Amended and
Restated Certificate of Incorporation is their act and deed and that the facts
stated herein are true.
Executed in Mountain View, California, this 8th day of March, 1999.
/s/ KEN GARDNER /s/ ARTHUR F. SCHNEIDERMAN
- ------------------------------- -----------------------------------
Ken Gardner, President Arthur F. Schneiderman, Secretary
-12-
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
Sagent Technology, Inc.
800 W. El Camino Real, Suite 300
Mountain View, CA 94040
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission on January 28, 1999 (Registration No.
333-71369) (the "Registration Statement"), in connection with the registration
under the Securities Act of 1933, as amended, of up to 5,750,000 shares of your
Common Stock, par value $0.001 per share (the "Shares"). The Shares include an
over-allotment option granted to the underwriters of the offering to purchase
750,000 shares. We understand that the Shares are to be sold to the
underwriters of the offering for resale to the public as described in the
Registration Statement. As your legal counsel, we have examined the proceedings
taken, and are familiar with the proceedings proposed to be taken, by you in
connection with the sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, including the proceedings being taken in order to permit such
transaction to be carried out in accordance with applicable state securities
laws, the Shares, when issued and sold in the manner described in the
Registration Statement and in accordance with the resolutions adopted by the
Board of Directors of the Company, will be legally and validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE> 1
EXHIBIT 10.31
SOFTWARE LICENSE AND SERVICES AGREEMENT
THIS SOFTWARE LICENSE AND SERVICES AGREEMENT (the "Agreement") is between SAGENT
TECHNOLOGY, INC., with its principal place of business at 2226 E. Bayshore Road,
Suite 100, Palo Alto, CA 94303 ("Sagent") and SIEBEL SYSTEMS, INC., with its
principal place of business at 1855 South Grant Street, San Mateo, CA 94402
("Customer"), and For purposes of this Agreement, "Customer" shall include
Siebel Systems, Inc. and all its Affiliates, as defined below.
The terms of this Agreement shall apply to each Program License (as defined in
Section 1.13 below) and to all services provided by Sagent under this Agreement.
When completed by the parties, Order Forms (as defined in Section 1.10 below)
shall evidence the Program Licenses to be provided in Customer hereunder. The
terms and conditions set forth in this Agreement and in any Order Form shall
control in the event that there are different or additional terms set forth in
any other purchase order submitted by Customer or acceptance form or invoice
issued by Sagent. The terms and conditions of any Order Form shall control over
any conflicting terms and conditions contained in this Agreement.
1. DEFINITIONS
1.1 "AFFILIATE" shall mean any entity controlled by, controlling, or under
common control with Customer. Such entity shall be deemed to be an "Affiliate"
only so long as such control exists. Upon request, Customer agrees to confirm
the Affiliate status of a particular entity.
1.2 "COMMENCEMENT DATE" of each Program License shall mean the date on which an
Ordered Program is first delivered to Customer.
1.3 "DESIGNATED SYSTEM" shall mean Customer's computer hardware and operating
system designated on the Order Form.
1.4 "DOCUMENTATION" shall mean Sagent's then current published guides, manuals
and on-line help for the Ordered Programs. As of the Effective Date, such guides
and manuals for the Ordered Programs are listed in Exhibit C.
1.5 "EFFECTIVE DATE" shall mean the effective date set forth at the end of this
Agreement.
1.6 "PRE-PRODUCTION PROGRAM" shall mean a software program which is (i) not
generally licensed for commercial use by Sagent, (ii) not listed as generally
available in Sagent's marketing literature, or (iii) designated by Sagent as an
"Alpha," "Beta," or "Pre Production" program or release.
1.7 "MAINTENANCE SERVICES" shall mean the services provided under Sagent's
standard Maintenance Services policy in effect on the date such services are
ordered. A copy of Sagent's current Maintenance Services policy is attached as
EXHIBIT B.
1.8 "ORDER FORM" shall mean the document, substantially in the form of EXHIBIT
A, by which Customer orders Program Licenses and related services and which is
executed by the parties. Each Order Form shall reference the Effective Date of
this Agreement and shall upon signature by both parties, be incorporated into
this Agreement.
1.9 "ORDERED PROGRAMS" shall mean the User Programs and System Programs as
delivered by Sagent as listed in one or more Order Forms.
1.10 "PROGRAMS" shall mean (i) the User Programs and System Programs, and (ii)
Updates.
1.11 "PROGRAM LICENSE" shall mean each license granted to Customer for a User to
use a Program.
1.12 "SERVER SYSTEM" shall mean the server hardware and operating system of
Customer specified on the Order Form.
1.13 "SYSTEM PROGRAMS" shall mean the object code of the software specified as
"System Programs" on an Order Form that resides and operates on Server Systems.
1.14 "SUPPORTED PLATFORM" shall mean the hardware and software platforms (e.g.
database server systems, application server systems, and client systems) that
are supported by Sagent as expressly set forth in the Documentation. The
requirements for the Supported Platform are subject to change as specified by
Sagent in its discretion with thirty (30) days prior written notice to Customer.
1.15 "UPDATE" shall mean a subsequent release of a Program that Sagent makes
generally available at no additional charge for Programs receiving Maintenance
Services. Updates shall not include any release, option, future product, or any
upgrade in features, functionality or performance of the Programs which Sagent
licenses separately or offers only for an additional fee; provided, however,
that Updates shall include all (i) bug fixes, patches, and maintenance releases,
(ii) new point releases denoted by a change to the right of the first decimal
point (e.g., v30 to 31), and (iii) new major version releases denoted by a
change to the left of the first decimal point (e.g., v3.0 to 4.0) so long as
Customer is current on maintenance fee obligations.
1.16 "USERS" shall mean the unlimited number of individuals using the Programs.
Users may include the employees of Customer or third parties; provided that such
third party is limited to use of the Programs (i) only as configured and
deployed by Customer, and (ii) solely in connection with Customer's business
operations as conducted by or through such third party, including but not
limited to the installation, administration or implementation of the Programs
for Customer. Customer agrees that it is responsible for insuring that any third
party usage is in accordance with the terms and conditions of this Agreement.
Notwithstanding the foregoing, Users shall exclude any individuals employed by,
or acting on behalf or under the direction of, a direct competitor of Sagent.
1.17 "USER PROGRAMS" shall mean the object code of the software specified as
"User Programs" on an Order Form that resides and operates on User Systems.
1.18 "USER SYSTEM" shall mean the hardware and operating systems operated by
Users, including notebook and portable computers.
2. PROGRAM LICENSE
2.1 LICENSE GRANT. Subject to the terms and conditions of this Agreement,
Sagent grants Customer the worldwide, nonexclusive, perpetual right, solely for
its own internal business operations.
A. TO USE. (i) to use the Programs solely on the Designated System, or on
a backup system if the Designated System is inoperative, (ii) to use the
Documentation solely for purposes of supporting Customer's use of the Programs;
(iii) to use the Training Materials solely for purposes of supporting Users who
attend Sagent training courses; (iv) to use the Sagent Tools User Programs
solely in accordance with the Documentation to create Customer specific objects
for use with the User Programs, (v) to use the Deliverables solely for purposes
of installing or operating the programs, and (vi) to have third parties (e.g.,
system integrators) install, integrate, and implement the Programs for the
Customer;
B. TO COPY. (i) to copy the System Programs as reasonably necessary to
support the Users; (ii) to copy the User Programs, so long as such User operates
only one copy of the User Program at any given time, (iii) to make a reasonable
number of additional copies of the Programs solely for archival, emergency
back-up, or disaster recovery purposes; and (iv) to copy the on-line help
Documentation as reasonably necessary to support its Users.
2.2 LICENSE RESTRICTIONS. The rights granted in Section 2.1 are subject to the
following restrictions: (i) Customer may not reverse engineer, disassemble,
decompile, or otherwise attempt to derive the source code of the Programs,
provided that, if required under applicable law, upon Customer's request, Sagent
shall provide information necessary for Customer to achieve interoperability
between the Programs and other software for a nominal administrative charge;
(ii) Customer may not sublicense or use the Programs for commercial
time-sharing, rental, or service bureau use, or to train persons other than
Users, unless previously agreed to in writing by Sagent; (iii) Customer shall
not use the Sagent Tools User Programs for general application development
purposes; and (iv) with regard to any and all copies of the Programs, and
Documentation, Customer shall only make exact copies of the versions as
originally delivered by Sagent. Customer shall ensure that each copy contains
all titles, trademarks, and copyright and restricted rights notices as in the
original, and all such copies shall be subject to the terms and conditions of
this Agreement.
2.3 RETENTION OF RIGHTS. Sagent reserves all rights not expressly granted to
Customer in this Agreement. Without limiting the generality of the foregoing,
Customer acknowledges and agrees that: (i) except as specifically set forth in
this Agreement, Sagent and its suppliers retain all rights, title and interest
in and to the Programs, Documentation, Deliverables, and Training Materials and
Customer acknowledges and agrees that it does not acquire any rights, express or
implied, thereon, (ii) any configuration or deployment of the User Programs
shall not affect or diminish Sagent's rights, title, and interest in and to
<PAGE> 2
the Programs and (iii) if Customer suggests any new features functionality, or
performance for the Programs that Sagent subsequently incorporates into the
Programs, such new features, functionality, or performance shall be the sole and
exclusive property of Sagent and shall be free from any confidentiality
restrictions that might otherwise be imposed upon Sagent pursuant to Section 9.1
2.4 ASSIGNMENT. Neither this Agreement nor any rights granted hereunder may be
sold, issued, assigned, or otherwise transferred, in whole or in part, by either
party, and any such attempted assignment shall be void and of no effect without
the advance written consent of the other party. Such consent not to be
unreasonably withheld or delayed, provided, however that such consent shall not
be required if (i) either party assigns this Agreement to a wholly owned
subsidiary or in connection with a merger, acquisition, or sale of all or
substantially all of its assets, unless the surviving entity is a direct
competitor of the other party, or (ii) Sagent assigns its right to receive and
collect payments hereunder.
2.5 ACCEPTANCE. Unless an Ordered Program has previously been accepted by
Customer. Customer shall have thirty (30) days from the first date of delivery
of the Ordered Program (the "Acceptance Period") to evaluate such Ordered
Program. If, during the Acceptance Period, any Ordered Program fails to conform
in all material respects to the functions described in the Documentation when
operated on a Supported Platform, then (i) for Ordered Programs listed on the
first Order Form executed under this Agreement. Customer has the right to
terminate this Agreement by providing Sagent written notice during the
Acceptance Period and upon return of the Order Programs pursuant to Section 5.5,
receive a full refund of all Program License fees paid to Sagent pursuant to
this Agreement as of such termination date, and (ii) for Ordered Programs listed
on subsequent Order Forms, Customer has the right to terminate the corresponding
Program License by providing Sagent written notice during the Acceptance Period
and, upon return of the Ordered Programs pursuant to Section 5.5, receive a full
refund of any Program Licensee fees paid to Sagent with respect to such returned
Ordered Program as of the termination date. This Section states Customer's sole
and exclusive remedy with regard to nonconformance of any Ordered Program to the
Documentation. Failure by Customer to notify Sagent in writing of nonconformance
of an Ordered Program within the Acceptance Period shall be deemed acceptance.
Notwithstanding the foregoing, the warranties and remedies set forth in Sections
6.2 and 6.3 shall have full force and effect both during and after the
Acceptance Period.
2.6 CHANGE OR ADDITION OF DESIGNATED SYSTEM. If, at any time, Customer desires
to change the Designated System to another Supported Platform, Customer may do
so at no additional charge by providing Sagent fifteen (15) days prior written
notice. If Customer wishes to add a database management system that is a
Supported Platform, Customer may do so by providing Sagent fifteen (15) days
prior written notice and paying any applicable fees.
2.7 VERIFICATION. At Sagent's written request, but not more frequently than
annually, Customer shall furnish Sagent with a document signed by Customer's
authorized representative listing (locations of the Designated Systems.
3. SOURCE CODE ESCROW
Customer shall have the right to become a beneficiary to the Master Preferred
Escrow Agreement between Sagent and Data Securities International, Inc., a copy
of which will be provided to Customer upon request and which will be
incorporated by reference into this Agreement when Customer executes an
Acceptance Form pursuant to the Master Preferred Escrow Agreement.
4. SERVICES
4.1 MAINTENANCE SERVICES FOR PROGRAMS. Customer agrees to purchase Maintenance
Services for the period specified in the applicable Order Form for each Program
licensed pursuant to this Agreement. Sagent reserves the right to alter its
standard Maintenance Services policy from time to time using reasonable
discretion but in no event shall such alterations result in diminished support
from the level of support set forth in Exhibit B. Sagent shall provide Customer
with sixty (60) days prior written notice of any material changes to the level
of Maintenance Services set forth in Exhibit B.
5. TERM AND TERMINATION
5.1 TERM. Each Program License granted under this Agreement shall commence on
the applicable Commencement Date and shall remain in effect perpetually unless
such Program License or this Agreement is terminated as provided in Section 5.2
or 5.3 or in accordance with Section 2.5.
5.2 TERMINATION BY EITHER PARTY FOR MATERIAL BREACH. Either party may terminate
this Agreement or any Program License upon written notice if the other party
materially breaches this Agreement and fails to cure such breach within thirty
(30) days following receipt of written notice specifying the breach in detail;
provided, however, the Customer may terminate Maintenance Services only if
Sagent materially breaches the provisions of Exhibit B and fails to cure, or to
begin in good faith to cure, the breach within sixty (60) days following written
notice from Customer specifying the breach in detail. In the event of
termination of Maintenance Services, Customer shall be liable only for payment
for Maintenance Services through the termination date and shall receive a
pro-rata refund of any unused prepaid fees.
5.3 EFFECT OF TERMINATION. Subject to the provisions of Section 2.5,
termination of this Agreement or any Program License shall not limit either
party from pursuing other remedies available to it, including injunctive relief,
nor shall such termination relieve Customer of its obligation to pay all fees
that have accrued or are otherwise owed by Customer under any Order Form. The
parties' rights and obligations under Sections 2.2, 2.3, 2.5, 5, 6.1, 7, 8 and 9
shall survive termination of this Agreement.
5.4 HANDLING OF PROGRAMS UPON TERMINATION. If a Program License granted under
this Agreement terminates, Customer shall (i) cease using the applicable
Programs, Documentation, and related Confidential Information of Sagent, and
(ii) certify to Sagent within thirty (30) days after termination that Customer
has destroyed, or has returned to Sagent, the Programs, Documentation, related
Confidential Information of Sagent, and all copies thereof, whether or not
modified or merged into other materials.
6. INDEMNITY, WARRANTIES, REMEDIES
6.1 SAGENT'S INFRINGEMENT INDEMNITY. Sagent will defend and indemnify Customer
against any and all costs, damages and expenses (including reasonable legal
fees) finally awarded against Customer by a court of competent jurisdiction or
agreed to in a written settlement agreement signed by Sagent arising out of any
claim that the Programs directly infringe any U.S. patent issued as of the
Effective Date or any copyright, trade secret or trademark ("IP Claim"),
provided that: (i) Customer promptly notifies Sagent in writing no later than
sixty (60) days after Customer's receipt of notification of a potential claim,
(ii) Sagent may assume sole control of the defense of such claim and all related
settlement negotiations; and (iii) Customer provides Sagent, at Sagent's request
and expenses, with the assistance, information and authority necessary to
perform Sagent's obligations under this Section. Notwithstanding the foregoing,
Sagent shall have no liability for any claim of infringement based on (a) the
use of a superseded or altered release of Programs if the infringement would
have been avoided by the use of a current unaltered release of the Programs,
which Sagent provided to Customer, (b) the modification of a Program, or (c) the
use of the Programs other than in accordance with the Documentation.
If, due to an IP Claim, (i) the Programs are held by a court of competent
jurisdiction or are believed by Sagent to infringe, or (ii) Customer receives a
valid court order enjoining Customer from using the Programs, Sagent shall in
its reasonable judgment, and at its expense, (a) replace or modify the Programs
to be non infringing; (b) obtain for Customer a license to continue using the
Programs; or (c) if Sagent cannot reasonably obtain the remedies in (a) or (b),
terminate the Program License for the infringing Programs and refund the
license fees paid for those Programs upon return by Customer. This Section 6.1
states Sagent's entire liability and Customer's exclusive remedy for any claim
of infringement.
6.2 LIMITED WARRANTIES AND DISCLAIMERS
A. LIMITED PROGRAM WARRANTY. Sagent warrants for one (1) year from the
Commencement Date that each Ordered Program for which Customer has a Program
License will perform in all material respects the functions described in the
Documentation when operated on a Supported Platform.
B. LIMITED MEDIA WARRANTY. Sagent warrants for ninety (90) days from the
Commencement Date that the tapes, diskettes or other media upon which Sagent
delivers Programs to Customer will be free of defects in materials and
workmanship under normal use.
C. LIMITED SERVICES WARRANTY. Sagent warrants for ninety (90) days from
the performance of any services by Sagent pursuant to this Agreement, including
Maintenance Services, that such services shall be performed in a manner
consistent with generally accepted industry standards.
D. ANTI-VIRUS WARRANTY. Sagent warrants that to the best of its knowledge
after employing reasonable technical means to detect computer viruses, the
Programs do not contain any virus or computer software code, routines or
devices (other than as set forth in the Documentation) designed to disable,
damage, impair, or erase the Programs or other software or data. For failure to
comply with this warranty, Sagent shall, of Sagent's expenses, immediately
replace all copies of the affected Programs in the possession of
<PAGE> 3
Customer. This Section states Customer's sole and exclusive remedies and
Sagent's entire liability for a breach of this warranty.
E. YEAR 2000 WARRANTY. Sagent warrants that the Programs, as provided by
Sagent, are capable of processing, recording, storing and presenting data
containing four-digit years after December 31, 1999 in substantially the same
manner and with substantially the same functionality as before January 1, 2000.
Sagent assumes no responsibilities or obligations to cause third-party products
or services to function with the Programs. Sagent will not be in breach of this
warranty for any failure of the Programs to correctly create or process
date-related data if such failure results from the inability of any software,
hardware, or systems of Customer or any third party (including any underlying
database engines, operating systems, and related drivers) either to correctly
create or process date-related data or to create or process such date-related
data in a manner consistent with the method in which the Programs create or
process date-related data. In the event of a breach of this warranty,
Customer's sole and exclusive remedy and Sagent's sole liability shall be to
use its commercially reasonable efforts to correct or provide a workaround for
reproducible Program errors that cause breach of this warranty, or if Sagent is
unable to make the Program operate as warranted within a reasonable time
considering the severity of the error and its impact on the Customer. Customer
shall be entitled to return the Program to Sagent and recover the fees paid to
Sagent for the Program License.
F. DISCLAIMERS. Sagent does not warrant that the Programs will meet
Customer's requirements, the Programs will operate in combinations with other
hardware, software, systems or data not provided by Sagent (except as expressly
specified in writing by Sagent in the Documentation) which Customer may select
for use; the operation of the Programs will be uninterrupted or error free; or
all Program errors will be corrected. Notwithstanding any provision to the
contrary, Pre-Production Programs, Deliverables, and Training Materials are
distributed "AS IS" and Customer acknowledges that Pre-Production Programs are
not suitable for general use. THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU
OF ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6.3 EXCLUSIVE REMEDIES. Customer must report in writing any breach of the
warranties contained in Sections 6 2A, 6 2B and 6 2C to Sagent during the
relevant warranty period, and Customer's exclusive remedy and Sagent's entire
liability for such breach shall be.
A. FOR PROGRAMS. To use its commercially reasonable efforts to correct or
provide a workaround for reproducible Program errors that cause a breach of
this warranty or if Sagent is unable to make the Program operate as warranted
within a reasonable time considering the severity of the error and its impact
on the Customer. Customer shall be entitled to return the Program to Sagent and
recover the fees paid to Sagent for the Program License.
B. FOR MEDIA. The replacement of the defective media.
C. FOR SERVICES. The reperformance of the services, or if Sagent is unable
to perform the services as warranted. Customer shall be entitled to recover the
fees paid to Sagent for the nonconforming services.
6.4 GENERAL INDEMNITY. Each party (an "Indemnitor") shall defend and indemnify
the other party and its employees, officers, directors and agents (the
"Indemnitee") against all damages for bodily injury, death, or damage to real
or tangible personal property proximately caused by the Indemnitor in the
course of performing this Agreement; provided that (i) the Indemnitor receives
prompt written notice of the claim from the Indemnitee under this Section, (ii)
the Indemnitor has the right to control the defense of such claim and any
related settlement negotiations, and (iii) the Indemnitee provides to the
Indemnitor, at the Indemnitor's request and expense, with the assistance,
information and authority necessary to perform the Indemnitor's obligations
under this Section.
7. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF
PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN
AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. Except for Sagent's liability for infringement
claims under Section 6.1 or for any breach of its obligations under Section
9.1, Sagent's aggregate and cumulative liability for damages hereunder shall in
no event exceed the amount of fees paid by Customer under this Agreement, and
if such damages result from Customer's use of the Program or services, such
liability shall be limited to fees paid for the relevant Program or services
giving rise to the liability. Except for any breach of its obligations under
Sections 2.1, 2.2, 8 and 9.1, Customer's aggregate and cumulative liability for
damages hereunder shall in no event exceed the amount of fees paid by Customer
under this Agreement.
8. PAYMENT PROVISIONS
8.1 LICENSE FEES. In consideration of the license granted herein, Customer
agrees to make the license fee payments set forth in Order Forms which payments
shall be nonrefundable and irrevocable except as otherwise provided in Sections
2.5, 6.1 and 6.3A of this Agreement. Concurrently with the execution of this
Agreement, Customer shall place a binding initial order for Programs using the
Order Form attached hereto as EXHIBIT A.
8.2 MAINTENANCE SERVICE FEES. Fees for Maintenance Services shall be payable
as set forth in the Order Form.
8.3 OTHER FEES. All other applicable fees, if any, shall be payable thirty
(30) days from the receipt of Sagent's invoice.
8.4 TAXES. The fees listed in this Agreement do not include taxes, duties or
fees; if Sagent is required to pay (i) sales, use, property, value-added,
withholding or other taxes, (ii) any customs or other duties or (iii) any
import, warehouse or other fees, associated with the importation or delivery
based on the Program Licenses granted or services provided in this Agreement or
on Customer's use of Programs or services, then such taxes, duties or fees shall
be billed to and paid by Customer. If Customer is permitted to declare any such
taxes, Customer shall declare and pay such taxes and Sagent shall not be
required to invoice Customer. This Section shall not apply to taxes based on
Sagent's income or payroll taxes.
9. GENERAL TERMS
9.1 NONDISCLOSURE. Each party may have access to information that is
confidential to the other party ("Confidential Information"). Sagent's
Confidential Information shall include, but not be limited to, the Programs,
Documentation, formulas, methods, know how, processes, designs, new products,
developmental work, marketing requirements, marketing plans, customer names,
prospective customer names, the terms and pricing under this Agreement, and all
information clearly identified in writing at the time of disclosure as
confidential. Customer's Confidential Information shall include but not be
limited to, its software programs, formulas, methods, know-how, processes,
designs, new products, developmental work, marketing requirements, marketing
plans, customer names, prospective customer names, and all information clearly
identified in writing at the time of disclosure as confidential. Confidential
Information includes all information received from third parties that either
party is obligated to treat as confidential and oral information that is
identified by either party as confidential.
A party's Confidential Information shall not include information that (i) is or
becomes a part of the public domain through no act or omission of the other
party; (ii) was in the other party's lawful possession prior to the disclosure
and had not been obtained by the other party either directly or indirectly from
the disclosing party; (iii) is lawfully disclosed to the other party by a third
party without restriction on disclosure; (iv) is independently developed by the
other party without use of or reference to the other party's Confidential
Information, or (v) is required to be disclosed by law or valid order of a
court or other governmental authority; provided, however, that the responding
party shall first have given notice to the other party and shall have made a
reasonable effort to obtain a protective order requiring that the Confidential
Information so disclosed be used only for the purposes for which the order was
issued.
The parties agree, unless required by law, not to make each other's
Confidential Information available in any form to any third party (except
third parties who are Users as defined hereunder) or to use each other's
Confidential Information for any purpose other than in the performance of this
Agreement. Customer shall not disclose the results of any performance tests of
the Programs to any third party without Sagent's prior written approval. Each
party agrees to take all reasonable steps to ensure that Confidential
Information is not disclosed or distributed by its employees or agents in
breach of this Agreement. The parties agree to hold each other's Confidential
Information in confidence during the term of this Agreement and for a period of
three (3) years thereafter. Each party acknowledges and agrees that, due to the
unique nature of Confidential Information, there can be no adequate remedy at
law for breach of this Section 9.1 and that such breach would cause irreparable
harm to the non-breaching party; therefore, the non-breaching party shall be
entitled to seek immediate injunctive relief, in addition to whatever remedies
it might have at law or under this Agreement.
<PAGE> 4
This Section 9.1 constitutes the entire understanding of the parties and
supersedes all prior or contemporaneous agreements, representations or
negotiations, whether oral or written, with respect to confidential information.
9.2 GOVERNING LAW. This Agreement and all matters arising out of or relating
to this Agreement, shall be governed by the laws of the State of California,
excluding its conflict of law provisions. The parties agree that the United
Nations Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
9.3 NOTICES. All notices required to be sent hereunder shall be in writing and
shall be deemed to have been given upon (i) the date sent by confirmed
facsimile, (ii) on the date it was delivered by courier, or (iii) if by
certified mail return receipt requested, on the date received, to the addresses
set forth above and to the attention of the signatory of this Agreement or to
such other address or individual as the parties may specify from time to time
by written notice to the other party.
9.4 SEVERABILITY. In the event any provision of this Agreement is held to be
invalid or unenforceable, the remaining provisions of this Agreement will
remain in full force.
9.5 WAIVER. The waiver by either party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for nonpayment or breach of Sagent's proprietary
rights in the Programs or Documentation, no action, regardless of form, arising
out of this Agreement may be brought by either party more than one year after
the cause of action has accrued.
9.6 DELIVERY. All materials provided by Sagent hereunder shall be delivered
to Customer on a F.O.B. Sagent's Palo Alto Headquarters basis for destinations
within the United States, or on FCA (?????? 1990) Sagent's Palo Alto
Headquarters basis for destinations outside the United States, at which point
title to the carrier ?????? and risk of loss or damage to the materials shall
be transferred from Sagent to Customer. Nothing in this Section shall be deemed
to transfer title to, or provide Customer with any rights in, the Programs,
Deliverables or Documentation, except as specifically provided in this
Agreement.
9.7 EXPORT CONTROLS. Customer agrees to comply fully with all relevant export
laws and regulations of the United States, including but not limited to the U.S.
Export Administration Regulations (collectively, "U.S. Export Controls").
Without limiting the generality of the foregoing, Customer expressly agrees that
it shall not, and shall cause its representatives to agree not to, export,
directly or indirectly, re-export, divert, or transfer the Programs,
Documentation or any direct product thereof to any destination, company or
person restricted or prohibited by U.S. Export Controls.
9.8 RELATIONSHIP BETWEEN THE PARTIES. Sagent is an independent contractor,
nothing in this Agreement shall be construed to create a partnership, joint
venture or agency relationship between the parties.
9.9 ENTIRE AGREEMENT. This Agreement, together with the attached exhibits
which are incorporated by reference, constitutes the complete agreement between
the parties and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of this
Agreement and such exhibits. This Agreement may not be modified or amended
except in writing signed by a duly authorized representative of each party. No
other act, document, usage or custom shall be deemed to amend or modify this
Agreement.
9.10 COUNTERPARTS AND EXCHANGES BY FAX. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which will be
considered an original, but all of which together will constitute one and the
same instrument. The exchange of a fully executed Agreement (in counterparts or
otherwise) by fax shall be sufficient to bind the parties to the terms and
conditions of this Agreement.
The Effective Date of this Agreement shall be _____________________.
EXECUTED BY: SAGENT TECHNOLOGY, INC.
Signature: [SIG]
----------------------
Name: [SIG]
---------------------------
Title: EVP of Sales
---------------------------
Date: March 31, 1998
---------------------------
EXECUTED BY: SIEBEL SYSTEMS, INC.
Signature: /s/ KEVIN A. JOHNSON/ [initials]
----------------------
Name: Kevin A. Johnson
---------------------------
Title: Vice President, Legal Affairs
---------------------------
Date: March 31, 1998
---------------------------
[SEAL]
Copyright (c) Sagent Systems, Inc. Revised internal use 0331b3
rev 980311 Page 3
Sagent Systems, Inc.
Software License and Services Agreement
<PAGE> 5
EXHIBIT A
ORDER FORM
<TABLE>
<S> <C>
CUSTOMER NAME: SIEBEL SYSTEMS, INC.
--------------------------------------------------------------------------------
Effective Date of Software License and Services Agreement: March 31, 1998
--------------------------------
Number of Server Systems: Unlimited site license
--------------------------------
Maximum Number of Named Users: Unlimited site license
--------------------------------
Designated System: To Be Determined
--------------------------------
</TABLE>
<TABLE>
<S> <C>
ORDERED PROGRAMS:
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF USERS OR SERVERS
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Data Mart Server Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Admin Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Design Studio Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
OLE/DB Client Connections Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Information Studio Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Analysis Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
Sagent Weblink Unlimited
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PROGRAM LICENSE FEES FOR THE PROGRAMS LICENSED HEREUNDER, DUE AND PAYABLE NET 45 DAYS FROM RECEIPT OF INVOICE $[*]
- ------------------------------------------------------------------------------------------------------------------------------------
MAINTENANCE SERVICES
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL MAINTENANCE FEES FOR THE PROGRAMS LICENSED HEREUNDER, DUE AND PAYABLE NET 45 DAYS FROM RECEIPT OF INVOICE $[*]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL TERMS AND CONDITIONS:
1. SITE LICENSE Sagent and Customer agree that the Total Program License
Fees set forth in this Order Form are in consideration for a worldwide license
to use the Programs set forth in this Order Form by an unlimited number of
Designated Systems and servers and an unlimited number of Users. The Programs
set forth in this Order Form represent all products currently generally
available from Sagent. Upon Sagent's release of additional products, Sagent
shall promptly deliver such products to Customer as Updates under this Agreement
at no additional charge.
2. ELECTRONIC DELIVERY OF THE ORDERED PROGRAMS AND DOCUMENTATION Sagent
shall deliver the Ordered Programs, Updates, and Documentation to Customer
electronically. Customer agrees to set up a secure FTP site or to take other
reasonable measures to assist Sagent in the secure delivery of the Ordered
Programs (i.e., establishing a FTP server) and the parties collectively
determine that electronic delivery is technically feasible within the time
frame specified for delivery. The Ordered Programs and the Documentation will
be electronically transmitted in separate transactions, and Sagent and Customer
each will provide the other party with tangible evidence that the Ordered
Programs and Documentation were electronically transmitted and received,
respectively.
ORDER ACCEPTED AND ACKNOWLEDGED:
SAGENT TECHNOLOGY, INC. SIEBEL SYSTEMS, INC.
Signature: /s/ THOMAS M. LOUNIBOS Signature: /s/ KEVIN A. JOHNSON
--------------------------- ------------------------------
Name: Thomas M. Lounibos Name: Kevin A. Johnson
-------------------------------- -----------------------------------
Title: EVP of Sales Title: Vice President of Legal Affairs
------------------------------- ----------------------------------
Date: March 31, 1998 Date: March 31, 1998
-------------------------------- -----------------------------------
[SEAL]
Sagent Systems, Inc.
Software License and Services Agreement
Copyright(C) 1998 Sagent Systems, Inc. revised internal-use0331b3
rev880311 Page 4
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 6
EXHIBIT B
SAGENT MAINTENANCE OBLIGATIONS
1. DEFINITIONS.
A. "MAINTENANCE" shall mean Sagent's obligations set forth in this
Agreement.
B. "MAINTENANCE AND SUPPORT PERIOD" shall mean a twelve (12)-month
period. The initial Maintenance and Support Period shall begin on the
date of Customer's acceptance of the initial Licensed Materials.
C. "MAINTENANCE AND SUPPORT" shall mean the maintenance and support
services set forth in this Agreement. If Sagent increases its standard
maintenance and support services generally available to its customers
or distributors, Sagent shall make such increased maintenance and
support services available to Siebel at the rate set forth herein.
D. "MAINTENANCE AND SUPPORT FEES" shall mean fees payable in accordance
with Section 3 of this Agreement.
E. "SUPPORT" shall mean the services set forth in Section 3 of this
Agreement.
F. "SUPPORTED PROGRAMS" shall mean the Licensed Products.
2. MAINTENANCE. In consideration of the Maintenance Fees paid in
accordance with this Agreement, Sagent shall provide Customer with any and all
Updates to the Supported Programs, promptly as such Updates become available.
All Updates shall include an updated OLE/OB interface that enables the Siebel
Programs to interface with the most updated version of the Licensed Materials.
All Updates shall be provided for no additional charge. Sagent shall provide all
Updates necessitated by new or successor releases of hardware and operating
systems software, including but not limited to all subsequent versions of (1)
the Windows and Windows NT client operating systems, (2) the Windows NT (Intel)
server platform, (3) the Oracle, Sybase, Informix, Microsoft, and IBM DB2 RDBMS
platforms and (4) the Microsoft OLE interface. Sagent shall provide such Updates
within thirty (30) days of the date that the vendor of such hardware and/or
software systems makes such subsequent versions generally available. Any
versions of the Licensed Materials that operate on other operating systems or
server platforms shall be considered Updates under this Agreement, Sagent shall
make pre-release versions of Updates available to Customer to permit Customer to
upgrade its internal use licenses to the next version. All Updates include
updated Documentation.
3. SUPPORT.
A. STANDARD SUPPORT. Sagent shall provide to Customer the Standard Support
services set forth below ("Standard Support") at a rate of $40.000 per
year. Standard Support shall consist of support services consistent with
the following support obligations:
Sagent shall establish and maintain the organization and processes to
provide Support for Customer. Support shall include but not be limited to
(i) a diagnosis of problems or performance deficiencies of the delivered
products and (ii) a resolution of problems or performance deficiencies of
the Supported Licensed Products. Sagent shall provide Support on a prompt
and timely basis via both (1) toll-free phone support, and (2) Internet-
based support pages that are generally accessible on a 7x24 basis. Sagent
agrees to inform Customer in writing at least quarterly of all known
anomalies, including known bugs, that then exist in the Licensed Products.
Siebel may, in its discretion, notify Sagent of anomalies and bugs that it
discovers or of which it becomes aware. Sagent will use its best efforts to
cure, as described below, reported and reproducible errors in the Licensed
Products so that the Licensed Products operate as specified in the
Agreement. Customer recognizes four error levels.
SEVERITY 1 - Critical Business Impact. The production use of the
Licensed Products are stopped or so severely impacted that the
Customer cannot reasonably continue work. Sagent will begin work on
the error within one hour of notification and will engage development
staff until an acceptable work around is achieved.
SEVERITY 2 - Significant Business Impact. Important features of the
Licensed Products are unavailable with no acceptable workaround. The
implementation of production use of the Licensed Products is
continuing but not stopped. However, there is a serious impact on the
Customer's productivity and/or service levels. Sagent will begin work
on the error within two hours of notification and will engage
development staff until an acceptable work around is achieved.
SEVERITY 3 - Some Business Impact. Important features of the Licensed
Products unavailable but a workaround is available, or less
significant features of the Licensed Products are unavailable with no
reasonable workaround. Customer's work, regardless of the environment
or product usage, has minor loss of operational functionality or
implementation resources. Sagent will begin work on the error within a
day of notification and will engage development staff.
SEVERITY 4 - Minimum Business Impact. Siebel requests information, an
enhancement, or documentation clarification regarding the Licensed
Products but there is no impact on the operation of the Licensed
Products. The implementation or production use of the Licensed
Products is continuing and there is no work being impeded at the time.
Sagent will provide an initial response regarding the requested
information or documentation clarification within one week and will
consider enhancements for inclusion in a subsequent Update.
Copyright (c) 1997 Sagent Systems, Inc. revised internal-use0331b3
rev880311
Sagent Systems, Inc.
Software License and Service Agreement Page 3
<PAGE> 7
4. MAINTENANCE AND SUPPORT CONTINUITY. Maintenance and Support shall continue
as renewed by Customer at Customer's option. If Customer fails to pay any amount
due pursuant to the terms set forth above, and fails to cure such failure within
sixty (60) business days from receiving a notice of such failure from Sagent,
Sagent shall have the right to terminate Maintenance and Support to Customer
without any liability to Sagent.
<PAGE> 1
EXHIBIT 10.32
SAGENT TECHNOLOGY, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 28th day of February, 1999, between Sagent
Technology, Inc., a Delaware corporation (the "Company") and Klaus Luft (the
"Purchaser").
The parties agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions of this
Agreement, the Company hereby agrees to sell to Purchaser and Purchaser agree to
purchase from the Company on the Closing Date (as herein defined), an aggregate
of 10,000 shares of the Company's Common Stock (the "Stock") at a price of $9.00
per share, for an aggregate purchase price of $90,000.00. The purchase price for
the Stock shall be paid by check or wire transfer to the Company.
2. CLOSING. The purchase and sale of the Stock shall occur on February
___, 1999 or at such other time as shall be designated and agreed upon by the
parties (the "Closing Date"). The Closing will take place at the principal
office of the Company or at such other place as shall be designated by the
Company. Within a reasonable time after the Closing, the Company will issue a
duly executed certificate evidencing the Stock in the name of the Purchaser.
3. STOCK SPLITS, ETC. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Company; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Company; then, in any such event, any
and all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Stock shall be immediately
subject to this Agreement and be included in the word "Stock" for all purposes
with the same force and effect as the shares of Stock presently subject to the
right of first refusal and other terms of this Agreement.
4. RESTRICTION ON TRANSFER; RIGHT OF FIRST REFUSAL. Before any shares of
Stock registered in the name of Purchaser may be sold or transferred (including
transfer by operation of law), such shares shall first be offered to the
Company.
(a) Purchaser shall deliver a notice ("Notice") to the Company
stating (i) his bona fide intention to sell or transfer such shares, (ii) the
number of such shares to be sold or transferred, (iii) the price for which he
proposes to sell or transfer such shares, and (iv) the name of the proposed
purchaser or transferee.
(b) Within thirty (30) days after receipt of the Notice, the Company
or its assignee may elect to purchase all or none of the shares to which the
Notice refers, at the price per share specified in the Notice.
<PAGE> 2
(c) If all of the shares to which the Notice refers are not elected
to be purchased, as provided in Section 4(b) hereof, Purchaser may sell the
shares to any person named in the Notice at the price specified in the Notice or
at a higher price, provided that such sale or transfer is consummated within
thirty (30) days of the date of said Notice to the Company, that any such person
named in the Notice shall agree to be bound by and comply with the terms of this
Agreement, and provided, further, that any such sale is in accordance with all
the terms and conditions hereof.
The provisions of this Section 4 shall not apply to the sale of any
or all shares of the Stock in connection with an underwritten public offering of
the Company's Common Stock pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act"). The provisions of this Section 4
shall terminate on (i) the effective date of a registration statement filed by
the Company under the Act with respect to an underwritten public offering of
Common Stock of the Company or (ii) the closing date of a sale of assets or
merger of the Company pursuant to which shareholders of this Company receive
securities of a buyer whose shares are publicly traded and after which the
shareholders of the Company own less than fifty percent of the voting securities
of the Company. The provisions of this Section 4 shall not apply to a transfer
of any shares of Stock by Purchaser to any person employed by the Purchaser,
engaged by the Purchaser to render consulting or advisory services, or otherwise
mutually agreed upon by the Company and Purchaser; provided, in each such case
that the transferee shall receive and hold such shares subject to the provisions
of this Section 4 and there shall be no further transfer of such shares.
The Company shall not be required (i) to transfer on its books any
shares of Stock which shall have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The share certificate evidencing the Stock issued
hereunder shall be endorsed with the following legends (in addition to any
legends required under applicable state securities laws):
"TO THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, TO THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A
2
<PAGE> 3
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any shares of Stock that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Stock or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Stock shall have been so
transferred.
6. PURCHASER'S REPRESENTATIONS. In connection with his purchase of the
Stock, the Purchaser hereby represents and warrants to the Company as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser is
purchasing the Stock solely for his own account for investment and not with a
view to or for sale in connection with any distribution of the Stock or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Stock or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Act"). Purchaser also represents that
the entire legal and beneficial interest of the Stock is being purchased, and
will be held, for Purchaser's account only, and neither in whole or in part for
any other person. Purchaser either has a pre-existing business or personal
relationship with the Company or any of its officers, directors or controlling
persons or by reason of Purchaser's business or financial experience or the
business or financial experience of Purchaser's professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, could be reasonably
assumed to have the capacity to evaluate the merits and risks of an investment
in the Company and to protect Purchaser's own interests in connection with this
transaction.
(b) INFORMATION CONCERNING COMPANY. Purchaser has heretofore
discussed the Company and its plans, operations and financial condition with the
Company's officers and has hereto fore received all such information as
Purchaser has deemed necessary and appropriate to enable Purchaser to evaluate
the financial risk inherent in making an investment in the Stock, and Purchaser
has received satisfactory and complete information concerning the business and
financial condition of the Company in response to all inquiries in respect
thereof.
(c) ECONOMIC RISK. Purchaser realizes that the purchase of the Stock
will be a highly speculative investment and involves a high degree of risk, and
Purchaser is able, without impairing financial condition, to hold the Stock for
an indefinite period of time and to suffer a complete loss on Purchaser's
investment.
3
<PAGE> 4
(d) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) the Stock has not been registered under the Securities
Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of Purchaser's investment intent
as expressed herein. In this connection, Purchaser understands that, in the view
of the Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if Purchaser's representation was predicated solely
upon a present intention to hold the Stock for the minimum capital gains period
specified under tax statutes, for a deferred sale for or until an increase or
decrease in the market price of the Stock, or for a period of one (1) year or
any other fixed period in the future.
(ii) the Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or unless an exemption from
such registration is otherwise available. Purchaser further acknowledges and
understands that the Company is under no obligation to register the Stock. In
addition, Purchaser understands that the certificate evidencing the Stock will
be imprinted with a legend which prohibits the transfer of the Stock unless they
are registered or such registration is not required in the opinion of counsel
satisfactory to the Company.
(e) DISPOSITION UNDER RULE 144. Purchaser understands that:
(i) the shares of Stock are restricted securities within the
meaning of Rule 144 promulgated under the Act; that the exemption from
registration under Rule 144 will not be available in any event for at least one
(1) year from the date of purchase and payment of the Stock (or at least two (2)
years in the case of affiliates of the Company), and even then will not be
available unless (i) a public trading market then exists for the Common Stock of
the Company, (ii) adequate information concerning the Company is then available
to the public, and (iii) other terms and conditions of Rule 144 are complied
with; and that any sale of the Stock may be made only in limited amounts in
accordance with such terms and conditions;
(ii) that at the time Purchaser wishes to sell the Stock there
may be no public market upon which to make such a sale, and that, even if such a
public market then exists, the Company may not be satisfying the current public
information requirements of Rule 144, and that, in such event, Purchaser would
be precluded from selling the Stock under Rule 144 even if the two (2) year
minimum holding period had been satisfied; and
(iii) in the event all of the requirements of Rule 144 are not
satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding
the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
(f) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
his
4
<PAGE> 5
representations set forth above, Purchaser further agrees that it shall in no
event make any disposition of all or any portion of the Stock unless and until:
(i) (A) there is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or, (B)(1) Purchaser shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, (2) Purchaser shall have furnished the Company with an opinion of
Purchaser's counsel to the effect that such disposition will not require
registration of such shares under the Act, and (3) such opinion of Purchaser's
counsel shall have been concurred in by counsel for the Company and the Company
shall have advised Purchaser of such concurrence; and,
(ii) Purchaser shall have complied with the Right of First
Refusal set forth in Section 4 hereof and the Standoff Agreement set forth in
Section 8 hereof.
(g) TAX LIABILITY. Purchaser understands that he (and not the
Company) shall be responsible for his own federal, state, local or foreign tax
liability and any of his other tax consequences that may arise as a result of
the transactions contemplated by this Agreement. Purchaser shall rely solely on
the determinations of his tax advisors or his own determinations, and not on any
statements or representations by the Company or any of its agents, with regard
to all such tax matters.
7. MISCELLANEOUS.
(a) The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at the address et forth below
and to the Company at the address of its principal corporate offices (attention:
President) or at such other address as such party may designate by ten (10) days
advance written notice to the other party hereto.
(c) The Company may assign its rights and delegate its duties under
this Agreement, including but not limited to Section 4 hereof. This Agreement
shall inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon the
Purchaser, his heirs, executors, administrators, successors and assigns.
(d) The Purchaser hereby authorizes and directs the Secretary or
Transfer Agent of the Company to transfer the Stock as to which the right of
first refusal has been exercised from Purchaser to the Company or the Company's
assignee.
(e) This Agreement represents the entire agreement between the
parties with respect to the purchase of Common Stock by the Purchaser, may only
be modified or amended in writing signed
5
<PAGE> 6
by both parties and satisfies all of the Company's obligations to Purchaser with
regard to the issuance or sale of securities.
8. STANDOFF AGREEMENT. The Purchaser agrees, in connection with the
Company's initial public offering of its equity securities, and upon request of
the Company or the underwriters managing such offering, (i) not to sell, make
any short sale of, loan, grant any option for the purchase of or otherwise
dispose of any shares of Stock (other than those included in the registration,
if any) without the prior written consent of the Company or such underwriters,
as the case may be, for such period of time (not to exceed one hundred eighty
(180) days) from the effective date of such registration as may be requested by
the Company or such underwriters and (ii) to execute any agreement regarding (i)
above as may be requested by the Company or underwriters at the time of the
public offering; provided, that the officers and directors of the Company who
own stock of the Company also agree to such restrictions.
9. GOVERNING LAW. This Agreement shall be governed and construed by the
laws of the State of California as applied to agreements made and performed in
California by residents of the State of California, without reference to
conflict of laws principles.
10. JURISDICTION; VENUE. With respect to any disputes arising out of or
related to this Agreement, the parties consent to the exclusive personal
jurisdiction of, and venue in, the state courts of Santa Clara County,
California (or in the event of exclusive federal jurisdiction, the courts of the
Northern District of California).
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SAGENT TECHNOLOGY, INC. KLAUS LUFT
a Delaware corporation
By: /s/ KLAUS LUFT
------------------------------- --------------------------------------
(Signature)
Title: Klaus Luft
------------------------------- --------------------------------------
(Print Name)
Address: Address:
800 W. El Camino Real, Suite 300
Mountain View, CA 94040 --------------------------------------
--------------------------------------
7
<PAGE> 1
EXHIBIT 10.33
NOTE
$630,000.00
Mountain View
February 5, 1999
FOR VALUE RECEIVED, Thomas M. Lounibos promises to pay to Sagent
Technology, Inc., a Delaware corporation (the "Company"), the principal sum of
Six Hundred Thirty Thousand dollars ($630,000.00), together with interest on the
unpaid principal hereof from the date hereof at the rate of (4.66%) per annum,
compounded semiannually.
Principal and interest shall be due and payable on January 28, 2002. Payment of
principal and interest shall be made in lawful money of the United States of
America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of December 28,
1998. This Note is secured in part by a pledge of the Company's Common Stock
under the terms of a Security Agreement of even date herewith and is subject to
all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ THOMAS M. LOUNIBOS
------------------------------------
Signature
Thomas M. Lounibos
------------------------------------
Print Name
<PAGE> 2
NOTE
$3,442.95
Mountain View
February 5, 1999
FOR VALUE RECEIVED, Thomas M. Lounibos promises to pay to Sagent
Technology, Inc., a Delaware corporation (the "Company"), the principal sum of
Three Thousand Four Hundred Forty Two dollars and Ninety Five cents ($3,442.95),
together with interest on the unpaid principal hereof from the date hereof at
the rate of (4.66%) per annum, compounded semiannually.
Principal and interest shall be due and payable on January 28, 2002. Payment of
principal and interest shall be made in lawful money of the United States of
America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of March 6,
1996. This Note is secured in part by a pledge of the Company's Common Stock
under the terms of a Security Agreement of even date herewith and is subject to
all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ THOMAS M. LOUNIBOS
------------------------------------
Signature
Thomas M. Lounibos
------------------------------------
Print Name
-2-
<PAGE> 3
NOTE
$300,000.00
Mountain View
February 5, 1999
FOR VALUE RECEIVED, Thomas M. Lounibos promises to pay to Sagent
Technology, Inc., a Delaware corporation (the "Company"), the principal sum of
Three Hundred Thousand dollars ($300,000.00), together with interest on the
unpaid principal hereof from the date hereof at the rate of (4.66%) per annum,
compounded semiannually.
Principal and interest shall be due and payable on January 28, 2002. Payment of
principal and interest shall be made in lawful money of the United States of
America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of September 29,
1997. This Note is secured in part by a pledge of the Company's Common Stock
under the terms of a Security Agreement of even date herewith and is subject to
all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ THOMAS M. LOUNIBOS
------------------------------------
Signature
Thomas M. Lounibos
------------------------------------
Print Name
-3-
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-71369) of our reports dated January 27, 1999 on our audits of the
consolidated financial statements and financial statement schedule of Sagent
Technology, Inc. We also consent to the reference to our firm under the caption
"Experts."
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
San Jose, California
March 9, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
333-71369) of our report dated February 20, 1998 on our audit of the financial
statements of Talus, Incorporated. We also consent to the reference to our firm
under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
McClean, Virginia
March 9, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF A PERSON ABOUT TO BECOME A DIRECTOR
In accordance with Regulation C, Rule 438, promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, the
undersigned hereby consents to be named as a person about to become a director
in the Registration Statement and related Prospectus of Sagent Technology, Inc.
for the registration of the shares of its Common Stock.
/s/ KLAUS S. LUFT Dated: March 8, 1999
- ------------------------------------- ----------------------
Klaus S. Luft
