<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION NO. 333-82251
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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
------------------------
BROADBASE SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 77-0417081
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
172 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 614-8300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) CHUCK BAY
CHIEF FINANCIAL OFFICER
172 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 614-8300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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GORDON K. DAVIDSON ROBERT M. MATTSON, JR.
DAVID K. MICHAELS TAMARA POWELL TATE
JOHN F. PLATZ CRAIG S. MORDOCK
WENDY LUN BRANDON C. PARRIS
FENWICK & WEST LLP MORRISON & FOERSTER LLP
TWO PALO ALTO SQUARE 19900 MACARTHUR BOULEVARD
PALO ALTO, CALIFORNIA 94306 IRVINE, CALIFORNIA 92612
(650) 494-0600 (949) 251-7500
</TABLE>
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 of 1933, 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 of 1933, 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 of 1933, 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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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per
share........................... 4,600,000 $12.00 $55,200,000 $15,346
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(1) Includes 600,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.
(3) Includes the incremental registration fee for an increase of $5,200,000 to
the Proposed Maximum Aggregate Offering Price. The Company paid a
registration fee in the amount of $13,900 with its filing on July 2, 1999
and is transmitting the remaining $1,446 with this amendment.
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
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 12, 1999
[BROADBASE LOGO]
- --------------------------------------------------------------------------------
4,000,000 SHARES
COMMON STOCK
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This is the initial public offering of Broadbase Software, Inc. and we are
offering 4,000,000 shares of our common stock. We anticipate that the initial
public offering price will be between $10.00 and $12.00 per share.
We have applied to list our common stock on the Nasdaq National Market under the
symbol "BBSW."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND BROADBASE
PUBLIC COMMISSIONS SOFTWARE, INC.
<S> <C> <C> <C>
Per share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to 600,000 additional
shares to cover any over-allotments.
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
THOMAS WEISEL PARTNERS LLC
E*OFFERING
THE DATE OF THIS PROSPECTUS IS , 1999.
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUMMARY.................... 1
RISK FACTORS.......................... 4
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS AND INDUSTRY
DATA................................ 16
USE OF PROCEEDS....................... 17
DIVIDEND POLICY....................... 17
CAPITALIZATION........................ 18
DILUTION.............................. 19
SELECTED CONSOLIDATED FINANCIAL DATA.. 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 22
BUSINESS.............................. 31
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PAGE
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MANAGEMENT............................ 47
CERTAIN TRANSACTIONS.................. 56
PRINCIPAL STOCKHOLDERS................ 58
DESCRIPTION OF CAPITAL STOCK.......... 60
SHARES ELIGIBLE FOR FUTURE SALE....... 63
UNDERWRITING.......................... 65
LEGAL MATTERS......................... 68
EXPERTS............................... 68
WHERE YOU CAN FIND ADDITIONAL
INFORMATION......................... 69
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1
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<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the financial statements, before
making an investment decision.
OUR BUSINESS
Broadbase develops and markets software that integrates and analyzes
customer information from Internet and traditional business channels, enabling
businesses to improve their customer acquisition, retention and profitability.
Broadbase EPM integrates and analyzes information from numerous points of
customer interaction, or touch points, to provide a comprehensive understanding
of the customer lifecycle from initial identification through acquisition and
retention. Our products then allow businesses to translate this analysis into
specific actions such as targeting profitable customers, personalizing customer
interactions and identifying opportunities to sell complementary or higher-end
products and services. By integrating, analyzing and acting on valuable customer
information, our products enable businesses to build long-lasting and profitable
customer relationships.
The Internet is emerging as an important channel for businesses to interact
with their customers. As a result, traditional "bricks and mortar" companies are
adapting many of their business activities to the Internet. In addition, a new
class of Internet-only companies is rapidly emerging. Together, these companies
represent a new category of enterprise called the e-business. The rise of the
Internet as a new business channel has led to a dramatic increase in the number
of ways that businesses interact with their customers. Today, these include not
only traditional storefronts, catalogs and call centers, but also websites,
e-mail marketing campaigns and online customer service. The Internet has also
created a highly competitive environment for businesses, where customers can
easily switch among alternative product and service offerings. To maintain
customer loyalty in this environment, e-businesses need to develop a complete
understanding of individual customers to maximize the effectiveness of every
customer interaction.
Broadbase EPM is a software solution that addresses this need. Broadbase
EPM consists of a suite of applications that are built on EPM/Foundation, our
software platform that provides comprehensive analytic capabilities. Broadbase
EPM integrates information that has traditionally been isolated in separate
systems designed to support specific types of customer interactions, such as
customer service and Internet-based sales. It provides decision-makers in sales,
marketing, customer service and e-commerce business functions with a more
comprehensive view of the customer. Each application provides these
decision-makers with analysis of customer information that is specifically
designed for their particular business function. Our solutions can generally be
deployed in less than 30 days, allowing our customers to quickly capture revenue
opportunities and achieve rapid return on investment. To date, over 80 customers
have licensed our products from us and our distributors and resellers, including
both traditional "bricks and mortar" companies such as Boeing, Hewlett-Packard
and United Airlines and Internet-only companies such as InsWeb and Mercata.
We introduced EPM/Foundation in the fourth quarter of 1997, and began
offering our analytic applications in the third quarter of 1998. In May 1999, we
expanded our suite by introducing new applications designed for e-business. We
first recognized revenue from our products in 1998. Our revenues were $3.4
million in 1998 and $3.5 million in the six months ended June 30, 1999. We have
incurred net losses in each period since our inception and as of June 30, 1999
we had accumulated net losses of approximately $29.0 million.
We incorporated in California in November 1995 under the name Broadbase
Information Systems, Inc., and plan to reincorporate in Delaware as Broadbase
Software, Inc. prior to this offering. Our address is 172 Constitution Drive,
Menlo Park, California 94025, and our telephone number is (650) 614-8300.
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THE OFFERING
Common stock offered by
Broadbase.......................... 4,000,000 shares
Common stock to be outstanding
after this offering................ 17,203,690 shares
Use of proceeds.................... General corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................. BBSW
The number of shares of our common stock that will be outstanding after
this offering is based on the number outstanding on June 30, 1999 and assumes
the conversion into common stock of all our preferred stock and convertible
debentures outstanding on that date. It excludes 2,050,013 shares subject to
outstanding options and warrants as of June 30, 1999 at a weighted-average
exercise price of $0.65 per share and additional shares available for issuance
under our stock plans.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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PERIOD FROM YEARS ENDED SIX MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED JUNE 30,
(INCEPTION) TO ------------------ ------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................... $ -- $ -- $ 3,439 $ 1,447 $ 3,539
Gross margin.................. -- -- 2,472 998 2,179
Loss from operations.......... (1,273) (5,575) (11,452) (5,158) (10,520)
Net loss...................... $(1,272) $(5,487) $(11,343) $(5,100) $(10,887)
Basic and diluted net loss per
share....................... $ (4.30) $ (6.19) $ (8.85) $ (4.58) $ (6.30)
Weighted-average common
shares -- basic and
diluted..................... 296 887 1,281 1,114 1,728
Pro forma basic and diluted
net loss per share.......... $ (1.51) $ (1.16)
Pro forma weighted-average
common shares -- basic and
diluted..................... 7,536 9,383
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<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents.............................. $27,981 $27,981 $71,566
Working capital........................................ 21,357 21,357 66,851
Total assets........................................... 32,561 32,561 76,146
Long-term debt and capital lease obligations, net of
current portion...................................... 10,302 777 777
Stockholders' equity (net capital deficiency).......... $12,964 $22,489 $66,074
</TABLE>
The unaudited pro forma balance sheet data summarized above gives effect to
the conversion of all our preferred stock and convertible debentures outstanding
as of June 30, 1999 into common stock upon the closing of this offering. See
Notes 3, 5 and 9 of Notes to Consolidated Financial Statements. The unaudited
pro forma as adjusted balance sheet data above reflects the receipt of the net
proceeds from the sale of the 4,000,000 shares of common stock offered by
Broadbase at an assumed initial public offering price of $12.00 per share after
deducting the estimated underwriting discounts and commissions and offering
expenses.
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Our business is subject to many risks, and our industry is subject to rapid
technological change and intense competition. You should carefully consider the
information discussed under "Risk Factors" in this prospectus.
Unless otherwise indicated, all information in this prospectus:
- assumes that the underwriters do not exercise their over-allotment option
to purchase additional shares in this offering;
- gives effect to a Delaware reincorporation to be implemented prior to
completion of this offering; and
- gives effect to the conversion of all our preferred stock and convertible
debentures into common stock upon completion of this offering.
Broadbase and Broadbase EPM are trademarks of Broadbase. This prospectus also
contains trademarks and trade names of other companies.
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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 to purchase shares of our common stock. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may also impair our business operations.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
We are still in the early stages of our development. Our revenue and income
potential is unproven and depends on emerging, rapidly changing markets and on
acceptance of products that we have only recently introduced. Because our
operating history is limited and our product offerings are evolving, it is
difficult to evaluate our business and our future prospects.
We incorporated in November 1995, and from that date through December 1997
were in the development stage, conducting research and developing our initial
products. We have only recently begun licensing our products and deriving
revenue. In the fourth quarter of 1997, we introduced our first product,
EPM/Foundation, which was designed to enable organizations to build and manage
datamarts -- a system for storing, retrieving and managing data for a specific
business function or department -- to analyze their customer information. In the
third quarter of 1998, we began offering Broadbase EPM applications designed to
operate with EPM/ Foundation to provide analysis for customer relationship
management. In May 1999, we introduced Broadbase EPM applications designed for
Internet sales channels, Internet marketing and other customer-focused
e-business applications. We also released new versions of existing Broadbase EPM
applications in May 1999. Because we have only recently introduced our products,
it is difficult to predict whether our products will be accepted by the market
and the level of revenues we can expect to derive from sales of our products. As
a result, you should evaluate our chances of financial and operational success
in light of the risks, uncertainties, expenses, delays and difficulties
associated with starting a new business and having limited product sales, many
of which may be beyond our control.
OUR GROWTH DEPENDS ON MARKET ACCEPTANCE OF OUR RECENTLY INTRODUCED BROADBASE EPM
APPLICATIONS DESIGNED FOR INTERNET-BASED SYSTEMS
We first introduced Broadbase EPM applications designed for Internet-based
systems in May 1999. We expect that our future growth will depend significantly
on revenue from licenses of these Broadbase EPM applications and related
services, which is subject to significant risks. These new applications are our
first products specifically designed for the emerging e-business market. To
date, two customers, InsWeb and Mercata, have licensed these e-business
applications. To date, revenue from licenses of our Broadbase EPM applications
have constituted only a minority of our revenues, and most of our license
revenue has been derived from licenses of EPM/Foundation. There are significant
risks inherent in the introduction of new products like our new e-business
applications. Market acceptance of these new applications will depend on the
growth of the market for e-business solutions. This growth may not occur. We
also cannot be certain that our new e-business applications will meet customer
performance expectations. If they do not meet customer expectations or the
market for these products fails to develop or develops more slowly than we
expect, our business would be harmed.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE
We incurred net losses and losses from operations for each period from our
inception through the second quarter of 1999. As of June 30, 1999, we had
accumulated net losses of approximately $29.0 million (415% of our cumulative
revenue as of that date). We have not
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achieved profitability and we expect to continue to incur substantial operating
losses for the foreseeable future. We expect to incur increasing sales and
marketing, research and development and general and administrative expenses. As
a result, we will need to significantly increase our revenue to achieve
profitability. While our revenue has grown significantly in 1999, our growth may
not continue at the current rate or at all.
WE EXPECT OUR QUARTERLY REVENUE AND OPERATING RESULTS TO FLUCTUATE
Our revenue and operating results are likely to vary significantly from
quarter to quarter. The factors that affect our quarterly operating results
include:
- the demand for our products, particularly our recently-introduced
Broadbase EPM applications;
- the size and timing of customer orders for our EPM/Foundation product,
our Broadbase EPM applications and our professional services;
- increased expenses for sales and marketing, product development and
administration;
- changes in the mix of sales between EPM/Foundation and the various
Broadbase EPM applications we provide as well as the level of sales of
professional services as compared to product licenses;
- changes in the mix of our domestic and international sales; and
- changes in general economic and market conditions.
Our quarterly revenue increased 208% from the first quarter of 1998 to the first
quarter of 1999 and increased 113% from the second quarter of 1998 to the second
quarter of 1999. We do not believe that these rates of growth are indicative of
the growth in revenues, if any, that we can expect in the future. Accordingly,
we believe that period-to-period comparisons of our operating results may not be
meaningful and you should not rely on these comparisons as an indication of our
future performance. Our operating results may fall below the expectations of
securities analysts and investors. In this event, the market price of our common
stock would likely fall.
OUR OPERATING EXPENSES ARE INCREASING AND WE WOULD NOT BE ABLE TO REDUCE THEM
QUICKLY, WHICH COULD RESULT IN LOWER THAN EXPECTED OPERATING RESULTS IF WE DO
NOT ACHIEVE EXPECTED REVENUE LEVELS
We plan to significantly increase our operating expenses as we expand our
sales, marketing, research and development, professional services, customer
support and administrative groups. These expenses will be incurred before we
generate any revenues from this increased spending. If we do not significantly
increase revenues as a result of these efforts, we will not achieve
profitability. Our operating expenses are based on our expectations of future
revenues and are relatively fixed in the short term. As a result, we would not
be able to reduce spending quickly if our revenue is lower than we had
projected. Our ability to accurately forecast our quarterly revenue is limited
because of our limited operating history, the rapidly evolving nature of our
market and the sales cycle for our products, which can be long and
unpredictable. If our revenue falls below our expectations in any quarter, or if
we increase our spending ahead of our revenue growth, our operating results
would be lower than expected.
THE UNPREDICTABLE TIMING OF OUR SALES AND IMPLEMENTATION CYCLE MAKES IT
DIFFICULT TO FORECAST OUR OPERATING RESULTS
Our products can have a long and unpredictable sales cycle. Consequently,
we face difficulty predicting the quarter in which sales to expected customers
will occur. This contributes to the uncertainty of our future operating results.
Potential customers often require
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time to weigh the costs and benefits of our products compared to those of
in-house development and integration efforts. As a result, our sales cycle has
typically ranged from approximately two to four months, although it can take
longer.
In a typical application license transaction, a portion of the
implementation of our products is performed by our professional services group,
which connects our products to the customer's systems and data sources. Upon
completion of that connection, no significant obligations remain with respect to
implementation, and we recognize the revenue related to that license. The actual
connection process can often be completed in approximately two to four weeks.
However, the timing of the commencement and completion of this connection
process is subject to factors that may be beyond our control, as this process
requires access to the customer's facilities and coordination with the
customer's personnel after delivery of the software. As a result, we typically
do not recognize the license revenue from an application license until one to
three months after our product is shipped to the customer. Uncertainty as to
when our product can be connected at the customer's facilities makes it more
difficult to forecast our operating results and can result in significant
variability in our period to period results.
WE NEED TO ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED PERSONNEL IN A
COMPETITIVE EMPLOYMENT MARKET
Our success depends on our ability to attract, train and retain qualified,
experienced employees. There is substantial competition for experienced
management, engineering, sales and marketing personnel, particularly in the
market segment in which we compete. If we are unable to retain our existing key
personnel, or to attract, train and retain additional qualified personnel, we
may experience inadequate levels of staffing to develop and sell our products
and perform services for our customers.
We believe that our success will depend on the continued services of our
executive officers. Other than initial offer letters containing information
regarding compensation, the Company does not currently have employment
agreements with any of these individuals. As a result, these employees serve
"at-will" and may elect to pursue other opportunities at any time. The loss of
any of our executive officers could harm our business. Certain of our executive
officers joined us only recently and have had a limited time to work together.
We cannot assure you that they will be able to work effectively together to
manage our growth and continuing operations. Our Executive Vice President of
Applications and Engineering joined Broadbase in December 1998, our Executive
Vice President of Sales joined Broadbase in May 1999, and our Vice President of
Marketing joined Broadbase in July 1999. If we are unable to hire a qualified
Vice President of Marketing or expand our sales and marketing organizations in a
timely manner, our growth could be limited. See "Management" for more
information regarding our management personnel.
OUR BUSINESS WILL SUFFER IF WE DO NOT INCREASE MARKET AWARENESS OF OUR PRODUCTS
BY SIGNIFICANTLY EXPANDING OUR SALES CAPABILITIES
We sell our products primarily through our direct sales force. We must
significantly expand our direct sales operations to increase market awareness of
our products and increase revenue. We cannot be certain that we will be
successful in these efforts. Our products and services require sophisticated
sales efforts. As a result, our ability to increase our direct sales operation
will depend on our ability to recruit, train and retain top sales people with
advanced sales skills and technical knowledge. There is a shortage of sales
personnel with these qualifications, and competition for qualified personnel is
intense in our industry.
Prior to 1999, our sales force sold our EPM/Foundation product and
applications designed to provide analysis for customer relationship management.
The skills required to sell these products differ in many respects from the
skills required to sell applications designed for
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Internet-based systems. Accordingly, the introduction of our new e-business
applications has required us to hire new sales personnel with these skills and
train existing personnel to sell these new applications. As a result, most of
our current direct sales force has been with us for a relatively short period.
During the first six months of 1999, we added nine direct sales representatives
to our direct sales force, which represents 45% of our total direct sales
representatives and 23% of our total sales personnel as of June 30, 1999. New
sales personnel require training and take time to achieve full productivity. If
we are unable to hire or retain qualified sales personnel, or if newly hired
personnel fail to develop the necessary skills or reach productivity more slowly
than anticipated, our business could be harmed.
WE ARE DEPENDENT ON STRATEGIC RELATIONSHIPS AND DISTRIBUTION RELATIONSHIPS THAT
MAY GENERALLY BE TERMINATED AT ANY TIME, AND IF OUR CURRENT AND FUTURE STRATEGIC
RELATIONSHIPS OR DISTRIBUTION RELATIONSHIPS ARE NOT SUCCESSFUL, OUR GROWTH MAY
BE LIMITED
We rely on strategic relationships with a variety of companies which
generate leads for the sale of our products. These strategic relationships
include relationships with system integrators and consulting firms, vendors of
e-commerce and Internet software, vendors of software designed for customer
relationship management or for management of organizations' operational
information, technology and vendors of key technology platforms and demographic
data providers. If we cannot maintain successful strategic relationships or
cannot enter into additional strategic relationships, we may have difficulty
expanding the sales of our products and our growth may be limited. We believe
that many of our direct sales are the result of leads generated by vendors of
e-business and enterprise applications that work with our products. Our
strategic relationships are generally not documented in writing, or are governed
by agreements that can be terminated by either party with little or no prior
notice. Some of these agreements specify that payments are to be made by us to
these companies for providing us with qualifying customer leads. The generation
of leads to date by these companies has not generally satisfied the specified
criteria and therefore payments for leads have been immaterial in amount.
In addition, we have relationships with distributors and resellers of our
products located in the United States, Japan and the Netherlands -- our indirect
sales channel. Sales through our indirect sales channel accounted for
approximately 28.7% of our total revenue for 1998 and 40.8% for the six months
ended June 30, 1999. Sales of our products to Indus, which integrates
EPM/Foundation into certain of its enterprise solutions for the energy and
utility industries, represented 18.4% of our total revenue in 1998 and 11% in
the first six months of 1999. Substantially all of our sales in Japan have been
made through distributors. If we cannot maintain successful relationships with
our indirect sales channel, we may have difficulty expanding the sales of our
products and our growth may be limited.
Companies with which we have a strategic or distribution relationship may
promote products of several different companies, including, in some cases,
products that compete with our products. These companies may not devote adequate
resources to selling our products. We may not be able to maintain these
relationships and enter into additional relationships that will provide timely
and cost-effective customer support and service. See "Business -- Strategic
Relationships" and "Sales and Marketing" for a description of these
relationships.
CUSTOMER SATISFACTION AND DEMAND FOR OUR PRODUCTS WILL DEPEND ON OUR ABILITY TO
EXPAND OUR PROFESSIONAL SERVICES GROUP, WHICH ASSISTS OUR CUSTOMERS WITH THE
IMPLEMENTATION OF OUR PRODUCTS
We believe that growth in our product sales depends on our ability to
provide our customers with professional services to assist with support,
training, consulting and initial implementation of our products and to educate
third-party systems integrators in the use of our products. As a result, we plan
to increase the number of professional services personnel to
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meet these needs. New professional services personnel will require training and
take time to reach full productivity. We may not be able to attract or retain a
sufficient number of highly qualified professional services personnel.
Competition for qualified professional services personnel with the appropriate
knowledge is intense. We are in a new market and there is a limited number of
people who have the necessary skills. To meet our customers' needs for
professional services, we may also need to use more costly third-party
consultants to supplement our own professional services group. In addition, we
could experience delays in recognizing revenue if our professional services
group falls behind schedule in connecting our products to customers' systems and
data sources.
WE MAY BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO NOT DEVELOP NEW PRODUCTS AND
ENHANCEMENTS
If we do not continue to improve our products and develop new products that
keep pace with competitive product introductions and technological developments,
satisfy diverse and rapidly evolving customer requirements and achieve market
acceptance, we may be unable to attract new customers. For example, we are
developing new applications as well as new versions of a number of our existing
applications, which are scheduled for release in the second half of 1999. We may
not be successful in developing and marketing these applications and new
versions, or other product enhancements and new products that respond to
technological advances and market changes, on a timely or cost-effective basis.
In addition, even if these products are developed and released, they may not
achieve market acceptance. We have in the past 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.
MARKET ACCEPTANCE OF OUR PRODUCTS MAY SUFFER IF WE ARE UNABLE TO KEEP PACE WITH
RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY
Rapidly changing technology and operating system standards may impede
market acceptance of our products. Our new Broadbase EPM applications have been
designed based upon currently prevailing Internet technology. If new Internet
technologies emerge that are incompatible with Broadbase EPM applications, our
key products may become obsolete and our existing and potential customers may
seek alternatives to our products. We may not be able to quickly adapt our
products to any new Internet technology.
Additionally, we have designed our products to work with databases such as
Oracle and Microsoft SQL Server. Any changes to those databases, or increasing
popularity of other databases, could require us to modify our products, and
could cause us to delay releasing future products and enhancements. Furthermore,
software adapters are necessary to integrate our products with other systems and
data sources used by our customers. We must develop and update these adapters to
reflect changes to these systems and data sources in order to maintain the
functionality provided by our products. As a result, uncertainties related to
the timing and nature of new product announcements, introductions or
modifications by vendors of operating systems, databases, customer relationship
management software, web servers and other enterprise and Internet-based
applications could delay our product development, increase our product
development expense or cause customers to delay evaluation, purchase and
deployment of our products.
WE ARE DEPENDENT ON THE ACCEPTANCE AND USE OF THE WINDOWS NT OPERATING SYSTEM
Our products currently run only on the Windows NT operating system. Any
change to this operating system could require us to modify our products and
could cause us to delay product releases. Any decline in the market acceptance
of the Windows NT operating system for any reason, including as a result of
errors or delayed introduction of enhancement or upgrades,
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<PAGE> 12
could seriously harm us. If potential customers do not want to use the Windows
NT operating system, we will need to develop products that run on other
operating systems such as UNIX.
The development of new products in response to these risks would require us
to commit a substantial investment of resources, and we may not be able to
successfully develop or introduce such products on a timely or cost-effective
basis, or at all, which could lead potential customers to choose alternatives to
our products.
WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT TO ACQUIRE AND RETAIN
CUSTOMERS
Our market is intensely competitive, and we expect competition to intensify
in the future. Our failure to maintain and enhance our competitive position
could seriously harm our business. Our customers' requirements and the
technology available to satisfy those requirements are continually changing.
Therefore, we must be able to respond to these changes in order to remain
competitive. Our competitors vary in size and in the scope and breadth of
products and services offered.
We have three primary sources of competition:
- providers of consulting services-based analysis solutions, such as
E.piphany;
- vendors of point solutions that provide website analysis, such as Accrue,
Andromedia and Net Perceptions; and
- in-house development efforts by potential customers using traditional or
generic decision support tools.
In addition, we face potential competition from vendors of other enterprise
applications as they expand the functionality of their product offerings,
including companies that design software for decision support, management of
customer relationships or of organizations' operational information, as well as
vendors of database applications. Accordingly, it is possible that new
competitors may emerge and acquire our market share.
Some of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we do, and thus may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements. Also, many
current and potential competitors have wider name recognition and more extensive
customer bases that they could leverage, thereby gaining market share to our
detriment. They may be able to undertake more extensive promotional activities,
adopt more aggressive pricing strategies, and offer purchasers more attractive
terms than we can. Our competitors may develop products that are superior to
ours or that achieve greater market acceptance. In addition, current and
potential competitors may establish cooperative relationships among themselves
or with third parties to enhance their products to address customer needs.
Competitive pressures may make it difficult for us to acquire and retain
customers and may require us to reduce the price of our products. We cannot be
certain that we will be able to compete successfully with existing or new
competitors. If we fail to compete successfully against current or future
competitors, our business would be seriously harmed.
WE DEPEND ON OUR INTELLECTUAL PROPERTY, AND LITIGATION REGARDING OUR
INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS
Our intellectual property is important to our business. Our intellectual
property includes our proprietary technology, our trade secrets, copyrights in
our software and our trademarks. We have no patents or pending patent
applications, although patents may become increasingly important in software and
e-business applications. Unauthorized use or misappropriation of our
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<PAGE> 13
intellectual property could seriously harm our business. Third parties may
infringe upon our intellectual property rights, and we may be unable to detect
this unauthorized use or effectively enforce our rights. In addition, any legal
action that we may bring to protect our intellectual property rights could be
expensive and distract management from day-to-day operations.
Our business activities may infringe upon the proprietary rights of others,
and other parties may assert infringement claims against us. For example, on
July 21, 1999, Timeline, Inc. filed a complaint against us in the United States
District Court for the Western District of Washington, alleging infringement by
us of U.S. Patent No. 5,802,511 held by Timeline. Timeline alleges that we
directly and indirectly infringe its patent claims by making, using, selling and
offering to sell software products, both alone and in combination with third
party software products, and further alleges that we induce infringement of the
Timeline patent claims. Timeline has requested permanent injunctions prohibiting
us from directly or indirectly infringing the Timeline patent, and seeks
damages, exemplary damages, costs and attorneys' fees. Timeline has further
disclosed to us patent claims of a pending related patent application that
Timeline expects to be issued and to be added to the present case. Based on our
investigation of this matter to date, we believe that we do not infringe any
valid claims of the Timeline patent or of the pending patent application, and
that we have other meritorious defenses to all claims made by Timeline.
Accordingly, we intend to defend this suit vigorously. Nevertheless, it is
possible that we could be found liable for infringing the Timeline patent.
In addition, in the future, we may receive communications from other
parties asserting that our intellectual property infringes their proprietary
rights. If we become liable to Timeline or any other third party for infringing
its intellectual property rights, we could be required to pay substantial damage
awards and to develop non-infringing technology, obtain licenses or cease
selling the applications that contain the infringing intellectual property. We
may be unable to develop non-infringing technology or obtain licenses on
commercially reasonable terms, if at all. In addition, our defense of the
Timeline litigation and any other litigation, regardless of the merits of the
complaint, will likely be time-consuming, costly and a distraction for our
management personnel.
FAILURE TO LICENSE NECESSARY THIRD PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS
MAY CAUSE DELAYS OR REDUCTIONS IN OUR SALES
We currently rely on software that we have licensed from a number of
suppliers. These licenses may not continue to be available to us on commercially
reasonable terms or at all. In the future, we expect to license other third
party technologies to enhance our products, to meet evolving customer needs or
to adapt to changing technology standards. Failure to license, or the loss of
any license of necessary technologies, could result in delays or reductions of
shipments of our products until equivalent software is identified, licensed and
integrated or developed by us. If customers require the features provided by a
technology when licenses for that technology are not available, customers may
delay or decline to purchase our products. In addition, we may fail to
successfully integrate licensed technology into our products, which could
similarly delay or harm product development and market acceptance.
SOFTWARE DEFECTS COULD LEAD TO LOSS OF REVENUE OR DELAY IN MARKET ACCEPTANCE FOR
OUR PRODUCTS
Our software products are internally complex and may contain defects,
especially when they are first introduced or when new versions are released. In
the past we have discovered software errors in some of our products after their
introduction. If we are not able to detect and correct errors in products or
releases before commencing commercial shipments, we may experience loss of
revenue or delays in market acceptance for our products. We continue to evaluate
our products for errors following the commencement of commercial shipments and
receive information from customers regarding errors they detect, as well as
requests for future
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<PAGE> 14
enhancements to our products. Our license agreements with our customers
typically contain provisions designed to limit our exposure to potential product
liability claims. However, all domestic and international jurisdictions may not
enforce these limitations. We may encounter product liability claims in the
future. Product liability claims brought against us could divert the attention
of management and key personnel, could be expensive to defend and may result in
adverse settlements and judgments.
BARRIERS TO INTERNATIONAL EXPANSION COULD LIMIT OUR FUTURE GROWTH
We intend to expand our international operations, but we may face
significant barriers to this expansion. Our failure to manage our international
operations effectively could limit the future growth of our business.
International sales represented approximately 5.1% of our total revenue for the
year ended December 31, 1998 and 23.6% of our total revenue in the first six
months of 1999, substantially all of which consisted of sales of EPM/Foundation
to customers in Japan. We conduct our international sales primarily through
direct sales offices in Germany, the Netherlands and the United Kingdom, and
through distributors in Japan. The expansion of our existing international
operations and entry into additional international markets will require
significant management attention and financial resources.
Our international operations face numerous risks. Our products must be
localized -- customized to meet local user needs -- in order to be sold in
particular foreign countries. Developing local versions of our products for
foreign markets is difficult and can take longer than we anticipate. We
currently have limited experience in localizing products and in testing whether
these localized products will be accepted in the targeted countries. For
example, we are currently marketing localized products only in Japan, and we
have only recently begun to develop products for sale in Germany. We cannot
assure you that our localization efforts will be successful. In addition, we
have only a limited history of marketing, selling and supporting our products
and services internationally. As a result, we must hire and train experienced
personnel to staff and manage our foreign operations. However, we may experience
difficulties in recruiting and training an international staff. We must also be
able to enter into strategic relationships with companies in international
markets, particularly in Japan where all of our sales have been made through
distributors. If we are not able to maintain successful strategic relationships
internationally or recruit additional companies to enter into strategic
relationships, our future growth could be limited.
We also face certain other risks inherent in conducting business
internationally, such as:
- difficulties and costs of staffing and managing international operations;
- language and cultural differences;
- difficulties in collecting accounts receivable and longer collection
periods;
- seasonal business activity in certain parts of the world;
- fluctuations in currency exchange rates;
- legal and governmental regulatory requirements;
- trade barriers; and
- potentially adverse tax consequences.
Any of these factors could seriously harm our international operations and,
consequently, our business.
To date, a majority of our international revenue and costs have been
denominated in foreign currencies. We have not engaged in any foreign exchange
hedging transactions, and we are therefore subject to foreign currency risk.
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WE ARE GROWING RAPIDLY, AND THE FAILURE TO MANAGE OUR GROWTH, INCLUDING
EXPANSION OF OUR MANAGEMENT SYSTEMS, COULD ADVERSELY AFFECT OUR BUSINESS
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
full-time employees grew from 41 at December 31, 1997 to 105 at June 30, 1999,
and we anticipate further significant increases in the number of our employees.
Our growth has placed significant demands on management as well as on our
administrative, operational and financial resources and controls. We expect our
future growth to cause similar, and perhaps increased, strain on our systems and
controls. In particular, we need to substantially upgrade our information
systems including accounting and order entry. We also will need to institute new
systems such as human resource management and time and billing systems. If we
cannot effectively establish and improve our processes, we may not be able to
manage our growth successfully or sustain and manage the growth rates we have
experienced in the past.
OUR PROSPECTS FOR OBTAINING ADDITIONAL FINANCING, IF REQUIRED, ARE UNCERTAIN AND
FAILURE TO OBTAIN NEEDED FINANCING COULD AFFECT OUR ABILITY TO PURSUE FUTURE
GROWTH
We expect our net proceeds from this offering, cash on hand, cash
equivalents, credit facilities and proceeds from our recent preferred stock
financing to meet our working capital and capital expenditure needs for at least
the next 12 months. After that, we may need to raise additional funds to meet
our working capital needs, develop or enhance our products or services, to fund
expansion, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. We cannot assure you that we would be able
to obtain additional financing on favorable terms, if at all. If we issue
additional equity securities, stockholders may experience additional dilution or
the new equity securities may have rights, preferences or privileges senior to
those of existing holders of common stock. If we cannot raise necessary
additional funds on acceptable terms, we may not be able to develop or enhance
our products, fund expansion, take advantage of future opportunities or respond
to competitive pressures or unanticipated requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" for a discussion of our future
capital requirements.
RISKS RELATED TO OUR INDUSTRY
POTENTIAL YEAR 2000 PROBLEMS MAY INVOLVE SIGNIFICANT TIME AND EXPENSE AND MAY
REDUCE OUR FUTURE SALES
If our technology or technology developed by third parties which is
incorporated into our products or which interacts with our products, is not year
2000 compliant in a timely manner, our business could be seriously harmed. The
year 2000 problem exists because many currently installed computer systems and
software products electronically store dates using only the last two digits of
the calendar year. As a result, these 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
operations and customers' purchasing patterns, any 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. In addition, technology
developed by others and incorporated in our products could have year 2000
problems. 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. We may in the future be required to defend our products or
services in litigation or arbitration proceedings involving our products or
services related to year 2000 compliance
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<PAGE> 16
issues, or to negotiate resolutions of claims based on year 2000 issues.
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 be expensive. In addition, we may
experience reduced sales of products as customers and potential customers put a
priority on correcting year 2000 problems and therefore defer purchases of our
products. Accordingly, demand for our products may be particularly volatile and
unpredictable for the remainder of 1999 and early 2000.
We currently have no contingency plans in place to address the risks
associated with unremediated year 2000 problems, but we are currently developing
these plans and expect to have them in place in the third quarter of 1999. With
the exception of our accounting system and software on a few of the computers
used by our sales representatives to demonstrate our products, we believe that
virtually all of our internal information systems are currently year 2000
compliant. We are in the process of obtaining the necessary compliance upgrades
for the systems that are not already year 2000 compliant. If we do not complete
in a timely manner these compliance upgrades for our internal information
systems, our operations could be disrupted as a result of a temporary lack of
availability of our accounting systems and an inability of certain of our sales
representatives to engage in demonstrations of our products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Readiness" for more information about our potential year 2000 problems and
the measures that we have taken to address these problems.
WE DEPEND ON THE GROWTH IN THE USE OF THE INTERNET FOR OUR BUSINESS
Our future success depends heavily on the increased acceptance and use of
the Internet for business. Although the Internet is experiencing rapid growth in
the number of users and traffic, this growth is a recent phenomenon and may not
continue. Furthermore, despite this growth in usage, the use of the Internet for
business transactions is relatively new. If use of the Internet for business
does not continue to increase or increases more slowly than expected, our
business would be seriously harmed. Consumers and businesses may reject the
Internet as a viable commercial medium, or be slow to adopt it, for a number of
reasons, including potentially inadequate network infrastructure, slow
development of enabling technologies, concerns about the security of
transactions and confidential information and insufficient commercial support.
The Internet infrastructure may not be able to support the demands placed on it
by increased Internet usage and bandwidth requirements. In addition, delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity, or increased governmental regulation,
could cause the Internet to lose its viability as a commercial medium. If these
or any other factors cause use of the Internet for business to slow or decline,
our business would be harmed. Even if the required infrastructure, standards,
protocols or complementary products, services or facilities are developed, we
may incur substantial expenses adapting our products to changing or emerging
technologies.
INCREASING GOVERNMENTAL REGULATION OF THE INTERNET COULD LIMIT THE MARKET FOR
OUR PRODUCTS
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, such as user privacy,
taxation of goods and services provided over the Internet, pricing, content and
quality of products and services. Legislation could dampen the growth in
Internet usage and decrease or limit its acceptance as a communications and
commercial medium. If enacted, these laws and regulations could limit the market
for our products. In addition, existing laws could be applied to the Internet,
including consumer privacy laws. Legislation or application of existing laws
could expose companies involved in electronic commerce, or e-commerce, to
increased liability, which could limit the growth of e-commerce generally.
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GOVERNMENT REGULATION OF THE COLLECTION AND USE OF PERSONAL DATA COULD REDUCE
DEMAND FOR OUR PRODUCTS
Our products connect to and analyze data from various applications,
including Internet applications, that enable businesses to capture and use
information about their customers. Government regulation which limits our
customers' use of this information could reduce the demand for our products. A
number of jurisdictions have adopted, or are considering adopting, laws that
restrict the use of customer information from Internet applications. The
European Union has required that its member states adopt legislation that
imposes restrictions on the collection and use of personal data on the Internet,
and that limits the transfer of personally-identifiable data to countries that
do not impose equivalent restrictions. In the United States, the Children's
Online Privacy Protection Act was enacted in October 1998. This legislation
directs the Federal Trade Commission to regulate the collection of data from
children on commercial websites. In addition, the Federal Trade Commission has
begun investigations into the privacy practices of businesses that collect
information on the Internet. These and other privacy-related initiatives could
reduce demand for some of the Internet applications with which our products
operate, and could restrict the use of our products in some e-commerce
applications. This could reduce demand for our products.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE WHICH COULD LEAD TO LOSSES BY INVESTORS AND TO
SECURITIES LITIGATION
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
this offering. We will negotiate and determine the initial public offering price
with the representatives of the underwriters based on several factors. See
"Underwriting." The initial public offering price may not be indicative of the
prices that will prevail in the public market after this offering, and the
market price of the common stock could fall below the initial public offering
price.
The value of your investment in Broadbase could decline due to the impact
of any of the following factors upon the market price of our common stock:
- variations in our actual and anticipated operating results;
- changes in our earnings estimates by analysts;
- our failure to meet analysts' performance expectations; and
- lack of liquidity.
In addition, stock markets, particularly the Nasdaq National Market, have
experienced extreme price and volume fluctuations, and the market prices of
securities of technology companies, particularly Internet-related companies,
have been highly volatile. These fluctuations have often been unrelated to the
operating performance of such companies. Fluctuations such as these may affect
the market price of our common stock. Substantial sales of our common stock
after this offering could also cause our stock price to decline. As a result,
investors may not be able to resell their shares at or above the initial public
offering price.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in their stock price. This
type of litigation could result in substantial costs and could divert our
management's attention and resources.
OUR OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL HAVE SIGNIFICANT CONTROL
OVER US WHICH COULD DELAY OR PREVENT A CHANGE OF CONTROL
Our executive officers, directors and major stockholders will have
significant control over us following completion of this offering as they will
beneficially own an aggregate of approximately 66.8% of our outstanding common
stock at that time. This could limit the ability of our other stockholders to
influence matters requiring approval by our stockholders, including the election
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<PAGE> 18
of directors and the approval of mergers or similar transactions. See "Principal
Stockholders" for information regarding the shares beneficially owned by our
executive officers, directors and major stockholders.
WE HAVE ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT THE SALE OF
OUR COMPANY AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
Provisions of our certificate of incorporation, bylaws 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. For example, we have a classified board
of directors. In addition, our stockholders are unable to act by written consent
or to fill any vacancy on the board of directors. In addition, our stockholders
cannot call special meetings of stockholders for any purpose, including to
remove any director or the entire board of directors without cause. We will also
be subject to the provisions of Section 203 of the Delaware General Corporation
Law regulating corporate takeovers. These provisions could also limit the price
that investors might be willing to pay in the future for shares of our common
stock. See "Description of Capital Stock" for a description of these provisions.
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING, AND OUR
INVESTMENT OF THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
Our management has broad discretion as to how to spend the proceeds from
this offering and may spend these proceeds in ways with which our stockholders
may not agree. Pending any such uses, we plan to invest the net proceeds of this
offering in short-term, investment-grade, interest-bearing securities. These
investments may not yield a favorable return.
FUTURE SALES OF SHARES OF OUR COMMON STOCK COULD CAUSE THE PRICE OF OUR SHARES
TO DECLINE
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could decline. These sales also might make it more difficult for us 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 June 30,
1999, upon completion of this offering, we will have outstanding 17,203,690
shares of common stock, assuming no exercise of outstanding options or warrants
after June 30, 1999. Of these shares, the 4,000,000 shares sold in this offering
will be freely tradable, 10,284,667 additional shares of common stock will be
available for sale in the public market 180 days after the date of this
prospectus following the expiration of lock-up agreements, and 2,919,023 more
shares will become available for sale in the public market on subsequent dates.
These stockholders may be released from their lock-up agreements at any time and
without notice, which would allow for the earlier sale of shares in the public
market.
After this offering, the holders of approximately 9,991,146 million shares
of common stock, which represent 58% of our outstanding stock after completion
of this offering, will be entitled to certain rights to have the resale of their
shares registered under the Securities Act of 1933. If these holders cause a
large number of securities to be registered and sold in the public market, such
sales could result in a significant decline in the market price for our common
stock.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT
The initial public offering price is substantially higher than the pro
forma net book value per share of the outstanding common stock. If you purchase
shares of our common stock, you will incur immediate and substantial dilution in
the amount of $8.16 per share. If the holders of outstanding options or warrants
exercise those options or warrants, you will experience further dilution.
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<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA
We make many statements in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere that are
forward-looking and are not based on historical facts. These statements relate
to our future plans, objectives, expectations and intentions. We may identify
these statements by the use of words such as "believe," "expect," "anticipate,"
"intend" and "plan" and similar expressions. These forward-looking statements
involve a number of risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those we discuss in "Risk Factors" and
elsewhere in this prospectus. These forward-looking statements speak only as of
the date of this prospectus, and we caution you not to rely on these statements
without also considering the risks and uncertainties associated with these
statements and the Company's business that are addressed in this prospectus.
This prospectus contains estimates of market growth related to the
Internet. These estimates have been included in studies published by Forrester
Research, a market research firm. These estimates assume that certain events,
trends and activities will occur. If Forrester Research is wrong about any of
their assumptions, then their market estimates may also be wrong.
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USE OF PROCEEDS
The net proceeds to us from the sale of the 4,000,000 shares of common
stock offered by us will be approximately $43.6 million, at an assumed initial
public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses. If the
underwriters' over-allotment option is exercised in full, our net proceeds will
be approximately $50.3 million. We intend to use the net proceeds from this
offering primarily for general corporate purposes, including working capital. We
may also use a portion of the net proceeds from this offering to acquire or
invest in businesses, technologies or services that are complementary to our
business. We have no present plans or commitments and are not engaged in any
negotiations with respect to any transactions of this type.
We have not identified any specific uses for the net proceeds from this
offering, and we will have discretion over their use and investment. Pending use
of the net proceeds, we intend to invest the net proceeds from this offering in
short-term, interest-bearing, investment-grade securities. See "Risk
Factors -- We have broad discretion to use the proceeds from this offering, and
our investment of these proceeds may not yield a favorable return."
DIVIDEND POLICY
We have never declared or paid any cash dividends on shares of our capital
stock. We intend to retain any future earnings to finance future growth and do
not anticipate paying any cash dividends in the future. In addition, the terms
of our credit facility with Silicon Valley Bank restrict our ability to pay cash
dividends.
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CAPITALIZATION
The following table shows:
- our actual capitalization as of June 30, 1999;
- our capitalization as of that date on a pro forma basis to give effect to
the conversion of all preferred stock and convertible debentures
outstanding at June 30, 1999 into common stock upon the closing of this
offering and to give effect to changes in our authorized shares as a
result of our Delaware reincorporation; and
- our pro forma capitalization as adjusted to reflect our receipt of the
net proceeds from the sale of shares of common stock offered by us at an
assumed initial public offering price of $12.00 per share and after
deducting estimated underwriting discounts and commissions and offering
expenses.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term liabilities, less current portion................. $ 10,302 $ 777 $ 777
Stockholders' equity (net capital deficiency):
Preferred stock, no par value; 10,154,046 shares
authorized, 8,663,089 shares issued and outstanding,
actual; 15,154,046 shares authorized, no shares issued
or outstanding, pro forma and pro forma as adjusted.... 38,554 -- --
Common stock, no par value; 30,000,000 shares authorized,
3,226,808 shares issued and outstanding, actual;
90,000,000 shares authorized, 13,203,690 shares issued
and outstanding, pro forma; 90,000,000 shares
authorized, 17,203,690 shares issued and outstanding,
pro forma as adjusted.................................. 14,970 63,049 106,634
Deferred stock compensation............................... (10,907) (10,907) (10,907)
Notes receivable from stockholders........................ (626) (626) (626)
Accumulated other comprehensive loss...................... (38) (38) (38)
Accumulated deficit....................................... (28,989) (28,989) (28,989)
-------- -------- --------
Total stockholders' equity (net capital deficiency).... 12,964 22,489 66,074
-------- -------- --------
Total capitalization.............................. $ 23,266 $ 23,266 $ 66,851
======== ======== ========
</TABLE>
The outstanding share information shown in the table above excludes:
- 36,764 shares of common stock issuable upon the exercise of outstanding
warrants as of June 30, 1999, at a weighted-average per share exercise
price of $2.34;
- 2,013,249 shares of common stock issuable upon the exercise of
outstanding stock options as of June 30, 1999, at a weighted-average per
share exercise price of $0.62;
- 572,443 shares of common stock available for future grant under our 1996
Equity Incentive Plan as of June 30, 1999;
- 3,500,000 shares of common stock to be initially available for future
grant under our 1999 Equity Incentive Plan; and
- 500,000 shares of common stock to be initially available for issuance
under our 1999 Employee Stock Purchase Plan.
See "Management -- Employee Benefit Plans" for more information about our
stock plans.
18
<PAGE> 22
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was $22.5
million, or $1.70 per share of common stock. Pro forma net tangible book value
per share represents the amount of our total tangible assets less total
liabilities, divided by 13,203,690 shares of common stock outstanding as of June
30, 1999 after giving effect to the conversion of all outstanding shares of
preferred stock and convertible debentures into shares of common stock upon
completion of this offering. After giving effect to the receipt of the net
proceeds from the sale of 4,000,000 shares of our common stock at an assumed
initial public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses, our
pro forma net tangible book value as of June 30, 1999 would have been
approximately $66.1 million, or $3.84 per share. This represents an immediate
increase in pro forma net tangible book value of $2.14 per share to existing
stockholders and an immediate dilution of $8.16 per share to new investors
purchasing shares at the initial public offering price. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 12.00
Pro forma net tangible book value per share as of
June 30, 1999.......................................... $1.70
Increase per share attributable to new investors.......... 2.14
-----
Pro forma net tangible book value per share after
offering.................................................. 3.84
------
Dilution per share to new investors......................... $ 8.16
======
</TABLE>
The following table summarizes, as of June 30, 1999, on the pro forma basis
described above, the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing shares of common stock in this
offering, before deducting estimated underwriting discounts and commissions and
the estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 13,203,690 76.7% $ 63,049,000 56.8% $ 4.77
New investors........... 4,000,000 23.3 48,000,000 43.2 12.00
---------- ----- ------------ ----- ------
Total................. 17,203,690 100.0% $111,049,000 100.0% $ 6.45
========== ===== ============ ===== ======
</TABLE>
The above discussion and tables assume no exercise of any stock options or
warrants outstanding as of June 30, 1999. As of June 30, 1999, there were
options and warrants outstanding to purchase a total of 2,050,013 shares of our
common stock with a weighted-average exercise price of $0.65 per share. If any
of these options or warrants are exercised, there will be further dilution to
new public investors. Please see Notes 5 and 9 of Notes to Financial Statements
for more information about these options and warrants.
19
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this prospectus. The consolidated
statement of operations data for the period from November 28, 1995 (inception)
to December 31, 1996 and each of the two years ended December 31, 1997 and 1998
and the consolidated balance sheet data at December 31, 1997 and 1998, are
derived from our consolidated financial statements that have been audited by
Ernst & Young LLP, independent auditors, and are included elsewhere in this
prospectus. The consolidated balance sheet data as of June 30, 1999 and the
consolidated statement of operations data for the six months ended June 30, 1998
and 1999 are derived from unaudited consolidated financial statements included
elsewhere in this prospectus and include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, that are necessary
for the fair presentation of our financial position and results of operations
for those periods. Historical results are not necessarily indicative of future
results. The pro forma consolidated balance sheet data as of June 30, 1999 is
unaudited and reflects the assumed conversion of all outstanding shares of
preferred stock and convertible debentures into common stock upon the completion
of this offering.
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED SIX MONTHS ENDED
NOVEMBER 28, 1995 DECEMBER 31, JUNE 30,
(INCEPTION) TO ------------------ -------------------
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License........................................ $ -- $ -- $ 2,996 $ 1,349 $ 2,693
Maintenance and professional services.......... -- -- 443 98 846
------- ------- -------- ------- --------
Total net revenue....................... -- -- 3,439 1,447 3,539
Cost of revenue:
License........................................ -- -- 713 366 428
Maintenance and professional services.......... -- -- 254 83 932
------- ------- -------- ------- --------
Total cost of revenue................... -- -- 967 449 1,360
------- ------- -------- ------- --------
Gross margin..................................... -- -- 2,472 998 2,179
Operating expenses:
Sales and marketing............................ 130 2,851 7,888 3,641 6,495
Research and development....................... 928 1,980 3,738 1,665 2,800
General and administrative..................... 215 744 1,165 522 932
Amortization of deferred stock compensation.... -- -- 1,133 328 2,472
------- ------- -------- ------- --------
Total operating expenses................ 1,273 5,575 13,924 6,156 12,699
------- ------- -------- ------- --------
Loss from operations............................. (1,273) (5,575) (11,452) (5,158) (10,520)
Interest income.................................. 30 154 335 158 194
Interest expense................................. (29) (66) (226) (100) (561)
------- ------- -------- ------- --------
Net loss......................................... $(1,272) $(5,487) $(11,343) $(5,100) $(10,887)
======= ======= ======== ======= ========
Basic and diluted net loss per share............. $ (4.30) $ (6.19) $ (8.85) $ (4.58) $ (6.30)
======= ======= ======== ======= ========
Weighted-average shares used in computing basic
and diluted net loss per share................. 296 887 1,281 1,114 1,728
======= ======= ======== ======= ========
Pro forma basic and diluted
net loss per share............................. $ (1.51) $ (1.16)
======== ========
Weighted-average shares used in computing pro
forma basic and diluted net loss per share..... 7,536 9,383
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
----------------- --------------------
1997 1998 ACTUAL PRO FORMA
------ ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $1,153 $13,990 $27,981 $27,981
Working capital............................................. 61 8,801 21,357 21,357
Total assets................................................ 2,113 17,173 32,561 32,561
Long-term debt and capital lease obligations, net of current
portion................................................... 916 9,360 10,302 777
Stockholders' equity (net capital deficiency)............... (75) 1,226 12,964 22,489
</TABLE>
20
<PAGE> 24
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain consolidated statement of operations
data for each of the six quarters beginning with the quarter ended March 31,
1998 through the quarter ended June 30, 1999, including such amounts expressed
as a percentage of total net revenue. This quarterly information is unaudited,
but has been prepared on the same basis as the annual consolidated financial
statements and, in the opinion of management, reflects all adjustments,
consisting only of normal recurring adjustments necessary for a fair
representation of the information for the periods presented. This statement of
operations data should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus. Operating
results for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License..................................... $ 482 $ 867 $ 888 $ 759 $ 1,126 $ 1,567
Maintenance and professional services....... -- 98 104 241 360 486
------- ------- ------- ------- ------- -------
Total net revenue..................... 482 965 992 1,000 1,486 2,053
Cost of revenue:
License..................................... 210 156 180 167 260 168
Maintenance and professional services....... -- 83 84 87 391 541
------- ------- ------- ------- ------- -------
Total cost of revenue................. 210 239 264 254 651 709
------- ------- ------- ------- ------- -------
Gross margin.................................. 272 726 728 746 835 1,344
Operating expenses:
Sales and marketing......................... 1,595 2,046 1,975 2,272 2,656 3,839
Research and development.................... 742 923 1,030 1,043 1,188 1,612
General and administrative.................. 219 303 315 328 494 438
Amortization of deferred stock
compensation.............................. 62 266 374 431 925 1,547
------- ------- ------- ------- ------- -------
Total operating expenses.............. 2,618 3,538 3,694 4,074 5,263 7,436
------- ------- ------- ------- ------- -------
Loss from operations.......................... (2,346) (2,812) (2,966) (3,328) (4,428) (6,092)
Interest income............................... 53 105 94 83 113 81
Interest expense.............................. (60) (40) (47) (79) (260) (301)
------- ------- ------- ------- ------- -------
Net loss...................................... $(2,353) $(2,747) $(2,919) $(3,324) $(4,575) $(6,312)
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
PERCENT OF TOTAL NET REVENUE
Net revenue:
License..................................... 100.0% 89.8% 89.5% 75.9% 75.8% 76.3%
Maintenance and professional services....... -- 10.2 10.5 24.1..... 24.2 23.7
------- ------- ------- ------- ------- -------
Total net revenue..................... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License..................................... 43.6 16.2 18.1 16.7 17.5 8.2
Maintenance and professional services....... -- 8.6 8.5 8.7 26.3 26.4
------- ------- ------- ------- ------- -------
Total cost of revenue................. 43.6 24.8 26.6 25.4 43.8 34.5
------- ------- ------- ------- ------- -------
Gross margin.................................. 56.4 75.2 73.4 74.6 56.2 65.5
Operating expenses:
Sales and marketing......................... 330.9 212.0 199.1 227.2 178.7 187.0
Research and development.................... 153.9 95.6 103.8 104.3 79.9 78.5
General and administrative.................. 45.4 31.4 31.8 32.8 33.2 21.3
Amortization of deferred stock
compensation.............................. 12.9 27.6 37.7 43.1 62.2 75.4
------- ------- ------- ------- ------- -------
Total operating expenses.............. 543.1 366.6 372.4 407.4 354.0 362.2
------- ------- ------- ------- ------- -------
Loss from operations.......................... (486.7) (291.4) (299.0) (332.8) (297.8) (296.7)
Interest income............................... 11.0 10.9 9.5 8.3 7.6 3.9
Interest expense.............................. (12.5) (4.1) (4.7) (7.9) (17.5) (14.7)
------- ------- ------- ------- ------- -------
Net loss...................................... (488.2)% (284.6)% (294.2)% (332.4)% (307.7)% (307.5)%
======= ======= ======= ======= ======= =======
</TABLE>
21
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
We incorporated in November 1995 and from that date through December 1997
were in the development stage, conducting research and developing our initial
products. In the fourth quarter of 1997, we introduced EPM/Foundation. This
software product was originally designed to enable organizations to build and
manage datamarts for their customer information. In the third quarter of 1998,
we began offering Broadbase/EPM applications, built on EPM/ Foundation, which
provide analysis for customer relationship management. In May 1999 we expanded
our Broadbase/EPM suite by introducing new applications designed for Internet
sales channels, Internet marketing and other customer-focused e-business
applications, as well as new versions of our existing applications. As a result,
most of our license revenue through the first six months of 1999 has been
derived from licenses of EPM/Foundation. Throughout these periods, we expanded
our organization by hiring personnel in key areas, particularly marketing, sales
and research and development. We have grown from a total of 41 full-time
employees at December 31, 1997 to 75 full-time employees at December 31, 1998
and 105 full-time employees at June 30, 1999, and we intend to continue to
increase our number of employees throughout 1999.
Our revenue comes principally from licenses of our software products, with
the balance coming from maintenance and professional services. We adopted the
provisions of Statement of Position ("SOP") No. 97-2 Software Revenue
Recognition, as amended by SOP No. 98-4, Deferral of the Effective Date of
Certain Provisions of SOP No. 97-2. Under SOP No. 97-2 we recognize license
revenue when persuasive evidence of an agreement exists, delivery of the product
has occurred, no significant company obligations with regard to installation or
implementation of the software remain, the fee is fixed or determinable and
collectibility is probable. In a typical application license transaction, our
professional services group connects our product to the customer's systems and
data sources. Upon completion of that connection, no significant obligations
remain with respect to implementation, and we recognize the revenue related to
that license. The actual connection process can often be completed in two to
four weeks. However, the timing of the commencement and completion of this
process is subject to factors that may be beyond our control, as this process
requires access to the customer's facilities and coordination with the
customer's personnel following delivery of the software. As a result, we
typically do not recognize the license revenue from an application license until
one to three months after our product is shipped to the customer. License
revenue generated by distributors and other resellers is recognized upon receipt
of a reseller report of sale and our shipment of the licensed software.
Maintenance and support revenue associated with new product licenses and
maintenance revenue resulting from renewed maintenance contracts are deferred
and recognized ratably over the contract period. Professional services revenue
is recognized when services are performed.
Currently, businesses that license our products generally license one or
more Broadbase EPM applications, together with EPM/Foundation and adapters to
interface with the customers' existing data sources. Customers generally receive
a nonexclusive, perpetual license to use our
22
<PAGE> 26
products for a specified number of servers and named concurrent users. After the
initial license, they may purchase licenses for additional servers and users as
needed. In addition, customers often purchase professional services from us,
including training services, although they may use other consulting
organizations. Customers that license our products also usually purchase
maintenance contracts, which provide software upgrades and technical support
over a stated term, typically 12 months.
We sell our products through our direct sales force and through indirect
sales channels. Direct sales are made by our direct sales force in North
America, Germany, the United Kingdom and the Netherlands. Our indirect sales
channels include software application vendors, resellers and distributors
located in the United States, Japan and the Netherlands. Sales through indirect
sales channels accounted for approximately 28.7% of our total net revenue for
1998 and 40.8% for the six months ended June 30, 1999. Although a significant
portion of our revenue to date has been generated by our indirect sales
channels, we intend to continue increasing the size of our direct sales force,
both in the United States and internationally.
Revenue from customers outside North America represented 5.1% of our total
net revenue for 1998 and 23.6% for the six months ended June 30, 1999.
Substantially all of our international revenue has been derived from sales of
EPM/Foundation by our distributors in Japan. We intend to continue to expand our
international operations and commit significant management time and financial
resources to developing our direct and indirect international sales channels.
International revenue may not, however, increase as a percentage of total net
revenue.
We have experienced substantial net losses since our inception due to the
significant costs incurred to develop our technology and products and to recruit
and train personnel for our engineering, sales, marketing, professional services
and administration departments. As of June 30, 1999, we had an accumulated
deficit of $29.0 million. We expect to continue to incur substantial operating
losses for the foreseeable future.
RESULTS OF OPERATIONS
NET REVENUE
License. We began licensing our products in the first quarter of 1998.
License revenue increased from nothing in the period from inception through 1996
and nothing in 1997 to $3.0 million in 1998. License revenue increased from $1.3
million in the first six months of 1998 to $2.7 million in the first six months
of 1999, representing an increase of 100.7%. These increases in license revenue
are attributable to increases in the number of licenses sold, reflecting the
results of the expansion of our direct sales force and our indirect sales
channels. We intend to continue to expand both these channels. In addition, we
expect the average size of our revenue per license transaction to increase as a
result of our licensing Broadbase EPM applications as well as EPM/Foundation.
Our license revenue decreased from the third quarter of 1998 to the fourth
quarter of 1998, as we transitioned to a direct sales force with the specific
skills required to sell our new Broadbase EPM applications for customer
relationship management.
During 1998, we invested in developing our direct and indirect sales
channels as well as our maintenance and professional services groups. The result
of these efforts is reflected in the 48.4% increase in license revenue between
the fourth quarter of 1998 and the first quarter of 1999 and the steadily
increasing revenue from maintenance and professional services from the second
quarter of 1998 through the second quarter of 1999.
23
<PAGE> 27
Maintenance and professional services. Maintenance revenue is recognized on
a straight-line basis over the period support is provided, usually one year. We
first began recognizing maintenance revenue in the second quarter of 1998 for
maintenance contracts sold at the end of the first quarter of 1998. Professional
services revenue is recognized as the services are performed. Professional
services revenue was first recognized in the second quarter of 1998. Maintenance
and professional services revenue increased from nothing in the period from
inception through 1996 and nothing in 1997, to $443,000 in 1998 and increased
from $98,000 in the first six months of 1998 to $846,000 in the first six months
of 1999. The growth in maintenance and professional services revenue in the
first six months of 1999 compared to the same period of 1998 reflects the
expansion of our installed base of customers and the Company's increasing
emphasis on providing its customers with post-implementation consulting and
support.
COST OF REVENUE
Cost of licenses. The cost of licenses consists primarily of royalties paid
to third parties and the cost of product manuals, media, packaging and shipping.
The cost of licenses increased from nothing in the period from inception through
1996 and nothing in 1997 to $713,000 in 1998 and from $366,000 in the first six
months of 1998 to $428,000 in the first six months of 1999, primarily as a
result of increased license revenue. Our cost of licenses has varied
significantly from quarter to quarter. These variations are due primarily to
changes in the mix of products sold, since our products require payment of
royalties to third parties at differing rates.
Cost of maintenance and professional services. The cost of maintenance and
professional services consists primarily of personnel costs associated with
providing maintenance and support services, consulting services and training
services. We began incurring costs associated with maintenance and support in
the second quarter of 1998 when support periods for our customers began, which
resulted in an increase from nothing in the period from inception through 1996
and nothing in 1997 to $254,000 in 1998 and from $83,000 in the first six months
of 1998 to $932,000 in the first six months of 1999. The increase in cost of
maintenance and professional services between the first six months of 1998 and
the first six months of 1999 was due primarily to the hiring of a vice president
of professional services and eight additional professional services personnel.
We plan to continue expanding our professional services group and, accordingly,
expect the dollar amount of our cost of maintenance and professional services to
increase.
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions, travel and promotional expenses and
the facilities cost for the various domestic and international field sales
offices. Sales and marketing expenses increased from $130,000 for the period
from inception through 1996 to $2.9 million in 1997 and to $7.9 million in 1998
and from $3.6 million in the six months of 1998 to $6.5 million in the first six
months of 1999. These increases in sales and marketing expenses resulted
primarily from higher salary, recruiting, benefits, travel and facilities costs
associated with the hiring of additional sales and marketing personnel and the
expansion of our international sales organization. Full time sales and marketing
personnel grew from 23 at June 30, 1998 to 44 at June 30, 1999. We plan to
continue expanding our sales and marketing organization, and expect our sales
and marketing expense to increase.
Research and development. Research and development expenses consist
primarily of salaries for development personnel and related costs associated
with the development of new products, the enhancement of existing products,
localization, quality assurance and testing. Research and development expenses
increased from $928,000 in the period from inception through 1996 to $2.0
million in 1997 and to $3.7 million in 1998 and from $1.7 million in the first
six months of 1998 to $2.8 million in the first six months of 1999. These
increases in
24
<PAGE> 28
research and development expenses were due to the hiring of additional personnel
and to other expenses associated with the development and localization of new
products. Full time research and development personnel grew from 25 at June 30,
1998 to 33 at June 30, 1999. We plan to continue expanding our research and
development organization, and expect our research and development expense to
increase.
General and administrative. General and administrative expenses consist
primarily of salaries of executive, financial, human resource and information
services personnel as well as outside professional fees. General and
administrative expenses increased from $215,000 in the period from inception
through 1996 to $744,000 in 1997 and to $1.2 million in 1998 and from $522,000
in the first six months of 1998 to $932,000 in the first six months of 1999.
These increases in general and administrative expenses were primarily due to
increased staffing required to support our expanded operations in the United
States and abroad and, to a lesser extent, increased costs of outside
professional services and costs to implement additional management information
systems. Our full time general and administrative personnel grew from 8 at June
30, 1998 to 13 at June 30, 1999.
Deferred compensation. We recorded deferred compensation of approximately
$3.5 million in 1998, representing the difference between the exercise prices of
options granted to acquire approximately 632,000 shares of common stock during
1998 and the deemed fair value for financial reporting purposes of our common
stock on the grant dates. We amortized deferred compensation expense of
approximately $1.1 million during 1998. This compensation expense relates to
options awarded to individuals in all operating expense categories. Total
deferred compensation at December 31, 1998 of approximately $2.3 million is
being amortized using a graded vesting method over the vesting periods of the
options. In addition, we granted options to purchase common stock in the first
six months of 1999 for which we recorded additional deferred compensation of
approximately $11.0 million which will be amortized using a graded vesting
method over the vesting periods of the options. The amortization of deferred
compensation recorded through June 30, 1999 will be approximately $6.0 million
for 1999, $4.2 million for 2000, $2.1 million for 2001, $897,000 for 2002 and
142,000 for 2003.
Interest income. Interest income consists of interest earned on our cash
and cash equivalents. Interest income for the period from inception through 1996
was $30,000 and for 1997 was $154,000, representing interest earned on the cash
proceeds of our Series A and Series B preferred stock financings. Interest
income increased to $335,000 in 1998, due primarily to the investment of the
proceeds of our Series C preferred stock financing. Interest income increased
from $158,000 in the first six months of 1998 to $194,000 in the first six
months of 1999 due to higher invested cash balances in 1999 as a result of the
investment of proceeds received from the sale of $8.3 million and $1.3 million
of Series D convertible debentures in December 1998 and April 1999,
respectively.
Interest expense. Interest expense consists primarily of interest on our
notes payable, bank line of credit and convertible debentures. Interest expense
increased from $29,000 for the period from inception through 1996 to $66,000 in
1997 due to $300,000 in additional borrowings in 1997 under notes from a
financial institution, and to $226,000 in 1998 due to $1.0 million in additional
borrowing in 1998 under a bank line of credit. Interest expense increased from
$100,000 in the first six months of 1998 to $561,000 in the first six months of
1999 due primarily to interest payments on $8.3 million of convertible
debentures issued in December 1998 and $1.3 million of convertible debentures
issued in April 1999.
Income taxes. There was no federal income tax provision in any period
presented due to our net operating losses. We had deferred tax assets of
approximately $2.9 million as of December 31, 1997 and $6.5 million as of
December 31, 1998. Realization of deferred tax assets is dependent on future
earnings, if any, the timing and amount of which are uncertain.
25
<PAGE> 29
Accordingly, a valuation allowance, in an amount equal to the net deferred tax
assets as of December 31, 1997 and 1998, has been established to reflect these
uncertainties. Our deferred tax assets primarily relate to net operating loss
and tax credit carryforwards. As of December 31, 1998, we had federal net
operating loss carryforwards of approximately $15.4 million and state net
operating loss carryforwards of approximately $10.7 million. We also had federal
and state research and development tax credit carryforwards of approximately
$300,000 and $200,000, respectively. The net operating loss and tax credit
carryforwards will expire at various dates beginning in 2004, if not utilized.
Utilization of the net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the "change in ownership"
provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating loss and tax
credit carryforwards before utilization.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have funded our operations primarily through the sale of
equity securities, with net proceeds of $38.6 million, sales of convertible
debentures, with net proceeds of $9.5 million, and bank borrowings.
Net cash used in operating activities was $4.8 million in 1997 and $6.1
million in 1998. Net cash used in operating activities was $6.4 million in the
six months ended June 30, 1999. In each period, net cash used in operating
activities resulted from our net loss offset in part by increases in current
liabilities, especially deferred revenue in 1998 and accrued expenses in the
first six months of 1999. The increase in deferred revenue consisted primarily
of prepayments of licenses from Japanese distributors and prepayment of
maintenance.
Our investing activities used cash of $661,000 in 1997, $1.4 million in
1998 and $637,000 in the first six months of 1999. Net cash used in investing
activities in these periods was primarily the result of capital expenditures for
computer and communications equipment, purchased software, office equipment,
furniture, fixtures and leasehold improvements.
Our financing activities provided cash of $1.1 million in 1997, $20.4
million in 1998 and $21.0 million in the first six months of 1999. In 1997,
financing activities provided cash primarily from issuance of $1.0 million of
long-term debt. In 1998, financing activities provided cash of $11.9 million
from the issuance of preferred stock, $8.3 million from the issuance of
convertible debentures and $1.0 million from borrowings under our bank credit
facility. This was offset in part by long-term debt repayment of $380,000 and a
$400,000 loan to an officer and stockholder in exchange for a non-recourse
promissory note which is secured by common stock of Broadbase held by the
officer. For the first six months of 1999, our financing activities provided
cash primarily from the issuance of $20.0 million of preferred stock and the
issuance of $1.3 million of convertible debentures.
In July 1998, we entered into a loan and security agreement with Silicon
Valley Bank, providing a line of credit of up to $2.0 million and an equipment
line of credit of up to $1.0 million. Any borrowings under the line of credit
bear interest at the bank's prime lending rate, and any borrowings under the
equipment line of credit would bear interest at the bank's prime lending rate
plus 0.5%. As of June 30, 1999, borrowings under the line of credit would have
accrued interest at a rate of 7.75% and the borrowings under the equipment line
of credit accrued interest at a rate of 8.25%. Borrowings under this agreement
are secured by certain assets of Broadbase. As of June 30, 1999, no borrowings
were outstanding and $2.0 million was available for borrowing under the line of
credit. In addition, as of that date, $833,500 was outstanding under the
equipment line of credit. Borrowings under the equipment line of credit are due
in 36 equal monthly installments of principal, plus accrued interest, beginning
in January 1999 and ending in December 2001. The agreement contains covenants
requiring that we
26
<PAGE> 30
satisfy certain financial ratios and maintain a minimum tangible net worth. The
agreement also prohibits us from paying cash dividends. As of December 31, 1998
and June 30, 1999, we were in compliance with these covenants. In addition, as
of June 30, 1999, we had outstanding indebtedness under two separate notes
payable to a financial institution aggregating $684,000, at a weighted-average
interest rate of 14.5% per year.
As of June 30, 1999, we had $28.0 million of cash and cash equivalents
which, together with the proceeds from this offering and the $2.0 million
available for borrowing under our bank line of credit, will be sufficient to
fund our operations, including working capital and capital equipment purchase
requirements, through at least December 31, 2000. After that time, we intend to
fund our working capital and capital expenditure requirements from any remaining
cash and cash equivalents, cash generated from operating activities existing and
future bank financing, and possibly from future sales of our capital stock. We
cannot be certain that we would be able to obtain additional financing on
favorable terms, if at all. If we cannot raise necessary additional funds on
acceptable terms, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements. At June 30, 1999, we had no material commitments for
capital expenditures and $2.1 million of minimum lease payments under
noncancellable operating and capital leases, net of future sublease income under
noncancellable subleases.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt obligations. We primarily use proceeds from these debt
obligations to support general corporate requirements including capital
expenditures and working capital needs. We have interest rate exposure on
borrowings under our revolving line of credit and equipment line of credit which
bear interest at variable rates based on the prime interest rate. We have no
interest rate exposure on our convertible debentures and notes payable to a
financial institution, as the interest rates on these obligations are fixed.
The table below presents principal amounts by year of maturity and related
weighted-average interest rates for our debt obligations as of December 31,
1998.
<TABLE>
<CAPTION>
FAIR
1999 2000 THEREAFTER TOTAL VALUE
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Notes payable
Fixed rate amounts..... $436,000 $442,000 -- $ 878,000 $ 878,000
Average rate........... 14.50% 14.50%
Convertible debentures
Fixed rate amounts..... -- -- $8,250,000 8,250,000 8,250,000
Average rate........... 10.0%
Line of credit
Variable rate
amounts............. $333,000 $333,000 334,000 1,000,000 1,000,000
Average rate........... 8.25% 8.34%
</TABLE>
We have no derivative financial instruments in our cash and cash
equivalents. We invest our cash and cash equivalents in investment grade, highly
liquid investments, consisting of money market instruments and bank certificates
of deposit. We anticipate investing our net proceeds from this offering in
similar investment grade and highly liquid investments pending their use as
described in this prospectus.
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<PAGE> 31
We are exposed to market risk from fluctuations in foreign currency
exchange rates. We manage exposure to variability in foreign currency exchange
rates primarily through the use of natural hedges, as both liabilities and
assets are denominated in the local currency. However, different durations in
our funding obligations and assets may expose us to the risk of foreign exchange
rate fluctuations. We have not entered into any derivative instrument
transactions to manage this risk. Based on our overall foreign currency rate
exposure at March 31, 1999, we do not believe that a hypothetical 10% change in
foreign currency rates would materially adversely affect our financial position.
YEAR 2000 READINESS
Many currently installed computer systems and software products
electronically store dates using only the last two digits of the calendar year.
As a result, these systems may not be able to distinguish whether "00" means
1900 or 2000, which may cause system failures or erroneous results. This problem
is generally referred to as the "year 2000 issue."
State of readiness. We have completed our assessment of the potential
overall impact of the impending century change on our business. Based on our
current assessment, we believe current and prior versions of our software
products are year 2000 compliant. By year 2000 compliant, we mean that the use
or occurrence of dates on or after January 1, 2000 will not materially affect
the performance of our software products or the ability of our products to
correctly create, store, process and output data involving dates, provided that
all other products, such as hardware and software used with our products, are
also year 2000 compliant. However, our products are generally integrated into,
and process data extracted from, other enterprise systems involving
sophisticated hardware and complex software products 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 even if our products are otherwise
year 2000 compliant.
Utilizing a combination of an external consulting firm and our information
systems department personnel, we have completed an assessment of our internal
management information systems and other computer systems' readiness for year
2000 issues. As part of this effort, we have communicated with the external
vendors that supply us with our software and information systems and with our
significant suppliers to determine their products' and organization's year 2000
compliance. We received a written response from a small percentage of the
external vendors and significant suppliers that were contacted indicating that
their systems are year 2000 compliant. Those who have not responded have
statements on their web sites indicating that their systems are year 2000
compliant.
The results of these readiness assessment initiatives indicate that, with
the exception of our accounting system and software on a few of the computers
used by our sales representatives to demonstrate our products, virtually all of
our internal information technology systems and other internal operating systems
are currently year 2000 compliant. For those non-compliant internal information
systems, we are in the process of obtaining the necessary compliance upgrades.
We plan to implement the necessary upgrades to these systems by September 30,
1999.
Costs. To date, costs directly associated with our year 2000 compliance
efforts have not been material, amounting to less than $20,000. These costs
consist of fees paid to an external consulting firm assisting us with our year
2000 readiness assessment initiatives as well as costs incurred for consultants
to assist in our remediation efforts. In addition, we have incurred expenses in
amounts that are not material associated with our salaried employees who have
devoted some of their time to our year 2000 assessment and remediation efforts.
We do not expect the total cost of year 2000 problems to be material to our
business. However, during
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the months prior to the century change, we will continue to evaluate new
versions of our software products, new software and information systems provided
to us by third parties and any new infrastructure systems that we acquire, to
determine whether they are year 2000 compliant. Despite our current assessment,
we 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 seriously harm our business. We currently have no
contingency plans in place to address the risks associated with unremediated
year 2000 problems but we are currently developing these plans and expect to
have them in place in the third quarter of 1999.
Risks. We are not currently aware of any year 2000 compliance problems
relating to our products that would seriously harm our business. We may discover
year 2000 compliance problems in our products that will require substantial
revision and could subject us to liability claims. 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. In addition, technology developed by others and
incorporated in our products could have year 2000 problems. 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 even if our
products are otherwise year 2000 compliant. Our failure to fix or replace our
internally developed proprietary software or third-party software, hardware or
services on a timely basis could result in lost revenue, increased operating
costs, the loss of customers and other business interruptions, any of which
could seriously harm our business. Moreover, our failure to adequately address
year 2000 compliance issues in our internally developed proprietary software
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend. In
particular, if we fail to complete in a timely manner the compliance upgrades to
our accounting systems and certain of the computers used to demonstrate our
products, our operations would be disrupted as a result of a lack of
availability of our accounting systems and an inability of certain of our sales
representatives to engage in demonstration of our products.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be year 2000 compliant. The failure of these entities to be year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our customers, decrease the use of
the Internet or prevent users from accessing websites.
Although we have not been a party to any litigation or arbitration
proceeding involving our products related to year 2000 compliance issues, we may
in the future be required to defend our products or services in these
proceedings, or to negotiate resolutions of claims based on year 2000 issues.
Defending and resolving year 2000-related disputes, regardless of the merits of
these disputes, and any liability we have for year 2000-related damages,
including consequential damages, could be expensive and could seriously harm our
business.
We may experience reduced sales of products as customers and potential
customers put a priority on correcting year 2000 problems and therefore defer
purchases of our products. Accordingly, demand for our products may be
particularly volatile and unpredictable for the remainder of 1999 and early
2000. To the extent year 2000 issues cause a significant delay in, or
cancellation of, decisions to purchase our products or services, our business
would be seriously harmed.
Contingency plan. As discussed above, we are engaged in an ongoing year
2000 assessment and have not yet implemented any contingency plans. However, we
are currently developing these plans and expect to have them in place in the
third quarter of 1999. The
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results of our year 2000 simulation testing and the responses received from
third-party vendors and service providers are being taken into account in
determining the nature and extent of any contingency plans we adopt.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires
companies to capitalize certain qualifying computer software costs which are
incurred during the application development stage and amortize them over the
software's estimated useful life. Broadbase was required to adopt SOP 98-1
effective January 1, 1999. The adoption of SOP 98-1 did not have a material
impact on Broadbase's consolidated financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 was effective beginning on January 1, 1999
and requires that start-up costs capitalized prior to January 1, 1999, be
written off, and any future start-up costs be expensed as incurred. The adoption
of SOP 98-5 did not have a material impact on Broadbase's consolidated financial
position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Broadbase will be required to
adopt FAS 133 for its year ending December 31, 2001. However, because Broadbase
does not utilize derivative financial instruments, it does not believe the
impact of FAS 133 will be material to its consolidated financial position or
results of operations.
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<PAGE> 34
BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in such
forward-looking statements.
Broadbase develops and markets software that integrates and analyzes
customer information from Internet and traditional business channels, enabling
businesses to improve their customer acquisition, retention and profitability.
Broadbase EPM integrates and analyzes information from numerous points of
customer interaction, or touch points, to provide a comprehensive understanding
of the customer lifecycle from initial identification through acquisition and
retention. Our products then allow businesses to translate this analysis into
specific actions such as targeting profitable customers, personalizing customer
interactions and identifying opportunities to sell complementary or higher-end
products and services. By integrating, analyzing and acting on valuable customer
information, our products enable businesses to build long-lasting and profitable
customer relationships.
Broadbase EPM consists of a suite of applications that are built on
EPM/Foundation, our software platform that provides comprehensive analytic
capabilities. Broadbase EPM integrates information that has traditionally been
isolated in separate systems designed to support specific types of customer
interactions, such as customer service and Internet-based sales. It provides
decision-makers in sales, marketing, customer service and e-commerce business
functions with a more comprehensive view of the customer. Each application
provides these decision-makers with analysis of customer information that is
specifically designed for their particular business function. Our solutions can
generally be deployed in less than 30 days, allowing our customers to quickly
capture revenue opportunities and achieve rapid return on investment. To date,
over 80 customers have licensed our products from us and our distributors and
OEMs, including both traditional "bricks and mortar" companies such as Boeing,
Hewlett-Packard and United Airlines and Internet-only companies such as InsWeb
and Mercata.
INDUSTRY BACKGROUND
The recent emergence and acceptance of the Internet as a medium for
commerce is fundamentally changing the way companies communicate, obtain
information, purchase goods and transact business with their customers. The
Internet offers a number of compelling benefits that are causing increasing
numbers of companies to transact business online, including opportunities to
increase revenue, reduce operating costs and improve customer retention. As a
result, the Internet has become an important new channel for both traditional
"bricks and mortar" and Internet-only businesses to interact with and market and
sell to customers. Both types of companies are adapting many of their business
activities for the Internet, defining a new category of enterprise called the
e-business. Forrester Research estimates that the number of U.S. companies with
5,000 or more employees using the Internet as a channel for e-commerce will
increase from 20% in 1998 to 92% in 2002. Across companies of all sizes,
Forrester Research estimates that online business-to-business and
business-to-consumer transactions will grow from $127 billion in 1999 to over
$1.4 trillion in 2003.
This rise of the Internet as a primary business channel has created a
highly competitive environment with low barriers to entry for new competitors
and insignificant switching costs for customers. Because customers have a
growing number of easily accessible choices both on and off the Internet,
e-businesses face a constant battle for customer loyalty. For example,
travelers, once limited to traditional travel agents, can now also choose among
numerous online providers at the click of a mouse. In this rapid paced Internet
environment, existing enterprise applications that automate processes and reduce
costs are no longer sufficient to build long lasting and profitable customer
relationships. In order to create these relationships, e-businesses must
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target, convert and retain customers by differentiating their products and
services to meet each customer's individual requirements.
PROLIFERATION OF CUSTOMER TOUCH POINTS
As a result of this competitive environment, enterprises need to develop
customer-focused business models founded on a comprehensive understanding of
individual customer relationships. Traditionally, businesses have managed these
relationships by functional departments, such as marketing, sales and customer
support, and customer information has been isolated within these departments. In
contrast, e-businesses must integrate customer information across functional
departments to maximize the value of the entire customer lifecycle, from initial
identification through acquisition and retention. E-businesses need to analyze
and act on customer information gathered from all sources, including direct
sales organizations, storefronts, catalogs and websites. By using real time and
historic customer intelligence to personalize business relationships, successful
e-businesses can maximize loyalty and profitability throughout the customer
lifecycle.
With the emergence of the Internet as a primary business channel, the
number of points of customer interaction, or touch points, has increased
dramatically. Internet sales systems, online customer service solutions, website
logs and e-mail management systems have multiplied the massive amounts of
customer interaction data already generated by conventional front office systems
such as sales force automation systems, telesales and customer support call
centers, marketing automation systems, and customer and field service
applications. In addition, traditional back office systems such as billing,
manufacturing and human resource systems, capture large volumes of important
customer and operational data. This increase in data sources makes the challenge
of integrating and analyzing the information generated throughout the customer
lifecycle more difficult. The sheer volume and variety of customer data creates
a competitive opportunity for businesses that can effectively integrate, analyze
and act on this information.
NEED FOR COMPREHENSIVE E-BUSINESS ANALYTIC SOLUTIONS
Traditionally, businesses tried to analyze this valuable data by piecing
together generic technologies -- point tools -- that address narrow and discrete
analytical needs. These point tools include data extraction tools to access
data, online analytical processing tools to analyze and model data, data mining
technologies to identify patterns in data, and report generators to present the
information. Piecing together these point tools to create a patchwork system
typically requires significant custom programming and takes a long time to
complete. In addition, these patchwork systems are very difficult and costly to
maintain. Because patchwork systems are inflexible and costly to maintain, they
are poorly suited to the rapidly changing business and technology requirements
of e-businesses.
Moreover, patchwork systems and point tools cannot provide e-businesses
with a comprehensive understanding of the entire customer lifecycle. Instead,
they generally offer limited analysis based on a single element of a customer's
interaction with a business, focusing on a single channel, customer touch point
or period of time. For example, today's website monitoring tools completely
ignore historical customer activity across other channels, such as call centers
or traditional storefronts. As a result, these tools would not indicate that a
customer used the Internet to gather information about a product, purchased the
product at a physical store and later contacted customer support.
Finally, patchwork systems and point tools do not enable e-businesses to
act quickly on data generated by customer interactions. These tools were not
designed for specific functions such as e-commerce or customer service, or their
unique underlying business processes. Because the data and reports generated by
point tools cannot be quickly translated into
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concrete actions, they cannot unleash one of the most powerful potentials of
e-business -- the ability to personalize customer interactions and differentiate
product offerings in real time.
Both multi-channel "bricks and mortar" and Internet-only businesses require
solutions that integrate, analyze and act on information from all customer touch
points. These analytic solutions must create a comprehensive view of the
customer lifecycle by integrating information from e-commerce and Internet-based
systems, front office systems, back office applications and external information
sources. They also must provide business users in different functional areas
with packaged applications that analyze this information using industry
benchmarks, business logic and guided decision-making capabilities. Finally,
e-businesses require solutions that enable them to move quickly from analysis to
action, enhancing customer relationships both online and offline.
OUR SOLUTION
Our Broadbase EPM -- E-Business Performance Management -- solution consists
of two components: the EPM/Foundation software platform and the Broadbase EPM
suite of analytic applications. EPM/Foundation is a robust and extensible
software platform that integrates and analyzes customer interactions and
operational data from multiple sources. Our Broadbase EPM applications provide
decision-makers within various business functions with analysis of this
information to improve customer targeting, acquisition, conversion and
retention. Broadbase EPM applications are designed for the specific and changing
analytic needs of decision makers in e-commerce, online publishing and
advertising, marketing, sales and customer service functions. Our solutions are
designed to enable businesses to target customer segments, personalize marketing
promotions and campaigns, differentiate product and service offerings and
leverage operational resources, resulting in more loyal and profitable
customers.
We believe our solutions represent an innovative and comprehensive approach
to analyzing and optimizing e-business customer interactions by providing the
following benefits:
UNDERSTAND THE ENTIRE CUSTOMER LIFECYCLE
Our Broadbase EPM solution integrates information from multiple channels
and customer touch points to provide a comprehensive view of the entire customer
lifecycle, from initial identification through acquisition and retention.
EPM/Foundation transforms, cleanses, loads and integrates large volumes of
customer and operational data, such as previous purchases, responses to
promotions and service requests. The Broadbase EPM applications then use this
integrated information to deliver function-specific analysis.
IMPROVE CUSTOMER ACQUISITION, CONVERSION AND RETENTION RATES
E-businesses that deploy our solutions use analysis of the entire customer
lifecycle to target, personalize and differentiate all aspects of online and
offline customer interactions -- moving beyond the simple automation of customer
transactions. For instance, businesses use our solutions to increase customer
acquisition by targeting higher value customers, to improve conversion rates by
personalizing web content and advertising, and to enhance customer retention by
streamlining customer service bottlenecks. In doing so, our solutions enable
e-businesses to use both the Internet and traditional business channels to build
profitable, long-lasting customer relationships.
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IDENTIFY AND TARGET MOST PROFITABLE CUSTOMERS
Our Broadbase EPM solution enables e-businesses to identify their most
profitable customers and to tailor promotions and marketing campaigns, sales
efforts, product offerings and customer service based on individual buying
habits and demographics. In doing so, it allows companies to maintain and
enhance the value of their most profitable customers as well as to increase the
profitability of other customer segments.
RESPOND RAPIDLY TO OPPORTUNITIES AND RISKS
Our Broadbase EPM solution allows business decision makers to respond
rapidly and effectively to new opportunities and risks by providing timely
information, measuring results against industry targets and suggesting actions.
These capabilities help close the loop between a customer interaction and the
business response --that is, they help the business react to information
generated from previous customer interactions. Examples of these capabilities
include utilizing prior customer behavior to personalize web content or
identifying opportunities to sell complementary products, or "cross-sell," and
to sell higher-end products, or "up-sell." In addition, our solutions
incorporate business logic to monitor performance, identify exceptions and alert
users to key events such as ineffective promotions or service backlogs.
ACHIEVE FAST RETURN ON INVESTMENT THROUGH RAPID IMPLEMENTATION
Because our Broadbase EPM solution can generally be deployed in less than
30 days, businesses can rapidly begin to realize the increased revenue resulting
from personalized customer interactions, without suffering the delays associated
with the creation of in-house patchwork systems and consulting services-based
approaches. In addition, our packaged adapters for integration with Internet and
enterprise systems, and our pre-built applications, support rapid implementation
with a lower investment than applications developed in-house.
REDUCE TOTAL COST OF OWNERSHIP
Our Broadbase EPM solution requires fewer resources than the development
and implementation of alternatives such as in-house patchwork systems and
consulting services-based approaches. In addition, our applications are
specifically designed to be easily used by business decision makers, minimizing
training and support costs. Finally, because we offer an open platform,
businesses can easily adapt and extend our open modular solutions to meet their
changing business and technical requirements with minimal additional investment.
CASE STUDIES
The following case studies illustrate the use of our Broadbase EPM solution
by an Internet-only company as well as a traditional "bricks and mortar"
business.
MERCATA
Mercata is a web-based retailer that offers an online group buying system
through which groups of buyers can exercise volume purchasing power and drive
prices lower. As its e-commerce activity increases, Mercata must analyze and
optimize content, promotions and specific group purchases, as well as improve
customer targeting.
Mercata has licensed our Broadbase EPM solution to analyze the traffic and
buying habits of its users by integrating our product with BroadVision, which is
Mercata's e-commerce system. By analyzing their users' habits, Mercata can
discover trends and patterns, such as how often
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consumers make offers and how much they raise their offers. In addition,
Broadbase EPM will analyze the optimal product mix, price and length of each
group purchase. Mercata can then use this information to customize and
personalize its content to attract new users and retain current ones. In
addition, our Broadbase EPM solution will enable Mercata to understand and
determine the growing purchasing leverage of Mercata's e-consumer community.
Mercata also plans to use our Broadbase EPM solution to integrate and analyze
data from Mercata's customer service call center, its enterprise resource
planning system and its e-mail management system.
PLYMOUTH ROCK
The Plymouth Rock Company is a property, casualty and auto insurance
company headquartered in New England. Since the state of Massachusetts sets
automobile insurance rates and prohibits insurers from denying coverage to any
driver, Plymouth faces the challenge of providing coverage to high risk drivers
while minimizing costs and claims.
Plymouth selected Broadbase EPM to help it reduce insurance claim expenses.
By generating an enterprise-wide, customer-focused view of Plymouth's lines of
business, and by analyzing data about customers' insurance claims, Plymouth can
target low risk customers. In addition, Plymouth is incorporating sales to low
risk customers as a compensation criterion for its agents, and will automate
this process by integrating Broadbase EPM and its payroll applications.
Broadbase EPM is currently used by more than 100 employees at Plymouth and over
150 of its external insurance agents.
OUR STRATEGY
Our objective is to be the leading provider of customer-focused e-business
solutions. To achieve this objective, we have adopted the following strategies:
EXTEND PRODUCT LEADERSHIP IN THE E-BUSINESS ANALYTIC SOLUTIONS MARKET
Our underlying product architecture enables us to develop new products and
enhancements rapidly. We will continue to invest significantly in research and
development to maintain and extend our product and technology leadership. We
utilize a customer-driven development cycle, focused on identifying current and
future e-business requirements, through frequent customer meetings and customer
programs. We have strategic relationships with application, technology and
system integration companies, and we work closely with these companies to
identify other opportunities to extend our product leadership.
TARGET MULTI-CHANNEL COMPANIES AND INTERNET-ONLY BUSINESSES
We believe that both traditional multi-channel companies and emerging,
Internet-only businesses need our integrated e-business solutions. We also
believe that both categories of businesses will continue to invest heavily in
e-business solutions, such as those offered by Broadbase, in order to
differentiate their product and service offerings, leverage the Internet as a
primary business channel and develop lasting relationships with their customers.
Accordingly, we will continue to target both multi-channel companies and
Internet-only businesses.
LEVERAGE STRATEGIC RELATIONSHIPS
We believe that strategic relationships with a strong network of companies
will broaden our product adoption, increase our market presence and enhance our
ability to deliver complete solutions to our customers. Our strategic
relationships with these companies provide value to both parties. For example,
our strategic relationships with application vendors enhance the value
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of their products by allowing their customers to access, analyze and act upon
the data within these products. We plan to continue to invest in jointly
integrating, marketing and selling our solutions and services with these
companies. We plan to form new relationships with additional e-commerce software
vendors whose customers require e-business analysis. We also intend to continue
to build relationships with major systems integrators and consulting service
providers.
EXPAND PROFESSIONAL SERVICES CAPABILITIES
We believe that our professional services group is important to ensure our
customers' success and to drive increased sales. Our professional services group
assists businesses in developing innovative ways to implement our solution,
leading to increased adoption of our products. We plan to continue to expand our
professional services group.
EXTEND OUR GLOBAL PRESENCE
We believe that there will continue to be significant international
opportunities for our solutions. We currently have offices in Germany, Japan,
the Netherlands and the United Kingdom, and distributors in Japan. We plan to
continue to invest in our sales infrastructure in order to support a growing
global sales force in both the United States and in international markets,
particularly Asia-Pacific and Europe.
BROADBASE PRODUCTS AND SERVICES
OVERVIEW OF BROADBASE EPM
Broadbase EPM is a suite of e-business software solutions designed to
provide business decision-makers in sales, marketing, customer service and
e-commerce with analysis of customer information that is specifically designed
for their business function. This suite is built on EPM/Foundation, our software
platform that provides comprehensive analytic capabilities. We introduced
EPM/Foundation in the fourth quarter of 1997, and began offering our analytic
applications designed for specific business functions in the third quarter of
1998. In May 1999, we expanded our suite by introducing new applications
designed for e-business, as well as new versions of our existing applications.
Our Broadbase EPM applications may be licensed individually or in any
combination. A license for any one or more of our Broadbase EPM applications
also includes a license for EPM/Foundation and adapters to interface with the
customers' existing data sources. While we have derived most of our license
revenue from our EPM/Foundation product to date, we anticipate that an
increasing portion of our license revenue will be derived from our Broadbase EPM
applications.
Each Broadbase EPM application incorporates its own data model and business
logic. The data models organize the relevant data through EPM/Foundation into
consistent formats that can support dynamic and interactive analysis. The
business logic used in each application then analyzes this data using the rules
that typically govern the decision making process within each specific business
function. It can identify risks and opportunities and suggest actions for
specific processes. For example, our E-Personalize application organizes
profiles of website visitors, analyzes the content of the web site, links
information about visitors and content and suggests types of content or products
that should be presented to the customer. Organizations can customize the data
models and business logic to support their specific and changing needs.
EPM/Foundation is the software platform upon which each of our applications
is built. It enables the applications to extract data from multiple sources,
transform this data into a consistent format and store this data in widely used
databases such as Microsoft SQL Server and Oracle. This data can include both
real time and historic data from Internet-based systems, such as websites,
e-mail and online service, front-office applications such as sales, marketing
and customer support
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systems, back-office applications such as finance, manufacturing and human
resources and sources of demographic data. EPM/Foundation's analytic engine
provides the capabilities that allow the Broadbase EPM applications to perform
complex function-specific analysis.
Broadbase EPM incorporates browser-based interface that enables business
users to take advantage of all of its capabilities with minimal training. This
intuitive interface guides business users through the analysis process, while
providing sophisticated users with more extensive functionality.
The following graphic illustrates the architecture of Broadbase EPM:
GRAPHICS
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BROADBASE EPM APPLICATIONS
Each Broadbase EPM application is designed specifically for critical
business functions. The Broadbase EPM applications are:
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BROADBASE EPM
APPLICATION DESCRIPTION
<S> <C> <C>
-------------------------------------------------------------------------------------------------
Customer Service - Analyzes service costs and case queues
- Measures workforce readiness and service level management
- Prioritizes support cases and optimizes resource
allocation
-------------------------------
Sales - Measures profitability and bookings, billings and backlog
- Analyzes sales leads, pipeline, forecasting accuracy and
competitive wins/losses
- Evaluates sales representative and channel productivity
-------------------------------
E-Marketing - Recommends cross-selling and up-selling opportunities
- Analyzes return on investment of campaigns and promotions
- Profiles customers and generates lists for campaign
management
-------------------------------
E-Commerce - Analyzes customer purchasing behavior and online shopping
processes, channel profitability and order fulfillment
- Analyzes the performance of website content and identifies
impact of content changes
- Measures commerce website statistics and online user
activity
-------------------------------
E-Personalize - Analyzes business rules for personalization of web
content, product and service offerings
- Features personalization engine that creates content
personalization rules based on usage patterns, user
interests and demographics (not included in current
version; anticipated in next release)
- Also provides closed-loop input of rules into e-commerce
systems, such as BroadVision (not included in current
version; anticipated in next release)
-------------------------------
E-Procurement - Analyzes buying behavior throughout the company to help it
(anticipated to be released negotiate better volume discounts
in the fourth quarter of - Quantifies external interactions with existing suppliers
1999). including price/performance scoring
- Analyses supplier performance benchmarking across the
marketplace
-------------------------------
</TABLE>
38
<PAGE> 42
Our Customer Service, Sales and E-Marketing applications were first
released in July 1998, and the most recent versions of each were released in May
1999. Our E-Commerce and our E-Personalize applications were first released in
May 1999. We anticipate releasing our E-Procurement application and a new
version of our E-Personalize application in the fourth quarter of 1999. Actual
features and release dates for new applications and versions could differ
materially from those projected as a result of a variety of factors, some or all
of which may be beyond our control. See "Risk Factors -- We may be unable to
attract new customers if we do not develop new products and enhancements."
EPM/FOUNDATION
Broadbase EPM applications are built on EPM/Foundation, a comprehensive
software platform that provides analytic capabilities. EPM/Foundation has the
following features:
Adapters for internal and external enterprise systems. EPM/Foundation
features adaptable and robust data extraction, transformation and loading
capabilities that extract and transform data from key data sources and load that
data into Broadbase EPM. The extraction, transformation and loading layer
includes adapters for integration with key enterprise systems and sources. Using
adapters, EPM/Foundation integrates with:
- e-commerce systems such as those offered by Allaire, BroadVision,
InterWorld, Kana, Microsoft, Open Market and Vignette;
- customer interaction systems such as those offered by Aurum, Baan,
Clarify, ONYX, Oracle, Pivotal, Rubric, Saratoga Systems, Scopus, Siebel
and Vantive;
- enterprise resource planning applications that manage and integrate data
from business operations, such as those offered by Baan, JD Edwards,
Oracle, PeopleSoft and SAP;
- custom, legacy and homegrown applications and systems;
- demographic and other data from external providers such as Acxiom and Dun
& Bradstreet; and
- leading data warehouses, or enterprise-wide systems that store, retrieve
and manage data such as those offered by IBM, Informix/Red Brick, NCR,
Oracle and Sybase.
The extraction, transformation and loading layer also provides businesses with
the flexibility to integrate other data sources and systems as their
requirements change.
Open, scalable architecture. EPM/Foundation runs on leading databases, such
as Microsoft SQL Server and Oracle. EPM/Foundation is composed of industry
standard SQL and Java components and utilizes the Microsoft Data Warehouse
Framework, including SQL Server's OLAP Services and the Microsoft Metadata
Repository. Our applications operate on Windows NT and access data stored on
both Windows NT and UNIX platforms.
Application server and analytic engine. EPM/Foundation features a powerful
analytic engine, with capabilities including hybrid online analytical
processing, data mining, statistical analysis and ad hoc analysis. In addition,
EPM/Foundation contains an extendable library of reusable application
components, such as profitability calculations, that facilitate the management
and customization of analytical applications.
Information delivery. EPM/Foundation supports a completely Internet-based,
publish-and-subscribe information delivery model with security features for
individuals or groups of users. In addition, alerts and triggers can be set to
automatically deliver information only when and where needed.
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<PAGE> 43
Integrated graphical application management. EPM/Foundation features an
integrated graphical management environment for complete system administration
and management of both EPM/Foundation and the Broadbase EPM applications.
SERVICE OFFERINGS
Our professional services group helps businesses define, design and
implement e-business analysis solutions. Our customers benefit from the
accumulated expertise of our professional services group including its
experience in developing, deploying and implementing analytic applications,
enterprise applications and data warehouses. In addition, our professional
services group has built expertise in key functional areas including e-commerce,
customer relationship management and direct marketing. Moreover, our
professional services group has specific expertise in the systems with which our
solution is integrated and assists in the development of our adapters. We
generally charge for our services on a time and materials basis and provide them
worldwide through offices in the United States, Europe and Japan. Our
professional services include:
- project planning and management;
- system implementation;
- software integration;
- user training; and
- ongoing customer support.
In a typical application license transaction, our professional services
group connects our products to the customer's systems and data sources. The
actual connection process can often be completed in approximately two to four
weeks.
The goals of our professional services group are to rapidly deliver
solution value and meet the specific business needs of our customers. We will
continue to work closely with our network of systems integration partners and
expand our training capabilities both in the United States and internationally.
We believe that our professional services group can assist businesses in
developing innovative ways to implement our solutions, leading to increased
product adoption.
CUSTOMERS
To date, over 80 customers have licensed our products from us and our
distributors and resellers, including both traditional "bricks and mortar"
companies and Internet-only companies.
40
<PAGE> 44
As of July 31, 1999, we had license agreements with the following customers for
our products:
<TABLE>
<S> <C> <C>
FINANCIAL SERVICES MANUFACTURING ENERGY INDUSTRIES
Automatic Data Processing Baxter IV Systems Boston Edison
BankBoston Bell & Howell Chevron
CommerzBank Boeing Commercial Airplanes Idaho Power
Fidelity Investments Group Los Alamos National Labs
Plymouth Rock Assurance Canon Computer New Century Energy
PMA Group Eastman Kodak Omaha Public Power
Putnam Investments Honda
Oakley OTHER
INTERNET AND Rockwell Automation DSC Logistics
COMMUNICATION SERVICES Harvard Pilgrim Health Care
InsWeb TECHNOLOGY PreVision Marketing
Mercata Computer Hardware Shikishima Baking Company
NECX Direct Maintenance Co. Tokai
NTT DG Systems United Airlines
Pointcast Hewlett Packard
WebTV/Microsoft Inprise
Kana Communications
RETAIL Thomson Technology
Catalog Marketing Services Vantive
Ginza Cozy Corner
Golden Books
The Sharper Image
Travers Tool
United Natural Foods
</TABLE>
Hewlett-Packard represented 10.1% of our net revenue in 1998 and 6.6% in
the first six months of 1999.
In addition, our products have also been licensed to original equipment
manufacturers which have included them as part of their product offerings to
their customers.
STRATEGIC RELATIONSHIPS
We establish strategic relationships to assist in the marketing, selling
and implementation of our solutions, as well as to increase the interoperability
of our solutions with our partners' complementary products. We have five types
of strategic relationships:
SYSTEM INTEGRATORS AND CONSULTING FIRMS
To ensure the successful implementation of our solutions, we have
established relationships with a number of leading system integrators and
consulting firms. These firms implement our products, provide related business
consulting, and often assist us in our sales process. In the United States, we
have relationships with Andersen Consulting, Cambridge Technology Partners,
Condor/DST, Ernst & Young, Renaissance Worldwide, Technology Solutions Company
and US Web/CKS. In addition, we have relationships with Internet-focused
professional services firms and regional system integrators.
E-COMMERCE AND INTERNET SOFTWARE VENDORS
To enhance our software, and to identify potential customers, we have
formed relationships with leading vendors of e-commerce and Internet solutions,
such as BroadVision and Kana. We jointly integrate, market and sell our
complementary solutions with BroadVision. We have also
41
<PAGE> 45
been featured at BroadVision's user group meetings, internal sales meetings and
on their website. We are engaged in joint marketing and integration of our
solutions with Kana's e-mail management solution.
FRONT AND BACK OFFICE SOFTWARE VENDORS
To enable our solutions to integrate data from as many customer touch
points as possible, and to target the installed customer base of these
applications, we have formed relationships with leading enterprise applications
vendors. We currently have strategic relationships with Clarify, Genesys, ONYX,
Rubric, Saratoga Systems and Vantive. These software vendors highlight
Broadbase's applications in their sales cycle, at their user group meetings or
on their websites. For each of these vendors, Broadbase provides adapters that
enable integration between our complementary systems.
TECHNOLOGY AND PLATFORM VENDORS
To ensure that our products are based on industry standards and to take
advantage of new and emerging technologies, we have formed relationships with
key technology and platform vendors. As part of our relationship with Microsoft,
we have joined the Microsoft Data Warehouse Alliance, whose members support the
Microsoft Data Warehouse Framework. In addition, we support Windows NT, Internet
Information Server and Office 2000.
DEMOGRAPHIC DATA PROVIDERS
To provide more effective customer and marketing analysis, our solutions
allow businesses to integrate external demographic data with their customer
data. We have entered into joint marketing agreements with Acxiom and Dunn and
Bradstreet and are integrating our products with their products to enable our
customers to access and analyze the demographic data of these companies.
Our strategic relationships are generally not documented in writing, or are
governed by agreements that can be terminated by either party with little or no
notice. These agreements generally provide for the parties to cooperate to make
joint press releases, do joint marketing and where appropriate to integrate
their products or make them compatible with each other. These agreements may
also specify that payments are to be made by us to these companies for providing
us with qualifying customer leads. The generation of leads to date by these
companies has not generally satisfied the specified criteria and therefore
payments for leads have been immaterial in amount.
SALES AND MARKETING
We sell our software through both our direct sales force and indirect sales
channels. As of June 30, 1999, our sales group consisted of 40 employees, in ten
locations -- six offices in the United States and four offices internationally,
which are located in Germany, Japan, the Netherlands and the United Kingdom. Our
direct sales force consists of sales representatives as well as sales personnel
who provide pre-sales technical support and other support personnel. We plan to
expand our direct sales force significantly. Our corporate sales organization is
responsible for collecting inbound leads, performing initial qualification and
introducing each prospective customer to a direct sales representative. We sell
to companies at the departmental level, targeting directors and executives in
e-commerce, sales, marketing, customer service and information technology.
42
<PAGE> 46
Our indirect sales channel includes companies such as Baan, Datamedica and
Indus, which sell our products as part of an integrated solution with their own
offerings. Indus selected EPM/Foundation as the platform on which to build its
Indus Knowledge Warehouse solution, which it licenses to its customers in the
utility and energy industries. Indus represented 18.4% of our revenue in 1998
and 11.0% of our revenue in the first six months of 1999. Baan selected
EPM/Foundation as the platform on which to build its Enterprise Decision Manager
decision support suite. We also have distributors in Japan, which include Beacon
Information Technology, Compaq Computer K.K., Oki Electric Industry, Sharp
System Products and Teijin Systems Technology.
Our distribution relationships are generally governed by agreements that
can be terminated by either party with little or no prior notice. These
agreements generally grant nonexclusive licenses to distribute our products, are
not subject to minimum purchase requirements and provide for certain discounts
on the purchase prices of our products. We entered into our distribution
agreement with Indus, which contains similar provisions, on June 2, 1998. This
agreement is effective until June 30, 2001 and will automatically renew for
additional one year terms unless it is terminated earlier by either party with
30 days written notice prior to the date of the automatic renewal.
We focus our marketing efforts on sales lead generation, sales support,
creating market awareness of our solutions and establishing strategic
relationships. Our marketing activities include direct mail and e-mail
campaigns, press relations and industry analyst briefings, speaking engagements,
attendance at partners' user group meetings and industry trade shows, and
participation in sales and marketing programs of companies with whom we have
strategic relationships.
INTERNATIONAL OPERATIONS
International sales represented approximately 5.1% of our total net revenue
for 1998 and 23.6% of our total net revenue in the first six months of 1999, all
of which consisted of sales of EPM/Foundation to customers in Japan and Germany.
We currently conduct our international sales primarily through direct sales
offices in Germany, the Netherlands and the United Kingdom, and through
distributors in Japan. We believe that there will continue to be significant
international opportunities for our integrated e-business solutions. As a
result, we intend to expand our international operations and to continue to
invest in our sales infrastructure in order to support a growing global sales
force in international markets, particularly Asia-Pacific and Europe.
The expansion of our existing international operations and entry into
additional international markets will require significant management attention
and financial resources. In particular, we must develop local versions of our
products for foreign markets and must recruit and train an international staff.
Currently, we have only limited experience in localizing our products and in
marketing, selling and supporting our products and services overseas.
RESEARCH AND DEVELOPMENT
Our research and development organization is comprised of separate groups
responsible for core product development, application development and product
strategy and management. The core product development group is responsible for
ongoing development of EPM/Foundation. Our application development group is
responsible for developing new Broadbase EPM applications and enhancing existing
applications. Our product strategy and management group is responsible for
prioritizing customer requirements and defining the resources and timelines
necessary to deliver products. Our current research and development efforts are
focused on the
43
<PAGE> 47
development of additional applications and other enhancements that extend the
e-business functionality of our solutions.
Our research and development expenditures were $928,000 in the period from
November 28, 1995 (inception) to December 31, 1996, $2.0 million in 1997, $3.7
million in 1998 and $2.8 million in the six months ended June 30, 1999. We
expect that we will continue to commit significant resources to research and
development in the future. The market for our products and services is
characterized by rapid technological change, frequent new product introductions
and enhancements, evolving industry standards, and rapidly changing customer
requirements. Our future success will depend in part on our ability to
anticipate changes, enhance our current products, develop and introduce new
products that keep pace with technological advancements and address the
increasingly sophisticated needs of our customers. See "Risk Factors -- We may
be unable to attract new customers if we do not develop new products and
enhancements."
COMPETITION
Our competitors vary in company size, and in the scope and breadth of their
products and services. We have three primary sources of competition:
- providers of consulting services-based analysis solutions, such as
E.piphany;
- vendors of point technologies that provide website analysis such as
Accrue, Andromedia and Net Perceptions; and
- in-house development efforts by potential customers using traditional and
generic decision support tools.
In addition, we face potential competition from vendors of other enterprise
applications as they expand the functionality of their product offerings. These
vendors may include Oracle, SAP, Siebel, other vendors of software designed for
decision support or management of customer relationships or of organizations'
operational information. They also may include vendors of database applications.
Principal competitive factors include:
- quality, breadth and depth of application offerings;
- product robustness and extensibility;
- openness of technology architecture;
- ease of deployment and maintenance;
- quality of services and customer support; and
- price.
Although we believe that our solutions compete favorably with respect to
these factors, our market is new and rapidly evolving. We may not be able to
maintain our competitive position against current and potential competitors. See
"Risk Factors -- We face intense competition which could make it difficult to
acquire and retain customers."
We face the same sources of competition both domestically and
internationally. However, it faces additional challenges in selling its products
and services internationally. See "-- International Operations."
44
<PAGE> 48
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology. We rely on a combination
of trademark, trade secret and copyright law and contractual restrictions to
protect the proprietary aspects of our technology. We have no patents or pending
patent applications. We seek to protect our source code for our software,
documentation and other written materials under trade secret and copyright laws.
We license our software under signed license agreements, which impose
restrictions on the licensee's ability to utilize the software. Finally, we seek
to avoid disclosure of our intellectual property by requiring employees and
consultants with access to our proprietary information to execute
confidentiality agreements with us and by restricting access to our source code.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we
regard as proprietary. Our success and ability to compete are also dependent on
our ability to operate without infringing upon the proprietary rights of others.
See "Risk Factors -- We depend on our intellectual property, and litigation
regarding our intellectual property could harm our business."
We currently rely on software that we have licensed from a number of
suppliers. These licenses may not continue to be available to us on commercially
reasonable terms or at all. If these licenses cease to be available, we believe
we could license equivalent software on commercially reasonable terms. In the
future, we expect to license other third party technologies to enhance our
products, meet evolving customer needs or adapt to changing technology
standards. Failure to license, or the loss of any license of necessary
technologies could result in delays or reductions of shipments of our products
until equivalent software is identified, licensed and integrated or developed by
us. See "Risk Factors -- Failure to license necessary third party software
incorporated in our products may cause delays or reductions in our sales."
EMPLOYEES
As of June 30, 1999, we had 105 full-time employees, including 40 in sales
and four in marketing, 33 in research and development, 14 in administrative,
nine in professional services and five in customer support. Our future success
will depend in part on our ability to attract, train, retain, integrate and
motivate highly qualified sales, technical and management personnel, for whom
competition is intense. From time to time we also employ independent contractors
to support our services, product development, sales and marketing departments.
Our employees are not represented by any collective bargaining unit, and we have
never experienced a work stoppage. We believe our relations with our employees
are good.
FACILITIES
Our principal office occupies approximately 21,000 square feet in Menlo
Park, California under a lease that expires on July 31, 2002. In addition, we
also lease sales and support offices in the United States in the metropolitan
areas of Atlanta, Chicago, Dallas, New York and Oakland, and internationally in
the metropolitan areas of Amsterdam, Frankfurt, London and Tokyo.
LEGAL PROCEEDINGS
On July 21, 1999, Timeline, Inc. filed a complaint against us in the United
States District Court for the Western District of Washington, alleging
infringement by us of U.S. Patent No. 5,802,511 held by Timeline. Timeline
alleges that we directly and indirectly infringe its patent claims by making,
using, selling and offering to sell software products, both alone and in
combination with third party software products, and further alleges that we
induce infringement
45
<PAGE> 49
of the Timeline patent claims. Timeline has requested permanent injunctions
prohibiting us from directly or indirectly infringing the Timeline patent, and
seeks damages, exemplary damages, costs and attorneys' fees. Timeline has
further disclosed to us patent claims of a pending related patent application
that Timeline expects to be issued and to be added to the present case. Based on
our investigation of this matter to date, we believe that we do not infringe any
valid claims of the Timeline patent or of the pending patent application, and
that we have other meritorious defenses to all claims made by Timeline.
Accordingly, we intend to defend this suit vigorously. Nevertheless, it is
possible that we could be found liable for infringing the Timeline patent. See
"Risk Factors -- We depend on our intellectual property, and litigation
regarding our intellectual property could harm our business."
46
<PAGE> 50
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table shows the name, age and position of each of our
executive officers and directors as of the date of this prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark Kremer.................. 43 President, Chief Executive Officer and Chairman of the
Board of Directors
Chuck Bay.................... 42 Chief Financial Officer, General Counsel, Executive Vice
President of Business Development and Corporate
Secretary
Thomas Doyle................. 49 Executive Vice President of Sales
Brian Kelly.................. 34 Executive Vice President of Applications and Engineering
Anil Gupta................... 40 Vice President of Marketing
Kevin Harvey................. 35 Director
Paul Levy.................... 43 Director
Nancy Schoendorf............. 44 Director
</TABLE>
MARK KREMER is the founder of Broadbase and has served as President, Chief
Executive Officer and Chairman of the Board of Directors of Broadbase since its
inception in November 1995. From January 1994 to November 1995, Mr. Kremer
served as a Director of Product Development for Oracle Corporation, a software
company. Mr. Kremer holds a B.S. degree in computer engineering from the
Technion Israel Institute of Technology.
CHUCK BAY joined Broadbase in January 1998 and currently serves as Chief
Financial Officer, General Counsel, Executive Vice President of Business
Development and Corporate Secretary. From July 1997 to January 1998, Mr. Bay
served as Chief Financial Officer and General Counsel for Reasoning, Inc., a
software company. From January 1995 to August 1997, Mr. Bay served as Chief
Financial Officer and General Counsel for Pure Atria Software, Inc., a software
company. From April 1994 to January 1995, Mr. Bay served as President and Chief
Financial Officer of Software Alliance Corporation, a software company. Mr. Bay
holds a B.S. degree in business administration from Illinois State University
and a J.D. degree from the University of Illinois.
THOMAS DOYLE joined Broadbase in May 1999 as Executive Vice President of
Sales. From October 1996 to April 1999, Mr. Doyle served as Senior Vice
President of Worldwide Sales at Reasoning, Inc., a software company. From May
1984 to September 1996, Mr. Doyle held numerous sales and sales management
positions at Tandem Computers, a computer manufacturer. Mr. Doyle holds a B.S.
degree in finance from the University of Missouri.
BRIAN KELLY joined Broadbase in December 1998 as Executive Vice President
of Applications and Engineering. From June 1998 to December 1998, Mr. Kelly
served as Director of Product Strategy, Analytic Applications at PeopleSoft,
Inc., a software company. From June 1996 to June 1998, Mr. Kelly served as Vice
President of Product Strategy at Intrepid Systems, Inc., a software company.
From December 1992 to June 1996, Mr. Kelly was President of Kelly Information
Systems, a software company. Mr. Kelly holds a B.S. degree in computer science
from the University of Cincinnati.
ANIL GUPTA joined Broadbase in August 1999 as Vice President of Marketing.
From January 1999 to August 1999, Mr. Gupta served as Vice President of
Marketing at Niku Corporation, a software company. From May 1995 to December
1998, Mr. Gupta held various marketing positions at Baan, a software company,
including Vice President of Marketing for the Baan
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<PAGE> 51
Supply Chain Solutions. From June 1993 to May 1995, Mr. Gupta served as Director
of Industry Marketing at Oracle, a software company. Mr. Gupta holds a B.S.
degree in Electrical Engineering from The Birla Institute of Technology and
Science in Pilani, India and an M.B.A. degree from Santa Clara University.
KEVIN HARVEY has served as a member of Broadbase's Board of Directors since
January 1996. Mr. Harvey has been a General Partner of Benchmark Capital, a
venture capital firm, since January 1995. From July 1993 to January 1995, Mr.
Harvey served as General Manager for Lotus Development Corporation, a software
company. Mr. Harvey is also a director of Silicon Gaming, Inc., an entertainment
and gaming technology company, Critical Path, Inc., an e-mail hosting services
company, and several privately held companies. Mr. Harvey holds a B.S.E.E.
degree from Rice University.
PAUL LEVY has served as a member of Broadbase's Board of Directors since
May 1999. In 1981, Mr. Levy co-founded Rational Software Corporation, a software
company, and he currently serves as its Chairman of the Board of Directors. From
1981 to April 1999, Mr. Levy served as Chairman of the Board of Directors and
Chief Executive Officer of Rational Software Corporation. Mr. Levy also serves
as a director of Genesys Telecommunications Laboratories, Inc. Mr. Levy holds a
B.S. degree from the United States Air Force Academy and an M.S. degree in
engineering from Stanford University.
NANCY SCHOENDORF has served as a member of Broadbase's Board of Directors
since February 1997. Ms. Schoendorf has been a General Partner of Mohr, Davidow
Ventures, a venture capital firm, since 1994 and a Managing Partner since 1997.
Ms. Schoendorf currently serves as a director of Actuate Software Corporation
and several privately held companies. Ms. Schoendorf holds a B.S. degree in
computer science and mathematics from Iowa State University and an M.B.A. degree
from Santa Clara University.
Our Board of Directors is currently comprised of four directors. Upon the
closing of the offering, any existing contractual rights of stockholders with
respect to Board representation will terminate and no stockholders will have any
special rights with respect to Board representation. Directors are elected by
the stockholders at each annual meeting of stockholders and serve for one year
or until their successors are duly elected and qualified. However, our
certificate of incorporation and bylaws provide, following the offering, that
our Board of Directors will be divided into three classes as nearly equal in
size as possible with staggered three-year terms. The term of office of our
Class I directors will expire at the annual meeting of stockholders to be held
in 2000; the term of office of our Class II directors will expire at the annual
meeting of stockholders to be held in 2001; and the term of office of our Class
III directors will expire at the annual meeting of stockholders to be held in
2002. At each annual meeting of stockholders, beginning with the 2000 annual
meeting, the successors to the directors whose terms will then expire will be
elected to serve from the time of their election and qualification until the
third annual meeting following their election or until their successors have
been duly elected and qualified, or until their earlier resignation or removal.
Mr. Harvey has been designated as a Class I director; Ms. Schoendorf has been
designated as a Class II director; and Mr. Kremer and Mr. Levy have been
designated as Class III directors. The classification of our Board of Directors
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, control of Broadbase.
BOARD COMMITTEES
Our Board of Directors has a compensation committee and an audit committee.
Compensation committee. The current members of our compensation committee
are Mr. Harvey and Ms. Schoendorf. The compensation committee reviews and makes
recommen-
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<PAGE> 52
dations to our Board of Directors concerning salaries and incentive compensation
for our officers and employees. The compensation committee also administers our
1996 Equity Incentive Plan and will administer our 1999 Equity Incentive Plan
and 1999 Employee Stock Purchase Plan.
Audit committee. The current members of our audit committee are Mr. Harvey
and Ms. Schoendorf. Our audit committee reviews and monitors our financial
statements and accounting practices, makes recommendations to our Board of
Directors regarding the selection of independent auditors and reviews the
results and scope of the audit and other services provided by our independent
auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee has at any time since our
formation been an officer or employee of Broadbase. No executive officer of
Broadbase currently serves, or in the past has served, as a member of the Board
of Directors or compensation committee of any entity that has one or more
executive officers serving on our Board of Directors or compensation committee.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses in
attending board and committee meetings.
Each non-employee director who is or becomes a member of our Board of
Directors on or after the date of this offering and who has not previously
received shares or options in Broadbase will be granted an option to purchase
10,000 shares of our common stock under the 1999 Equity Incentive Plan.
Immediately following each annual meeting of our stockholders, each non-employee
director will automatically be granted an additional option to purchase 10,000
shares under that plan if the director has served continuously as a member of
our Board of Directors since the date of the director's initial grant. Each
option will have an exercise price equal to the fair market value of our common
stock on the date of grant and will have a ten-year term. Each of these options
will be immediately exercisable and fully vested.
In May 1999, we granted to Paul Levy, one of our directors, an option to
purchase 96,750 shares of common stock at an exercise price of $0.73 per share.
Mr. Levy exercised this option in full in May 1999. This option vests as to
12,094 shares in November 1999 and vests as to 1/48 of the original number of
shares subject to the option each month thereafter. Broadbase has the right to
repurchase the unvested shares of this option if Mr. Levy ceases to provide
services as a director of Broadbase.
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<PAGE> 53
EXECUTIVE COMPENSATION
The following table shows all compensation awarded to, earned by or paid
for services rendered to Broadbase in all capacities during 1998 by our chief
executive officer and our other executive officers or former executive officers
who earned at least $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS
---------------------------- -------- -------- ------------
<S> <C> <C> <C>
Mark Kremer, President, Chief Executive Officer and
Chairman of the Board of Directors................. $205,000 $ 25,000(1) --
Chuck Bay, Chief Financial Officer, General Counsel,
Executive Vice President of Business Development
and Corporate Secretary............................ 143,269 40,000(1) 259,000
Bruce Armstrong, Vice President of Sales(2).......... 160,000 112,000(3) --
</TABLE>
- -------------------------
(1) Represent bonuses earned in 1998 but paid in January 1999 to Mr. Kremer and
Mr. Bay.
(2) Mr. Armstrong ceased to be an employee of Broadbase on June 30, 1999.
(3) Includes $92,000 paid to Mr. Armstrong as commissions.
Brian Kelly was hired as Executive Vice President of Applications and
Engineering in December 1998 and is compensated at an annual rate of $150,000
with bonuses of up to $30,000. Thomas Doyle was hired as Executive Vice
President of Sales in May 1999 and is compensated at an annual rate of $225,000
with a targeted commission of $100,000. Mr. Doyle's commission is dependent upon
his level of performance. If Mr. Doyle achieves 100% of the annual sales target
established by Broadbase, he would earn $100,000 in commission income. If Mr.
Doyle exceeds the sales target, he would earn more than $100,000 in commission
income. If Mr. Doyle fails to meet the sales target, his commission income would
be reduced to the percentage of $100,000 that actual sales represent of the
sales target. By way of example, if Mr. Doyle achieves 80% of the sales target,
he would earn $80,000 in commission income. Anil Gupta was hired as Vice
President of Marketing in August 1999 and is compensated at an annual rate of
$150,000 with bonuses of up to $40,000 per year.
OPTION GRANTS IN 1998
The following table shows information about each stock option grant during
1998 to the officers named in the Summary Compensation Table above.
All options included in the following table are immediately exercisable and
are incentive stock options. We have a right to repurchase the shares issued on
exercise of these options upon termination of the optionee's employment. This
right lapses over a four-year period and will lapse as to 50% of the 173,000
shares upon a change of control of Broadbase. All options were granted at an
exercise price equal to the fair market value of our common stock, as determined
by our Board of Directors on the date of grant.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED IN 1998 PER SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Chuck Bay............... 173,000 13.79% $0.25 01/21/08 $27,200 $ 68,929
86,000 6.85 0.73 12/23/08 39,482 100,055
</TABLE>
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<PAGE> 54
The 5% and 10% assumed annual rates of compounded stock price appreciation
in the table above are required by rules of the Securities and Exchange
Commission and do not represent our estimates or projections of our future stock
prices.
See "Employment Agreements" for discussion of information regarding option
grants made to Brian Kelly, Thomas Doyle and Anil Gupta in 1999.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table provides information concerning stock option exercises
by each of the executive officers named in the Summary Compensation Table above
that exercised options during the fiscal year ended December 31, 1998 and
information concerning unexercised options held by these officers at the end of
1998. We have a right to repurchase the shares issued upon exercise of these
options upon termination of the optionee's employment. Our right to repurchase
the shares lapses over a four-year period from the date of grant. In the
following table, the heading "exercisable" refers to shares that were
exercisable although our right to repurchase unvested shares had not lapsed.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Chuck Bay............... 173,000 $-- 86,000 -- -- --
Bruce Armstrong(1)...... -- -- 202,500 202,500 38,092 $35,045
</TABLE>
- ---------------
(1) We entered into a Separation Agreement, effective April 14, 1999, with our
former Vice President of Sales, Bruce Armstrong. The Separation Agreement
provides for termination of Mr. Armstrong's employment as of June 30, 1999,
payment of salary and benefits by the Company to Mr. Armstrong through June
30, 1999, the continuation of vesting of Mr. Armstrong's options through
June 30, 1999 and the repurchase of all 119,581 unvested shares held by Mr.
Armstrong as of June 30, 1999.
EMPLOYEE BENEFIT PLANS
1996 EQUITY INCENTIVE PLAN
We adopted our 1996 Equity Incentive Plan in April 1996. As of June 30,
1999, there were outstanding options to purchase a total of 2,013,249 shares of
common stock under this plan, and 572,443 shares remained available for future
grants of options under this plan. This plan will terminate immediately prior to
this offering, and no further options will be granted under this plan after this
offering. However, the termination of this plan will not affect any outstanding
options, which will remain outstanding until they are exercised or until they
terminate or expire.
1999 EQUITY INCENTIVE PLAN
We intend to adopt the 1999 Equity Incentive Plan and intend to reserve
3,500,000 shares of common stock for issuance under this plan. The number of
shares reserved for issuance under this plan will be increased to include any
shares reserved under our 1996 Equity Incentive Plan not issued or subject to
outstanding grants on the date of this prospectus and any shares issued under
our 1996 Equity Incentive Plan that are forfeited or repurchased by us at the
original purchase price or that are issuable upon exercise of options granted
under our 1996 Equity Incentive Plan that expire or become unexercisable for any
reason without having been exercised in full. Thereafter the number of shares
reserved under this plan will be increased
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<PAGE> 55
automatically on December 31, 1999 and each anniversary thereafter, by an amount
equal to 5% of the total outstanding shares as of the immediately preceding
December 31st. Our 1999 Equity Incentive Plan will become effective on the date
of this prospectus and will serve as the successor to our 1996 Equity Incentive
Plan. The following shares will be available for grant and issuance under our
1999 Equity Incentive Plan:
- shares subject to issuance upon exercise of an option granted under our
1999 Equity Incentive Plan that cease to be subject to that option for
any reason other than exercise of the option;
- shares issued pursuant to the exercise of an option granted under our
1999 Equity Incentive Plan that are subsequently forfeited or repurchased
by us at the original purchase price;
- shares subject to awards granted pursuant to restricted stock purchase
agreements under our 1999 Equity Incentive Plan that are subsequently
forfeited or repurchased by us at the original issue price; and
- shares subject to stock bonuses granted under our 1999 Equity Incentive
Plan that terminate without shares being issued.
Our 1999 Equity Incentive Plan will terminate in 2009, unless sooner
terminated in accordance with the terms of the plan.
Our 1999 Equity Incentive Plan authorizes the award of options, restricted
stock awards and stock bonuses. Our non-employee directors are entitled to
receive automatic annual grants of fully vested options to purchase 10,000
shares of our common stock, as described under "Management -- Director
Compensation." Additionally, our non-employee directors are eligible to receive
discretionary awards under our 1999 Equity Incentive Plan. Our 1999 Equity
Incentive Plan is administered by the compensation committee of our Board of
Directors, which currently consists of Mr. Harvey and Ms. Schoendorf, both of
whom are "non-employee directors" under applicable federal securities laws and
"outside directors" as defined under applicable federal tax laws. The committee
has the authority to construe and interpret this plan and any agreement made
thereunder, grant awards and make all other determinations necessary or
advisable for the administration of this plan.
Our 1999 Equity Incentive Plan provides for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. Incentive stock options may be granted only to
employees. Nonqualified stock options, and all other awards other than incentive
stock options, may be granted to employees, officers, directors, consultants,
independent contractors and advisors of Broadbase or any parent or subsidiary of
Broadbase. However, consultants, independent contractors and advisors are only
eligible to receive awards if they render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction. The
exercise price of incentive stock options must be at least equal to the fair
market value of our common stock on the date of grant. The exercise price of
incentive stock options granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of nonqualified stock options must be at
least equal to 85% of the fair market value of the our common stock on the date
of grant.
The maximum term of options granted under our 1999 Equity Incentive Plan is
ten years. Awards other than nonqualified stock options granted under this plan
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of the
optionee only by the optionee. The plan allows exceptions to this restriction
with respect to awards that are nonqualified stock options. Options granted
under our 1999 Equity Incentive Plan generally expire three months after the
termination of the
52
<PAGE> 56
optionee's service to Broadbase or a parent or subsidiary of Broadbase. In the
event of a "change in control" transaction, outstanding awards may be assumed or
substituted by the successor corporation. The compensation committee may also
accelerate the vesting of awards upon a change of control transaction.
1999 EMPLOYEE STOCK PURCHASE PLAN
We intend to adopt the 1999 Employee Stock Purchase Plan prior to
completion of this offering, and to reserve a total of 500,000 shares of common
stock for issuance under this plan. On each January 1, the aggregate number of
shares reserved for issuance under our 1999 Employee Stock Purchase Plan will be
increased automatically by a number of shares equal to 1% of our outstanding
shares on the preceding December 31. Our compensation committee will administer
our 1999 Employee Stock Purchase Plan. The plan will become effective on the
first day on which price quotations are available for our common stock on the
Nasdaq National Market.
Employees generally will be eligible to participate in our 1999 Employee
Stock Purchase Plan if they are employed 10 days before the beginning of the
applicable offering period and they are customarily employed by Broadbase or its
parent or any subsidiaries that Broadbase designates for more than 20 hours per
week and more than five months in a calendar year. Employees are not eligible to
participate in our 1999 Employee Stock Purchase Plan if they are 5%
stockholders, or would become 5% stockholders as a result of their participation
in this plan.
Under our 1999 Employee Stock Purchase Plan, eligible employees will be
able to acquire shares of our common stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 2% and 10% of their
cash compensation and are subject to certain maximum purchase limitations.
Participation in this plan will end automatically upon termination of employment
for any reason.
Each offering period under our 1999 Employee Stock Purchase Plan will be
for two years and will consist of four six-month purchase periods. The first
offering period is expected to begin on the first business day on which price
quotations for Broadbase's common stock are available on the Nasdaq National
Market. The first purchase period may be more or less than six months long.
Offering periods and purchase periods thereafter will begin on February 1 and
August 1.
The purchase price for common stock purchased under our 1999 Employee Stock
Purchase Plan will be 85% of the lesser of the fair market value of our common
stock on the first day of the applicable offering period or the last day of each
purchase period. The compensation committee will have the power to change the
duration of offering periods. Our 1999 Employee Stock Purchase Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code. The plan will terminate in 2009, unless it is terminated
earlier pursuant to its terms.
401(K) PLAN
We sponsor a defined contribution plan intended to qualify under Section
401(k) of the Internal Revenue Code. All employees are generally eligible to
participate and may enter the 401(k) plan as of the first day of each month.
Participants may make pre-tax contributions to the plan of up to 20% of their
eligible pay, subject to a statutorily prescribed annual limit. Participants are
fully vested in their contributions and the investment earnings. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
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<PAGE> 57
EMPLOYMENT AGREEMENTS
In August 1999, we executed an offer letter to Anil Gupta, our Vice
President of Marketing. This offer letter establishes Mr. Gupta's annual base
salary at $150,000. In addition, the offer letter provides for bonuses of up to
$40,000 per year. Under the offer letter, Mr. Gupta was granted an option to
purchase 170,000 shares of common stock at an exercise price of $4.56 per share.
This option vests as to 12.5% of the shares on February 4, 2000 and 2.083% of
the shares each month thereafter. In the event of a change in control of
Broadbase and termination of Mr. Gupta's position, 50% of the then unvested
shares issuable upon exercise of this option will immediately vest. Broadbase
will provide Mr. Gupta the health, holiday, vacation and other benefits
available to all its employees. Mr. Gupta's employment is considered an
"at-will" agreement. Mr. Gupta or Broadbase may terminate the employment
relationship at any time for any reason.
In April 1999, we executed an offer letter to Thomas Doyle, our Executive
Vice President of Sales. This offer letter establishes Mr. Doyle's annual base
salary at $225,000 and a commission of $100,000, which can increase or decrease
if sales are above or below an established sales target. The letter also
provides for a sign-on bonus of $250,000 to be paid on his first day of
employment and an additional bonus of $250,000 payable on July 1, 1999. Each
bonus is subject to repayment if he voluntarily terminates his employment less
than 18 months after the payment of that bonus and describes his eligibility for
benefits. Under this offer letter, Mr. Doyle was granted options to purchase
240,000 shares of common stock at an exercise price of $0.73 per share, vesting
over a four year period. An option to purchase 60,000 of these shares will
become exercisable only if a specified sales target is achieved. In the event of
a change of control of Broadbase and Mr. Doyle's involuntary termination, 50% of
his unvested shares will immediately vest. Broadbase will provide Mr. Doyle the
health, holiday, vacation and other benefits available to all its employees. Mr.
Doyle's employment is considered an "at-will" agreement. Mr. Doyle or Broadbase
may terminate the employment relationship at any time for any reason.
In November 1998, we executed an offer letter to Brian Kelly, our Executive
Vice President of Applications and Engineering. This offer letter establishes
Mr. Kelly's annual base salary at $150,000. In addition, the offer letter
provides for bonuses of up to $30,000 a year. Under this offer letter, Mr. Kelly
was granted an option to purchase 135,000 shares of common stock at an exercise
price of $0.73 per share. This option was immediately exercisable in full and
Broadbase has a right to repurchase the shares issued upon exercise of this
option upon termination of Mr. Kelly's employment. This repurchase right lapses
over a four-year period. In addition, the agreement provided for the grant of an
option to purchase an additional 20,000 shares to Mr. Kelly under certain
circumstances. On May 27, 1999, Mr. Kelly was granted options to purchase
115,000 shares of our common stock at an exercise price of $0.73 per share. Of
these options, 20,000 shares vest as to 12.5% of the shares on June 1, 1999 and
2.083% each month thereafter and 95,000 shares vest as to 12.5% of the shares on
June 1, 1999 and 4.16% each month thereafter. In the event of a change of
control, 50% of the shares issued upon exercise of the option to purchase 20,000
shares will immediately vest. Broadbase will provide Mr. Kelly the health,
holiday, vacation and other benefits available to all its employees. Mr. Kelly's
employment is considered an "at-will" agreement. Mr. Kelly or Broadbase may
terminate the employment relationship at any time for any reason.
In January 1998, we executed an offer letter to Chuck Bay, our Chief
Financial Officer, General Counsel, Executive Vice President of Business
Development and Corporate Secretary. This offer letter establishes Mr. Bay's
annual base salary at $150,000. In addition, the offer letter provided for
bonuses of up to $40,000 a year. Under this offer letter, Mr. Bay was granted an
option to purchase 173,000 shares of common stock at an exercise price of $0.25
per share. This option was immediately exercisable in full, and Broadbase has a
right to
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<PAGE> 58
repurchase the shares issued upon exercise of this option upon termination of
Mr. Bay's employment. This repurchase right lapses over a four-year period. In
the event of a change of control, 50% of the shares issued upon exercise of this
option will immediately vest. Broadbase will provide Mr. Bay the health,
holiday, vacation, 401(k) and other benefits available to all its employees. Mr.
Bay's employment is considered an "at-will" agreement. Mr. Bay or Broadbase may
terminate the employment relationship at any time for any reason.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to Broadbase or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Delaware law regarding unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by Delaware law, our bylaws provide that:
- we must indemnify our directors and executive officers to the fullest
extent permitted by Delaware law, provided that each indemnified officer
and director acted in good faith and in a manner that the officer or
director reasonably believed to be in or not opposed to Broadbase's best
interests;
- we may indemnify our other employees and agents; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to very limited exceptions.
In addition to the indemnification required in our certificate of
incorporation and bylaws, we intend to enter into indemnification agreements
with each of our current directors and executive officers, prior to the
completion of this offering. We also intend to obtain directors' and officers'
insurance to cover our directors, officers and some of our employees for certain
liabilities. We believe that these indemnification provisions and agreements and
this insurance are necessary to attract and retain qualified directors and
officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also reduce the likelihood of derivative litigation against directors and
officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against directors
and officers as required by these indemnification provisions.
Presently, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
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<PAGE> 59
CERTAIN TRANSACTIONS
Other than the transactions described in "Management" and the transactions
described below, since the incorporation of Broadbase on November 28, 1995,
there has not been nor is there currently proposed any transaction or series of
similar transactions to which we were or will be a party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than 5% of our
common stock or any member of his or her immediate family had or will
have a direct or indirect material interest.
TRANSACTIONS WITH PROMOTER
On November 30, 1995, in connection with the formation and initial
financing of Broadbase, Mark Kremer purchased 1,282,500 shares of our common
stock for an aggregate purchase price of $2,565. Mr. Kremer is our President,
Chief Executive Officer and Chairman of the Board of Directors, and may be
considered to be a promoter of Broadbase. Broadbase retained the right to
repurchase 1,154,250 of these shares, at his initial purchase price, if Mr.
Kremer ceased to be employed by Broadbase. This repurchase right lapses at a
rate of 24,046 shares per month.
PREFERRED STOCK FINANCINGS IN WHICH 5% STOCKHOLDERS PARTICIPATED
In December 1995, April 1996 and June 1996, we sold a total of 2,384,999
shares of Series A preferred stock at a purchase price of $0.667 per share. In
December 1996 and March 1997, we sold a total of 1,923,223 shares of Series B
preferred stock at a purchase price of $2.683 per share. In February and April
1998, we sold a total of 2,166,055 shares of Series C preferred stock at a
purchase price of $5.54 per share. In June 1999, we sold a total of 2,188,812
shares of Series E preferred stock at a purchase price of $9.1325 per share.
Certain purchasers of our Series E preferred stock have a contractual right to
purchase, at the initial public offering price, up to an aggregate of 384,644
shares of the common stock offered in this offering. See "Underwriting." Upon
closing of this offering, each of the outstanding shares of preferred stock will
convert into common stock on a one-for-one basis.
Purchasers of our preferred stock include, among others, the following
holders of more than 5% of our outstanding stock:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES E
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
STOCKHOLDER PURCHASED PURCHASED PURCHASED PURCHASED
----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Entities affiliated with
Benchmark Capital.............. 2,249,999 559,070 526,173 109,500
Entities affiliated with Mohr,
Davidow Ventures............... -- 1,304,510 286,101 --
Entities affiliated with Accel
Partners....................... -- -- 902,527 27,375
Entities affiliated with Charter
Growth Capital................. -- -- -- 218,999
</TABLE>
Our director Kevin Harvey is a general partner of Benchmark Capital, and
our director Nancy Schoendorf is a managing partner of Mohr, Davidow Ventures.
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<PAGE> 60
DEBENTURE FINANCINGS IN WHICH 5% STOCKHOLDERS PARTICIPATED
In December 1998 and April 1999, we sold debentures in the aggregate
principal amount of $9,525,000, which principal amount is convertible into a
total of 1,313,793 shares of Series D preferred stock at a conversion price of
$7.25 per share. Unless earlier converted by their terms into stock of
Broadbase, $8,250,000 in principal amount of the debentures must be repaid on
December 9, 2003, and $1,275,000 in principal amount must be repaid on April 15,
2004. Charter Growth Capital and certain of its affiliated funds purchased
$8,000,000 of the debentures. These funds would hold more than 5% of our
outstanding stock if these debentures were converted into stock. These
debentures are convertible into 1,103,448 shares of Series D preferred stock.
Upon the closing of this offering, the debentures will be converted into an
equal number of shares of common stock. None of our executive officers,
directors or other holders of more than 5% of our outstanding common stock
purchased any of the debentures.
INDEBTEDNESS OF MANAGEMENT
Mark Kremer. In April 1998, we lent $400,000 to Mark Kremer, our President
and Chief Executive Officer, secured by a pledge of all shares of Mr. Kremer's
Broadbase common stock. The loan accrues interest at a rate of 5.51% and is
payable on or before April 29, 2000. As of June 30, 1999, the total amount
outstanding, including accrued interest, was $426,378.
Chuck Bay. In February 1998 and March 1999, Chuck Bay, our Chief Financial
Officer, executed promissory notes in the principal amounts of $43,250 and
$62,780 in connection with the exercise of stock options. These notes are
secured by a pledge of Mr. Bay's Broadbase common stock, bear interest at rates
of 8.5% and 7.5%, respectively, and are payable on or before March 19, 2000. As
of June 30, 1999, the total amount outstanding, including accrued interest, was
$112,321.
Brian Kelly. In March 1999, Brian Kelly, our Executive Vice President of
Applications and Engineering, executed a promissory note in the principal amount
of $98,550 in connection with the exercise of a stock option. This note is
secured by a pledge of Mr. Kelly's Broadbase common stock, bears interest at the
rate of 7.5% and is payable on or before March 19, 2000. As of June 30, 1999,
the total amount outstanding, including accrued interest, was $100,641.
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<PAGE> 61
PRINCIPAL STOCKHOLDERS
The following table presents information as to the beneficial ownership of
our common stock as of June 30, 1999, and as adjusted to reflect the sale of the
common stock in this offering by:
- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
- each of our directors;
- each executive officer listed in the Summary Compensation Table above;
and
- all current executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES BENEFICIALLY OWNED
NUMBER OF SHARES --------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Kevin Harvey(1).................................. 3,444,742 26.1% 19.3%
c/o Benchmark Capital
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Nancy Schoendorf(2).............................. 1,590,611 12.0 8.9
c/o Mohr, Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Entities affiliated with Charter Growth
Capital(7)..................................... 1,322,447 10.0 7.4
525 University Avenue, Suite 1500
Palo Alto, CA 94301
Mark Kremer(3)................................... 1,282,500 9.7 7.2
Entities affiliated with Accel Partners(8)....... 929,902 7.0 5.2
428 University Avenue
Palo Alto, CA 94301
Chuck Bay(4)..................................... 259,000 2.0 1.4
Bruce Armstrong(5)............................... 253,125 1.9 1.4
Paul Levy(6)..................................... 96,750 * *
All eight current directors and executive
officers as a group(9)......................... 7,163,603 54.2 40.2
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Represents 3,063,891 and 380,851 shares of common stock held of record by
Benchmark Capital Partners, L.P. and Benchmark Founders Fund, L.P. Mr.
Harvey, a director of Broadbase, is a general partner of Benchmark. Mr.
Harvey disclaims beneficial ownership of shares held by Benchmark except to
the extent of his pecuniary interest arising from his interest in Benchmark.
(2) Represents 1,524,126 and 66,485 shares of common stock held of record by
Mohr, Davidow Ventures IV, L.P. and MDV IV Entrepreneurs' Network Fund, L.P.
Ms. Schoendorf, a director of Broadbase, is a general partner of Mohr,
Davidow Ventures. Ms. Schoendorf disclaims beneficial ownership of shares
held by Mohr, Davidow Ventures except to the extent of her pecuniary
interest arising from her interest in Mohr, Davidow Ventures.
(3) Includes 120,230 shares subject to a repurchase right that lapses at a rate
of 24,046 shares per month until November 30, 1999. Mr. Kremer is our
President and Chief Executive Officer.
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<PAGE> 62
(4) Includes 111,729 shares subject to a repurchase right that lapses at a rate
of 3,604 shares per month until January 2002, and 75,250 shares subject to a
repurchase right that lapses at a rate of 1,791 shares per month until
December 2002. Mr. Bay is our Chief Financial Officer, General Counsel,
Executive Vice President of Business Development and Corporate Secretary.
(5) Mr. Armstrong was Broadbase's Vice President of Sales and ceased to be an
employee of Broadbase on June 30, 1999.
(6) Includes 96,750 shares subject to a repurchase right that lapses as to
12,094 shares in November 1999, and thereafter at a rate of 2.083% per month
until April 2003. Mr. Levy is a director of Broadbase.
(7) Includes 810,345, 275,862 and 17,241 shares of common stock into which the
principal amounts of debentures held of record by Charter Growth Capital
Co-Investment Fund, Charter Growth Capital, L.P. and CGC Investors, L.L.C.
are convertible within 60 days of June 30, 1999. Does not include up to
384,644 shares that may be purchased at the initial public offering price
upon exercise of contractual rights to purchase shares in this offering.
(8) Includes 729,974, 96,710, 44,635, 38,125 and 20,458 shares of common stock
held of record by Accel V L.P., Accel Internet/Strategic Technology Fund
L.P., Accel Investors '97 L.P. Accel Keiretsu V L.P. and Ellmore C.
Patterson Partners.
(9) Includes 218,750 shares that are subject to a repurchase right which lapses
as to 15,625 shares per month until March 2001 and as to an additional 5,208
shares per month thereafter until December 2002. Also includes 240,000
shares that are subject to a repurchase right which lapses as to 30,000
shares in October 1999 and as to an additional 2.083% per month thereafter
until April 2003.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated above, to our knowledge, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Percentage ownership is based on 13,203,690 shares outstanding
as of June 30, 1999, assuming conversion of all outstanding preferred stock and
convertible debentures into common stock. Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days of June 30,
1999, and shares of preferred stock subject to debentures that are currently
convertible or convertible within 60 days of June 30, 1999, are deemed to be
outstanding and to be beneficially owned by the person holding the options or
debentures for the purpose of computing the percentage ownership of such person
but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Unless indicated above, the address for each
beneficial owner of more than 5% of our common stock is Broadbase Software,
Inc., 172 Constitution Drive, Menlo Park, CA 94025.
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<PAGE> 63
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of Broadbase will consist of 90,000,000 shares of common stock, $0.001 par
value per share, and 15,154,046 shares of preferred stock, $0.001 par value per
share, of which 5,000,000 shares will be available for future issuance. As of
June 30, 1999, and assuming the conversion of all outstanding preferred stock
and convertible debentures into common stock upon the closing of this offering,
there were outstanding 13,203,690 shares of common stock held of record by
approximately 150 stockholders, and options to purchase 2,013,249 shares of
common stock and warrants to purchase 36,764 shares of common stock.
Before the closing of this offering, Broadbase will reincorporate in the
State of Delaware. Following the closing of this offering, we intend to amend
and restate our certificate of incorporation to reflect the conversion of our
preferred stock to common stock.
COMMON STOCK
Dividend rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as our Board of Directors may from time to time
determine.
Voting rights. Each common stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
No preemptive or similar rights. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
Right to receive liquidation distributions. Upon a liquidation, dissolution
or winding-up of Broadbase, the holders of common stock are entitled to share
ratably with holders of any participating preferred stock in all assets
remaining after payment of all liabilities and the liquidation preferences of
any outstanding preferred stock. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of preferred
stock will be converted into shares of common stock. See Note 5 of Notes to
Consolidated Financial Statements for a description of this preferred stock.
Following the offering, Broadbase will be authorized, subject to the limits
imposed by Delaware law, to issue preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series
and to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. Our
Board of Directors can also increase or decrease the number of shares of any
series, but not below the number of shares of any series then outstanding,
without any further vote or action by the stockholders.
Our Board of Directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of the common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of Broadbase and may
adversely affect the market price of the common stock and the voting and other
rights of the holders of
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<PAGE> 64
common stock. We have no current plan to issue any shares of preferred stock
after the offering.
WARRANTS
As of June 30, 1999, we had outstanding the following warrants to purchase
our stock:
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES SUBJECT EXERCISE PRICE
TYPE OF STOCK TO WARRANTS PER SHARE EXPIRATION DATE
------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Series A preferred stock.............. 12,537 $1.675 November 30, 2003
Series B preferred stock.............. 24,227 2.683 July 31, 2004
</TABLE>
After the closing of this offering, all of these warrants will become
exercisable for a like number of shares of common stock.
REGISTRATION RIGHTS
The holders of approximately 9,961,882 shares of common stock have the
right to require us to register their shares with the Securities and Exchange
Commission so that those shares may be publicly resold or to include their
shares in any registration statement we file.
DEMAND REGISTRATION RIGHTS
At any time more than six months after the closing of this offering, the
holders of at least 30% of the shares having registration rights have the right
to demand that we file a registration statement so that they can publicly sell
their shares, so long as the value of the securities to be sold in that
registration exceeds $7,500,000. In addition, if we are eligible to file a
registration statement on Form S-3, the holders of at least 20% of the shares
having registration rights have the right to demand that we file a registration
statement on Form S-3, so long as the amount of securities to be sold in that
registration exceeds $500,000.
PIGGYBACK REGISTRATION RIGHTS
If we register any securities for public sale, these stockholders will have
the right to include their shares in the registration statement. The
underwriters of any underwritten offering will have the right to limit the
number of shares to be included in that registration statement.
EXPENSES OF REGISTRATION
We generally will pay all of the expenses relating to any demand or
piggyback registration.
EXPIRATION OF REGISTRATION RIGHTS
The registration rights described above will expire five years after this
closing of this offering. The registration rights will terminate earlier with
respect to a particular stockholder if that holder owns less than 1% of our
outstanding securities, that holder can resell all of its securities in a
three-month period under Rule 144 of the Securities Act and we are subject to
the reporting requirements of the Securities Exchange Act of 1934.
ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law, our certificate of incorporation and
bylaws described below may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
DELAWARE LAW
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations from engaging, under limited circumstances, in a "business
combination," which includes a merger or
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<PAGE> 65
sale of more than 10% of the corporation's assets, with any "interested
stockholder," or a stockholder who owns 15% or more of the corporation's
outstanding voting stock, as well as affiliates and associates of such
stockholder, for three years following the date that stockholder becomes an
"interested stockholder" unless:
- the transaction is approved by the board prior to the date the
"interested stockholder" attained that status;
- upon the closing of the transaction that resulted in the stockholder's
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or
- on or subsequent to such date the "business combination" is approved by
the board and authorized at an annual or special meeting of stockholders
by at least two-thirds of the outstanding voting stock that is not owned
by the "interested stockholder."
This provision could prohibit or delay mergers or other takeover or
change-in-control attempts and, accordingly, may discourage attempts to acquire
us.
CHARTER AND BYLAW PROVISIONS
Our certificate of incorporation and bylaws provide for the division of our
Board of Directors into three classes as nearly equal in size as reasonably
possible with staggered three-year terms. Our stockholders are unable to fill
any vacancy on our Board of Directors. Any action required or permitted to be
taken by our stockholders at an annual meeting or a special meeting of the
stockholders may only be taken if it is properly brought before that meeting and
may not be taken by written consent. Our stockholders are limited in their
ability to remove any director or the entire Board of Directors without cause.
Our bylaws provide that special meetings of the stockholders may be called at
any time by the Board of Directors, and must be called upon the request of the
chairman of the Board of Directors, the chief executive officer, the president,
stockholders that are entitled to cast not less than a majority of the total
number of votes entitled to be cast by all stockholders at that special meeting,
or by a majority of the members of the Board of Directors. These provisions of
our certificate of incorporation and bylaws are intended to enhance the
likelihood of continuity and stability in the composition of the Board of
Directors and to discourage transactions that may involve an actual or
threatened change of control of Broadbase. These provisions are designed to
reduce the vulnerability of Broadbase to an unsolicited acquisition proposal
and, accordingly, could discourage potential acquisition proposals and could
delay or prevent a change in control of Broadbase. These provisions are also
intended to discourage tactics that may be used in proxy fights but could have
the effect of discouraging others from making tender offers for our shares and,
consequently, might also inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts. These changes may
also have the effect of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation. The address of our transfer agent and registrar is 1745
Gardena Avenue, Glendale, California 91204-2991, and its telephone number at
this location is (818) 502-1404.
LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "BBSW."
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<PAGE> 66
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, you could not buy or sell our common stock on a
public market. An active public market for our common stock may not develop or
be sustained after this offering. Future sales of substantial amounts of common
stock, including shares issued upon exercise of outstanding options or warrants,
in the public market after this offering could adversely affect the prevailing
market price of our common stock and could impair our ability to raise equity
capital in the future. In addition, since few shares will be available for sale
immediately after this offering due to the contractual and legal restrictions on
resale described below, sales of substantial amounts of our common stock in the
public market after the restrictions lapse could adversely affect the prevailing
market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding 17,203,690
shares of common stock based on shares outstanding at June 30, 1999, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants. Of this amount, the 4,000,000 shares sold in
this offering will be freely tradable in the public market without restriction
or further registration under the Securities Act, unless those shares are
purchased by any of our affiliates. An affiliate of Broadbase is a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, Broadbase. Our current
affiliates include the individuals and entities that holds more than 10% of our
stock listed under "Principal Stockholders" as well as our other executive
officers and directors. The remaining 13,203,690 shares held by existing
stockholders are subject to various resale restrictions. Of these shares, all
shares are subject to lock-up agreements with the underwriters or directly with
the Company, under which all of our directors and officers and stockholders have
agreed not to transfer or dispose of, directly or indirectly, any shares of
common stock or any securities convertible into or exercisable or exchangeable
for shares of common stock, for a period of 180 days after the date of this
prospectus. Deutsche Bank Securities Inc., in some instances together with us,
may release the shares subject to the lock-up agreements in whole or in part at
any time with or without notice. After expiration or release of the lock-up
agreements, 10,284,667 of the shares held by our existing stockholders will be
eligible for sale in the public market under Rule 144 or Rule 701 beginning 180
days after the date of this prospectus, although 8,793,961 of these shares will
be subject to volume limitations. The remaining 2,919,023 shares held by our
existing stockholders will become eligible for public sale, subject in most
cases to volume limitations, on subsequent dates.
RULE 144
In general, under Rule 144, beginning 90 days after the date of this
prospectus, stockholders of Broadbase that have beneficially owned their shares
for at least one year, but less than two years, and affiliates of Broadbase that
have beneficially owned their shares for any period of more than one year, would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, equal to
approximately 172,036 shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice of sale with the SEC.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
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<PAGE> 67
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except one of our affiliates, is
entitled to sell those shares without complying with the volume limitation or
the manner of sale, public information or notice provisions of Rule 144.
RULE 701
In general, under Rule 701 of the Securities Act, any of our employees,
officers, directors, consultants or advisors who purchased shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell those shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period contained in Rule 144. However, all
shares issued pursuant to Rule 701 are subject to lock-up agreements and will
only become eligible for sale at the earlier of the expiration of the 180-day
lock-up agreements or obtaining the prior written consent of Deutsche Bank
Securities Inc.
REGISTRATION RIGHTS
At any time more than six months after the closing of this offering, the
holders of 9,991,146 shares of our common stock and warrants to acquire common
stock, or their transferees, will be entitled to rights to register their shares
under the Securities Act. See "Description of Capital Stock--Registration
Rights." After registration, these shares could be sold without restriction
under the Securities Act.
STOCK OPTIONS
Promptly following this offering, we will file a registration statement
under the Securities Act covering all shares of common stock subject to
outstanding options or reserved for issuance under our 1996 Equity Incentive
Plan, our 1999 Equity Incentive Plan and our 1999 Employee Stock Option Plan.
Based on the number of shares subject to options outstanding or reserved for
issuance under these plans, at June 30, 1999 this registration statement would
cover approximately 10,523,249 shares. The registration statement will
automatically become effective upon filing. Accordingly, shares registered under
the registration statement will, subject to Rule 144 volume limitations
applicable to our affiliates, be available for sale in the open market
immediately after the 180-day lock-up agreements expire.
WARRANTS
As of June 30, 1999, we had outstanding warrants to purchase 36,764 shares
of common stock. When these warrants are exercised and the exercise price is
paid in cash the shares must be held for one year before they can be sold under
Rule 144. These warrants also contain "net exercise provisions." These
provisions allow a holder to exercise the warrant for a lesser number of shares
of common stock in lieu of paying cash. The shares of common stock issued in a
"net exercise" could be publicly sold under Rule 144 immediately after exercise,
subject to the 180-day lock-up period.
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<PAGE> 68
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, Thomas
Weisel Partners LLC and E*OFFERING Corp., have severally agreed to purchase from
Broadbase the following respective number of shares of common stock at a public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc. ..............................
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated..............................................
Thomas Weisel Partners LLC..................................
E*OFFERING Corp.............................................
---------
Total............................................. 4,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 600,000 additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer the additional shares on the same terms as those on
which the 4,000,000 shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is currently expected to be approximately 7.0% of
the initial public offering price. We have agreed
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<PAGE> 69
to pay the underwriters the following fees, assuming either no exercise or full
exercise by the underwriters of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
----------------------------------------
WITHOUT EXERCISE WITH FULL EXERCISE
FEE PER OF OVER-ALLOTMENT OF OVER-ALLOTMENT
SHARE OPTION OPTION
------------- ----------------- -------------------
<S> <C> <C> <C>
Fees paid by Broadbase...................
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $1,055,000.
We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers, directors, stockholders and holders of options and
warrants to purchase our stock, has agreed not to offer, sell, contract to sell
or otherwise dispose of, or enter into any transaction that is designed to, or
could be expected to, result in the disposition of any portion of our common
stock held by these persons prior to this offering or common stock issuable upon
exercise of options or warrants held by these persons for a period of 180 days
after the effective date of the registration statement of which this prospectus
is a part without the prior written consent of Deutsche Bank Securities Inc.
This consent may be given at any time without public notice. We have entered
into a similar agreement with the representatives of the underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
A prospectus in electronic format is being made available on Internet
websites maintained by E*OFFERING Corp. and E*TRADE Securities, Inc. Internet
purchases of the common stock offered by this prospectus will be available only
to registered customers of E*TRADE who possess sufficient net worth and
investment experience. All eligible accounts may submit a conditional offer to
E*TRADE to purchase shares. If demand exceeds availability, E*TRADE will
randomly allocate shares to applicants in 100 share lots in a round-robin
fashion, meaning that no applicant will receive a second lot until all
applicants have received one lot and so forth, until all shares available to
E*TRADE have been distributed. The common stock offered by this prospectus will
not be directed to any additional Internet customers other than the registered
customers of E*TRADE mentioned above.
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<PAGE> 70
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to (1) 200,000 shares for friends and family members
of our executive officers and other persons that are affiliated with companies
with whom we have a business relationship, such as executives of companies that
market, sell or otherwise promote our products and (2) up to 384,644 additional
shares for certain current stockholders under their pre-existing contractual
rights to purchase shares in this offering. None of these shares will be subject
to lock-up agreements. The sales of these shares will only be made pursuant to
this prospectus. The stockholders who hold these pre-existing contractual rights
are Attractor Offshore Ltd., Attractor Institutional LP, Attractor Ventures LLC,
Attractor LP, Spinnaker Clipper Fund, L.P., Spinnaker Founders Fund, L.P.,
Spinnaker Offshore Founders Fund Cayman Limited, Axa U.S. Growth Fund LLC,
Parallel Capital I LLC, Parallel Capital II LLC, Almanori Limited, Multinvest
LLC, Charter Growth Capital, L.P., Charter Growth Capital Co-Investment Fund,
L.P. and CGC Investors, L.P. The number of shares of our common stock available
for sale to the general public will be reduced to the extent these reserved
shares are purchased. Any reserved shares that are not purchased by these
persons will be offered by the underwriters to the general public on the same
basis as the other shares in this offering.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 56 filed
public offerings of equity securities, of which 31 have been completed, and has
acted as a syndicate member in an additional 27 offerings of equity securities.
Thomas Weisel Partners does not have any material relationship with us or any of
our officers, directors or other controlling persons, except with respect to its
contractual relationship with us pursuant to the underwriting agreement entered
into in connection with this offering.
In December 1998, DRW Investors LLC, an affiliate of Dain Rauscher Wessels,
purchased debentures in the principal amount of $250,000, which are convertible
into 34,482 shares of our Series D preferred stock at a conversion price of
$7.25 per share. DRW Investors purchased these debentures on the same terms as
the other investors in this private placement.
In June 1999, we sold shares of our Series E preferred stock in a private
placement at a price of $9.1325 per share. Each of the shares of Series E
preferred stock is convertible at the option of the holder into one share of our
common stock. In this private placement, BT Investment Partners, Inc., an
affiliate of Deutsche Bank Securities Inc., purchased 109,263 shares of Series E
preferred stock for an aggregate purchase price of $997,844. BT Investment
Partners, Inc. purchased the Series E preferred stock on the same terms as the
other investors in the private placement. In addition, three individuals
associated with Thomas Weisel Partners purchase an aggregate of 6,570 shares of
our Series E preferred stock in the private placement. Pursuant to the rules of
the National Association of Securities Dealers, Inc.,the shares of Series E
preferred stock held by the above-referenced persons could be deemed to be
underwriting compensation received in connection with this offering.
Accordingly, these shares cannot be sold, transferred, assigned, pledged or
hypothecated by any person for a period of one year after the effective date of
this offering, except to officers or partners of the underwriters and members of
the selling group and their officers or partners.
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<PAGE> 71
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among us and the representatives of the
underwriters. Among the primary factors to be considered in determining the
public offering price will be:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalizations and stages of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
The estimated initial public offering price range set forth on the cover of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus.
Investment partnerships comprised of certain partners of Fenwick & West LLP own
32,379 shares of our common stock. Morrison & Foerster LLP, Irvine, California,
will pass upon certain legal matters in connection with this offering for the
underwriters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at December 31, 1997 and 1998, and for the
period from November 28, 1995 (inception) to December 31, 1996 and for each of
the two years in the period ended December 31, 1998, as set forth in their
report. We've included our consolidated financial statements and schedule in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
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<PAGE> 72
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedule filed as part of the
registration statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the exhibits and
schedule filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that has been filed. Each statement in this prospectus relating to a
contract or document filed as an exhibit is qualified in all respects by the
filed exhibit. The registration statement, including exhibits and schedule, may
be inspected without charge at the principal office of the Securities and
Exchange Commission in Washington, D.C., and copies of all or any part of it may
be obtained from that office after payment of fees prescribed by the Securities
and Exchange Commission. The Securities and Exchange Commission maintains a
website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission at http://www.sec.gov.
We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.
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<PAGE> 73
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets
As of December 31, 1997 and 1998 and June 30, 1999
(unaudited)............................................... F-3
Consolidated Statements of Operations
Period from November 28, 1995 (Inception) to December 31,
1996 and the Years Ended December 31, 1997 and 1998 and
the Six Months Ended June 30, 1998 and 1999 (unaudited)... F-4
Consolidated Statements of Cash Flows
Period from November 28, 1995 (Inception) to December 31,
1996 and the Years Ended December 31, 1997 and 1998 and
the Six Months Ended June 30, 1998 and 1999 (unaudited)... F-5
Consolidated Statements of Shareholders' Equity (Net Capital
Deficiency)
Period from November 28, 1995 (Inception) to December 31,
1996 and the Years Ended December 31, 1997 and 1998 and
the Six Months Ended June 30, 1999 (unaudited)............ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 74
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
BroadBase Information Systems, Inc.
We have audited the accompanying consolidated balance sheets of BroadBase
Information Systems, Inc. as of December 31, 1997 and 1998, and the related
consolidated statements of operations, cash flows, and shareholders' equity (net
capital deficiency) for the period from November 28, 1995 (inception) to
December 31, 1996 and for each of the two years in the period ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BroadBase
Information Systems, Inc. at December 31, 1997 and 1998, and the results of its
operations and its cash flows for the period from November 28, 1995 (inception)
to December 31, 1996 and for the each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Jose, California
March 5, 1999
F-2
<PAGE> 75
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA AT
DECEMBER 31, JUNE 30, JUNE 30,
------------------ ----------- ------------
1997 1998 1999 1999
------- -------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,153 $ 13,990 $ 27,981 $ 27,981
Accounts receivable, net of allowances of $0, $50,000, and
$50,000 at December 31, 1997 and 1998 and June 30, 1999,
respectively............................................ -- 1,072 1,718 1,718
Prepaid expenses and other current assets................. 180 326 953 953
------- -------- -------- --------
Total current assets................................ 1,333 15,388 30,652 30,652
Property and equipment, net................................. 702 1,610 1,796 1,796
Other assets................................................ 78 175 113 113
------- -------- -------- --------
Total assets........................................ $ 2,113 $ 17,173 $ 32,561 $ 32,561
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 486 $ 395 $ 863 $ 863
Accrued compensation...................................... 173 922 1,751 1,751
Accrued expenses.......................................... 242 1,142 2,345 2,345
Current portion of capital lease obligations.............. 24 30 15 15
Current portion of bank line of credit and notes
payable................................................. 347 768 740 740
Deferred revenue.......................................... -- 3,330 3,581 3,581
------- -------- -------- --------
Total current liabilities........................... 1,272 6,587 9,295 9,295
Capital lease obligations................................... 38 -- -- --
Bank line of credit and notes payable....................... 878 1,110 777 777
Convertible debentures...................................... -- 8,250 9,525 --
------- -------- -------- --------
Total liabilities................................... 2,188 15,947 19,597 10,072
Commitments and contingencies
Shareholders' equity (net capital deficiency):
Convertible preferred stock: no par value; 10,154,046
shares authorized and issuable in series:
Series A: 2,398,000 shares designated, 2,384,999 shares
issued and outstanding at December 31, 1997 and 1998
and June 30, 1999, and none pro forma; aggregate
liquidation preference at December 31, 1998 and June
30, 1999 of $1,590.................................... 1,559 1,559 1,559 --
Series B: 2,000,000 shares designated, 1,923,223 shares
issued and outstanding at December 31, 1997 and 1998
and June 30, 1999, and none pro forma; aggregate
liquidation preference at December 31, 1998 and June
30, 1999 of $5,160.................................... 5,110 5,110 5,110 --
Series C: 2,166,065 shares designated, none issued and
outstanding at December 31, 1997, 2,166,055 shares
issued and outstanding at December 31, 1998 and June
30, 1999, and none pro forma; aggregate liquidation
preference at December 31, 1998 and June 30, 1999 of
$12,000............................................... -- 11,906 11,906 --
Series D: 1,400,000 shares designated, none issued and
outstanding at December 31, 1997 and 1998 and June 30,
1999, and none pro forma.............................. -- -- -- --
Series E: 2,189,981 shares designated, none outstanding
at December 31, 1997 and 1998, 2,188,812 shares issued
and outstanding at June 30, 1999, and none pro forma;
aggregate liquidation preference at June 30, 1999 of
$19,989............................................... -- -- 19,979 --
Common stock: no par value; 30,000,000 shares authorized;
2,492,825, 2,707,300 and 3,226,808 shares issued and
outstanding at December 31, 1997 and 1998 and June 30,
1999, respectively, and 13,203,690 shares issued and
outstanding pro forma................................... 49 3,604 14,970 63,049
Deferred stock compensation............................... -- (2,338) (10,907) (10,907)
Notes receivable from shareholders........................ (34) (476) (626) (626)
Accumulated other comprehensive loss...................... -- (37) (38) (38)
Accumulated deficit....................................... (6,759) (18,102) (28,989) (28,989)
------- -------- -------- --------
Total shareholders' equity (net capital
deficiency)....................................... (75) 1,226 12,964 22,489
------- -------- -------- --------
Total liabilities and shareholders' equity (net
capital deficiency)............................... $ 2,113 $ 17,173 $ 32,561 $ 32,561
======= ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 76
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED SIX MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED JUNE 30,
(INCEPTION) TO ------------------- -------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------ ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue:
License.................................... $ -- $ -- $ 2,996 $ 1,349 $ 2,693
Maintenance and professional services...... -- -- 443 98 846
------- ------- -------- ------- --------
Total net revenue.................... -- -- 3,439 1,447 3,539
Cost of revenue:
License.................................... -- -- 713 366 428
Maintenance and professional services...... -- -- 254 83 932
------- ------- -------- ------- --------
Total cost of revenue................ -- -- 967 449 1,360
------- ------- -------- ------- --------
Gross margin................................. -- -- 2,472 998 2,179
Operating expenses:
Sales and marketing........................ 130 2,851 7,888 3,641 6,495
Research and development................... 928 1,980 3,738 1,665 2,800
General and administrative................. 215 744 1,165 522 932
Amortization of deferred stock
compensation............................. -- -- 1,133 328 2,472
------- ------- -------- ------- --------
Total operating expenses............. 1,273 5,575 13,924 6,156 12,699
------- ------- -------- ------- --------
Loss from operations......................... (1,273) (5,575) (11,452) (5,158) (10,520)
Interest income.............................. 30 154 335 158 194
Interest expense............................. (29) (66) (226) (100) (561)
------- ------- -------- ------- --------
Net loss..................................... $(1,272) $(5,487) $(11,343) $(5,100) $(10,887)
======= ======= ======== ======= ========
Basic and diluted net loss per share......... $ (4.30) $ (6.19) $ (8.85) $ (4.58) $ (6.30)
======= ======= ======== ======= ========
Weighted-average shares used in computing
basic and diluted net loss per share....... 296 887 1,281 1,114 1,728
======= ======= ======== ======= ========
Pro forma basic and diluted net loss per
share...................................... $ (1.51) $ (1.16)
======== ========
Weighted-average shares used in computing pro
forma basic and diluted net loss per
share...................................... 7,536 9,383
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 77
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED SIX MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED JUNE 30,
(INCEPTION) TO ------------------ ------------------
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss............................................... $(1,272) $(5,487) $(11,343) $(5,100) $(10,887)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization...................... 37 149 507 191 451
Write-off of note receivable from shareholder...... -- -- -- -- 7
Amortization of deferred stock compensation........ -- -- 1,133 328 2,472
Changes in balance sheet items:
Accounts receivable................................ -- -- (1,072) (829) (646)
Prepaid expenses and other current assets.......... (46) (212) (243) (455) (565)
Accounts payable................................... 30 456 (91) (116) 468
Accrued expenses................................... 88 327 1,649 864 2,032
Deferred revenue................................... -- -- 3,330 741 251
------- ------- -------- ------- --------
Net cash used in operating activities............ (1,163) (4,767) (6,130) (4,376) (6,417)
------- ------- -------- ------- --------
Investing activities:
Purchases of property and equipment.................... (148) (661) (1,415) (628) (637)
------- ------- -------- ------- --------
Net cash used in investing activities............ (148) (661) (1,415) (628) (637)
------- ------- -------- ------- --------
Financing activities:
Net proceeds from issuance of convertible preferred
stock................................................ 6,521 133 11,906 11,902 19,979
Proceeds from issuance of common stock................. 2 10 41 8 176
Proceeds from notes payable............................ 300 1,000 -- -- --
Payments to repurchase unvested common stock........... -- -- -- -- (8)
Payments on shareholders' notes receivable............. -- 3 1 -- --
Issuance of notes receivable to shareholder............ -- -- (400) -- --
Payments on notes payable.............................. -- (77) (347) (851) (194)
Principal payments on capital lease obligations........ -- -- (32) -- (15)
Principal payments on equipment line of credit......... -- -- -- -- (167)
Borrowings on equipment line of credit................. -- -- 1,000 642 --
Proceeds from issuance of convertible debt............. -- -- 8,250 -- 1,275
------- ------- -------- ------- --------
Net cash provided by (used in) financing
activities..................................... 6,823 1,069 20,419 11,701 21,046
Effect of foreign exchange rate changes on cash and
cash equivalents..................................... -- -- (37) (11) (1)
------- ------- -------- ------- --------
Net increase (decrease) in cash and cash equivalents... 5,512 (4,359) 12,837 6,686 13,991
Cash and cash equivalents:
Beginning of period.................................... -- 5,512 1,153 1,153 13,990
------- ------- -------- ------- --------
End of period.......................................... $ 5,512 $ 1,153 $ 13,990 7,839 27,981
======= ======= ======== ======= ========
Supplemental disclosure of cash flow information:
Cash paid for interest................................. $ 13 $ 82 $ 227 $ 84 $ 541
Supplemental schedule of noncash investing and financing
activities:
Issuance of convertible preferred stock
for services......................................... $ 15 $ -- $ -- $ -- $ --
Purchase of equipment under capital leases............. $ -- $ 64 $ -- $ -- $ --
</TABLE>
See accompanying notes.
F-5
<PAGE> 78
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK DEFERRED RECEIVABLE COMPREHENSIVE
------------------- ------------------- STOCK FROM INCOME
SHARES AMOUNT SHARES AMOUNT COMPENSATION SHAREHOLDERS (LOSS)
--------- ------- --------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of restricted common stock
to founder at $0.002 per share in
November 1995 in exchange for
cash.............................. -- $ -- 1,282,500 $ 2 $ -- $ -- $ --
Issuance of Series A convertible
preferred stock at $0.67 per share
in December 1995 and April 1996
for cash, net of $31 issuance
costs, and in June 1996 for
services.......................... 2,384,999 1,559 -- -- -- -- --
Issuance of Series B convertible
preferred stock at $2.68 per share
in December 1996 for cash, net of
$23 issuance costs................ 1,863,580 4,977 -- -- -- -- --
Issuance of common stock upon
exercise of options............... -- -- 1,409,225 47 -- (47) --
Comprehensive income (loss):....... -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- (1,272)
--------
Comprehensive loss................. -- -- -- -- -- -- $ (1,272)
--------- ------- --------- ------- -------- ----- ========
Balance at December 31, 1996....... 4,248,579 $ 6,536 2,691,725 $ 49 $ -- $ (47) --
Issuance of Series B convertible
preferred stock at $2.68 per share
in March 1997 for cash, net of $27
issuance costs.................... 59,643 133 -- -- -- -- --
Issuance of common stock upon
exercise of options............... -- -- 7,350 10 -- -- --
Repurchase of common stock......... -- -- (206,250) (10) -- 10 --
Payments of notes receivable from
shareholders...................... -- -- -- -- -- 3 --
Comprehensive income (loss):....... -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- (5,487)--
--------
Comprehensive loss................. -- -- -- -- -- -- $ (5,487)
--------- ------- --------- ------- -------- ----- ========
Balance at December 31, 1997....... 4,308,222 $ 6,669 2,492,825 $ 49 $ -- $ (34) --
Issuance of Series C preferred
stock, at $5.54 per share in
February and March 1998 for cash,
net of $94 issuance costs......... 2,166,055 11,906 -- -- -- -- --
Deferred stock compensation related
to certain options granted to
employees......................... -- -- -- 3,471 (3,471) -- --
Amortization of deferred stock
compensation...................... -- -- -- -- 1,133 -- --
Issuance of common stock upon
exercise of options............... -- -- 293,889 87 -- (46) --
Repurchase of common stock......... -- -- (79,414) (3) -- 3 --
Payments of notes receivable from
shareholders...................... -- -- -- -- -- 1 --
Note receivable from shareholder... -- -- -- -- -- (400) --
Comprehensive income (loss):....... -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- (11,343)
Foreign currency translation
adjustment...................... -- -- -- -- -- -- (37)
--------
Comprehensive loss................. -- -- -- -- -- -- $(11,380)
--------- ------- --------- ------- -------- ----- ========
Balance at December 31, 1998....... 6,474,277 $18,575 2,707,300 $ 3,604 $ (2,338) $(476)
Issuance of Series E preferred
stock, at $9.13 per share in June
1999 for cash, net of $10 of
issuance costs (unaudited)........ 2,188,812 19,979 -- -- -- -- --
Deferred stock compensation related
to certain options granted to
employees (unaudited)............. -- -- -- 11,041 (11,041) -- --
Amortization of deferred stock
compensation (unaudited).......... -- -- -- -- 2,472 -- --
Issuance of common stock upon
exercise of options (unaudited)... -- -- 665,862 337 -- (161) --
Repurchase of common stock
(unaudited)....................... -- -- (146,354) (8) -- --
Note receivable from shareholder
(unaudited)....................... -- -- -- (4) -- 11 --
Comprehensive income (loss):....... -- -- -- -- -- --
Net loss (unaudited).............. -- -- -- -- -- -- (10,887)
Foreign currency translation
adjustment (unaudited).......... -- -- -- -- -- -- (1)
--------
Comprehensive loss (unaudited)..... -- -- -- -- -- -- $(10,888)
--------- ------- --------- ------- -------- ----- ========
Balance at June 30, 1999
(unaudited)....................... 8,663,089 $38,554 3,226,808 $14,970 $(10,907) $(626)
========= ======= ========= ======= ======== =====
<CAPTION>
TOTAL
ACCUMULATED SHAREHOLDERS'
OTHER EQUITY
COMPREHENSIVE ACCUMULATED (NET CAPITAL
LOSS DEFICIT DEFICIENCY)
------------- ----------- -------------
<S> <C> <C> <C>
Issuance of restricted common stock
to founder at $0.002 per share in
November 1995 in exchange for
cash.............................. $ -- $ -- $ 2
Issuance of Series A convertible
preferred stock at $0.67 per share
in December 1995 and April 1996
for cash, net of $31 issuance
costs, and in June 1996 for
services.......................... -- -- 1,559
Issuance of Series B convertible
preferred stock at $2.68 per share
in December 1996 for cash, net of
$23 issuance costs................ -- -- 4,977
Issuance of common stock upon
exercise of options............... -- -- --
Comprehensive income (loss):....... -- -- --
Net loss.......................... -- (1,272) (1,272)
Comprehensive loss................. -- -- --
---- -------- --------
Balance at December 31, 1996....... $ -- $ (1,272) $ 5,266
Issuance of Series B convertible
preferred stock at $2.68 per share
in March 1997 for cash, net of $27
issuance costs.................... -- -- 133
Issuance of common stock upon
exercise of options............... -- -- 10
Repurchase of common stock......... -- -- --
Payments of notes receivable from
shareholders...................... -- -- 3
Comprehensive income (loss):....... -- -- --
Net loss.......................... -- (5,487) (5,487)
Comprehensive loss................. -- -- --
---- -------- --------
Balance at December 31, 1997....... $ -- $ (6,759) $ (75)
Issuance of Series C preferred
stock, at $5.54 per share in
February and March 1998 for cash,
net of $94 issuance costs......... -- -- 11,906
Deferred stock compensation related
to certain options granted to
employees......................... -- -- --
Amortization of deferred stock
compensation...................... -- -- 1,133
Issuance of common stock upon
exercise of options............... -- -- 41
Repurchase of common stock......... -- -- --
Payments of notes receivable from
shareholders...................... -- -- 1
Note receivable from shareholder... -- -- (400)
Comprehensive income (loss):....... -- -- --
Net loss.......................... -- (11,343) (11,343)
Foreign currency translation
adjustment...................... (37) -- (37)
Comprehensive loss................. -- -- --
---- -------- --------
Balance at December 31, 1998....... $(37) $(18,102) $ 1,226
Issuance of Series E preferred
stock, at $9.13 per share in June
1999 for cash, net of $10 of
issuance costs (unaudited)........ -- -- 19,979
Deferred stock compensation related
to certain options granted to
employees (unaudited)............. -- -- --
Amortization of deferred stock
compensation (unaudited).......... -- -- 2,472
Issuance of common stock upon
exercise of options (unaudited)... -- -- 176
Repurchase of common stock
(unaudited)....................... -- -- (8)
Note receivable from shareholder
(unaudited)....................... -- -- 7
Comprehensive income (loss):....... -- -- --
Net loss (unaudited).............. -- (10,887) (10,887)
Foreign currency translation
adjustment (unaudited).......... (1) -- (1)
Comprehensive loss (unaudited)..... -- -- --
---- -------- --------
Balance at June 30, 1999
(unaudited)....................... $(38) $(28,989) $ 12,964
==== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 79
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
BroadBase Information Systems, Inc. (the "Company") was incorporated on
November 28, 1995 and develops and markets software that integrates and analyzes
customer information from Internet and traditional business channels, enabling
businesses to improve their customer acquisition, retention, and profitability.
Through December 31, 1997, the Company was in the development stage. During
1998, the Company sold its first product and, accordingly, is no longer
classified as a development stage company. The Company has incurred operating
losses to date, including a net loss of $11,343,000 for the year ended December
31, 1998. The Company's activities have been financed primarily through private
placements of equity and debt securities. Management recognizes the need for
additional financing and will pursue various funding options including both
private and public equity and debt financings. In the longer term, the Company
plans to finance operations with revenues from product sales.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The Company has export sales from the United
States and has operations in Japan and the United Kingdom. All significant
intercompany transactions and balances have been eliminated.
INTERIM FINANCIAL INFORMATION
The financial information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited but includes all adjustments, consisting of
only normal recurring adjustments, that in the opinion of management is
necessary for a fair presentation of the Company's financial position, operating
results, and cash flows for such periods. Operating results for the six month
period ended June 30, 1999 are not necessarily indicative of results to be
expected for the full fiscal year of 1999 or any future period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), as amended by Statement of Position 98-4, "Deferral
of the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). The Company
derives revenue from the sale of software licenses, post-contract support
("maintenance"), and other professional services.
F-7
<PAGE> 80
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Maintenance includes telephone technical support, bug fixes and rights to
upgrades and enhancements on a when-and-if available basis. Professional
services include training and basic post-implementation consulting to meet
specific customer needs.
Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, no significant company
obligations with regard to installation or implementation of the software
remain, the fee is fixed or determinable and collectibility is probable. Revenue
on arrangements with customers that are not the ultimate end users (primarily
resellers) is recognized upon receipt of a reseller report of the sale and the
Company's shipment of the licensed software. Advance payments are recorded as
deferred revenue until the products are shipped, services are delivered or
obligations are met. The Company's products do not require significant
customization.
Revenue related to maintenance is recognized on a straight-line basis over
the period maintenance is provided and revenue allocable to professional
services is recognized as the services are performed.
In December 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions" ("SOP 98-9"). SOP
98-9 requires use of the "residual method" for recognition of revenue when
vendor-specific objective evidence exists for undelivered elements but does not
exist for delivered elements of a software arrangement. The Company will be
required to comply with the provisions of SOP 98-9 for transactions entered into
beginning January 1, 2000. The Company has not yet determined the effect of the
adoption of SOP 98-9 on its financial position or operating results. However,
SOP 98-9 may require more revenue to be deferred for certain types of
transactions.
CONCENTRATIONS OF CREDIT RISK AND CREDIT EVALUATIONS
Financial instruments which subject the Company to concentrations of credit
risk primarily consist of cash, cash equivalents and accounts receivable. The
Company maintains its cash and cash equivalents principally in domestic
financial institutions of high credit standing. The Company's accounts
receivables are derived primarily from sales of software products and services.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral.
A limited number of customers has accounted for a substantial portion of
the Company's revenues. The Company had no revenue for the year ended December
31, 1997. One customer accounted for 18% and 11%, of total revenue for the year
ended December 31, 1998 and the six months ended June 30, 1999, respectively.
Another customer accounted for 10% of total revenue for the year ended December
31, 1998. Sales of the Company's products will vary as a result of fluctuations
in market demand for such products and technology. Further, the markets in which
the Company competes are characterized by rapid technological change and intense
competition.
F-8
<PAGE> 81
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
CASH AND CASH EQUIVALENTS
Cash equivalents consist of money market funds. The Company considers all
highly liquid investments with an original maturity date of three months or less
to be cash equivalents. The fair value, based on quoted market prices, of the
cash equivalents is approximately equal to their carrying value at December 31,
1997 and 1998 and June 30, 1999.
SOFTWARE DEVELOPMENT COSTS
Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based upon the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between the establishment of
technological feasibility and the point at which the product is ready for
general release have been insignificant. Accordingly, the Company has charged
all such costs to research and development expenses in the accompanying
statements of operations.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"), which requires the use of the liability method in accounting for income
taxes. Under FAS 109, deferred tax assets and liabilities are measured based on
differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees under the
intrinsic value method in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and has adopted
the disclosure-only alternative of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123").
ADVERTISING EXPENSES
The Company expenses advertising costs in the period in which they are
incurred. Advertising expenses for 1997, 1998, and the six months ended June 30,
1999 were approximately $0, $57,000 and $1,000, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned foreign subsidiaries
are translated from their functional currencies at exchange rates in effect at
the balance sheet date, and revenues and expenses are translated at average
exchange rates prevailing during the year. Resulting translation adjustments are
reflected as a separate component of shareholders' equity
F-9
<PAGE> 82
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
(net capital deficiency). Foreign currency transaction gains and losses, which
have not been material, are included in results of operations.
NET LOSS PER SHARE
Basic and diluted net loss per share are presented in conformity with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128") for all periods presented. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 98, common stock and convertible preferred stock
issued or granted for nominal consideration prior to the anticipated effective
date of the Company's initial public offering must be included in the
calculation of basic and diluted net loss per share as if they had been
outstanding for all periods presented. To date, the Company has not had any
issuances or grants for nominal consideration. In accordance with FAS 128, basic
and diluted net loss per share has been computed using the weighted-average
number of shares of common stock outstanding during the period, less shares
subject to repurchase.
PRO FORMA NET LOSS PER SHARE AND PRO FORMA SHAREHOLDERS' EQUITY
Pro forma net loss per share has been computed as described above and also
gives effect, under Securities and Exchange Commission guidance, to the
conversion of convertible preferred stock and convertible debentures not
included above that will automatically convert or which management intends to
convert upon the completion of the Company's initial public offering (using the
if-converted method) from the original date of issuance. If the offering
contemplated by this prospectus is consummated, all of the convertible preferred
stock and convertible debentures outstanding as of June 30, 1999 will be
converted into an aggregate of 8,663,089 and 1,313,793 shares, respectively, of
common stock. Pro forma shareholders' equity at June 30, 1999, as adjusted for
conversion of the convertible preferred stock and convertible debentures, is
disclosed on the accompanying balance sheet. Historical and pro forma basic and
diluted net loss per share are as follows:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
NOVEMBER 28, 1995 YEARS ENDED ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ------------------
1996 1997 1998 1998 1999
----------------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Historical:
Net loss.......................... $(1,272) $(5,487) $(11,343) $(5,100) $(10,887)
======= ======= ======== ======= ========
Basic and diluted shares:
Weighted-average shares of common
stock outstanding............... 1,339 2,689 2,615 2,570 2,754
Less weighted-average shares
subject to repurchase........... (1,043) (1,802) (1,334) (1,456) (1,026)
------- ------- -------- ------- --------
Weighted-average shares of common
stock outstanding used in
computing basic and diluted net
loss per share.................. 296 887 1,281 1,114 1,728
------- ------- -------- ------- --------
Basic and diluted net loss per
share........................... $ (4.30) $ (6.19) $ (8.85) $ (4.58) $ (6.30)
======= ======= ======== ======= ========
</TABLE>
F-10
<PAGE> 83
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
NOVEMBER 28, 1995 YEARS ENDED ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ------------------
1996 1997 1998 1998 1999
----------------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Pro forma:
Net loss.......................... $(11,343) $(10,887)
======== ========
Weighted-average shares of common
stock outstanding used in
computing basic and diluted net
loss per share.................. 1,281 1,728
Adjusted to reflect the assumed
conversion of convertible
preferred stock and convertible
debentures from the date of
issuance........................ 6,255 7,655
-------- --------
Weighted-average shares used in
computing pro forma basic and
diluted net loss per share...... 7,536 9,383
-------- --------
Pro forma basic and diluted net
loss per share.................. $ (1.51) $ (1.16)
======== ========
</TABLE>
If the Company had reported net income, diluted net income per share would
have included the shares used in the computation of pro forma net loss per share
as well as approximately 661,914, 1,278,889 and 2,050,013 common equivalent
shares related to outstanding options and warrants to purchase common stock not
included above for the years ended December 31, 1997 and 1998 and for the six
months ended June 30, 1999, respectively. The common equivalent shares from
options and warrants would be determined on a weighted-average basis using the
treasury stock method.
COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS
130 establishes new rules for the reporting and display of comprehensive income
and its components, requiring foreign currency translation adjustments, which
currently are reported in shareholders' equity (net capital deficiency), to be
included in other comprehensive income along with net income (loss). For the
years ended December 31, 1997 and 1998 total other comprehensive loss was
approximately $0 and $37,000, respectively, and for the six months ended June
30, 1999 other comprehensive loss totaled $1,000. Other comprehensive income
(loss) consisted solely of foreign currency translation adjustments.
SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 131 changes the way
companies report selected segment information in annual financial statements and
requires companies to report selected segment information in interim financial
reports to shareholders. FAS 131 is effective beginning in the
F-11
<PAGE> 84
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Company's year ended December 31, 1998. The Company operates solely in one
segment, the development and marketing of customer-centric analytic software
products, and therefore there is no impact to the Company's financial statements
of adopting FAS 131. The Company did not have revenue in the year ended December
31, 1997. For the year ended December 31, 1998, revenue from customers outside
of the United States was approximately $175,000. This revenue was from customers
in Japan.
PROPERTY AND EQUIPMENT
The Company records property and equipment at cost and calculates
depreciation using the straight-line method over the estimated useful lives of
the assets, generally three to five years. Equipment held under capital leases
is amortized on a straight-line basis over the shorter of the lease term or the
lives of the respective assets, generally three to five years.
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1998
----- ------
(IN THOUSANDS)
<S> <C> <C>
Computer hardware and software.......................... $ 411 $1,407
Office furniture and fixtures........................... 462 881
----- ------
873 2,288
Less accumulated depreciation and amortization.......... (171) (678)
----- ------
$ 702 $1,610
===== ======
</TABLE>
As of December 31, 1998, property and equipment include amounts held under
capital leases of $60,941 and related accumulated amortization of $30,584.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires
companies to capitalize certain qualifying computer software costs that are
incurred during the application development stage and amortize them over the
software's estimated useful life. The Company adopted SOP 98-1 effective January
1, 1999. The adoption of SOP 98-1 did not have a material affect on the
Company's consolidated financial position, results of operations, or cash flows.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 is effective beginning on January 1, 1999,
and requires that start-up costs, capitalized prior to January 1, 1999, be
written off and any future start-up costs be expensed as incurred. The adoption
of SOP 98-5 did not have a material impact on the Company's financial position,
results of operations, or cash flows.
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. The
F-12
<PAGE> 85
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Company will be required to adopt FAS 133 for its year ending December 31, 2001.
However, because the Company does not utilize derivative financial instruments
the Company does not believe the impact of FAS 133 will be material to its
financial position, results of operations, or cash flows.
2. BANK LINE OF CREDIT AND NOTES PAYABLE
Notes payable and line of credit borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) --------------- JUNE 30,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable............................... $1,225 $ 878 $ 684
Bank line of credit......................... -- 1,000 833
------ ------ ------
1,225 1,878 1,517
Less current portion........................ (347) (768) (740)
------ ------ ------
Noncurrent portion.......................... $ 878 $1,110 $ 777
====== ====== ======
</TABLE>
During 1996 and 1997, the Company secured financing under the terms of
$300,000 and $1,000,000 three-year notes payable, respectively. The notes bear
interest at a rate of 15% and 14%, respectively. Principal and interest
installments are payable monthly and the notes are secured by the tangible
assets of the Company. Of the $684,000 in principal amount of notes payable
outstanding at June 30, 1999, $242,000 is due in 1999 and $442,000 is due in
2000. The carrying value of these note obligations approximates their fair
value.
In connection with the issuance of the notes, the Company issued warrants
to purchase 12,537 and 24,227 shares of Series A and Series B preferred stock at
prices of $1.67 and $2.68 per share, respectively. These warrants are
immediately exercisable and expire in November 2003 and July 2004, respectively.
At the date of grant, the value ascribed to these warrants was immaterial for
financial statement purposes.
In July 1998, the Company entered into a loan and security agreement with a
financial institution. The agreement provides for a line of credit not to exceed
$2,000,000 and an equipment line of credit not to exceed $1,000,000. Borrowings
under the line of credit bear interest at the institution's prime lending rate
(7.75% at December 31, 1998), and any borrowings under the equipment line of
credit bear interest at the institution's prime lending rate plus 0.5% (8.25% at
December 31, 1998). All borrowings under this agreement are secured by certain
assets of the Company. As of December 31, 1998, no borrowings were outstanding
and $2,000,000 remained available under the line of credit, and $1,000,000, the
full amount available, has been borrowed under the equipment line of credit. The
equipment line of credit borrowings are due in 36 equal monthly installments of
principal, plus accrued interest, beginning in January 1999 and ending in
December 2001. The carrying value of borrowings under the equipment line of
credit approximates their fair value. The agreement also includes terms
requiring satisfaction of certain financial ratios, and a minimum tangible net
worth requirement, and restricts the Company from paying cash dividends. The
Company was in compliance with these financial covenants at December 31, 1998
and June 30, 1999.
F-13
<PAGE> 86
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
3. CONVERTIBLE DEBENTURES
In December 1998 and April 1999, the Company issued to investors an
aggregate of $8,250,000 and $1,275,000 respectively, principal amount of
unsecured convertible debentures bearing interest of 10.0% per annum. Interest
on the notes is payable quarterly commencing on January 4, 1999 and July 1,
1999, respectively. The debentures are due on December 9, 2003 and are
convertible, at the holders' option, into shares of the Series D preferred stock
anytime prior to the maturity date. As of December 31, 1998, the difference
between the carrying value and the fair value of the convertible debentures was
immaterial based upon the minimal change in interest rates from the date of
issuance to fiscal year end.
In the event the Company completes a qualified underwritten public offering
of its common stock with aggregate proceeds of at least $10,000,000, the Company
may, at its option, convert the debentures into shares of Series D preferred
stock. Upon conversion, the investors are entitled to the number of shares of
Series D preferred stock determined by dividing the aggregate amount of each
debenture to be converted by a conversion price of $7.25, subject to certain
future adjustments. As of December 31, 1998 and June 30, 1999, no debentures
have been converted into Series D preferred stock.
4. COMMITMENTS
LEASES
The Company leases its principal office under a noncancelable operating
lease agreement that expires in July 2002.
The gross rental payments under all operating leases were approximately
$114,000, $230,000 and $496,000 for the years ended December 31, 1997 and 1998,
and the six months ended June 30, 1999, respectively. Rental expense, net of
reimbursements from sublessees, was approximately $114,000, $73,000 and $316,000
in 1997 and 1998 and the six months ended June 30, 1999, respectively.
As of December 31, 1998, minimum lease payments under all noncancelable
lease agreements were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31,
1999.................................................. $ 34 $ 401
2000.................................................. -- 629
2001.................................................. -- 753
2002.................................................. -- 429
---- ------
Total minimum lease payments.................. 34 $2,212
======
Less amount representing interest....................... (4)
----
Present value of minimum lease payments................. 30
Less current portion.................................... (30)
----
Long-term capital lease obligations..................... $ --
====
</TABLE>
F-14
<PAGE> 87
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Included in the above minimum operating lease payments are future
reimbursements from sublessees under noncancellable subleases, which amount to
$317,000 in 1999, $96,000 in 2000, and $0 in 2001 and 2002.
5. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock consisted of the following at June 30, 1999:
<TABLE>
<CAPTION>
SHARES ISSUED AGGREGATE
SHARES AND LIQUIDATION
DESIGNATED OUTSTANDING PREFERENCE
---------- ------------- -----------
<S> <C> <C> <C>
Series A.............................. 2,398,000 2,384,999 $ 1,590,000
Series B.............................. 2,000,000 1,923,223 5,160,000
Series C.............................. 2,166,065 2,166,055 12,000,000
Series D.............................. 1,400,000 -- --
Series E.............................. 2,189,981 2,188,812 19,989,325
---------- --------- -----------
10,154,046 8,663,089 $38,739,325
========== ========= ===========
</TABLE>
Each share of Series A, B, C, D and E preferred stock is convertible at any
time into common stock at the exchange rate in effect at the time of conversion,
currently one-for-one, and is subject to appropriate adjustment for common stock
splits, stock dividends, and similar transactions. Conversion is automatic upon
the closing of an initial public offering of common stock in which the aggregate
gross proceeds to the Company are at least $10,000,000 and the offering price is
at least $11.08 per share.
Each holder of Series A, B, C and D preferred stock is entitled to the
number of votes equal to the number of shares of common stock into which such
preferred stock is convertible.
Each holder of preferred stock is entitled to receive, when and as declared
by the Board of Directors, noncumulative dividends at the annual rate of $0.05,
$0.21, $0.44, $0.58 and $0.73 per share of Series A, B, C, D and E preferred
stock, respectively, payable in preference and priority to any payment of any
dividend on common stock.
In the event of liquidation, the holders of preferred stock are entitled to
a liquidation preference equal to the original purchase price of their preferred
stock plus an amount equal to all accrued but unpaid dividends on such shares.
COMMON STOCK
In November 1995, 1,282,500 shares of common stock were issued to the
Company's founder at $0.002 per share in exchange for cash. These shares are
subject to certain transfer restrictions. These shares are also subject to
repurchase at the issuance price upon the occurrence of certain events,
including termination of employment. The Company's right of repurchase expires
over four years. At December 31, 1997 and 1998 and June 30, 1999, 553,078,
264,516 and 120,230 shares, respectively, remained subject to repurchase.
F-15
<PAGE> 88
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
STOCK OPTION PLAN
During 1996, the Company adopted the 1996 Equity Incentive Plan (the
"Plan"). Under the Plan, up to 4,030,000 shares of the Company's common stock
may be granted to eligible participants. Under the Plan, options to purchase
common stock may be granted at no less than 85% of the fair value on the date of
the grant (110% of fair value in certain instances), as determined by the board
of directors. Options generally vest over a 48-month period and have a maximum
term of 10 years.
As discussed in Note 1, the Company has elected to follow APB 25 and
related interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FAS
123 requires use of option valuation models that were not developed for use in
valuing employee stock options.
Under APB 25, when the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted subsequent to December 31, 1994 under the
fair value method of that Statement. The fair value of these options was
estimated at the date of grant using the minimum value method option pricing
model with the following weighted-average assumptions for the period from
November 28, 1995 (inception) to December 31, 1996, the years ended December 31,
1997 and 1998 and the six months ended June 30, 1999: risk-free interest rate of
6%; a dividend yield of 0%; and a weighted-average expected life of the option
of four years.
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
NOVEMBER 28, 1995 DECEMBER 31,
(INCEPTION) TO ------------------ SIX MONTHS
DECEMBER 31, 1996 1997 1998 ENDED JUNE 30, 1999
------------------ ------- -------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Pro forma net loss.......... $(1,274) $(5,496) $(11,702) $(11,739)
Pro forma basic and diluted
net loss per share........ $ (4.30) $ (6.20) $ (9.14) $ (6.79)
</TABLE>
F-16
<PAGE> 89
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
SHARES AVAILABLE WEIGHTED-AVERAGE
FOR GRANT NUMBER OF SHARES EXERCISE PRICE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Authorized.............................. 3,030,000 -- $ --
Granted................................. (1,457,225) 1,457,225 0.03
Exercised............................... -- (1,409,225) 0.03
---------- ---------- -----
Balance at December 31, 1996.............. 1,572,775 48,000 0.03
Granted................................. (694,000) 694,000 0.25
Exercised............................... -- (7,350) 0.22
Canceled................................ 109,500 (109,500) 0.20
Repurchased............................. 206,250 -- 0.03
---------- ---------- -----
Balance at December 31, 1997.............. 1,194,525 625,150 0.24
Authorized.............................. 1,000,000 -- --
Granted................................. (1,254,110) 1,254,110 0.47
Exercised............................... -- (293,889) 0.33
Canceled................................ 343,246 (343,246) 0.43
Repurchased............................. 79,414 -- 0.03
---------- ---------- -----
Balance at December 31, 1998.............. 1,363,075 1,242,125 0.40
Authorized (unaudited).................. 500,000 -- --
Granted (unaudited)..................... (1,860,607) 1,860,607 0.72
Exercised (unaudited)................... -- (665,862) 0.51
Canceled (unaudited).................... 423,621 (423,621) 0.59
Repurchased (unaudited)................. 146,354 -- 0.08
---------- ---------- -----
Balance at June 30, 1999 (unaudited)...... 572,443 2,013,249 $0.62
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
OPTIONS VESTED AND EXERCISABLE
-------------------------------------------------
1997 1998
----------------------- -----------------------
WEIGHTED- WEIGHTED-
OPTIONS AVERAGE PRICE OPTIONS AVERAGE PRICE
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Vested and exercisable at end of year....... 25,023 $0.19 219,116 $0.26
======= ===== ======= =====
</TABLE>
The weighted-average fair value of options granted during the period from
November 28, 1995 (inception) to December 31, 1996, and the years ended December
31, 1997 and 1998, with an exercise price equal to the fair value of the
Company's common stock on the date of grant was $0.01, $0.06, and $0.10,
respectively. The weighted-average fair value of options granted during 1998
with an exercise price below the deemed fair value of the Company's common stock
on the date of grant was $2.86.
Exercise prices for options outstanding as of December 31, 1998 ranged from
$0.03 to $0.73. The weighted-average remaining contractual life of those options
is 9.0 years. Options subject to repurchase by the Company total 890,393 and
810,486 at December 31, 1997 and 1998, respectively.
F-17
<PAGE> 90
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
In connection with the grant of certain options to employees during the
year ended December 31, 1998 and the six months ended June 30, 1999, the Company
recorded deferred stock compensation of approximately $3,471,000 and
$11,041,000, respectively, based on the difference between the exercise prices
of those options at their respective grant dates and the deemed fair value for
accounting purposes of the shares of common stock subject to such options. Such
amounts are included as a reduction of shareholders' equity and are being
amortized on a graded vesting method. The compensation expense of $1,133,000 and
$2,472,000 during 1998 and the six months ended June 30, 1999, respectively,
relate to options awarded to employees in all operating expense categories, as
well as employees in professional services. These amounts have not been
separately allocated between operating expense categories.
SHARES RESERVED FOR FUTURE ISSUANCE
At December 31, 1998 and June 30, 1999, the Company has reserved common
shares for issuance as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ ----------
<S> <C> <C>
Stock options:
Outstanding.......................................... 1,242,125 2,013,249
Available for grant.................................. 1,363,075 572,443
Upon conversion of:
Preferred stock warrants outstanding................. 36,764 36,764
Preferred stock outstanding.......................... 6,474,277 8,663,089
Convertible debentures outstanding................... 1,137,931 1,313,793
---------- ----------
10,254,172 12,599,338
========== ==========
</TABLE>
6. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan which stipulates that all full-time employees
can elect to contribute to the 401(k) plan, subject to certain limitations, up
to 20% of their salary on a pre-tax basis. The Company has the option to provide
matching contributions but has not done so to date.
7. INCOME TAXES
The Company's income tax provision (benefit) differs from the income tax
(benefit) determined by applying the U.S. federal statutory rate to the net loss
as follows:
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
NOVEMBER 28, 1995 DECEMBER 31,
(INCEPTION) TO ------------------
DECEMBER 31, 1996 1997 1998
----------------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax provision (benefit) at U.S. statutory rate... $(432) $(1,866) $(3,857)
Valuation allowance for deferred tax assets...... 432 1,866 3,857
----- ------- -------
Tax provision (benefit).......................... $ -- $ -- $ --
===== ======= =======
</TABLE>
F-18
<PAGE> 91
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities for federal and state income
taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 2,670 $ 5,800
Tax credit carryforwards.................................... 230 400
Deferred revenue............................................ 0 214
Other accruals and reserves not deductible for tax
purposes.................................................. 0 86
------- -------
Total gross deferred tax assets............................. 2,900 6,500
Less valuation allowance.................................... (2,900) (6,500)
------- -------
Net deferred tax assets................................ $ -- $ --
======= =======
</TABLE>
Realization of deferred tax assets is dependent on future earnings, if any,
the timing and amount of which are uncertain. Accordingly, a valuation allowance
in an amount equal to the net deferred tax assets as of December 31, 1997 and
1998 has been established to reflect these uncertainties. The valuation
allowance increased by $2,400,000 and $3,600,000 during the years ended December
31, 1997 and 1998, respectively.
As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $15,400,000 and $10,700,000, respectively.
The Company also had federal and state research and development tax credit
carryforwards of approximately $300,000 and $200,000, respectively. The net
operating loss and tax credit carryforwards will expire at various dates
beginning in 2004, if not utilized.
Utilization of the net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the "change in ownership"
provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating loss and tax
credit carryforwards before utilization.
8. RELATED PARTY TRANSACTION
In April 1998, the Company provided a $400,000 loan to an officer, who is
also a shareholder, in exchange for a nonrecourse promissory note which is
secured by security interest in common stock. The loan is due in April 2000 and
bears interest at 5.51%.
9. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
INITIAL PUBLIC OFFERING
In July 1999, the Company filed a registration statement with the
Securities and Exchange Commission that would permit the Company to sell shares
of the its common stock in connection with a proposed initial public offering
(IPO). If the offering is consummated under the terms presently anticipated, all
of the outstanding shares of the Company's convertible
F-19
<PAGE> 92
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
preferred stock, including those shares of convertible preferred stock into
which outstanding debentures are convertible, will convert into shares of common
stock on a one-for-one basis upon closing of the proposed IPO. The conversion of
the convertible preferred stock and debentures has been reflected in the
accompanying unaudited pro forma consolidated balance sheet.
1999 EQUITY INCENTIVE PLAN
On July 2, 1999, the Board of Directors approved the adoption of the
Company's 1999 Equity Incentive Plan (the "1999 Incentive Plan"), subject to
shareholder approval. A total of 3,500,000 shares of common stock has been
reserved for issuance under the 1999 Incentive Plan, plus, commencing on
December 31, 1999, annual increases equal to 5% of the outstanding shares. The
number of shares authorized for issuance under the 1999 Incentive Plan will be
increased to include any shares reserved under the 1996 Equity Incentive Plan
not issued or subject to outstanding grants on the date of the Company's initial
public offering and any shares issued under the 1996 Equity Incentive Plan that
are forfeited or repurchased by the Company at the original purchase price or
that expire or become unexercisable for any reason without having been exercised
in full. The types of awards that may be made under the 1999 Incentive Plan are
options to purchase shares of common stock, restricted stock and stock bonuses.
The exercise price for incentive stock options may not be less than 100% of the
fair market value of the Company's common stock on the date of grant (85% for
nonstatutory options). In the event of a change in control of the Company, an
option or award under the 1999 Incentive Plan may be assumed or substituted by
the successor corporation. The Company's compensation committee may also
accelerate the vesting of awards upon a change of control transaction.
1999 EMPLOYEE STOCK PURCHASE PLAN
On July 2, 1999, the Board of Directors approved the adoption of the
Company's 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"), subject
to shareholder approval. A total of 500,000 shares of common stock has been
reserved for issuance under the 1999 Purchase Plan, plus, commencing on January
1, 2000, annual increases equal to 1% of the Company's outstanding common shares
on the preceding December 31. The 1999 Purchase Plan permits eligible employees
to acquire shares of the Company's common stock through periodic payroll
deductions of up to 10% of their cash compensation, subject to certain maximum
purchase limitations. Each offering period will have a maximum duration of 24
months and will consist of four six-month purchase periods. The price at which
the common stock may be purchased is 85% of the lesser of the fair market value
of the Company's common stock on the first day of the applicable offering period
or the last day of each respective purchase period. This initial offering period
will begin on the first business day on which price quotations for the Company's
common stock are available on the Nasdaq National Market after the effectiveness
of the initial public offering.
LEGAL PROCEEDINGS
On July 21, 1999, Timeline Inc. filed a complaint against the Company in
the United States District Court for the Western Division of Washington,
alleging infringement by the Company of
F-20
<PAGE> 93
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
one of Timeline's patents. The complaint alleges that the Company directly and
indirectly infringes Timeline's patent claims by making, using, selling and
offering to sell software products, both alone and in combination with third
party software products, and further alleges that the Company induces
infringement of the Timeline patent claims. Timeline has requested permanent
injunctions prohibiting the Company from directly or indirectly infringing the
Timeline patent, and seeks damages, exemplary damages, costs and attorney's
fees. Timeline has further disclosed to the Company claims of a pending related
patent application that Timeline expects to be issued and to be added to the
present case. Based on the Company's investigation of this matter to date, the
Company does not believe its products infringe any valid claims of the Timeline
patent or of the pending patent application, and that it has meritorious
defenses to all claims made by Timeline. The Company intends to defend this suit
vigorously and does not believe the resolution of this matter will have a
material adverse impact on the Company's financial position, results of
operations, or cash flows.
F-21
<PAGE> 94
[Description of Graphics on Inside Front Cover]
At the center of this graphic is a circle labeled "Web Sites" which
contains the image of a computer screen. Arranged concentrically around this
circle is a series of six additional circles. The first circle, directly above
the "Web Sites" graphic, is labeled "E-Mail" and contains the image of an
envelope and a computer that is shaped in the form of a mailbox. Clockwise from
the "E-Mail" graphic, the second circle is labeled "Online Service" and contains
the image of a mouse sitting on a mouse pad. The third circle is labeled "Direct
Sales" and contains the image of a man in a suit holding a briefcase. The fourth
circle is labeled "Direct Mail" and contains the image of three envelopes. The
fifth circle is labeled "Call Centers" and contains the image of an individual
wearing headphones and facing a computer screen. The sixth circle is labeled
"Store Fronts" and contains the image of a store front. Above this graphic, the
text reads "You can touch your customers in many ways..." Below this graphic the
text reads "...Are you making the most of it?" At the bottom right corner of the
graphic is the Broadbase logo.
<PAGE> 95
DESCRIPTION OF GRAPHICS
[Description of Graphics on Gatefold]
This graphic is entitled, "E-business Analytic Solutions." In the center of the
page, a circle is labeled "Broadbase EPM." Below the circle is a column entitled
"Personalize," followed by five bullet points. The first point reads, "All
customer interactions with closed loop optimization." The second point reads,
"Recommend cross sells and up sells." The third point reads, "Adjust web content
& offerings." The fourth point reads, "Differentiate offerings." The fifth point
reads, "Target profitable customers." To the right of the circle, a
double-headed arrow moves straight to the right of the circle to a graphic of a
cloud labeled, from top-to-bottom, "Internet," "Intranets" and "Extranets."
Forming a semi-circle outside the image of the cloud is a series of circular
graphics entitled "Business Users" and labeled as follows: "Sales,"
"E-commerce," "Marketing" and "Customer Service." Below the cloud and the
circular graphics is the Broadbase logo. Above the cloud and the circular
graphics is a column entitled "Analyze," followed by three bullet points. The
first point reads, "With logic and best practices." The second point reads, "For
functional groups & business users." The third point reads, "Guided
decision-making & customer analysis." From the graphic of the cloud, an arrow
moves clockwise through the "Personalize" column to the left of the "Broadbase
EPM" circle to a series of circular graphics labeled "Customer touch points." In
the center of this series of graphics is a circle labeled "Web Sites" which
contains the image of a computer screen. Arranged concentrically around this
circle is a series of six additional circles. The first circle, directly above
the "Web Sites" graphic, is labeled "E-Mail" and contains the image of an
envelope and a computer that is shaped in the form of a mailbox. Clockwise from
the "E-Mail" graphic, the second circle is labeled "Online Service" and contains
the image of a mouse sitting on a mouse pad. The third circle is labeled "Direct
Sales" and contains the image of a man in a suit holding a briefcase. The fourth
circle is labeled "Direct Mail" and contains the image of three envelopes. The
fifth circle is labeled "Call Centers" and contains the image of an individual
wearing headphones and facing a computer screen. The sixth circle is labeled
"Store Fronts" and contains the image of a store front. Above the "Customer
touch points" graphic is a column entitled "Integrate," followed by three bullet
points. The first point reads, "Comprehensive customer data." The second point
reads "Historic and real time data." The third point reads, "From multiple
channels and customer touch points." A double-headed arrow moves straight from
the "Customer touch points" graphic to the "Broadbase EPM" circle. A second
arrow moves clockwise through the "Integrate" column from the "Customer touch
points" graphic to the space above the "Broadbase EPM" circle. A third arrow
moves clockwise from the head of the second arrow through the "Analyze" column
to the graphic of the cloud. On the left edge of the gatefold, a rectangle runs
from the top to the bottom of the page with the heading "Broadbase EPM
Customers" and a column of text reading, from top-to-bottom, "Automatic Data
Processing," "BankBoston," "Baxter IV Systems," "Bell & Howell," "Boeing
Commercial Airplanes Group," "Boston Edison," "Canon Computer," "Catalog
Marketing Services," "Chevron," "CommerzBank," "Computer Hardware Maintenance
Co.," "DG Systems," "DSC Logistics," "Eastman Kodak Company," "Fidelity
Investments," "Ginza Cozy Corner," "Golden Books," "Harvard Pilgrim Healthcare,"
"Hewlett-Packard," "Honda," "Idaho Power," "Inprise," and "InsWeb." On the right
edge of the gatefold, a rectangle runs from the top to the bottom of the page
with the heading "Broadbase EPM Customers" and a column of text reading, from
top-to-bottom, "Kana Communications," "Los Alamos National Labs," "Mercata,"
"NECX Direct," "New Century Energy," "NTT," "Oakley," "Omaha Public Power,"
"Plymouth Rock Assurance," "PMA Group," "Pointcast," "PreVision Marketing,"
"Putnam Investments," "Rockwell Automation," "Shikishima Baking Company," "The
Sharper Image," "Thomson Technology Services," "Tokai," "Travers Tool," "United
Airlines," "United Natural Foods," "Vantive," and "WebTV/Microsoft."
[Description of Graphics on Page 37]
Graphic depicts a three dimensional rectangle divided vertically from front to
back into six segments. There is a small gap between each of the segments. These
segments sit on a platform of two rectangles positioned at a right angle to the
bottom left corner of the segments. The horizontal axis of the platform is
labeled "Integrated Application Management." The vertical axis is labeled "Data
Source Adapters." The top edges of the six segments are labeled "E-Procurement
(Anticipated)," "E-Personalize," "E-Commerce," "E-Marketing," "Sales" and
"Customer Service." At the far right of the front segment, a vertical column
extending from the bottom to the top of the segment is labeled "Web User
Interface" The remainder of the front segment is divided into four sections. The
upper left section is labeled "Application Specific Data Models," the upper
right section is labeled "Business Logic," the lower left section is labeled
"Application Data Store." The lower right section is labeled "Analytic
Application Server." From the top of the first segment, a line extends upward to
a box above the segments. This box is vertically divided into two sections, the
left section is labeled, "Business Rules and Processes," and the right section
is labeled, "Business Views and Metrics." From the lower right corner of the
first segment, a line extends downward to a box below the platform. The box is
vertically divided into three columns. The left column is labeled, from top to
bottom, "Analytic Engine" followed by bullet points with each bullet followed by
one of the following words: "Online Analytic Processing," "Data Mining," "Ad
Hoc" and "Statistical." The middle column is horizontally divided into two
portions. The top portion is labeled, "Design Flow Engine" and the bottom
portion is labeled, "Application Components Library." The right column is
labeled, "Web Server Integration." To the left of this box is the heading
"EPM/Foundation." From the left side of the vertical axis, five lines extend to
one of five three-dimensional rectangles, each horizontally divided into two
portions. Below these rectangles is the heading "Data Sources." Above the six
segments is the heading "Broadbase EPM Application Modules."
<PAGE> 96
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Special Note Regarding Forward-
Looking Statements and Industry
Data................................ 16
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Selected Consolidated Financial
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 31
Management............................ 47
Certain Transactions.................. 56
Principal Stockholders................ 58
Description of Capital Stock.......... 60
Shares Eligible for Future Sale....... 63
Underwriting.......................... 65
Legal Matters......................... 68
Experts............................... 68
Where You Can Find Additional
Information......................... 69
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATION: UNTIL , 1999 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THESE SHARES
OF COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
LOGO
4,000,000 SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
THOMAS WEISEL PARTNERS LLC
E*OFFERING
PROSPECTUS
, 1999
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by the
Registrant in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 13,900
NASD filing fee............................................. 6,193
Nasdaq National Market filing fee........................... 17,500
Accounting fees and expenses................................ 275,000
Legal fees and expenses..................................... 425,000
Road show expenses.......................................... 50,000
Printing and engraving expenses............................. 250,000
Blue sky fees and expenses.................................. 5,000
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous............................................... 7,407
----------
Total............................................. $1,055,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and executive officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act").
As permitted by 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 of fiduciary duty as
a director, except for liability:
- for any breach of the director's duty of loyalty to the Registrant or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law (regarding
unlawful dividends and stock purchases); or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, the Registrant's
bylaws provide that:
- the Registrant is required to indemnify its directors and executive
officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain very limited exceptions;
- the Registrant may indemnify its other employees and agents as set forth
in the Delaware General Corporation Law;
- the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions; and
- the rights conferred in the bylaws are not exclusive.
II-1
<PAGE> 98
The Registrant intends to enter into indemnification agreements with each
of its current directors and executive officers to give such directors and
executive officers additional contractual assurances regarding the scope of the
indemnification set forth in the Registrant's certificate of incorporation and
to provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of the
Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.
Reference is also made to the Underwriting Agreement, which provides for
the indemnification of officers, directors and controlling persons of the
Registrant against certain liabilities. The indemnification provision in the
Registrant's certificate of incorporation, bylaws and the indemnity agreements
to be entered into between the Registrant and each of its directors and
executive officers may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the
Securities Act.
The Registrant expects to obtain directors' and officers' liability
insurance that will include coverage for securities matters.
See also the undertakings set out in response to Item 17.
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>
Underwriting Agreement...................................... 1.01
Registrant's Certificate of Incorporation................... 3.01
Registrant's Bylaws......................................... 3.02
Form of Indemnity Agreement................................. 10.01
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities sold by
the Registrant in the past three fiscal years:
<TABLE>
<CAPTION>
AGGREGATE
CLASS OF NUMBER OF PURCHASE FORM OF
PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES PRICE CONSIDERATION
---------- ------------ ------------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
2 investors.......... 04/29/96 Series A preferred stock 60,000 $ 40,000 Cash
1 investor........... 06/14/96 Series A preferred stock 22,500 15,000 Settlement of
Claims
17 employees......... 12/13/96 common stock 1,045,561 34,817 Promissory Notes
4 investors.......... 12/16/96 Series B preferred stock 1,863,580 4,999,985 Cash
1 lender............. 12/16/96 Warrant to purchase N/A -- (1) (1)
12,537.30 shares of
Series A preferred stock
3 employees.......... 01/24/97 common stock 6,500 1,625 Services
12 investors......... 03/14/97 Series B preferred stock 59,643 160,022 Cash
1 consultant......... 05/07/97 common stock 2,500 625 Services
1 consultant......... 5/23/97 common stock 2,500 625 Services
2 consultants........ 09/16/97 common stock 850 213 Services
1 lender............. 9/11/97 Warrant to purchase N/A -- (2) (2)
24,227 shares of
Series B Preferred Stock
10 investors......... 02/17/98 Series C preferred stock 1,975,172 10,942,453 Cash
Chuck Bay............ 02/19/98 common stock 173,000 43,250 Promissory Note
1 employee........... 03/31/98 common stock 583 321 Cash
25 investors......... 04/15/98 Series C preferred stock 190,883 1,057,492 Cash
2 employees.......... 04/21/98 common stock 5,000 5,000 Cash
1 employee........... 04/30/98 common stock 12,500 6,875 Cash
</TABLE>
II-2
<PAGE> 99
<TABLE>
<CAPTION>
AGGREGATE
CLASS OF NUMBER OF PURCHASE FORM OF
PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES PRICE CONSIDERATION
---------- ------------ ------------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
4 consultants........ 06/09/98 common stock 11,610 6,386 Services
1 employee........... 06/30/98 common stock 4,333 2,383 Cash
1 employee........... 07/06/98 common stock 5,416 2,979 Cash
1 employee........... 07/09/98 common stock 2,250 1,238 Cash
1 employee........... 07/27/98 common stock 42,250 23,375 Cash
1 employee........... 08/11/98 common stock 6,250 1,563 Cash
1 employee........... 09/12/98 common stock 3,125 781 Cash
2 employees.......... 09/13/98 common stock 313 153 Cash
1 employee........... 10/01/98 common stock 7,228 1,807 Cash
1 employee........... 11/16/98 common stock 5,000 2,750 Services
1 consultant......... 11/24/98 common stock 2,500 1,375 Services
1 employee........... 12/08/98 common stock 3,323 831 Cash
4 investors.......... 12/09/98 Debentures Convertible (3) 8,250,000 Cash
into Series D preferred
stock
1 employee........... 12/11/98 common stock 1,250 313 Cash
1 employee........... 12/21/98 common stock 5,208 1302 Promissory Note
1 employee........... 01/21/99 common stock 21,603 11,882 Cash
Chuck Bay............ 03/19/99 common stock 86,000 62,780 Promissory Note
Brian Kelly.......... 03/19/99 common stock 135,000 98,550 Promissory Note
1 employee........... 03/31/99 common stock 4,872 1,449 Cash
1 employee........... 04/1/99 common stock 4,584 2,596 Cash
2 investors.......... 4/13/99 Debentures Convertible (4) 1,275,000 Cash
into Series D preferred
stock
1 employee........... 04/17/99 common stock 13,125 3,281 Cash
1 employee........... 4/21/99 common stock 2,167 542 Cash
1 employee........... 4/23/99 common stock 5,664 1,276 Cash
1 employee........... 5/27/99 common stock 96,750 70,628 Cash
1 employee........... 6/1/99 common stock 3,696 2,698 Cash
1 employee........... 6/1/99 common stock 12,500 6,875 Cash
1 employee........... 6/4/99 common stock 4,855 550 Cash
1 employee........... 6/5/99 common stock 6,808 3,706 Cash
2 employees.......... 6/8/99 common stock 6,952 2,078 Cash
3 employees.......... 6/10/99 common stock 30,844 7,786 Cash
38 investors......... 6/30/99 Series E preferred stock 2,188,812 19,989,325 Cash
</TABLE>
Each share of Series A, Series B, Series C, Series D and Series E preferred
stock will convert automatically into one share of common stock, respectively,
upon the closing of this offering.
All sales of common stock set forth in the table were made in reliance on
Rule 701 under the Securities Act or on Section 4(2) of the Securities Act
and/or Rule 506 thereunder. The sales of Series A Preferred Stock relied upon
Section 4(2) of the Securities Act. The sales of Series B Preferred Stock relied
upon Section 4(2) of the Securities Act. The sales of Series C Preferred Stock
relied upon Section 4(2) of the Securities Act. The sales of Series D Preferred
Stock Convertible Debentures relied upon Rule 506 under Regulation D promulgated
under the Securities Act and on Section 4(2) of the Securities Act. The sales of
Series E Preferred Stock relied upon Rule 506 under Regulation D promulgated
under the Securities Act and on Section 4(2) of the Securities Act. These sales
of preferred stock or convertible debentures were made without general
solicitation or advertising. Each purchaser of preferred stock or convertible
debentures was a sophisticated investor with access to all relevant information
II-3
<PAGE> 100
necessary to evaluate the investment and represented to the Registrant that the
shares were being acquired for investment.
- -------------------------
(1) The warrant was issued in connection with debt financing the Registrant
obtained from the warrant holder. The warrant expires on 11/30/03 and has an
exercise price of $1.675 per share.
(2) The warrant was issued in connection with debt financing the Registrant
obtained from the warrant holder. The warrant expires on 07/31/04 and has an
exercise price of $2.683 per share.
(3) The debentures are convertible into 1,137,931 shares of common stock.
(4) The debentures are convertible into 175,862 shares of common stock.
II-4
<PAGE> 101
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<S> <C>
1.01 Form of Underwriting Agreement.**
3.01 Registrant's Certificate of Incorporation.*
3.02 Registrant's Bylaws.*
3.03 Registrant's Certificate of Designation.
4.01 Form of Specimen Certificate for Registrant's common stock.
4.02 Amended and Restated Investors' Rights Agreement, dated June
30, 1999.*
4.03 Series E Rights Agreement, dated June 30, 1999.
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.**
10.01 Form of Indemnity Agreement between Registrant and each of
its directors and executive officers.*
10.02 1996 Equity Incentive Plan and related forms of agreement.
10.03 1999 Equity Incentive Plan and related forms of agreement.
10.04 1999 Employee Stock Purchase Plan and related forms of
agreement.
10.05 Sublease between SaRonix and Registrant dated June 1, 1998.*
10.06 Offer letter for Brian Kelly dated November 10, 1998.*
10.07 Offer letter for Thomas Doyle dated April 12, 1999.*
10.08 Offer letter for Chuck Bay dated January 18, 1998.*
10.09 Separation Agreement between Registrant and Bruce Armstrong
dated April 14, 1999.**
10.10 Broadbase Partner Agreement between Registrant and Indus
International, Inc. dated June 2, 1998, as amended.+
10.11 Offer Letter for Anil Gupta dated August 3, 1999.
21.01 List of subsidiaries.*
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).**
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of Attorney.*
27.01 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested for portions of this agreement
pursuant to an application for confidential treatment sent to the Securities and
Exchange Commission. Such portions have been redacted and marked with an
asterisk. The non-redacted version of this document has been sent to the
Securities and Exchange Commission.
(b) Financial Statement Schedules.
The following financial statement schedule for the period November 28, 1995
(Inception) to December 31, 1996 and for the years ended December 31, 1997 and
1998 should be read in conjunction with the consolidated financial statements of
Broadbase Information Systems, Inc. filed as part of this Registration
Statement:
- Schedule II -- Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted since they are
either not required, not applicable, or because the information required is
included in the financial statements or related notes.
II-5
<PAGE> 102
ITEM 17. UNDERTAKINGS.
The undersigned Registrant 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
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than 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, 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 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, 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 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,
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-6
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Menlo Park, State of
California, on this 11th day of August, 1999.
BROADBASE SOFTWARE, INC.
By: /s/ CHUCK BAY
-----------------------------------------------
Chuck Bay
Chief Financial Officer, General Counsel,
Executive Vice President of Business
Development
and Corporate Secretary
Pursuant to the requirements of the Securities Act, this Amendment to
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
* Chairman of the Board of August 11, 1999
- ------------------------------------------------ Directors, President and
Mark Kremer Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ CHUCK BAY Chief Financial Officer, August 11, 1999
- ------------------------------------------------ General Counsel, Executive
Chuck Bay Vice President of Business
Development and Corporate
Secretary
ADDITIONAL DIRECTORS:
* Director August 11, 1999
- ------------------------------------------------
Kevin Harvey
* Director August 11, 1999
- ------------------------------------------------
Paul Levy
* Director August 11, 1999
- ------------------------------------------------
Nancy Schoendorf
*By: /s/ CHUCK BAY
- -----------------------------------------------
Chuck Bay
Attorney-in-fact
</TABLE>
II-7
<PAGE> 104
BROADBASE INFORMATION SYSTEMS, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM NOVEMBER 28, 1995 (INCEPTION) TO
DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
AMOUNTS
BALANCE CHARGED TO
AT REVENUE, WRITE-OFFS BALANCE
BEGINNING COSTS OR AND AT END
DESCRIPTION OF PERIOD EXPENSES RECOVERIES OF PERIOD
- -------------------------------------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Period from November 28, 1995
(Inception) to December 31, 1996....... $-- $ -- $-- $ --
Year Ended December 31, 1997.............. $-- $ -- $-- $ --
Year Ended December 31, 1998.............. $-- $50,000 $-- $50,000
</TABLE>
S-1
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<S> <C>
1.01 Form of Underwriting Agreement.**
3.01 Registrant's Certificate of Incorporation.*
3.02 Registrant's Bylaws.*
3.03 Registrant's Certificate of Designation.
4.01 Form of Specimen Certificate for Registrant's common stock.
4.02 Amended and Restated Investors' Rights Agreement, dated June
30, 1999.*
4.03 Series E Rights Agreement, dated June 30, 1999.
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.**
10.01 Form of Indemnity Agreement between Registrant and each of
its directors and executive officers.*
10.02 1996 Equity Incentive Plan and related forms of agreement.
10.03 1999 Equity Incentive Plan and related forms of agreement.
10.04 1999 Employee Stock Purchase Plan and related forms of
agreement.
10.05 Sublease between SaRonix and Registrant dated June 1, 1998.*
10.06 Offer letter for Brian Kelly dated November 10, 1998.*
10.07 Offer letter for Thomas Doyle dated April 12, 1999.*
10.08 Offer letter for Chuck Bay dated January 18, 1998.*
10.09 Separation Agreement between Registrant and Bruce Armstrong
dated April 14, 1999.**
10.10 Broadbase Partner Agreement between Registrant and Indus
International, Inc. dated June 2, 1998, as amended.+
10.11 Offer Letter for Anil Gupta dated August 3, 1999.
21.01 List of subsidiaries.*
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).**
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of Attorney.*
27.01 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested for portions of this agreement
pursuant to an application for confidential treatment sent to the Securities and
Exchange Commission. Such portions have been redacted and marked with an
asterisk. The non-redacted version of this agreement has been sent to the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 3.03
BROADBASE SOFTWARE, INC.
CERTIFICATE OF DESIGNATION
OF
PREFERRED STOCK
Pursuant to Section 151 of the
Delaware General Corporation Law
Broadbase Software, Inc., a Delaware corporation, (the "Corporation"),
does hereby certify that, pursuant to the authority contained in Article IV of
its Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the Delaware General Corporation Law, the Corporation's Board of
Directors has duly adopted the following resolution creating five separate
series of Preferred Stock designated as Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.
RESOLVED, that the Corporation hereby designate and create five (5)
separate series of the authorized Preferred Stock designated as Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock as follows:
A. SERIES OF PREFERRED STOCK. Of the fifteen million one hundred
fifty-four thousand and forty-six (15,154,046) shares of Preferred Stock, par
value $0.001 per share, authorized to be issued by the Corporation, two million
three hundred ninety-eighty thousand (2,398,000) shares are hereby designated as
"Series A Preferred Stock," two million (2,000,000) shares are hereby designated
as "Series B Preferred Stock," two million one hundred sixty-six thousand and
sixty-five (2,166,065) shares are hereby designated as "Series C Preferred
Stock", one million four hundred thousand (1,400,000) shares are hereby
designated "Series D Preferred Stock" and two million one hundred eighty-nine
thousand nine hundred eighty-one (2,189,981) shares are designated "Series E
Preferred Stock." The rights, preferences, privileges and restrictions granted
to and imposed upon the respective classes and series of the Corporation's
capital stock are set forth below in Article B.
B. RIGHTS, PREFERENCE AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock are as follows:
1. DEFINITIONS. For purposes of this Section B, the following
definitions shall apply:
1.1 "Board" shall mean the Board of Directors of the Company.
1.2 "Corporation" shall mean this corporation.
1.3 "Common Stock" shall mean the Common Stock, $0.001 par value,
of the Corporation.
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1.4 "Common Stock Dividend" shall mean a stock dividend declared
and paid on the Common Stock that is payable in shares of Common Stock.
1.5 "Dividend Rate" shall mean $0.05-1/3 per share per annum for
the Series A Preferred Stock, $0.215 per share per annum for the Series B
Preferred Stock, $0.443 per share per annum for the Series C Preferred Stock,
$0.58 per share per annum for the Series D Preferred Stock and $0.7306 per share
per annum for the Series E Preferred Stock.
1.6 "Original Issue Price" shall mean $0.66-2/3 per share for the
Series A Preferred Stock, $2.683 per share for the Series B Preferred Stock,
$5.54 per share for the Series C Preferred Stock, $7.25 per share for the Series
D Preferred Stock and $9.1325 per share for the Series E Preferred Stock.
1.7 "Permitted Repurchases" shall mean the repurchase by the
Corporation of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other persons performing
services for the Corporation or a subsidiary that are subject to restricted
stock purchase agreements or stock option exercise agreements under which the
Corporation has the option to repurchase such shares: (i) at cost, upon the
occurrence of certain events, such as the termination of employment or services;
or (ii) at any price pursuant to the Corporation's exercise of a right of first
refusal to repurchase such shares.
1.8 "Preferred Stock" shall mean the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock.
1.9 "Series A Preferred Stock" shall mean the Series A Preferred
Stock, $0.001 par value, of the Corporation.
1.10 "Series B Preferred Stock" shall mean the Series B Preferred
Stock, $0.001 par value, of the Corporation.
1.11 "Series C Preferred Stock" shall mean the Series C Preferred
Stock, $0.001 par value, of the Corporation.
1.12 "Series D Preferred Stock" shall mean the Series D Preferred
Stock, $0.001 par value, of the Corporation.
1.13 "Series E Preferred Stock" shall mean the Series E preferred
Stock, $0.001 par value, of the Corporation.
1.14 "Original Issue Date" shall mean the date on which the first
share of Series E Preferred Stock is issued by the Corporation.
1.15 "Series C Original Issue Date" shall mean the date on which
the first share of Series C Preferred Stock was issued by the Corporation.
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Broadbase Software, Inc.
Certificate of Designation
1.16 "Subsidiary" shall mean any corporation of which at least
fifty percent (50%) of the outstanding voting stock is at the time owned
directly or indirectly by the Corporation or by one or more of such subsidiary
corporations.
2. DIVIDEND RIGHTS.
2.1 Preferred Stock. In each calendar year, the holders of the
then outstanding Preferred Stock shall be entitled to receive, when, as and if
declared by the Board, out of any funds and assets of the Corporation legally
available therefor, noncumulative dividends at the applicable annual Dividend
Rate for the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock, the Series D Preferred Stock and the Series E Preferred
Stock, respectively, prior and in preference to the payment of any dividends on
the Common Stock in such calendar year (other than a Common Stock Dividend). No
dividends (other than a Common Stock Dividend) shall be paid with respect to the
Common Stock during any calendar year unless dividends in the total amount of
the annual Dividend Rate for the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series E Preferred Stock shall have first been paid or declared and set
apart for payment to the holders of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series E Preferred Stock, respectively, during that calendar year. Dividends
on the Preferred Stock shall not be mandatory or cumulative, and no rights or
interest shall accrue to the holders of the Preferred Stock by reason of the
fact that the Corporation shall fail to declare or pay dividends on the
Preferred Stock in the amount of the applicable annual Dividend Rate or in any
other amount in any calendar year or any fiscal year of the Corporation, whether
or not the earnings of the Corporation in any calendar year or fiscal year were
sufficient to pay such dividends in whole or in part. Payments of any dividends
to the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock
shall be paid pro rata, on an equal priority, pari passu basis according to the
respective Dividend Rates as set forth herein.
2.2 Participation Rights. If, after dividends in the full
preferential amount specified in this Section 2 for the Preferred Stock have
been paid or declared and set apart in any calendar year of the Corporation, the
Board shall declare additional dividends out of funds legally available therefor
in that calendar year, then such additional dividends shall be declared pro rata
on the Common Stock and the Preferred Stock on a pari passu basis according to
the number of shares of Common Stock held by such holders, where each holder of
shares of Preferred Stock is to be treated for this purpose as holding the
greatest whole number of shares of Common Stock then issuable upon conversion of
all shares of Preferred Stock held by such holder pursuant to Section 5.
2.3 Non-Cash Dividends. Whenever a dividend provided for in this
Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the funds and
assets of the Corporation that
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Broadbase Software, Inc.
Certificate of Designation
may be legally distributed to the Corporation's stockholders (the "Available
Funds and Assets") shall be distributed to stockholders in the following manner:
3.1 Preferred Stock. The holders of each share of Preferred Stock
then outstanding shall be entitled to be paid, out of the Available Funds and
Assets, and prior and in preference to any payment or distribution (or any
setting apart of any payment or distribution) of any Available Funds and Assets
on any shares of Common Stock, an amount per share equal to the Original Issue
Price of the applicable series of Preferred Stock plus all declared but unpaid
dividends per share on that series of Preferred Stock. If upon any liquidation,
dissolution or winding up of the Corporation, the Available Funds and Assets
shall be insufficient to permit the payment to holders of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock of their full preferential
amount described in this subsection, then all of the remaining Available Funds
and Assets shall be distributed among the holders of the then outstanding Series
A Preferred Stock, the holders of the then outstanding Series B Preferred Stock,
the holders of the then outstanding Series C Preferred Stock, the holders of the
then outstanding Series D Preferred Stock and the holders of the then
outstanding Series E Preferred Stock, pro rata according to the aggregate
preferential amount to which each holder is entitled.
3.2 Remaining Assets. If there are any Available Funds and Assets
remaining after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Preferred Stock of their full preferential
amounts described above in this Section 3, then all such remaining Available
Funds and Assets shall be distributed among the holders of the then outstanding
Common Stock, pro rata according to the number of shares of Common Stock held by
each holder thereof.
3.3 Merger or Sale of Assets. A (i) consolidation or merger of
the Corporation with or into any other corporation or corporations in which the
holders of the Corporation's outstanding shares immediately before such
consolidation or merger do not, immediately after such consolidation or merger,
retain stock representing a majority of the voting power of the surviving
corporation (or the parent corporation of such surviving corporation if the
surviving corporation is wholly-owned by the parent) of such consolidation or
merger; or (ii) sale of all or substantially all of the assets of the
Corporation, shall each be deemed to be a liquidation, dissolution or winding up
of the Corporation as those terms are used in this Section 3.
3.4 Non-Cash Consideration. If any assets of the Corporation
distributed to stockholders in connection with any liquidation, dissolution or
winding up of the Corporation are other than cash, then the value of such assets
shall be their fair market value as determined by the Board, except that any
securities to be distributed to stockholders in a liquidation, dissolution or
winding up of the Corporation shall be valued as follows:
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
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Broadbase Software, Inc.
Certificate of Designation
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter, then the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) days prior to the distribution; and
(iii) if there is no active public market, then the
value shall be the fair market value thereof, as determined in good faith by the
Board.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (a)(i), (ii) or (iii) of this subsection to reflect the
approximate fair market value thereof, as determined in good faith by the Board.
3.5 Notice.
(a) The corporation shall give each holder of record of
Preferred Stock written notice of any liquidation, dissolution or winding up of
the Corporation or any other transaction described in Section 3.3 not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 3, and the corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the corporation has given the first notice
provided for herein or sooner than ten (10) days after the corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened to no less than two (2) days upon the written consent
of the holders of Preferred Stock that are entitled to such notice rights or
similar rights and that represent at least a majority of the voting power of all
then outstanding shares of such Preferred Stock.
(b) In the event the requirements of this Section 3 are
not complied with, this corporation shall forthwith either:
(i) cause such closing to be postponed until such
time as the requirements of this Section 3 have been complied with; or
(ii) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Preferred Stock shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in this Section 3.
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Broadbase Software, Inc.
Certificate of Designation
4. VOTING RIGHTS.
4.1 Common Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share thereof held.
4.2 Preferred Stock. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 5 below at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of stockholders is solicited.
4.3 General. Subject to the provisions of this Section 4, each
holder of Preferred Stock shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled
to notice of any stockholders' meeting in accordance with the bylaws of the
Corporation (as in effect at the time in question) and applicable law, and shall
be entitled to vote, together with the holders of Common Stock, with respect to
any question upon which holders of Common Stock have the right to vote, except
as may be otherwise provided by applicable law. Except as otherwise expressly
provided herein or as required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together and not as separate classes.
4.4 Board of Directors Election and Removal.
(a) Election. Directors shall be elected in the following
manner: (i) So long as there are at least 500,000 shares of the Series A
Preferred Stock outstanding (subject to appropriate adjustment to reflect stock
dividends, splits or combinations), the holders of the Series A Preferred Stock,
voting as a separate series (with cumulative voting rights as among themselves
in accordance with Section 214 of the Delaware General Corporation Law), shall
be entitled to elect one (1) director of the Corporation; (ii) so long as there
are at least 500,000 shares of the Series B Preferred Stock outstanding (subject
to appropriate adjustment to reflect stock dividends, splits or combinations),
the holders of the Series B Preferred Stock, voting as a separate series (with
cumulative voting rights as among themselves in accordance with Section 214 of
the Delaware General Corporation Law), shall be entitled to elect one (1)
director of the Corporation; (iii) so long as there are at least 500,000 shares
of Common Stock outstanding (subject to appropriate adjustment to reflect stock
dividends, splits or combinations), the holders of the Common Stock, voting as a
separate class (with cumulative voting rights as among themselves in accordance
with Section 214 of the Delaware General Corporation Law), shall be entitled to
elect one (1) director of the Corporation; and (vi) the holders of the Preferred
Stock and the Common Stock, voting together as a single class (with cumulative
voting rights as among themselves in accordance with Section 214 of the Delaware
General Corporation Law), shall be entitled to elect any remaining directors of
the Corporation, if the authorized number of directors is greater than the
number to be elected pursuant to the foregoing.
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Broadbase Software, Inc.
Certificate of Designation
(b) Quorum; Required Vote.
(i) Quorum. At any meeting held for the purpose of
electing directors, the presence in person or by proxy of the holders of a
majority of the shares of the Series A Preferred Stock, Series B Preferred Stock
or Common Stock then outstanding, respectively, shall constitute a quorum of the
Series A Preferred Stock, Series B Preferred Stock or Common Stock, as the case
may be, for the election of directors to be elected solely by the holders of the
Series A Preferred Stock, Series B Preferred Stock or Common Stock,
respectively. The holders of Preferred Stock and Common Stock representing a
majority of the voting power of all the then-outstanding shares of Preferred
Stock and Common Stock shall constitute a quorum for the election of any
directors to be elected jointly by the holders of the Preferred Stock and the
Common Stock.
(ii) Required Vote. With respect to the election of
any director or directors by the holders of the outstanding shares of a
specified series of stock given the right to elect such director or directors
pursuant to subsection 4.4(a) above ("Specified Stock"), that candidate or those
candidates (as applicable) shall be elected who either: (i) in the case of any
such vote conducted at a meeting of the holders of such Specified Stock, receive
the highest number of affirmative votes of the outstanding shares of such
Specified Stock, up to the number of directors to be elected by such Specified
Stock; or (ii) in the case of any such vote taken by written consent without a
meeting, are elected by the written consent of the holders of a majority of the
outstanding shares of such Specified Stock.
(c) Vacancy. If there shall be any vacancy in the office
of a director elected by the holders of any Specified Stock pursuant to
subsection 4.4(a), then a successor to hold office for the unexpired term of
such director may be elected by either: (i) the remaining director or directors
(if any) in office that were so elected by the holders of such Specified Stock,
by the affirmative vote of a majority of such directors (or by the sole
remaining director elected by the holders of such Specified Stock if there be
but one), or (ii) the required vote of holders of the shares of such Specified
Stock specified in subsection 4.4(b)(ii) above that are entitled to elect such
director under subsection 4.4(a).
(d) Removal. Any director who shall have been elected to
the Board by the holders of any Specified Stock pursuant to subsection 4.4(a) or
by any director or directors elected by holders of any Specified Stock as
provided in subsection 4.4(c), may be removed during his or her term of office,
either with or without cause, by, and only by, the affirmative vote of shares
representing a majority of the voting power of all the outstanding shares of
such Specified Stock entitled to vote, given either at a meeting of such
stockholders duly called for that purpose or pursuant to a written consent of
stockholders without a meeting, and any vacancy created by such removal may be
filled only in the manner provided in subsection 4.4(c).
(e) Procedures. Any meeting of the holders of any
Specified Stock, and any action taken by the holders of any Specified Stock by
written consent without a meeting, in order to elect or remove a director under
this subsection 4.4, shall be held in accordance with the procedures and
provisions of the Corporation's Bylaws, the Delaware General Corporation
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Broadbase Software, Inc.
Certificate of Designation
Law and applicable law regarding stockholder meetings and stockholder actions by
written consent, as such are then in effect (including but not limited to
procedures and provisions for determining the record date for shares entitled to
vote).
(f) Termination. Notwithstanding anything in this
subsection 4.4 to the contrary, the provisions of this subsection 4.4 shall
cease to be of any further force or effect upon the first date that either there
is: (i) a merger or consolidation of the Corporation with or into any other
corporation or corporations if such consolidation or merger is approved by the
stockholders of the Corporation in compliance with applicable law and the
Certificate of Incorporation and Bylaws of the Corporation; (ii) a sale of all
or substantially all of the Corporation's assets; or (iii) immediately prior to
the closing of an IPO (as defined in Section 5.2(a)). Further, to the extent
that (i) the number of outstanding shares of Series A Preferred Stock is reduced
to less than 500,000 shares (subject to appropriate adjustment to reflect stock
dividends, splits or combinations), the provisions of Section 4.4(a)(i) shall
terminate and cease to be of any further force or effect; (ii) the number of
outstanding shares of Series B Preferred Stock is reduced to less than 500,000
shares (subject to appropriate adjustment to reflect stock dividends, splits or
combinations), the provisions of Section 4.4(a)(ii) shall terminate and cease to
be of any further force or effect; and (iii) the number of outstanding shares of
Common Stock is reduced to less than 500,000 shares (subject to appropriate
adjustment to reflect stock dividends, splits or combinations), the provisions
of Section 4.4(a)(iii) shall terminate and cease to be of any further force or
effect.
5. CONVERSION RIGHTS. The outstanding shares of Preferred Stock shall be
convertible into Common Stock as follows:
5.1 Optional Conversion.
(a) At the option of the holder thereof, each share of
Preferred Stock shall be convertible, at any time or from time to time prior to
the close of business on the business day before any date fixed for redemption
of such share, into fully paid and nonassessable shares of Common Stock as
provided herein.
(b) Each holder of Preferred Stock who elects to convert
the same into shares of Common Stock shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any
transfer agent for the Preferred Stock or Common Stock, and shall give written
notice to the Corporation at such office that such holder elects to convert the
same and shall state therein the number of shares of Preferred Stock being
converted. Thereupon the Corporation shall promptly issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled upon such conversion. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the certificate or certificates
representing the shares of Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
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5.2 Automatic Conversion.
(a) (i) Each share of Preferred Stock shall automatically
be converted into fully paid and nonassessable shares of Common Stock, as
provided herein immediately prior to the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended, covering the offer and sale
of Common Stock for the account of the Corporation in which the aggregate public
offering price (before deduction of underwriters' discounts and commissions)
equals or exceeds $10,000,000 and the public offering price per share of which
equals or exceeds $11.08 per share before deduction of underwriters' discounts
and commissions (such price per share of Common Stock to be appropriately
adjusted to reflect Common Stock Events (as defined in subsection 5.4)) (the
"IPO").
(ii) Each share of Preferred Stock (other than the
Series E Preferred Stock) shall automatically be converted into fully paid and
nonassessable shares of Common Stock, as provided herein upon the Corporation's
receipt of the written consent of the holders of not less than two-thirds (2/3)
of the then outstanding shares of Preferred Stock (other than the Series E
Preferred Stock) to the conversion of all then outstanding Preferred Stock
(other than the Series E Preferred Stock) under this Section 5.
(iii) Each share of Series E Preferred Stock shall
automatically be converted into fully paid and nonassessable shares of Common
Stock, as provided herein upon the Corporation's receipt of the written consent
of the holders of not less than a majority of the then outstanding shares of
Series E Preferred Stock to the conversion of all then outstanding Series E
Preferred Stock under this Section 5.
(b) Upon the occurrence of any event specified in
subparagraph 5.2(a)(i), (ii), or (iii) above, the outstanding shares of the
applicable series of Preferred Stock shall be converted into Common Stock
automatically without the need for any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of the applicable series of Preferred Stock are either
delivered to the Corporation or its transfer agent as provided below, 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. Upon the occurrence of such automatic
conversion of the applicable series of Preferred Stock, the holders of such
Preferred Stock shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of the applicable series of Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred.
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5.3 Conversion Price. Each share of Preferred Stock shall be
convertible in accordance with subsection 5.1 or subsection 5.2 above into the
number of shares of Common Stock which results from dividing the Original Issue
Price for such series of Preferred Stock by the conversion price for such series
of Preferred Stock that is in effect at the time of conversion (the "Conversion
Price"). The initial Conversion Price for the Series A Preferred Stock shall be
the Original Issue Price for the Series A Preferred Stock. The initial
Conversion Price for the Series B Preferred Stock shall be the Original Issue
Price for the Series B Preferred Stock. The initial Conversion Price for the
Series C Preferred Stock shall be the Original Issue Price for the Series C
Preferred Stock. The initial Conversion Price for the Series D Preferred Stock
shall be the Original Issue Price for the Series D Preferred Stock. The initial
Conversion Price for the Series E Preferred Stock shall be the Original Issue
Price for the Series E Preferred Stock. The Conversion Price of each series of
Preferred Stock shall be subject to adjustment from time to time as provided
below.
5.4 Adjustment Upon Common Stock Event. Upon the happening of a
Common Stock Event (as hereinafter defined) after the effective date of this
amendment, the Conversion Price of each series of Preferred Stock shall,
simultaneously with the happening of such Common Stock Event, be adjusted by
multiplying the Conversion Price of such series of Preferred Stock in effect
immediately prior to such Common Stock Event by a fraction, (i) the numerator of
which shall be the number of shares of Common Stock issued and outstanding
immediately prior to such Common Stock Event, and (ii) the denominator of which
shall be the number of shares of Common Stock issued and outstanding immediately
after such Common Stock Event, and the product so obtained shall thereafter be
the Conversion Price for such series of Preferred Stock. The Conversion Price
for each series of Preferred Stock shall be readjusted in the same manner upon
the happening of each subsequent Common Stock Event. As used herein, the term
"Common Stock Event" shall mean (i) the issue by the Corporation of additional
shares of Common Stock as a dividend or other distribution on outstanding Common
Stock, (ii) a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock, or (iii) a combination of the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
5.5 Adjustments for Other Dividends and Distributions. If at any
time or from time to time after the Original Issue Date the Corporation pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Corporation other than shares of Common Stock, then
in each such event provision shall be made so that the holders of each series of
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable upon conversion thereof, the amount of
securities of the Corporation which they would have received had their Preferred
Stock been converted into Common Stock on the date of such event (or such record
date, as applicable) and had they thereafter, during the period from the date of
such event (or such record date, as applicable) to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 5 with respect to the rights of the holders of the Preferred Stock
or with respect to such other securities by their terms.
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Broadbase Software, Inc.
Certificate of Designation
5.6 Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of any series of Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than by a
Common Stock Event or a stock dividend provided for elsewhere in this Section
5), then in any such event each holder of such series of Preferred Stock shall
have the right thereafter to convert such Preferred Stock into the kind and
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the number of
shares of Common Stock into which such shares of Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
5.7 Sale of Shares Below Conversion Price.
(a) Adjustment Formula. If at any time or from time to
time after the Original Issue Date the Corporation issues or sells, or is deemed
by the provisions of this subsection 5.7 to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), otherwise than in connection
with a Common Stock Event as provided in subsection 5.4, a dividend or
distribution as provided in subsection 5.5 or a recapitalization,
reclassification or other change as provided in subsection 5.6, for an Effective
Price (as hereinafter defined) that is less than the Conversion Price for a
series of Preferred Stock in effect immediately prior to such issue or sale,
then:
(x) in the event that such issuance or sale (a
"Triggering Issuance") occurs after the Corporation has in one or more
transactions issued or sold (together, the "Minimum Issuances"), following the
Series C Original Issue Date, a number of such Additional Shares of Common
Stock, for an Effective Price of less than the Conversion Price of the Series C
Preferred Stock in effect immediately prior to the applicable Minimum Issuance,
for an Aggregate Consideration Received (as hereinafter defined) for all such
Minimum Issuances in excess of an aggregate of $300,000, then (A) if the
Effective Price of such Triggering Issuance is greater than $3.47 per share
(subject to appropriate adjustment to reflect stock dividends, splits or
combinations), the Conversion Price of the Series C Preferred Stock shall be
reduced, as of the close of business on the date of such Triggering Issuance, to
the Effective Price of such Triggering Issuance or (B) if such Effective Price
is less than $3.47 per share (subject to appropriate adjustment to reflect stock
dividends, splits or combinations), the Conversion Price of the Series C
Preferred Stock shall be reduced, as of the close of business on the date of
such Triggering Issuance, to $3.47 and shall then be subject to adjustment
pursuant to subdivision 5.7(a)(z) hereof. After the Conversion Price of the
Series C Preferred Stock has been reduced pursuant to this Section 5.7(a)(x) to
$3.47 (subject to appropriate adjustment to reflect stock dividends, splits or
combinations), this Section 5.7(a)(x) shall no longer apply and Section
5.7(a)(z) shall instead apply. Notwithstanding the foregoing, this subdivision
5.7(a)(x) shall no longer apply, and thereafter subdivision 5.7(a)(z) shall
apply, in the event of the earlier of (A) three years after the Series C
Original Issue Date or (B) the date the Corporation receives proceeds from one
or more financings that are equal to or in excess of an aggregate of $8 million
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<PAGE> 12
Broadbase Software, Inc.
Certificate of Designation
and which value the Corporation immediately prior to each such financing at an
amount which is equal to or in excess of $80 million (calculated by multiplying
the price per share paid in such financing by the sum, immediately prior to such
financing, of the total number of Common Stock Equivalents and any shares of
Common Stock reserved for future issuance to employees, officers or directors
of, or contractors, consultants or advisers to, the Corporation or any
Subsidiary pursuant to options or rights not yet granted under stock purchase or
stock option plans, stock bonuses or awards, warrants, contracts or other
arrangements that are approved by the Board).
(y) in the event that such issuance or sale (a
"Series E Triggering Issuance") occurs after the Corporation has in one or more
transactions issued or sold (together, the "Series E Minimum Issuances"),
following the Original Issue Date, a number of such Additional Shares of Common
Stock, for an Effective Price of less than the Conversion Price of the Series E
Preferred Stock in effect immediately prior to the applicable Series E Minimum
Issuance, for an Aggregate Consideration Received (as hereinafter defined) for
all such Series E Minimum Issuances in excess of an aggregate of $300,000, then
(A) if the Effective Price of such Series E Triggering Issuance is greater than
$3.47 per share (subject to appropriate adjustment to reflect stock dividends,
splits or combinations), the Conversion Price of the Series E Preferred Stock
shall be reduced, as of the close of business on the date of such Series E
Triggering Issuance, to the Effective Price of such Series E Triggering Issuance
or (B) if such Effective Price is less than $3.47 per share (subject to
appropriate adjustment to reflect stock dividends, splits or combinations), the
Conversion Price of the Series E Preferred Stock shall be reduced, as of the
close of business on the date of such Triggering Issuance, to $3.47 and shall
then be subject to adjustment pursuant to subdivision 5.7(a)(z) hereof. After
the Conversion Price of the Series E Preferred Stock has been reduced pursuant
to this Section 5.7(a)(y) to $3.47 (subject to appropriate adjustment to reflect
stock dividends, splits or combinations), this Section 5.7(a)(y) shall no longer
apply and Section 5.7(a)(z) shall instead apply. Notwithstanding the foregoing,
this subdivision 5.7(a)(y) shall no longer apply, and thereafter subdivision
5.7(a)(z) shall apply, in the event of the earlier of (A) three years after the
Series C Original Issue Date, or (B) the date the Corporation receives proceeds
from one or more financings that are equal to or in excess of an aggregate of $8
million and which value the Corporation immediately prior to each such financing
at an amount which is equal to or in excess of $80 million (calculated by
multiplying the price per share paid in such financing by the sum, immediately
prior to such financing, of the total number of Common Stock Equivalents and any
shares of Common Stock reserved for future issuance to employees, officers or
directors of, or contractors, consultants or advisers to, the Corporation or any
Subsidiary pursuant to options or rights not yet granted under stock purchase or
stock option plans, stock bonuses or awards, warrants, contracts or other
arrangements that are approved by the Board), or (C) the date the Corporation
receives proceeds from the sale, in one or more financings (whether on the
Original Issue Date or thereafter) of at least 875,993 shares of Series E
Preferred Stock at a price per share equal to the Series E Preferred Stock
Original Issue Price.
(z) in each and every other case not covered by
subdivisions 5.7(a)(x) and (y), the Conversion Price for such series of
Preferred Stock shall be reduced, as of
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<PAGE> 13
Broadbase Software, Inc.
Certificate of Designation
the close of business on the date of such issue or sale, to the price obtained
by multiplying such Conversion Price by a fraction:
(i) The numerator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding (as
hereinafter defined) immediately prior to such issue or
sale of Additional Shares of Common Stock plus (B) the
quotient obtained by dividing the Aggregate
Consideration Received (as hereinafter defined) by the
Corporation for the total number of Additional Shares of
Common Stock so issued or sold (or deemed so issued and
sold) by the Conversion Price for such series of
Preferred Stock in effect immediately prior to such
issue or sale; and
(ii) The denominator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding
immediately prior to such issue or sale of Additional
Shares of Common Stock plus (B) the number of Additional
Shares of Common Stock so issued or sold (or deemed so
issued and sold).
(b) Certain Definitions. For the purpose of making any
adjustment required under this subsection 5.7:
(i) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation, whether or not
subsequently reacquired or retired by the Corporation, other than: (A) shares of
Common Stock issued or issuable upon conversion of Preferred Stock; and (B)
shares of Common Stock (or options, warrants or rights therefor) issued to
employees, officers or directors of, or contractors, consultants or advisers to,
the Corporation or any Subsidiary pursuant to stock purchase or stock option
plans, stock bonuses or awards, warrants, contracts or other arrangements that
are approved by the Board; and (C) up to 36,764 shares of Preferred Stock (or
warrants therefor) issued by the Corporation to lenders in connection with loan
financing transactions and any other shares of Preferred Stock or Common Stock
(or warrants therefor) that are unanimously approved by the Board for issuance
to lenders or equipment lessors;
(ii) The "Aggregate Consideration Received" by the
Corporation for any issue or sale (or deemed issue or sale) of securities shall
(A) to the extent it consists of cash, be computed at the gross amount of cash
received by the Corporation before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Corporation in
connection with such issue or sale and without deduction of any expenses payable
by the Corporation; (B) to the extent it consists of property other than cash,
be computed at the fair value of that property as determined in good faith by
the Board; and (C) if Additional Shares of Common Stock, Convertible Securities
or Rights or Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or Rights or Options;
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<PAGE> 14
Broadbase Software, Inc.
Certificate of Designation
(iii) "Common Stock Equivalents Outstanding" shall
mean the number of shares of Common Stock that is equal to the sum of (A) all
shares of Common Stock of the Corporation that are outstanding at the time in
question, plus (B) all shares of Common Stock of the Corporation issuable upon
conversion of all shares of Preferred Stock or other Convertible Securities that
are outstanding at the time in question, plus (C) all shares of Common Stock of
the Corporation that are issuable upon the exercise of Rights or Options that
are outstanding at the time in question assuming the full conversion or exchange
into Common Stock of all such Rights or Options that are Rights or Options to
purchase or acquire Convertible Securities into or for Common Stock;
(iv) "Convertible Securities" shall mean stock or
other securities convertible into or exchangeable for shares of Common Stock or
for shares of Preferred Stock that are convertible into shares of Common Stock;
(v) The "Effective Price" of Additional Shares of
Common Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold, by the Corporation under this subsection 5.7, into the Aggregate
Consideration Received, or deemed to have been received, by the Corporation
under this subsection 5.7, for the issue of such Additional Shares of Common
Stock; and
(vi) "Rights or Options" shall mean warrants, options
or other rights to purchase or acquire shares of Common Stock or Convertible
Securities.
(c) Deemed Issuances. For the purpose of making any
adjustment to the Conversion Price of the Preferred Stock required under this
subsection 5.7, if the Corporation issues or sells any Rights or Options or
Convertible Securities and if the Effective Price of the shares of Common Stock
issuable upon exercise of such Rights or Options and/or the conversion or
exchange of Convertible Securities (computed without reference to any additional
or similar protective or antidilution clauses) is less than the Conversion Price
then in effect for a series of Preferred Stock, then the Corporation shall be
deemed to have issued, at the time of the issuance of such Rights, Options or
Convertible Securities, that number of Additional Shares of Common Stock that is
equal to the maximum number of shares of Common Stock issuable upon exercise or
conversion of such Rights, Options or Convertible Securities upon their issuance
and to have received, as the Aggregate Consideration Received for the issuance
of such shares, an amount equal to the total amount of the consideration, if
any, received by the Corporation for the issuance of such Rights or Options or
Convertible Securities, plus, in the case of such Rights or Options, the minimum
amounts of consideration, if any, payable to the Corporation upon the exercise
in full of such Rights or Options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Corporation (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion or exchange thereof; provided that:
(i) if the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, then the Corporation
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<PAGE> 15
Broadbase Software, Inc.
Certificate of Designation
shall be deemed to have received the minimum amounts of consideration without
reference to such clauses;
(ii) if the minimum amount of consideration payable
to the Corporation upon the exercise of Rights or Options or the conversion or
exchange of Convertible Securities is reduced over time or upon the occurrence
or non-occurrence of specified events other than by reason of antidilution or
similar protective adjustments, then the Effective Price shall be recalculated
using the figure to which such minimum amount of consideration is reduced; and
(iii) if the minimum amount of consideration payable
to the Corporation upon the exercise of such Rights or Options or the conversion
or exchange of Convertible Securities is subsequently increased, then the
Effective Price shall again be recalculated using the increased minimum amount
of consideration payable to the Corporation upon the exercise of such Rights or
Options or the conversion or exchange of such Convertible Securities.
No further adjustment of the Conversion Price, adjusted upon the issuance of
such Rights or Options or Convertible Securities, shall be made as a result of
the actual issuance of shares of Common Stock or Preferred Stock on the exercise
of any such Rights or Options or the conversion or exchange of any such
Convertible Securities. If any such Rights or Options or the conversion rights
represented by any such Convertible Securities shall expire without having been
fully exercised, then the Conversion Price as adjusted upon the issuance of such
Rights or Options or Convertible Securities shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only shares of Common Stock so issued were the shares of
Common Stock, if any, that were actually issued or sold on the exercise of such
Rights or Options or rights of conversion or exchange of such Convertible
Securities, and such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such Rights or Options, whether or not exercised, plus the consideration
received for issuing or selling all such Convertible Securities actually
converted or exchanged, plus the consideration, if any, actually received by the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion or exchange of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Preferred Stock.
5.8 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price for a series of Preferred Stock, the
Corporation, at its expense, shall cause its Chief Financial Officer to compute
such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by first class mail, postage prepaid, to each registered
holder of the Preferred Stock at the holder's address as shown in the
Corporation's books.
5.9 Fractional Shares. No fractional shares of Common Stock shall be
issued upon any conversion of Preferred Stock. In lieu of any fractional share
to which the holder would otherwise be entitled, the Corporation shall pay the
holder cash equal to the product of
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<PAGE> 16
Broadbase Software, Inc.
Certificate of Designation
such fraction multiplied by the Common Stock's fair market value as determined
in good faith by the Board as of the date of conversion.
5.10 Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
5.11 Notices. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of the Preferred Stock shall be
deemed given upon the earlier of actual receipt or deposit in the United States
mail, by certified or registered mail, return receipt requested, postage
prepaid, addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
5.12 No Impairment. The Corporation shall not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Preferred Stock against impairment.
6. RESTRICTIONS AND LIMITATIONS.
6.1 Class Protective Provisions. So long as 500,000 shares of
Preferred Stock (subject to appropriate adjustment to reflect stock dividends,
splits or combinations) remain outstanding, the Corporation shall not, without
the approval, by vote or written consent, of the holders of 70% of the Preferred
Stock then outstanding (66-2/3% of the Preferred Stock with respect to
subsection 6.1(7)), voting as a single class:
(1) amend its Certificate of Incorporation in any manner
that would alter, change or adversely affect any of the rights, preferences,
privileges or restrictions of any series of Preferred Stock;
(2) reclassify any outstanding shares of securities of the
Corporation into shares having rights, preferences or privileges senior to or on
a parity with any series of Preferred Stock;
(3) authorize any other series or class of stock having
rights or preferences senior to or on a parity with any series of Preferred
Stock;
(4) increase or decrease (other than by conversion) the
total number of authorized shares of Preferred Stock;
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<PAGE> 17
Broadbase Software, Inc.
Certificate of Designation
(5) merge or consolidate with or into any corporation if
such merger or consolidation would result in the stockholders of the Corporation
immediately prior to such merger or consolidation holding less than a majority
of the voting power of the stock of the surviving corporation immediately after
such merger or consolidation;
(6) sell all or substantially all the Corporation's assets
in a single transaction or series of related transactions;
(7) liquidate or dissolve;
(8) declare or pay any dividends (other than dividends
payable solely in shares of its own Common Stock) on or declare or make any
other distribution (other than Permitted Repurchases), directly or indirectly,
on account of any shares of Common Stock now or hereafter outstanding; or
(9) amend the Corporation's bylaws to change the
authorized range of the number of members of its Board.
6.2 Additional Series C Protective Provisions. For so long as at
least 850,000 shares of Series C Preferred Stock (subject to appropriate
adjustment to reflect stock dividends, splits or combinations) remain
outstanding, the Corporation shall not, without the approval, by vote or written
consent, of the holders of at least 60% of the Series C Preferred Stock, take
the actions set forth in Section 6.1 above in a way that adversely affects the
Series C Preferred Stock in a different manner than other shares of Preferred
Stock (excluding those differences which currently exist in or are contemplated
by this Restated Certificate of Incorporation).
6.3 Additional Series E Protective Provisions. For so long as at
least 514,645 shares of Series E Preferred Stock (subject to appropriate
adjustment to reflect stock dividends, splits or combinations) remain
outstanding, the Corporation shall not, without the approval, by vote or written
consent, of the holders of at least 60% of the Series E Preferred Stock, take
the actions set forth in Section 6.1 above in a way that adversely affects the
Series E Preferred Stock in a different manner than other shares of Preferred
Stock (excluding those differences which currently exist in or are contemplated
by this Restated Certificate of Incorporation).
7. MISCELLANEOUS
7.1 No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the 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.
7.2 Consent to Certain Transactions. Each holder of shares of
Preferred Stock shall, by virtue of its acceptance of a stock certificate
evidencing Preferred Stock, be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the California Corporations Code, to all Permitted
Repurchases.
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<PAGE> 18
Broadbase Software, Inc.
Certificate of Designation
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed and attested by its duly authorized officer this ____
day of August, 1999.
-------------------------------------------
Chuck Bay, Chief Financial Officer,
General Counsel, Executive Vice President
of Business Development and Corporate
Secretary
I declare under penalty of perjury under the laws of the State of
California, the State of Delaware and the United States of America that the
foregoing is true and correct and that this declaration was executed on
August __, 1999 at Palo Alto, California.
By:
-----------------------------------
Chuck Bay
-18-
<PAGE> 1
EXHIBIT 4.01
Common Stock Common Stock
NUMBER
BSW [LOGO] SHARES
BROADBASE
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE
CUSIP 1113OR 10 0
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
BROADBASE SOFTWARE, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[corporate seal]
/s/ Chuck J. Bay /s/ Mark Kremer
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
BROADBASE SOFTWARE, INC.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Secretary of the Corporation at the principal office of the
Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as through they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM - as tenants in UNIF GIFT MIN - ________ Custodian _________
common ACT (Cust) (Minor)
TEN ENT - as tenants by the under Uniform Gifts to Minors
entireties Act ________________________
JT TEN - as joint tenants (State)
with right of - ___ Custodian (until age ___)
survivorship and UNIF TRF MIN (Cust)
not as tenants in ACT ____ under Uniform Transfers
common (Minor)
to Minors Act _______________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
____________________________________________________________________ Shares of
the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
____________________________________________________________________ Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated _____________________
X ___________________________________________________
X ___________________________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
NOTICE: WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED
By_____________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM).
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.03
SERIES E RIGHTS AGREEMENT
This Series E Rights Agreement (this "Agreement") is made and entered into
as of June 30, 1999 by and among BroadBase Information Systems, Inc., a
California corporation (the "Company"), and the persons and entities listed on
Exhibit A attached hereto (each hereinafter individually referred to as an
"Investor" and collectively referred to as the "Investors").
R E C I T A L S
A. The Investors have agreed to purchase from the Company, and the
Company has agreed to sell to such Investors, shares of the Company's Series E
Preferred Stock ("Series E Stock") on the terms and conditions set forth in that
certain Series E Preferred Stock Purchase Agreement, dated of even date herewith
by and among the Company and such Investors (the "Series E Agreement").
B. The Series E Agreement provides that the Investors shall be
granted board observer rights and certain of the Investors shall be granted a
right of first offer in connection with the Company's initial public offering,
all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereby agree as follows:
1. RIGHT OF FIRST OFFER.
1.1 Certain Definitions. For purposes of this Agreement, the
following definitions shall apply:
"Aggregate Proportionate Share" means seventy percent (70%) of
the quotient that results from dividing (i) the sum of the total number of
Series E Equivalent Shares that all Rights Holders hold on the Record Date (as
defined herein) by (ii) a number of shares of Common Stock of the Company equal
to the sum of (A) the total number of shares of Common Stock of the Company
outstanding on the Record Date, plus (B) the total number of shares of Common
Stock of the Company into which all then outstanding shares of the Preferred
Stock of the Company are then convertible, plus (C) the total number of shares
of capital stock of the Company (on an as-converted to Common Stock basis)
issuable upon exercise of all then outstanding options or warrants to purchase
shares of the Company's stock or upon conversion of all then outstanding
Debentures, plus (D) the number of shares of Common Stock of the Company then
reserved and available for issuance under stock purchase and stock option plans
of the Company; provided, however, that the foregoing seventy percent (70%) may
be cut back to such lower percentage as may be designated by the managing
underwriter in the IPO in a writing delivered by such managing underwriter to
those Rights Holders exercising their Right of First Offer hereunder (i) not
less than four (4) days prior to the effective date of the Registration
Statement to the extent deemed necessary to the success of such offering by such
managing underwriter in its reasonable opinion (provided that such percentage is
not reduced to less than
<PAGE> 2
fifty percent (50%) pursuant to this clause (i)) or (ii) prior to the Closing to
the extent necessary to comply with the applicable rules or regulations of the
SEC, the NASD, the Nasdaq Stock Market, Inc., or other regulatory body.
"Closing" means the closing of the IPO.
"Conversion Stock" means shares of Common Stock of the Company
issued upon conversion of shares of Series E Stock.
"Debentures" means those certain senior unsecured convertible
debentures of the Company issued and sold pursuant to that certain Series D
Preferred Stock Convertible Debenture Purchase Agreement dated December 9, 1998
by and among the Company and those "Investors" identified in Exhibit A thereto,
as amended on April 13, 1999.
"IPO" means the first public offering of the Company's Common
Stock pursuant to an effective registration statement filed under the Securities
Act of 1933, as amended, in which the aggregate public offering price (before
deduction of underwriters' discounts and commissions) equals or exceeds
$10,000,000 and the public offering price per share of which equals or exceeds
$11.08 per share before deduction of underwriters' discounts and commissions
(such price per share of Common Stock to be appropriately adjusted to reflect
"Common Stock Events" (as such term is defined in the Company's Articles of
Incorporation)).
"IPO Shares" means the shares of Common Stock of the Company
issued at the Closing (exclusive of any shares offered and sold pursuant to any
underwriter's over-allotment option).
"IPO Shares Number" means the total number of IPO Shares issued
and sold by the Company at the Closing (exclusive of any shares offered and sold
pursuant to any underwriter's over-allotment option).
"Maximum IPO Shares Number" means the number that results from
multiplying the IPO Shares Number by the Aggregate Proportionate Share.
"NASD" means the National Association of Securities Dealers, Inc.
"Offering Price" means the price per share at which IPO Shares
are offered to the public at the Closing (before deduction of underwriter's
discounts and commissions).
"Preferred Stock" means the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock.
"Pro Rata Share" means, as to a Rights Holder, the quotient that
results from dividing (i) the total number of Series E Equivalent Shares that
such Rights Holder holds on the Record Date by (ii) the total number of Series E
Equivalent Shares that all Rights Holders hold on the Record Date.
2
<PAGE> 3
"Record Date" means 5:00 p.m. (PST) on date on which the Company
first circulates a prospectus in connection with the IPO.
"Registration Statement" means the registration statement filed
by the Company with the SEC covering the offering of IPO Shares.
"Rights Holder" means an Investor, or an assignee of an Investor
in accordance with the provisions of Section 3 hereof, who holds at least
110,000 Series E Equivalent Shares and who is not otherwise (A) prohibited from
(i) exercising any of the rights of a Rights Holder under Section 1 or (ii)
being bound by any of the provisions under Section 1, in either case, by any
applicable rules or regulations of the SEC, NASD, the Nasdaq Stock Market, Inc.
or other regulatory body, or (B) an affiliate of any entities in the IPO
underwriting syndicate. For purposes of this Agreement, a holder of Series E
Stock convertible into Series E Equivalent Shares shall be deemed to be a holder
of such Series E Equivalent Shares.
"SEC" means the Securities and Exchange Commission.
"Series E Equivalent Shares" means all the shares of Common Stock
of the Company issued or issuable upon conversion of any shares of Series E
Stock.
1.2 Right of First Offer. The Company hereby grants to the Rights
Holders a right of first offer to purchase a number of IPO Shares at the Closing
up to the Maximum IPO Shares Number at a price per share equal to the Offering
Price all on the terms and conditions set forth herein (the "Right of First
Offer"). Notwithstanding any other provisions of this Agreement, under no
circumstances shall the Rights Holders have a Right of First Offer under this
Agreement with respect to a number of IPO Shares that exceeds the Maximum IPO
Shares Number.
1.3 Procedures.
(a) Notice and Elections. The Company shall give written notice
(a "Notice") to each Rights Holder no more than five (5) days after the Record
Date stating (i) the estimated dollar range of the Offering Price set forth in
the prospectus circulated on the Record Date (the "Estimated Offering Price
Range") and (ii) the estimated total number of IPO Shares to be issued at the
Closing (exclusive of any shares offered and sold pursuant to any underwriter's
over-allotment option) set forth in such prospectus (the "Estimated IPO Shares
Number"). A Rights Holder shall have five (5) days from the date of delivery of
the Notice (the "Exercise Period") to deliver to the Company written notice of
such Rights Holder's election to exercise its Right of First Offer (an
"Election") for a specified number of IPO Shares up to a maximum equal to the
Maximum IPO Shares Number (the "Requested IPO Shares Number"), which Requested
IPO Shares Number shall be subject to reduction in accordance with the terms and
conditions of this Agreement. Each Election shall be deemed to be made in
anticipation of (I) the Offering Price being in a range, the lower end of which
is no lower than the lower end of the Offering Price Range and the upper end of
which is no higher than the product that results from multiplying the midpoint
of the Offering Price Range by 150% (the "Final Offering Price Range") and (II)
the IPO Shares Number being in a range, the lower end of which is no lower than
the product that results from multiplying the Estimated IPO Shares Number by 80%
and the
3
<PAGE> 4
upper end of which is no higher than the product that results from multiplying
the Estimated IPO Shares Number by 150% (the "Final IPO Shares Number Range").
In the Election, the Rights Holder shall also set forth the name, telephone
number, facsimile number and pager number for those person(s) authorized by it
to make a revocation decision in accordance with the terms of subsection (e),
below, and to make a confirmation decision in accordance with the terms of
subsection (f), below.
(b) Elections for Maximum IPO Shares Number or Less. If the sum
of all of the Requested IPO Shares Numbers of the Rights Holders is equal to or
less than the Maximum IPO Shares Number, then each Rights Holder will be deemed
have exercised its Right of First Offer for its respective Requested IPO Shares
Number.
(c) Elections for More than Maximum IPO Shares Number. If the
sum of all of the Requested IPO Shares Numbers of the Rights Holders is greater
than the Maximum IPO Shares Number, then each Rights Holder will be deemed to
have exercised its Right of First Offer for a number of IPO Shares that is
determined as follows:
(1) Each Rights Holder shall be deemed to have exercised
its Right of First Offer for the lesser of (I) such Rights Holder's Requested
IPO Shares Number and (II) such Rights Holder's Pro Rata Share of the Maximum
IPO Shares Number.
(2) If the foregoing deemed exercises of the Rights of
First Offer of all of the Rights Holders pursuant to clause (c)(1) are for an
aggregate number of IPO Shares that is less than the Maximum IPO Shares Number,
then the remaining number of IPO Shares shall be deemed subject to further
exercises of the Right of First Offer by each Rights Holder whose Requested IPO
Shares Number was equal to or greater than its Pro Rata Share of the Maximum IPO
Shares Number (each a "Continuing Rights Holder") for an additional number of
IPO Shares equal to the lesser of (I) a number of IPO Shares equal to the number
that results from subtracting (x) the aggregate number of IPO Shares as to which
such Continuing Rights Holder was deemed to have exercised its Right of First
Offer in accordance with the preceding provisions of this subsection (c) from
(y) such Rights Holder's Requested IPO Shares Number and (II) such Continuing
Rights Holder's "Subsequent Pro Rata Share" of such remaining number of IPO
Shares. For purposes of this subsection (c)(2), a Continuing Rights Holder's
"Subsequent Pro Rata Share" means the quotient that results from dividing (aa)
the total number of Series E Equivalent Shares that such Continuing Rights
Holder held on the Record Date by (bb) the total number of Series E Equivalent
Shares that all Continuing Rights Holders held on the Record Date.
(3) If the deemed exercises of the Rights of First Offer of
all of the Rights Holders pursuant to each of the foregoing clauses of this
subsection (c) are, in the aggregate, for a total number of IPO Shares that is
less than the Maximum IPO Shares Number, then the number of IPO Shares that
still remains shall be deemed subject to yet further exercises of the Right of
First Offer by each Continuing Rights Holder who, as a result of its aggregate
deemed exercises in each of the foregoing clauses of this subsection (c), is not
yet deemed to have elected, in the aggregate, to be offered a number IPO Shares
equal to its Requested IPO Shares Number, for additional numbers of IPO Shares
determined in accordance with the same
4
<PAGE> 5
provisions as are set forth in subsection (c)(2) above, except that a
"Continuing Rights Holder" shall instead mean and refer to a Rights Holder who
is deemed to have a continuing Right of First Offer under this subsection
(c)(3), the remaining number of IPO Shares shall instead mean and refer to the
number of IPO Shares remaining from the Maximum IPO Shares Number after taking
into account all of the preceding deemed exercises of the Rights of First Offer,
and the "Subsequent Pro Rata Share" shall instead be calculated with reference a
denominator including shares owned only by those Continuing Rights Holders who
are deemed to have a continuing Right of First Offer under this subsection
(c)(3). The provisions of this subsection (c)(3) shall continue to be applied in
successive rounds until the first to occur of (A) the aggregate number of IPO
Shares as to which deemed exercises of the Rights of First Offer under this
subsection (c) have been made equals the Maximum IPO Shares Number or (B) each
of the Rights Holders has, by virtue of the deemed exercises of its Right of
First Offer under this subsection (c), exercised its Right of First Offer for a
number of IPO Shares equal to its Requested IPO Shares Number.
(d) Final Notice and Offer in IPO. A Rights Holder's exercise of
the Right of First Offer in accordance with subsection (b) or (c) hereof, as
applicable, shall be deemed an expression of interest in receiving an offer by
the Company to purchase that number of IPO Shares. The Company's offer to sell
such IPO Shares to the Rights Holders shall be deemed to occur automatically
upon the completion of the latest to occur of (i) the earliest to occur of (A)
the conclusion of any live, person-to-person communication (whether in-person or
by telephone) between a representative of the Company or the managing
underwriter and a representative of the Rights Holder designated by the Rights
Holder in its Election in which the Company or the managing underwriter notifies
the Rights Holder of the Offering Price and the IPO Shares Number; or (B) four
(4) hours after notice is given by the Company or the managing underwriter to a
representative of the Rights Holder designated by the Rights Holder in its
Election (with a contemporaneous copy to the Rights Holder's designated counsel
identified in Section 4.1(a) below) by actual delivery or facsimile transmission
of the Offering Price and the IPO Shares Number (such notice under either of
clauses (i)(A) or (i)(B) hereafter referred to as a "Final Notice"); and (ii)
the effectiveness of the Registration Statement (the completion of the later to
occur of the foregoing hereof, the "Offer Time"). In the event that the
Registration Statement becomes effective prior to the Company or the managing
underwriter giving a Final Notice to the representative of a Rights Holder as
provided for in clause (ii) of the immediately preceding sentence, the Company
or the managing underwriting shall give such Final Notice as promptly as
reasonably practicable and such Rights Holder's Right of First Offer shall not
be deemed to be inapplicable to the IPO by virtue of any failure to give such
Final Notice.
(e) IPO Within Ranges. Upon the giving of Final Notice by the
Company or the managing underwriter to the Rights Holder (with a contemporaneous
copy to the Rights Holder's designated counsel identified in Section 4.1(a)
below in the case of actual delivery or delivery by facsimile transmission) in
accordance with the provisions of subsection (d), if both (i) the Offering Price
described in the Final Notice is within the Final Offering Price Range and (ii)
the IPO Shares Number described in the Final Notice is within the Final IPO
Shares Number Range, then each Rights Holder who delivered an Election shall
have an unconditional right to terminate its Right of First Offer and revoke its
exercise thereof (x) by delivering oral notice thereof in any communication
described in clause (i)(A) of subsection (d), or (y) by delivering written
notice thereof by facsimile transmission, or by actual receipt, in each
5
<PAGE> 6
such case prior to or at the Offer Time. Once timely revoked by a Rights Holder,
the Right of First Offer as to such Rights Holder shall become null and void. A
Rights Holder's exercise of the Right of First Offer shall, unless so revoked by
such Rights Holder on or before the Offer Time, automatically be deemed,
immediately after the Offer Time, to be a binding commitment to purchase the
number of IPO Shares as to which such Rights Holder is deemed to have exercised
its Right of First Offer hereunder at the Offering Price for each such IPO
Share.
(f) IPO Outside of Ranges. Upon the giving of Final Notice by
the Company or the managing underwriter to the Rights Holder (with a
contemporaneous copy to the Rights Holder's designated counsel identified in
Section 4.1(a) below in the case of actual delivery or delivery by facsimile
transmission) in accordance with the provisions of subsection (d), if either (i)
the Offering Price described in the Final Notice is outside of the Final
Offering Price Range or (ii) the IPO Shares Number described in the Final Notice
is outside the Final IPO Shares Number Range, then each Rights Holder who
delivered an Election shall have until prior to or at the Offer Time to confirm
its Election hereunder (a "Confirmation") (notwithstanding the fact that the
Offering Price is not within the Final Offering Price Range or that the IPO
Shares Number is not within the Final IPO Shares Number Range) (x) by delivering
oral notice thereof in any communication described in clause (i)(A) of
subsection (d), or (y) by delivering written notice thereof by facsimile
transmission, or by actual receipt. Any Rights Holder who fails to so confirm
its Election in accordance with the foregoing shall be automatically deemed to
have revoked its Election and its Right of First Offer shall become null and
void. Each Rights Holder who delivered an Election shall have an unconditional
right to so revoke its Election and its Right of First Offer. A Rights Holder's
timely delivery of a Confirmation in accordance with the terms and conditions
hereof shall be a binding commitment to purchase the number of IPO Shares as to
which such Rights Holder is deemed to have exercised its Right of First Offer
hereunder at the Offering Price for each such IPO Share.
(g) Closing and Restrictions. The Rights Holders' purchases of
IPO Shares in accordance with this Section 1 shall occur simultaneously with the
Closing. The IPO Shares purchased by any Rights Holder pursuant to this Section
1 shall be subject to any restrictions on resale imposed by rules or regulations
of the SEC, the NASD, the Nasdaq Stock Market, Inc., or other regulatory body.
1.4 Termination of Right of First Refusal. Each Rights Holder's Right
of First Offer terminates immediately after the Closing.
1.5 This Agreement Not an Offer. This Agreement does not constitute
an offer to sell securities of the Company. Any offering of shares of the
Company's Common Stock in the IPO will only be made pursuant to a prospectus
filed with the SEC.
2. BOARD OBSERVER RIGHTS.
2.1 Observer Rights. The Company will permit one (1) representative
of the Investors (as designated in a writing delivered to the Company from time
to time that is executed by those Investors then holding a majority of the
Series E Equivalent Shares) (the "Representative") to attend all meetings of the
Company's Board of Directors in a non-voting observer capacity. The Company will
also provide the Representative with copies of all notices,
6
<PAGE> 7
minutes and other materials that it provides to its directors with respect to
such meetings ("Board Materials"). The initial Representative shall be Harvey
Allison.
2.2 Restrictions.
(a) Prior to attending any meeting or receiving any written
materials pursuant to Section 2.1, the Representative shall execute and deliver
to the Company an agreement providing that, except to the extent otherwise
required by law, the Representative shall hold in strict confidence, and not
disclose to any party other than to another Investor who has executed this
Agreement, all information and materials the Representative received pursuant to
Section 2.1; provided, however, that the Representative may disclose such
information and materials on a confidential basis to the professional advisors
or employees of an Investor who are under a duty to hold such information and
materials in confidence to the extent reasonably necessary for such Investor to
monitor its investment in the Company.
(b) Except to the extent otherwise required by law, each
Investor shall hold in strict confidence, and not disclose to any party, all
information and materials received from the Representative that the
Representative received pursuant to Section 2.1; provided, however, that the
Investor may disclose such information and materials on a confidential basis to
its professional advisors or employees who are under a duty to hold such
information and materials in confidence to the extent reasonably necessary for
such Investor to monitor its investment in the Company.
(c) The Representative may be excluded from certain confidential
"closed sessions" of the Board at any portions of a Board meeting if (i) the
presence of the Representative would jeopardize the Company's attorney-client
privilege or (ii) if the Board otherwise reasonably so requires; provided,
however, that the Board may not so exclude the Representative pursuant to clause
(ii) of this sentence with respect to matters of corporate governance. In
addition, the Company may withhold from the Representative any portions of any
Board Materials (i) if the disclosure of such portions of Board Materials would
jeopardize the Company's attorney-client privilege or (ii) if the Board
otherwise reasonably so requires; provided, however, that the Board may not so
exclude the Representative pursuant to clause (ii) of this sentence with respect
to matters of corporate governance.
2.3 Termination.
The rights of the Investors under Section 2 of this Agreement
shall terminate upon the first to occur of: (a) the date on which the Investors
hold, in the aggregate, fewer than 245,000 shares of any combination of Series E
Equivalent Shares, (b) the closing of an IPO; (c) the sale of all or
substantially all the Company's assets; or (d) upon the closing of any merger or
other acquisition involving the Company in which the Company is not the
surviving corporation or in which the shareholders of the Company immediately
prior to such merger or acquisition own less than fifty percent (50%) of the
voting equity securities of the surviving corporation or entity immediately
after such merger or acquisition.
7
<PAGE> 8
3. ASSIGNMENT AND AMENDMENT.
3.1 Assignment. The rights an Investor under Sections 1 and 2 hereof
may be assigned in connection with any transfer of shares of Series E Stock or
shares of Conversion Stock in accordance with the applicable provisions of
Section 4.7 of the Series E Agreement (i) by an Investor that is a partnership,
corporation or limited liability company to (A) a partner of such partnership, a
shareholder of such corporation or a member of such limited liability company,
(B) a retired partner of such partnership who retires after the date hereof, (C)
the estate of any such partner, shareholder or member, (ii) by any Investor by
way of transfer by gift, will or intestate succession by such Investor to his or
her spouse or lineal descendants or ancestors or any trust for any of the
foregoing, (iii) by an Investor to a transferee who acquires thereby a number of
shares of Series E Stock or shares of Conversion Stock equal to at least that
number of shares that results from dividing One Million Dollars ($1,000,000) by
the then current "Conversion Price" for the Series E Stock (as defined in the
Company's Articles of Incorporation), or (iv) by any Investor that is a
corporation, partnership or limited liability company to an affiliate.
Notwithstanding the foregoing (i) no party may be assigned any of the
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned and (ii) any such assignee agrees in a writing
delivered to the Company to receive such assigned rights subject to all the
terms and conditions of this Agreement, including without limitation the
provisions of this Section 3.
3.2 Amendment of Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the shares of
Series E Stock and Conversion Shares.
4. GENERAL PROVISIONS.
4.1 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given upon the earlier of (i) actual receipt, (ii) the day that is one business
day after transmission by facsimile (subject to receipt by the transmitting
party of automatic confirmation of successful transmission of such facsimile to
the number dialed), except with respect to the notice provided for in Section
1.3(d) as to which notice shall be deemed given upon completion of the facsimile
transmission (subject to receipt by the transmitting party of automatic
confirmation of successful transmission of such facsimile to the number dialed),
(iii) the date that is one business day after delivery to a nationally
recognized express overnight courier service for United States deliveries, or
(iv) the
8
<PAGE> 9
date that is three business days after delivery to an internationally recognized
express courier for deliveries outside the United States, fees prepaid, as
follows:
(a) if to an Investor, at such Investor's respective address as
set forth on Exhibit A hereto; with a copy to:
Rick Cohen, Esq.
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street, Ste. 2400
Los Angeles, CA 90017
Tel. (213) 896-0400
Fax. (213) 896-0400
and a copy to:
Jon Gavenman, Esq.
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Tel. (650) 233-8539
Fax. (650) 233-8386
(b) if to the Company, at 172 Constitution Drive, Menlo Park,
California 94025.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder.
4.2 Entire Agreement. This Agreement, together with all the Exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
4.3 Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflict of laws and choice of law.
4.4 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
4.5 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
9
<PAGE> 10
4.6 Successors And Assigns. Subject to the provisions of Section 3.1,
the provisions of this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the parties hereto.
4.7 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
4.8 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
4.9 Costs And Attorneys' Fees. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
4.10 Adjustments for Stock Splits, Etc. Wherever in this Agreement
there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or Series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or Series of stock by such subdivision, combination or stock dividend.
4.11 Aggregation of Stock. All shares of the Series E Stock and
Conversion Shares, as applicable, held or acquired by affiliated entities or
persons, or entities or persons under common management, shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement.
[Remainder of this page intentionally left blank.]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
THE COMPANY:
BROADBASE INFORMATION SYSTEMS, INC.
a California Corporation
By: /s/ CHUCK BAY
-----------------------------
Name:
---------------------------
Title:
--------------------------
INVESTORS:
ATTRACTOR OFFSHORE LTD.
By: /s/ HARVEY ALLISON
--------------------------------------
Harvey Allison, President
Attractor Investment Management Inc.
its Investment Manager
ATTRACTOR INSTITUTIONAL LP
By: /s/ HARVEY ALLISON
--------------------------------------
Harvey Allison
Managing Member of its General Partner
Attractor Ventures LLC
ATTRACTOR VENTURES LLC
By: /s/ HARVEY ALLISON
------------------------------------
Harvey Allison
Managing Member
ATTRACTOR LP
By: /s/ HARVEY ALLISON
--------------------------------------
Harvey Allison
Managing Member of its General Partner
Attractor Ventures LLC
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 12
SPINNAKER CLIPPER FUND, L.P.
By: Bowman Capital Management, LLC, its
General Partner
By: /s/ ERIC MOORE
-----------------------------------
Name: Eric Moore
---------------------------------
Title: Controller
--------------------------------
SPINNAKER FOUNDERS FUND, L.P.
By: Bowman Capital Management, LLC, its
General Partner
By: /s/ ERIC MOORE
-----------------------------------
Name: Eric Moore
---------------------------------
Title: Controller
--------------------------------
SPINNAKER OFFSHORE FOUNDERS FUND
CAYMAN LIMITED
By: Bowman Capital Management, LLC, its
Investment Adviser and
Attorney-in-Fact
By: /s/ ERIC MOORE
-----------------------------------
Name: Eric Moore
---------------------------------
Title: Controller
--------------------------------
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 13
AXA U.S. GROWTH FUND LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
DOUBLE BLACK DIAMOND II LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
45th PARALLEL LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
PARALLEL CAPITAL I LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
PARALLEL CAPITAL II LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
ALMANORI LIMITED
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
MULTINVEST LLC
By: /s/ GLEN SOLOMON
-----------------------------------
Name: Glen Solomon
Title: Attorney in Fact
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 14
BENCHMARK CAPITAL PARTNERS, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: /s/ [illegible]
---------------------------------------------
Name:
-------------------------------------------
Title: Managing Member
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: /s/ [illegible]
---------------------------------------------
Name:
-------------------------------------------
Title: Managing Member
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By: /s/ G. CARTER SEDNAOUI
---------------------------------------------
Name: G. Carter Sednaoui
-------------------------------------------
Title: Managing Member
ACCEL INTERNET/STRATEGIC TECHNOLOGY
FUND L.P.
By: Accel Internet/Strategic Technology Fund
Associates L.L.C.
By: /s/ G. CARTER SEDNAOUI
---------------------------------------------
Name: G. Carter Sednaoui
-------------------------------------------
Title: Managing Member
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
its General Partner
By: /s/ G. CARTER SEDNAOUI
---------------------------------------------
Name: G. Carter Sednaoui
-------------------------------------------
Title: Managing Member
ACCEL INVESTORS '97 L.P.
By: /s/ G. CARTER SEDNAOUI
---------------------------------------------
Name: G. Carter Sednaoui
-------------------------------------------
Title: General Partner
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 15
ELLMORE C. PATTERSON PARTNERS
By: /s/ ARTHUR C. PATTERSON
------------------------------------
Name: Arthur C. Patterson
Title: General Partner
BT INVESTMENT PARTNERS, INC.
By: /s/ KRISTINE CICARDO
------------------------------------
Name: Kristine Cicardo
Title: Vice President
CHARTER GROWTH CAPITAL, L.P.
By: /s/ JAMES H. BOETTCHER
------------------------------------
Name: James H. Boettcher
Title: General Partner of the General Partner
CGC Partners, L.P.
CHARTER GROWTH CAPITAL CO-
INVESTMENT FUND, L.P.
By: /s/ JAMES H. BOETTCHER
------------------------------------
Name: James H. Boettcher
Title: General Partner of the General Partner
CGC Partners, L.P.
CGC INVESTORS, L.P.
By: /s/ JAMES H. BOETTCHER
------------------------------------
Name: James H. Boettcher
Title: General Partner of the General Partner
CGC Partners, L.P.
WEBER FAMILY TRUST DATED 1/6/89
By: /s/ EUGENE M. WEBER
------------------------------------
Name: Eugene M. Weber
Title: [Illegible]
LION INVESTMENTS LIMITED
By: /s/ ROBERT RAYNE
------------------------------------
Name: Robert Rayne
Title: Director
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 16
WESTPOOL INVESTMENT TRUST PLC
By: /s/ Robert Rane
-------------------------------------
Name: ROBERT RANE
-----------------------------------
Title: Director
----------------------------------
/s/ Dr. Pehong Chen
-----------------------------------------
DR. PEHONG CHEN for Chen Family Trust
/s/ Mike Ogborne
-----------------------------------------
MIKE OGBORNE
/s/ Raj Gollamudi
-----------------------------------------
RAJ GOLLAMUDI
/s/ Kevin Sidders
-----------------------------------------
KEVIN SIDDERS
/s/ Ken Virnig
-----------------------------------------
KEN VIRNIG
/s/ Frida Shein by Delia Laskey
as attorney-in-fact
-----------------------------------------
FRIDA SHEIN
/s/ Arthur O. Armstrong
-----------------------------------------
ARTHUR O. ARMSTRONG
F & W INVESTMENTS 1989
By: /s/ Laird H. Simons III
--------------------------------------
Name: Laird H. Simons III
Title: Partner
/s/ Gil Margalit
-----------------------------------------
GIL MARGALIT
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 17
G&H PARTNERS
By: /s/ Gary S. Wohl for G&H Partners
---------------------------------
Name: Gary S. Wohl
-------------------------------
Title: Partner
------------------------------
SIGNATURE PAGE TO BROADBASE INFORMATION SYSTEMS, INC.
SERIES E RIGHTS AGREEMENT
<PAGE> 18
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
Attractor Offshore Ltd. 73,925 $ 675,120.07
c/o Attractor Investment Management,
Inc.
1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
Attn: Harvey Allison
(650) 685-8540 Phone
(650) 685-8545 Fax
Attractor Institutional LP 21,892 $ 199,928.69
c/o Attractor Investment Management,
Inc.
1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
Attn: Harvey Allison
(650) 685-8540 Phone
(650) 685-8545 Fax
Attractor Ventures LLC 39,756 $ 363,071.67
c/o Attractor Investment Management,
Inc.
1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
Attn: Harvey Allison
(650) 685-8540 Phone
(650) 685-8545 Fax
Attractor LP 302,424 $ 2,761,887.18
c/o Attractor Investment Management,
Inc.
1110 Burlingame Ave., Suite 211
Burlingame, CA 94010
Attn: Harvey Allison
(650) 685-8540 Phone
(650) 685-8545 Fax
Spinnaker Clipper Fund, L.P. 10,948 $ 99,982.61
c/o Bowman Capital Management
1875 S. Grant Street, Suite 600
San Mateo, CA 94402
Attn: Matthew Cowan
(650) 287-2228 Phone
(650) 572-1844 Fax
</TABLE>
<PAGE> 19
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
Spinnaker Founders Fund, L.P. 272,083 $ 2,484,798.00
c/o Bowman Capital Management
1875 S. Grant Street, Suite 600
San Mateo, CA 94402
Attn: Matthew Cowan
(650) 287-2228 Phone
(650) 572-1844 Fax
Spinnaker Offshore Founders Fund 154,966 $ 1,415,227.00
Cayman Limited
c/o Bowman Capital Management
1875 S. Grant Street, Suite 600
San Mateo, CA 94402
Attn: Matthew Cowan
(650) 287-2228 Phone
(650) 572-1844 Fax
Axa U.S. Growth Fund LLC 153,299 $ 1,400,003.12
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
Double Black Diamond II LLC 16,425 $ 150,001.32
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
45th Parallel LLC 5,475 $ 50,000.44
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
Parallel Capital I LLC 197,098 $ 1,799,997.49
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
</TABLE>
<PAGE> 20
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
Parallel Capital II LLC 273,748 $ 2,500,003.61
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
Almanori Limited 6,570 $ 60,000.53
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
Multinvest LLC 4,380 $ 40,000.35
c/o Partech International
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Glenn Solomon
(415) 788-2929 Phone
(415) 788-6763 Fax
Benchmark Capital Partners, L.P. 96,072 $ 877,377.54
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Attn: Kerri McClain
(650) 854-8180 Phone
(650) 854-8183 Fax
Benchmark Founders' Fund, L.P. 13,428 $ 122,631.21
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Attn: Kerri McClain
(650) 854-8180 Phone
(650) 854-8183 Fax
Accel V L.P. 21,490 $ 196,257.43
c/o Accel Partners
428 University Avenue
Palo Alto, CA 94301
Attn: Arthur Patterson
(650) 614-4800 Phone
(650) 614-4880 Fax
</TABLE>
<PAGE> 21
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
Accel Internet/Strategic Technology 2,847 $ 26,000.23
Fund L.P.
c/o Accel Partners
428 University Avenue
Palo Alto, CA 94301
Attn: Arthur Patterson
(650) 614-4800 Phone
(650) 614-4880 Fax
Accel Keiretsu V L.P 1,122 $ 10,246.67
c/o Accel Partners.
428 University Avenue
Palo Alto, CA 94301
Attn: Arthur Patterson
(650) 614-4800 Phone
(650) 614-4880 Fax
Accel Investors '97 L.P. 1,314 $ 12,000.11
c/o Accel Partners
428 University Avenue
Palo Alto, CA 94301
Attn: Arthur Patterson
(650) 614-4800 Phone
(650) 614-4880 Fax
Ellmore C. Patterson Partners 602 $ 5,497.77
c/o Accel Partners
428 University Avenue
Palo Alto, CA 94301
Attn: Arthur Patterson
(650) 614-4800 Phone
(650) 614-4880 Fax
BT Investment Partners, Inc. 109,263 $ 997,844.35
130 Liberty Street
New York, N.Y. 10006
Attn. Kristine Cicardo, V.P.
(212) 250-1737 Phone
(212) 669-1502 Fax
Charter Growth Capital, L.P. 54,750 $ 500,004.38
525 University Avenue, Suite 1400
Palo Alto, CA 94301
Attn: Steve Bird
(650) 325-6953 Phone
(650) 325-8811 Fax
Charter Growth Capital Co-Investment 160,827 $ 1,468,752.58
Fund, L.P.
525 University Avenue, Suite 1400
Palo Alto, CA 94301
Attn: Steve Bird
(650) 325-6953 Phone
(650) 325-8811 Fax
</TABLE>
<PAGE> 22
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
CGC Investors, L.P. 3,422 $ 31,251.42
525 University Avenue, Suite 1400
Palo Alto, CA 94301
Attn: Steve Bird
(650) 325-6953 Phone
(650) 325-8811 Fax
Weber Family Trust dated 1/6/89 1,643 $ 15,004.70
c/o Bluewater Capital Management, Inc.
50 California Street, Suite 3200
San Francisco, CA 94111
Attn: Eugene Weber
(415) 362-5680 Phone
(415) 788-6763 Fax
Lion Investments Limited 109,500 $ 1,000,008.75
c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WlM 5AH
ATT: Robert Rayne
011-44-171-935 3555 Phone
011-44-171-935-3737 Fax
Westpool Investment Trust plc 27,375 $ 250,002.19
c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WlM 5AH
ATT: Robert Rayne
011-44-171-935 3555 Phone
011-44-171-935-3737 Fax
Chen Family Trust 21,900 $ 200,001.75
c/o Dr. Pehong Chen
President & CEO
BroadVision
585 Broadway
Redwood City, CA 94063
(650) 261-5188 Phone
(650) 261-5900 Fax
Mike Ogborne 1,643 $ 15,004.70
One Montgomery Street, Suite 3700
San Francisco, CA 94104
(415) 364-2616 Phone
(415) 364-2697 Fax
</TABLE>
<PAGE> 23
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
Raj Gollamudi 2,737 $ 24,995.66
c/o Mike Ogborne
One Montgomery Street, Suite 3700
San Francisco, CA 94104
(415) 364-2616 Phone
(415) 364-2697 Fax
Kevin Sidders 2,190 $ 20,000.18
c/o Mike Ogborne
One Montgomery Street, Suite 3700
San Francisco, CA 94104
(415) 364-2616 Phone
(415) 364-2697 Fax
Ken Virnig 2,737 $ 24,995.66
718 University Avenue, Suite 110
Los Gatos, CA 95032
(408) 354-3400 Phone
(408) 354-1810 Fax
Frida Shein 3,639 $ 33,233.17
c/o Dalia Govshovitz
104-60 Apt. 17J Queens Blvd.
Forest Hills, N.Y. 11375-7327
(718) 830-0687 Home Fax
(212) 343-2529 Office Fax
Arthur and Stephani Armstrong 621 $ 5,671.29
Merle Norman Cosmetics
9130 Bellanca Avenue
Los Angeles, CA 90045
(310) 641-3000
F&W Investments 1999 4,626 $ 42,246.96
c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Laird Simons III
(650) 494-0600 Phone
(650) 494-1417 Fax
Gil Margalit 3,750 $ 34,246.88
17 Yerba Buena Avenue
Loa Altos, CA 94022
(650) 625-1111 Office Phone
(650) 404-9877 Office Fax
</TABLE>
<PAGE> 24
<TABLE>
SHARES OF SERIES E STOCK
INVESTOR PURCHASED PURCHASE PRICE
- -------- ------------------------ --------------
<S> <C> <C>
G&H Partners 8,325 $ 76,028.07
c/o Gunderson Dettmer Stough
Villeneuve Franklin &
Hachigian, LLP
155 Constitution Way
Menlo Park, CA 94025
Attn: Steve Spurlock/Gary Wohl
TOTALS 2,188,812 $19,989,325.73
</TABLE>
<PAGE> 1
EXHIBIT 10.02
BROADBASE INFORMATION SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
As adopted March 4, 1996 and amended June 28, 1999
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options and Restricted Stock.
Capitalized terms not defined in the text are defined in Section 22. This Plan
is intended to be a written compensatory benefit plan within the meaning of Rule
701 promulgated under the Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17, the
total number of Shares reserved and available for grant and issuance pursuant to
the Plan shall be 4,530,000 Shares as permitted under Section 260.140.45 of
Title 10 of the California Code of Regulations.(1) Subject to Sections 2.2 and
17 hereto, Shares subject to Awards previously granted shall again be available
for grant and issuance in connection with future Awards under the Plan that: (a)
are subject to issuance upon exercise of an Option but cease to be subject to
such Option for any reason other than exercise of such Option, (b) are subject
to an Award granted hereunder but are forfeited or are repurchased by the
Company at the original issue price, or (c) are subject to an Award that
otherwise terminates without Shares being issued. At all times the Company will
reserve and keep available a sufficient number of Shares as will be required to
satisfy the requirements of all Awards granted and outstanding under the Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
the Plan, (b) the Exercise Prices of and number of Shares subject to outstanding
Options, and (c) the Purchase Price of and number of Shares subject to other
outstanding Awards shall be proportionately adjusted, subject to any required
action by the Board or the shareholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of a Share shall
not be issued but shall either be paid in cash at Fair Market Value of such
fraction of a Share or shall be rounded up to the nearest whole Share, as
determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers,
- --------
(1) As adjusted for one and one-half for one split of outstanding Common Stock
effected in December 1996.
<PAGE> 2
directors, consultants and advisers of the Company or any Parent, Subsidiary or
Affiliate of the Company; provided such consultants and advisers render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award under
the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by the
Committee or the Board if no Committee has been created by the Board. Subject to
the general purposes, terms and conditions of the Plan, and to the direction of
the Board, the Committee shall have full power to implement and carry out the
Plan. Without limitation, the Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement and any
other agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating
to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under the Plan or awards under
any other incentive or compensation plan of the Company or
any Parent, Subsidiary or Affiliate of the Company;
(g) grant waivers of any conditions of this Plan or any Award
conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion either (i) at the
time of grant of the
-2-
<PAGE> 3
Award or (ii) subject to Section 5.9 hereof, unless in contravention of any
express term of the Plan or Award, at any later time, and such determination
shall be final and binding on the Company and all persons having an interest in
any Award under the Plan. The Committee may delegate to one or more officers of
the Company the authority to grant an Award under the Plan, provided such
officer or officers are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the Plan shall
be evidenced by an Award Agreement which shall expressly identify the Option as
an ISO or NQSO ("Stock Option Agreement"), and be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
shall from time to time approve, and which shall comply with and be subject to
the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be the date
on which the Committee makes the determination to grant such Option, unless a
later date is otherwise specified by the Committee. The Stock Option Agreement
and a copy of the Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately (subject
to repurchase pursuant to Section 11 of the Plan) or may be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
shall be exercisable after the expiration of ten (10) years from the date the
Option is granted, and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company ("Ten Percent Shareholder") shall be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for the exercise of Options to become exercisable at one time
or from time to time, periodically or otherwise, in such number of Shares or
percentage of Shares as the Committee determines. Subject to earlier termination
of the Option as provided herein, each Participant who is not an officer,
director or consultant of the Company or of a Parent or Subsidiary of the
Company shall have the right to exercise an Option granted hereunder at the rate
of no less than twenty percent (20%) per year over five (5) years from the date
such Option is granted.
5.4 Exercise Price. The Exercise Price of an Option shall be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO shall be not less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder shall not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 7 of the Plan.
-3-
<PAGE> 4
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company, and any applicable taxes, to comply with applicable
securities laws, together with payment in full of the Exercise Price, and any
applicable taxes, for the number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to Sections
16 or 17 and notwithstanding the exercise periods set forth in the Stock Option
Agreement, exercise of an Option shall always be subject to the following:
(a) If the Participant is Terminated for any reason except
death, Disability, or for Cause, then Participant may
exercise such Participant's Options only to the extent that
such Options are exercisable upon the Termination Date. Such
Options must be exercised by the Participant, if at all, as
to all or some of the Vested Shares calculated as of the
Termination Date, within three (3) months after the
Termination Date (or within such shorter time period, not
less than thirty (30) days, or within such longer time
period, after the Termination Date as may be determined by
the Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO), but in any
event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three
(3) months after a Termination other than for Cause), then
Participant's Options may be exercised only to the extent
that such Options are exercisable by Participant on the
Termination Date. Such Options must be exercised by
Participant (or Participant's legal representative or
authorized assignee) if at all, as to all or some of the
Vested Shares calculated as of the Termination Date, within
twelve (12) months after the Termination Date (or within
such shorter time period, not less than six (6) months, or
within such longer time period, after the Termination Date
as may be determined by the Committee, with any exercise
beyond (i) three (3) months after the Termination Date when
the Termination is for any reason other than the
Participant's death or disability, within the meaning of
Section 22(e)(3) of the Code, or (ii) twelve (12) months
after the Termination Date when the Termination is for
Participant's disability, within the meaning of Section
22(e)(3) of the Code, deemed to be an NQSO), but in any
event no later than the expiration date of the Options.
-4-
<PAGE> 5
(c) If the Participant is Terminated for Cause, then
Participant's Options shall expire on such Participant's
Termination Date, or at such later time and on such
conditions as determined by the Committee.
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under the Plan or
under any other incentive stock option plan of the Company or any Affiliate,
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise Price
may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 of the Plan for Options granted on the date the action is
taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in the
Plan, no term of the Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the Purchase Price, the restrictions to which
the Shares shall be subject, and all other terms and conditions of the
Restricted Stock Award, subject to the following:
-5-
<PAGE> 6
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to the Plan shall be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that shall be in such form (which need
not be the same for each Participant) as the Committee shall from time to time
approve, and shall comply with and be subject to the terms and conditions of the
Plan. The offer of Restricted Stock shall be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer shall terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted or at the time the purchase is consummated, except in the
case of a sale to a Ten Percent Shareholder, in which case the Purchase Price
shall be 100% of the Fair Market Value on the date the Restricted Stock Award is
granted or at the time the purchase is consummated. Payment of the Purchase
Price may be made in accordance with Section 7 of the Plan.
6.3 Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent under Section 25102(o) of the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to the Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's capital stock that
either: (1) have been owned by Participant for more than six
(6) months and have been paid for within the meaning of SEC
Rule 144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has been
fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the
Company shall not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by
collateral other than the Shares;
-6-
<PAGE> 7
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer")
whereby the Participant irrevocably elects to exercise
the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(2) through a "margin" commitment from Participant and an
NASD Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under the Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash by the Company, such payment
shall be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.
8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). All elections by a Participant to
have Shares withheld for this purpose shall be
-7-
<PAGE> 8
made in writing in a form acceptable to the Committee and shall be subject to
the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, then except as provided below, the election shall
be irrevocable as to the particular Shares as to which the
election is made;
(c) all elections shall be subject to the consent or disapproval
of the Committee; and
(d) in the event that the Tax Date is deferred until six (6)
months after the delivery of Shares under Section 83(b) of
the Code, the Participant shall receive the full number of
Shares with respect to which the exercise occurs, but such
Participant shall be unconditionally obligated to tender
back to the Company the proper number of Shares on the Tax
Date.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant shall have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company shall be subject to the same restrictions as
the Restricted Stock; provided, further, that the Participant shall have no
right to retain such stock dividends or stock distributions with respect to
Unvested Shares that are repurchased pursuant to Section 11. The Company will
comply with Section 260.140.1 of Title 10 of the California Code of Regulations
with respect to the voting rights of Common Stock.
9.2 Financial Statements. The Company shall provide financial
statements to each Participant annually during the period such Participant has
Awards outstanding or as otherwise required under Section 260.140.46 of Title 10
of the California Code of Regulations. Notwithstanding the foregoing, the
Company shall not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.
10. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, other than by
will or by the laws of descent and distribution, and may not be made subject to
execution, attachment or similar process. During the lifetime of the Participant
an Award shall be exercisable only by the Participant, or Participant's legal
representative, and any elections with respect to an Award may be made only by
the Participant or Participant's legal representative.
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<PAGE> 9
11. RESTRICTIONS ON SHARES.
11.1 Right of First Refusal. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
(a) a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under the Plan, for cash or cancellation of purchase money
indebtedness, at: (A) with respect to Shares that are "Vested" (as defined in
the Award Agreement), the Fair Market Value of such Shares on Participant's
Termination Date, provided, that such right of repurchase (i) must be exercised
as to all such "Vested" Shares unless a Participant consents to the Company's
repurchase of only a portion of such "Vested" Shares and (ii) terminates when
the Company's securities become publicly traded; or (B) with respect to Shares
that are not "Vested" (as defined in the Award Agreement), at the Participant's
original Purchase Price or Exercise Price, as the case may be, or such higher
price as determined by the Committee, provided, that to the extent the
Participant is not an officer, director or consultant of the Company, or of a
Parent or Subsidiary of the Company, such right of repurchase in this Subsection
(B) lapses at the rate of at least 20% per year over 5 years from the date the
Shares were purchased (or from the date of grant of options in the case of
Shares obtained pursuant to a Stock Option Agreement and Stock Option Exercise
Agreement).
12. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares in Section 11 hereof, the Committee may require the
Participant to deposit all certificates representing Shares, together with stock
powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to
hold in escrow until such restrictions have lapsed or terminated, and the
Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under the Plan shall be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional forms of
collateral to secure the payment of such obligation and, in any event, the
Company shall have full recourse against the Participant
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<PAGE> 10
under the promissory note notwithstanding any pledge of the Participant's Shares
or other collateral. In connection with any pledge of the Shares, Participant
shall be required to execute and deliver a written pledge agreement in such form
as the Committee shall from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a prorata basis as the
promissory note is paid.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant shall agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award shall not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in the Plan, the Company shall have no obligation to issue
or deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company shall be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company shall have no liability
for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor or Acquiring
Corporation. In the event of (a) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the shareholders of the Company or their relative stock holdings and the
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<PAGE> 11
Awards granted under the Plan are assumed, converted or replaced by the
successor or acquiring corporation, which assumption, conversion or replacement
shall be binding on all Participants), (b) a dissolution or liquidation of the
Company, (c) the sale of substantially all of the assets of the Company, or (d)
a merger in which the Company is the surviving corporation but after which the
shareholders of the Company immediately prior to such merger (other than any
shareholder which merges with the Company in such merger, or which owns or
controls another corporation which merges with the Company in such merger) cease
to own their shares or other equity interests in the Company, any or all
outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement shall be
binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards). The successor or acquiring
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions and other restrictions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 17.1.
In the event such successor or acquiring corporation (if any)
refuses to assume or substitute Awards, as provided above, pursuant to a
transaction described in this Subsection 17.1, then notwithstanding any other
provision in this Plan to the contrary, such Awards shall expire on such
transaction at such time and on such conditions as the Board shall determine.
17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
17.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become effective
on the date that it is adopted by the Board (the "Effective Date"). The Plan
shall be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan),
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<PAGE> 12
consistent with applicable laws, within twelve months before or after the
Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to
the Plan; provided, however, that: (a) no Option may be exercised prior to
initial shareholder approval of the Plan; (b) no Option granted pursuant to an
increase in the number of Shares approved by the Board shall be exercised prior
to the time such increase has been approved by the shareholders of the Company;
(c) in the event that initial shareholder approval is not obtained within the
time period provided herein, all Awards granted hereunder shall be cancelled,
any Shares issued pursuant to any Award shall be cancelled and any purchase of
Shares hereunder shall be rescinded; and (d) Awards granted pursuant to an
increase in the number of Shares approved by the Board which increase is not
timely approved by shareholders shall be canceled, any Shares issued pursuant to
any such Awards shall be canceled, and any purchase of Shares subject to any
such Award shall be rescinded.
19. TERM OF PLAN AND GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the Effective Date
or, if earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof,
the Board may at any time terminate or amend the Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to the Plan; provided, however, that the Board shall not,
without the approval of the shareholders of the Company, amend the Plan in any
manner that requires such shareholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans or
Section 25102(o) of the California Corporations Code.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
22. DEFINITIONS. As used in the Plan, the following terms shall have
the following meanings:
"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"Award" means any award under the Plan, including any Option or
Restricted Stock.
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<PAGE> 13
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award, including the Stock Option Agreement and the
Restricted Stock Agreement.
"Board" means the Board of Directors of the Company.
"Cause" shall mean Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent, Subsidiary or Affiliate of the Company, the
Participant's conviction for, or guilty plea to, a felony or a crime involving
moral turpitude, any willful perpetration by the Participant of a common law
fraud or any unlawful use by the Participant of drugs or other controlled
substances, (ii) the Participant's commission of an act of personal dishonesty
which involves personal profit in connection with the Company or any other
entity having a business relationship with the Company, (iii) any material
breach by the Participant of any provision of any agreement or understanding
between the Company or any Parent or Subsidiary or Affiliate of the Company and
the Participant regarding the terms of the Participant's service as an employee,
director, consultant, independent contractor or adviser to the Company or a
Parent, Subsidiary or Affiliate of the Company, including without limitation,
the willful and continued failure or refusal of the Participant to perform the
material duties required of him as an employee, officer, director, consultant,
independent contractor or adviser of the Company or a Parent, Subsidiary or
Affiliate of the Company, other than as a result of having a Disability, or a
breach of any applicable invention assignment and confidentiality agreement or
similar agreement between the Company and the Participant, (iv) Participant's
disregard of the policies of the Company or a Parent or Subsidiary or Affiliate
of the Company so as to cause loss, damage or injury to the property, reputation
or employees of the Company or a Parent, Subsidiary or Affiliate of the Company,
or (v) any other misconduct by the Participant which is materially injurious to
the financial condition or business reputation of, or is otherwise materially
injurious to, the Company or a Parent, Subsidiary or Affiliate of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means BroadBase Information Systems, Inc., a corporation
organized under the laws of the State of California, or any successor
corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
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<PAGE> 14
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the
date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading
on a national securities exchange, the average of the
closing bid and asked prices on the date of determination,
as reported by The Wall Street Journal (or, if not so
reported, as otherwise reported by any newspaper or other
source as the Board may determine); or
(d) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
"Option" means an award of an option to purchase Shares pursuant to
Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock representing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Participant" means a person who receives an Award under the Plan.
"Plan" means this BroadBase Information Systems, Inc. Amended and
Restated 1996 Equity Incentive Plan, as amended from time to time.
"Purchase Price" means the price at which a Participant may
purchase Restricted Stock.
"Restricted Stock" means Shares purchased pursuant to a Restricted
Stock Award.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under the Plan, as adjusted pursuant to Sections 2 and 17, and any
successor security.
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<PAGE> 15
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of the Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant or adviser, to
the Company or a Parent, Subsidiary or Affiliate of the Company, except in the
case of sick leave, military leave, or any other leave of absence approved by
the Committee, provided, that such leave is for a period of not more than ninety
(90) days, unless reinstatement (or, in the case of an employee with an ISO,
reemployment) upon the expiration of such leave is guaranteed by contract or
statute unless provided otherwise pursuant to formal policy adopted from time to
time by the Company and issued and promulgated to employees in writing. In the
case of any employee on sick leave, military leave or an approved leave of
absence, the Committee may make such provisions respecting suspension of vesting
of the Award while on leave from the Company or a Parent or a Subsidiary of the
Company as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Stock Option
Agreement. The Committee shall have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
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<PAGE> 16
BROADBASE INFORMATION SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between BroadBase Information Systems, Inc. a California corporation (the
"COMPANY"), and the participant named below (the "PARTICIPANT"). Capitalized
terms not defined herein shall have the meaning ascribed to them in the
Company's 1996 Equity Incentive Plan, as amended through June 28, 1999 (the
"Plan").
PARTICIPANT:
------------------------------------------------
SOCIAL SECURITY NUMBER:
------------------------------------------------
ADDRESS:
------------------------------------------------
------------------------------------------------
TOTAL OPTION SHARES:
------------------------------------------------
EXERCISE PRICE PER SHARE:
------------------------------------------------
DATE OF GRANT:
------------------------------------------------
FIRST VESTING DATE:
------------------------------------------------
EXPIRATION DATE:
------------------------------------------------
(unless earlier terminated under Section 5.6
of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (the "SHARES") at the
Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" (the "ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. Provided Participant
continues to provide services to the Company or any Subsidiary or Parent of the
Company, the Option will become vested and exercisable with respect to 25% of
the Shares on _______, __ (the "FIRST VESTING DATE") and thereafter at the end
of each month from the First Vesting Date, the Option shall become exercisable
as to 2.083% of the Shares, provided that for participants other than officers,
directors and consultants, the Option will become fully exercisable within five
years
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<PAGE> 17
from the Date of Grant with at least 20% of the total shares first
becoming exercisable at the end of each of the five years. If application of the
vesting percentage causes a fractional share, such share shall be rounded down
to the nearest whole share for each month except for the last month in such
vesting period, at the end of which last month this Option shall become
exercisable for the full remainder of the Shares.
2.2 Vesting of Options. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."
2.3 Expiration. The Option shall expire on the Expiration
Date set forth above or earlier as provided in Section 3 below or pursuant to
Section 5.6 of the Plan.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination when Termination is for
any reason other than Participant's Disability or for Cause), the Option, to the
extent that it is exercisable by Participant on the Termination Date, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the Termination Date, but in any event no later than
the Expiration Date. Any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section 22(e)(3) of the
Code; or (ii) twelve (12) months after the Termination Date when the termination
is for Participant's disability, within the meaning of Section 22(e)(3) of the
Code, is deemed to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated
for Cause, the Option shall cease to be exercisable by Participant immediately
upon such Termination, unless the Committee, in its sole discretion,
affirmatively decides otherwise and so informs the Participant in writing.
Termination for "Cause" shall mean Termination because of (i) any willful
material violation by the Participant of any law or regulation applicable to the
business of the Company or any of its Subsidiaries, the Participant's conviction
for, or guilty plea to, a felony or a crime involving moral turpitude, any
willful perpetration by the Participant of a common law fraud or any unlawful
use by the Participant of drugs or other controlled substances, (ii) the
Participant's commission of an act of personal dishonesty which involves
personal profit in connection with the Company or any other entity having a
business relationship with the Company, (iii) any material breach by the
Participant of any provision of any agreement or understanding between the
Company and the Participant regarding the terms of the Participant's service as
an employee, director, consultant, independent contractor or adviser to the
Company or a Parent, Subsidiary or Affiliate of the Company, including without
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of him as an employee, director,
consultant, independent contractor or adviser of the Company or a Parent,
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<PAGE> 18
Subsidiary or Affiliate of the Company, other than as a result of being
Disabled, or a breach of any applicable Invention Assignment and Confidentiality
Agreement or similar agreement between the Company and the Participant, (iv)
Participant's disregard of the policies of the Company so as to cause loss,
damage or injury to the property, reputation or employees of the Company or
their respective Parents, Subsidiaries or Affiliates, or (v) any other
misconduct by the Participant which is materially injurious to the financial
condition or business reputation of, or is otherwise materially injurious to,
the Company or any of its Parents, Subsidiaries or Affiliates, then the Option
will expire on Participant's Termination Date, or at such later time and on such
conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the case
may be) must deliver to the Company an executed stock option exercise agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Committee from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, (i) Participant's election to exercise the Option,
(ii) the number of Shares being purchased, (iii) any restrictions imposed on the
Shares and (iv) any representations, warranties and agreements regarding
Participant's investment intent and access to information as may be required by
the Company to comply with applicable securities laws. If someone other than
Participant exercises the Option, then such person must submit documentation
reasonably acceptable to the Company verifying that such person has the legal
right to exercise the Option.
4.2 Limitations on Exercise. The Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. The Option
may not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock
that (i) either (A) have been owned by Participant for
more than six (6) months and have been paid for within
the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such
shares); or (B) were obtained by Participant in the open
public market; and (ii) are clear of all liens, claims,
encumbrances or security interests;
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<PAGE> 19
(c) by waiver of compensation due or accrued to Participant
for services rendered;
(d) provided that a public market for the Company's stock
exists: (i) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased sufficient to pay for the total Exercise
Price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the total
Exercise Price directly to the Company, or (ii) through
a "margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the
Company; or
(e) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (i) the date two
(2) years after the Date of Grant, and (ii) the date one (1) year after transfer
of such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this
Agreement are intended to comply with Section 25102(o) of the California
Corporations Code and any regulations relating thereto. Any provision of this
Agreement which is inconsistent with Section 25102(o) or any regulations
relating thereto shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o) and any
regulations relating thereto. The exercise of the Option and the issuance and
transfer of
4
<PAGE> 20
Shares shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant or in the event of Participant's incapacity, by Participant's legal
representative. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company,
or its assignee, shall have the option to repurchase Participant's Unvested
Shares (as defined in Section 2.2 of this Agreement) on the terms and conditions
set forth in the Exercise Agreement (the "REPURCHASE OPTION") if Participant is
Terminated (as defined in the Plan) for Cause (as defined in Section 3.3
hereof).
8.1 Termination and Termination Date. In case of any
dispute as to whether Participant is Terminated for Cause, the Committee shall
have discretion to determine whether Participant has been Terminated for Cause
and the effective date of such Termination (the "Cause Termination Date").
8.2 Exercise of Repurchase Option. At any time within
ninety (90) days after the later of the Cause Termination Date or the date
Participant purchased the Shares, the Company, or its assignee, may elect to
repurchase the Participant's Unvested Shares by giving Participant written
notice of exercise of the Repurchase Option for Unvested Shares.
8.3 Calculation of Repurchase Price for Vested Shares. The
Company or its assignee shall have the option to repurchase from Participant (or
from Participant's personal representative as the case may be) the Unvested
Shares at the Fair Market Value of such shares on the Participant's Cause
Termination Date or such higher price as determined by the Committee.
8.4 Payment of Repurchase Price. The repurchase price
shall be payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Participant
to the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option for Unvested Shares.
8.5 Right of Termination Unaffected. Nothing in this
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Participant's employment or other relationship with
Company (or the Parent or Subsidiary of the Company) at any time, for any reason
or no reason, with or without cause.
8.6 Termination of Repurchase Option. The Company's
Repurchase Options for Unvested Shares will terminate upon the closing of the
first sale of Common Stock
5
<PAGE> 21
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the SEC (other than a registration statement
solely covering an employee benefit plan or corporate reorganization).
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares (either being sometimes referred to herein as the "Holder") may be
sold or otherwise transferred (including without limitation a transfer by gift
or operation of law), the Company and/or its assignee(s) shall have an
assignable right of first refusal to purchase the Vested Shares to be sold or
transferred (the "Offered Shares") on the terms and conditions set forth in this
Section (the "Right of First Refusal").
9.1 Notice of Proposed Transfer. The Holder of the Offered
Shares shall deliver to the Company a written notice (the "Notice") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed bona fide purchaser or other transferee
("Proposed Transferee"); (iii) the number of Offered Shares to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Offered Shares (the "Offered
Price"); and (v) that the Holder will offer to sell the Offered Shares to the
Company and/or its assignee(s) at the Offered Price as provided in this Section.
9.2 Exercise of Right of First Refusal. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
(or, with the consent of the Holder, less than all) of the Offered Shares
proposed to be transferred to any one or more of the Proposed Transferees named
in the Notice, at the purchase price determined as specified below.
9.3 Purchase Price. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the cash equivalent value of
the non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Company's Board of
Directors.
9.4 Payment. Payment of the purchase price for Offered
Shares will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within 120 days after the date
of the Notice, and provided further, that (i) any such sale or other transfer is
effected in compliance with all applicable securities laws and (ii) the Proposed
Transferee agrees in writing that the
6
<PAGE> 22
provisions of this Section will continue to apply to the Offered Shares in the
hands of such Proposed Transferee. If the Offered Shares described in the Notice
are not transferred to the Proposed Transferee within such 120 day period, then
a new Notice must be given to the Company, and the Company will again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the
contrary in this Section, the following transfers of Vested Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
Vested Shares during Participant's lifetime by gift or on Participant's death by
will or intestacy to Participant's "immediate family" (as defined below) or to a
trust for the benefit of Participant or Participant's immediate family, provided
that each transferee or other recipient agrees in a writing satisfactory to the
Company that the provisions of this Section will continue to apply to the
transferred Vested Shares in the hands of such transferee or other recipient;
(ii) any transfer of Vested Shares made pursuant to a statutory merger or
statutory consolidation of the Company with or into another corporation or
corporations (except that the Right of First Refusal and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation shall succeed to the rights of the
Company under this Section unless the agreement of merger or consolidation
expressly otherwise provides); or (iii) any transfer of Vested Shares pursuant
to the winding up and dissolution of the Company. As used herein, the term
"immediate family" will mean Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant's
spouse.
9.7 Termination of Right of First Refusal. The Company's
Right of First Refusal will terminate upon the closing of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC (other than a
registration statement solely covering an employee benefit plan or corporate
reorganization).
10. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
10.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal alternative minimum tax purposes and may subject
the Participant to the alternative minimum tax in the year of exercise.
10.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Participant is a current or former
7
<PAGE> 23
employee of the Company, the Company may be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
10.3 Disposition of Shares. The following tax consequences
may apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an ISO and are disposed of more than two (2)
years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
10.4. Section 83(b) Election for Unvested Shares. With
respect to Unvested Shares, which are subject to the Repurchase Option, unless
an election is filed by the Participant with the Internal Revenue Service (and,
if necessary, the proper state taxing authorities), within 30 days of the
purchase of the Unvested Shares, electing pursuant to Section 83(b) of the Code
(and similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
12. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to the
subject matter hereof.
8
<PAGE> 24
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be enforced to the maximum extent possible and the other provisions will
remain fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate, effective as of the Date of Grant.
BROADBASE INFORMATION PARTICIPANT
SYSTEMS, INC.
By:
---------------------------------- -----------------------------------
(Signature)
- ------------------------------------- -----------------------------------
(Please print name) (Please print name)
- -------------------------------------
(Please print title)
9
<PAGE> 25
[IF PERFORMANCE-BASED VESTING, POSSIBLE FORMAT FOR ATTACHMENT 1]
ATTACHMENT 1
Performance Based Vesting Schedule
Performance Period: __/__/__ - __/__/__
<TABLE>
<CAPTION>
Number of Shares for which the Option
Performance Performance shall Vest and Become Exercisable upon
Goal Due Date satisfactory completion of Performance Goals
----------- -------- --------------------------------------------
<S> <C> <C>
</TABLE>
[COMPANY NAME] PARTICIPANT
By:
---------------------------------- -----------------------------------
(Signature)
- ------------------------------------- -----------------------------------
(Please print name) (Please print name)
- -------------------------------------
(Please print title)
10
<PAGE> 26
EXHIBIT A
FORM OF STOCK OPTION EXERCISE AGREEMENT
<PAGE> 27
BROADBASE INFORMATION SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the "EXERCISE AGREEMENT") is made
and entered into as of _________________________, 19___ (the "EFFECTIVE DATE")
by and between BroadBase Information Systems, Inc., a California corporation
(the "COMPANY"), and the purchaser named below (the "PURCHASER"). Capitalized
terms not defined herein shall have the meanings ascribed to them in the
Company's 1996 Equity Incentive Plan, as amended through June 28, 1999 (the
"PLAN").
PURCHASER:
------------------------------------------------
------------------------------------------------
SOCIAL SECURITY NUMBER:
------------------------------------------------
ADDRESS:
------------------------------------------------
------------------------------------------------
TOTAL OPTION SHARES:
------------------------------------------------
EXERCISE PRICE PER SHARE:
------------------------------------------------
DATE OF GRANT:
------------------------------------------------
FIRST VESTING DATE:
------------------------------------------------
EXPIRATION DATE:
------------------------------------------------
(Unless earlier terminated under Section 5.6 of
the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 Exercise. Pursuant to exercise of that certain option (the
"OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above (the "SHARES") of the Company's Common Stock at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"). As used in this Exercise
Agreement, the term "SHARES" refers to the Shares purchased under this Exercise
Agreement and includes all securities received (i) in replacement of the Shares,
(ii) as a result of stock dividends or stock splits with respect to the Shares,
and (iii) all securities received in
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<PAGE> 28
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:
----------------------------------------------------------
----------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Other; please specify:
-------------------------------
To assign the Shares to a trust, a stock transfer agreement in
the form attached hereto as Exhibit [6] (the "TRANSFER AGREEMENT") must be
completed and executed.
1.3 Payment. Purchaser hereby delivers payment of the Exercise
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
[ ] in cash (by check) in the amount of
$____________, receipt of which is acknowledged
by the Company;
[ ] by cancellation of indebtedness of the Company
owed to Purchaser in the amount of
$_______________;
[ ] by delivery of _________ fully-paid,
nonassessable and vested shares of the Common
Stock of the Company owned by Purchaser for at
least six (6) months prior to the date hereof
which have been paid for within the meaning of
SEC Rule 144, (if purchased by use of a
promissory note, such note has been fully paid
with respect to such vested shares), or obtained
by Purchaser in the open public market, and
owned free and clear of all liens, claims,
encumbrances or security interests, valued at
the current Fair Market Value of $___________
per share;
[ ] by the waiver hereby of compensation due or
accrued for services rendered in the amount of
$_________.
2. DELIVERY.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
hereto (the "STOCK POWERS"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of
2
<PAGE> 29
Spouse in the form of Exhibit 2 attached hereto (the "SPOUSE CONSENT") executed
by Purchaser's spouse, and (iv) the Purchase Price.
2.2 Deliveries by the Company. Upon its receipt of the Exercise
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser to be placed in escrow as provided in Section 11
to secure payment of Purchaser's obligation to the Company under the promissory
note and until expiration or termination of the Company's Repurchase Option and
Right of First Refusal described in Sections 8, 9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a copy of
the Plan and the Stock Option Agreement, has read and understands the terms of
the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to
be bound by their terms and conditions. Purchaser acknowledges that there may be
adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.
3.3 Access to Information. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating the
merits and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
3.5 No General Solicitation. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
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<PAGE> 30
4.1 Compliance with U.S. Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with the
Securities and Exchange Commission ("SEC") under the Securities Act and that,
notwithstanding any other provision of the Stock Option Agreement to the
contrary, the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Purchaser agrees to cooperate with the Company to ensure
compliance with such laws. The Shares are being issued under the Securities Act
pursuant to the exemption provided by SEC Rule 701.
4.2 Compliance with California Securities Laws. THE PLAN, THE
STOCK OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO COMPLY WITH
SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES (INCLUDING
COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED THEREUNDER BY THE
CALIFORNIA DEPARTMENT OF CORPORATIONS (THE "REGULATIONS"). ANY PROVISION OF THIS
EXERCISE AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT
FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED TO COMPLY WITH
THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased and
paid for (within the meaning of Rule 144). Purchaser understands that Shares
paid for with a promissory note may not be deemed to be fully "paid for" within
the meaning of Rule
4
<PAGE> 31
144 unless certain conditions are met and that, accordingly, the Rule 144
holding period of such Shares may not begin to run until such Shares are fully
paid for within the meaning of Rule 144. Purchaser understands that Rule 144 may
indefinitely restrict transfer of the Shares so long as Purchaser remains an
"affiliate" of the Company or if "current public information" about the Company
(as defined in Rule 144) is not publicly available.
5.3 SEC Rule 701. The Shares are issued pursuant to SEC Rule 701
promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale) ninety
(90) days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the SEC, subject to the lengthier market standoff agreement contained in Section
7 of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 Disposition of Shares. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser shall have complied with all requirements of
this Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate actions necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) have been
taken; and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of the Regulations referred
to in Section 4.2 hereof.
6.2 Restriction on Transfer. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option or the Company's Right of First Refusal described below,
except as permitted by this Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the Company)
to whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Repurchase Option and
the
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<PAGE> 32
Company's Right of First Refusal granted hereunder and (ii)] the market
stand-off provisions of Section 7 hereof, to the same extent such Shares would
be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares 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) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its
assignee, shall have the option to repurchase Purchaser's Unvested Shares (as
defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section (the "REPURCHASE OPTION") if Purchaser is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Purchaser's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
8.1 Termination and Termination Date. In case of any dispute as
to whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "TERMINATION DATE").
8.2 Exercise of Repurchase Option. At any time within ninety (90)
days after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date, within
ninety (90) days after the date of such exercise), the Company, or its assignee,
may elect to repurchase the Purchaser's Unvested Shares by giving Purchaser
written notice of exercise of the Repurchase Option.
8.3 Calculation of Repurchase Price for Unvested Shares. The
Company or its assignee shall have the option to repurchase from Purchaser (or
from Purchaser's personal representative as the case may be) the Unvested Shares
at the Purchaser's Exercise Price, proportionately adjusted for any stock split
or similar change in the capital structure of the Company as set forth in
Section 2.2 of the Plan (the "REPURCHASE PRICE").
8.4 Payment of Repurchase Price. The Repurchase Price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 Right of Termination Unaffected. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent, Subsidiary or
Affiliate of the Company) to terminate Purchaser's
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<PAGE> 33
employment or other relationship with Company (or the Parent, Subsidiary or
Affiliate of the Company) at any time, for any reason or no reason, with or
without Cause.
The Repurchase Option for Unvested Shares shall terminate as to any Unvested
Shares upon the closing of the first sale of Common Stock of the Company to the
general public pursuant to a registration statement filed with and declared
effective by the SEC (other than a registration statement solely covering an
employee benefit plan or corporate reorganization).
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either being sometimes referred to herein as the "HOLDER") may be sold
or otherwise transferred by gift (including without limitation any transfer by
(i) an assignment of any Shares for the benefit of creditors of the Holder, (ii)
a transfer by operation of law, (iii) an execution of judgment against the
Shares or the acquisition of record or beneficial ownership of Shares by a
lender or creditor, (iv) a transfer by will or under the laws of descent and
distribution, (v) a transfer pursuant to any decree of divorce, dissolution or
separate maintenance, any property settlement, any separation agreement or any
other agreement with a spouse (except for bona fide estate planning purposes)
under which any Shares are transferred or awarded to the spouse of the Holder or
are required to be sold, or (vi) a transfer resulting from the filing by the
Holder of a petition for relief or the filing of an involuntary petition against
Holder, under the bankruptcy laws of the United States or of any other nation
(each instance referred to hereafter as the "INVOLUNTARY TRANSFER")), the
Company and/or its assignee(s) shall have an assignable right of first refusal
to purchase the Vested Shares to be sold or transferred (the "OFFERED SHARES")
on the terms and conditions set forth in this Section (the "RIGHT OF FIRST
REFUSAL").
9.1 Notice of Proposed Transfer. In the event the Holder proposes
to transfer any Vested Shares, other than by an Involuntary Transfer, the Holder
of the Offered Shares shall deliver to the Company a written notice (the
"VOLUNTARY TRANSFER NOTICE") stating: (i) the Holder's bona fide intention to
sell or otherwise transfer the Offered Shares; (ii) the name of each proposed
bona fide purchaser or other transferee (the "PROPOSED TRANSFEREE"); (iii) the
number of Offered Shares to be transferred to each Proposed Transferee; (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Offered Shares (the "OFFERED PRICE"); and (v) that the Holder
acknowledges this Notice is an offer to sell the Offered Shares to the Company
and/or its assignee(s) pursuant to the Company's Right of First Refusal at the
Offered Price as provided for in this Exercise Agreement. In the event of any
Involuntary Transfer of any Vested Shares, the Holder shall deliver to the
Company a written notice (the "INVOLUNTARY TRANSFER NOTICE") stating: (i) the
number of Shares subject to the Involuntary Transfer, (ii) the manner,
circumstances and date of the Involuntary Transfer, and (iii) the name and
address of the Holder and transferee. If the Company subsequently requests
additional information concerning the Involuntary Transfer or transferee, Holder
agrees to promptly provide the requested information to the Company.
9.2 Exercise of Right of First Refusal. At any time within thirty
(30) days after the date of the Voluntary Transfer Notice or the Involuntary
Transfer Notice (either being sometimes referred to herein as the "NOTICE"), the
Company and/or its assignee(s) may, by giving written notice to the Holder,
elect to purchase all (or, with the consent of the Holder, less than
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<PAGE> 34
all) the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees named in the Notice, at the purchase price, determined as
specified below.
9.3 Purchase Price. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If no price or other
legal consideration is to be paid for the Shares, the transfer will be referred
to as a "DONATIVE TRANSFER". If the Offered Price includes consideration other
than cash, then the cash equivalent value of the non-cash consideration shall
conclusively be deemed to be the present Fair Market Value of such non-cash
consideration as conclusively determined in good faith by the Board of Directors
of the Company. In the case of a Donative Transfer or an Involuntary Transfer,
the Offered Price to be paid to the Holder by the Company or its assignee will
be the Fair Market Value on the proposed transfer date, as conclusively
determined in good faith by the Board of Directors of the Company.
9.4 Payment. Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness owed by the
Holder to the Company (or to such assignee, in the case of a purchase of Offered
Shares by such assignee) or by any combination thereof. The Offered Price will
be paid without interest within sixty (60) days after the Company's receipt of
the Notice, or, at the option of the Company and/or its assignee(s), in the
manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided (i) that
such sale or other transfer is consummated within one hundred twenty (120) days
after the date of the Notice, (ii) any such sale or other transfer is effected
in compliance with all applicable securities laws, and (iii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such one hundred twenty (120) day period, then a new Notice
must be given to the Company pursuant to which the Company will again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the contrary in
this Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Vested Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any transfer of Vested Shares pursuant to the
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<PAGE> 35
winding up and dissolution of the Company. As used herein, the term "IMMEDIATE
FAMILY" will mean Purchaser's spouse, the lineal descendant or antecedent,
father, mother, brother or sister, child, adopted child, grandchild or adopted
grandchild of the Purchaser or the Purchaser's spouse, or the spouse of any
child, adopted child, grandchild or adopted grandchild of Purchaser or the
Purchaser's spouse.
9.7 Termination of Right of First Refusal. The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.
10. RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option or Right of
First Refusal. Upon an exercise of the Repurchase Option or the Right of First
Refusal, Purchaser will have no further rights as a holder of the Shares so
purchased upon such exercise, other than the right to receive payment for the
Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "ESCROW HOLDER"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Exercise Agreement. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed with any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination both the
Repurchase Option and the Right of First Refusal; provided, however, that the
Shares will remain in escrow so long as they are subject to the Pledge
Agreement.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 Legends. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or U.S. Federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND
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<PAGE> 36
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER,
INCLUDING THE RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND
TRANSFER RESTRICTIONS INCLUDING THE RIGHT OF REPURCHASE
AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
12.3 Refusal to Transfer. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Agreement or (ii) to treat
as owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b)
ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUST BE FILED WITHIN THIRTY
(30) DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE.] Set forth below is a brief
summary as of the date the Plan was adopted by the Board of some of the U.S.
Federal and California tax consequences of exercise of the Option and
disposition of the
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<PAGE> 37
Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
13.1 Exercise of Incentive Stock Option. If the Option qualifies
as an ISO, there will be no regular U.S. Federal income tax liability or
California income tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as a tax preference item for U.S.
Federal alternative minimum tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be a regular U.S. Federal income tax liability
and a California income tax liability upon the exercise of the Option. Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
13.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to withhold
from the Purchaser's compensation or collect from the Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
13.4 Section 83(b) Election for Unvested Shares. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by the Purchaser with the Internal Revenue Service (and, if necessary,
the proper state taxing authorities), WITHIN 30 DAYS OF THE PURCHASE of the
Unvested Shares, electing pursuant to Section 83(b) of the Code (and similar
state tax provisions, if applicable) to be taxed currently on any difference
between the Exercise Price of the Unvested Shares and their Fair Market Value on
the date of purchase, there may be a recognition of taxable income (including,
where applicable, alternative minimum
11
<PAGE> 38
taxable income) to the Purchaser, measured by the excess, if any, of the Fair
Market Value of the Unvested Shares at the time they cease to be Unvested
Shares, over the Exercise Price of the Unvested Shares. A form of Election under
Section 83(b) is attached hereto as Exhibit [5] for reference.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the
Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Exercise Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this Exercise
Agreement will be binding upon Purchaser and Purchaser's heirs, executors,
administrators, legal representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be governed
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California. If any provision of this
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered to
Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, (i) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested), (ii) one (1)
business day after its deposit with any return receipt express courier
(prepaid), or (iii) one (1) business day after transmission by rapifax or
telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will refer
to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all Exhibits thereto, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
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<PAGE> 39
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.
BROADBASE INFORMATION
SYSTEMS, INC. PURCHASER
By:
------------------------------- --------------------------------------
(Signature)
- ---------------------------------- --------------------------------------
(Please print name) (Please print name)
- ----------------------------------
(Please print title)
[SIGNATURE PAGE TO ______________________________ [ADD COMPANY NAME] STOCK
OPTION EXERCISE AGREEMENT]
13
<PAGE> 40
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check and/or Secured Full Recourse Promissory
Note
Exhibit 4: Stock Pledge Agreement
Exhibit 5: Section 83(b) Election
Exhibit 6: Transfer Agreement
<PAGE> 41
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE> 42
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "AGREEMENT"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
BroadBase Information Systems, Inc., a California corporation (the "COMPANY"),
standing in the undersigned's name on the books of the Company represented by
Certificate No(s). ______ delivered herewith, and does hereby irrevocably
constitute and appoint the Secretary of the Company as the undersigned's
attorney-in-fact, with full power of substitution, to transfer said stock on the
books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE
AGREEMENT AND ANY EXHIBITS THERETO.
Dated: _______________, _____
PURCHASER
---------------------------------------
(Signature)
---------------------------------------
(Please Print Name)
---------------------------------------
(Spouse's Signature, if any)
---------------------------------------
(Please Print Spouse's Name)
INSTRUCTIONS TO PURCHASER: Please do not fill in any blanks other than the
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares UPON A DEFAULT UNDER PURCHASER'S NOTE] [AND TO
EXERCISE] [PURSUANT TO] ITS "REPURCHASE OPTION" AND/OR "RIGHT OF FIRST REFUSAL"
SET FORTH IN THE EXERCISE AGREEMENT] without requiring additional signatures on
the part of the Purchaser [OR PURCHASER'S SPOUSE].
<PAGE> 43
EXHIBIT 2
SPOUSE CONSENT
<PAGE> 44
SPOUSE CONSENT
The undersigned spouse of ______________________________ (the
"PURCHASER") has read, understands, and hereby approves the Stock Option
Exercise Agreement between Purchaser and the Company (the "AGREEMENT"). In
consideration of the Company's granting my spouse the right to purchase the
Shares as set forth in the Agreement, the undersigned hereby agrees to be
irrevocably bound by the Agreement and further agrees that any community
property interest I may have in the Shares shall similarly be bound by the
Agreement. The undersigned hereby appoints Purchaser as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Agreement.
Date:
----------------------------
---------------------------------------
Print Name of Purchaser's Spouse
---------------------------------------
Signature of Purchaser's Spouse
Address:
---------------------------------------
---------------------------------------
---------------------------------------
<PAGE> 45
EXHIBIT 3
COPY OF PURCHASER'S CHECK [AND/OR SECURED FULL RECOURSE PROMISSORY NOTE]
<PAGE> 46
SECURED FULL RECOURSE PROMISSORY NOTE
____________________ [ADD CITY IN WHICH NOTE IS EXECUTED], California
$------------------------- --------------------, -----
[ADD TOTAL PRINCIPAL] [ADD EFFECTIVE DATE]
Reference is made to that certain [CHOOSE APPLICABLE AGREEMENT: STOCK OPTION
EXERCISE AGREEMENT [OR] RESTRICTED STOCK PURCHASE AGREEMENT] (the "PURCHASE
AGREEMENT") of even date herewith, by and between the undersigned (the
"PURCHASER") and ______________________________ [INSERT COMPANY NAME], a
California [DELAWARE] corporation (the "COMPANY"), issued to Purchaser under the
Company's _____ [INSERT YEAR OF PLAN] Equity Incentive Plan (the "PLAN"). This
Secured Full Recourse Promissory Note (the "NOTE") is being tendered by
Purchaser to the Company as [IF DELAWARE CORPORATION PAR VALUE MUST BE PAID IN
CASH, SO INSERT: PART OF] the total purchase price of the Shares (as defined
below) pursuant to the Purchase Agreement.
1. OBLIGATION. In exchange for the issuance to the Purchaser
pursuant to the Purchase Agreement of ______________ shares of the Company's
Common Stock (the "Shares"), receipt of which is hereby acknowledged, Purchaser
hereby promises to pay to the order of the Company on or before _______________,
_____, [INSERT DUE DATE] at the Company's principal place of business located at
_________________________________ California __________, or at such other place
as the Company may direct, [OPTION: IN INSTALLMENTS AS HEREINAFTER SET FORTH]
the principal sum of ________________________ Dollars ($__________) together
with interest compounded semi-annually on the unpaid principal at the rate of
_________ percent (___%) [NOTE: LOOK-UP IRS CODE SECTION 1274(d) MINIMUM RATE
APPLICABLE FOR THE MONTH THIS NOTE IS EFFECTIVE AND INDICATE HERE AS PUBLISHED
MONTHLY BY THE IRS IN THE DAILY TAX REPORT OR YOU CAN LOOK THIS RATE UP ONLINE
AT "HTTP://WWW.IRS.USTREAS.GOV" AND CLICK ONTO "COMMUNICATING WITH THE IRS"
WHICH TAKES YOU INTO "DIGITAL DAILY". THEN CLICK ONTO "TAX INFO FOR YOU" AND
THEN "APPLICABLE FEDERAL RATES". USE THE INDICATED TABLE PER INSTRUCTIONS.],
which rate is not less than the minimum rate established pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, on the earliest date
on which there was a binding contract in writing for the purchase of the Shares;
provided, however, that the rate at which interest will accrue on unpaid
principal under this Note will not exceed the highest rate permitted by
applicable law. [IF NOTE WILL BE PAID IN INSTALLMENTS ADD: THE PRINCIPAL SUM
WILL BE PAYABLE IN _______ SUCCESSIVE [MONTHLY] [QUARTERLY] [ANNUAL]
INSTALLMENTS OF ____________________ DOLLARS ($__________) EACH, EACH DUE AND
PAYABLE ON [IF MONTHLY: THE FIRST DAY OF EACH CALENDAR MONTH BEGINNING
_____________ [INDICATE MONTH] 1, _____ [INDICATE YEAR] [IF QUARTERLY: MARCH 31,
JUNE 30, SEPTEMBER 30 AND DECEMBER 31 OF EACH YEAR] [IF ANNUALLY: EACH
SUCCESSIVE ANNIVERSARY OF THE DATE OF THIS NOTE] AND ALL PAYMENTS OF ACCRUED
INTEREST WILL BE PAYABLE WITH EACH INSTALLMENT OF PRINCIPAL.] All payments
hereunder shall be made in lawful tender of the United States.
2. SECURITY. Performance of Purchaser's obligations under this
Note is secured by a security interest in the Shares [ADD IF APPLICABLE: AND
OTHER PROPERTY OF THE PURCHASER] granted to the Company by Purchaser under a
Stock Pledge Agreement dated
1
<PAGE> 47
of even date herewith between the Company and Purchaser (the "PLEDGE AGREEMENT")
[ADD IF APPLICABLE: AND UNDER THAT CERTAIN DEED OF TRUST, DATED
____________________ (THE "TRUST DEED")].
[NOTE: DO NOT USE REAL PROPERTY TO SECURE REPAYMENT OF THE NOTE WITHOUT
CONSIDERING FORECLOSURE LIMITATIONS UNDER CALIFORNIA LAW. IF REAL PROPERTY IS A
PART OF THE COLLATERAL, A PROPER DEED OF TRUST MUST BE PREPARED AND FILED WITH
THE COUNTY RECORDER IN THE COUNTY WHERE THE REAL PROPERTY IS LOCATED. IN
ADDITION, DO NOT USE OTHER PERSONAL PROPERTY WITHOUT (I) CONSULTING THE
CALIFORNIA UNIFORM COMMERCIAL CODE, (II) ADEQUATELY AMENDING THE PLEDGE
AGREEMENT TO COVER THE COLLATERAL, AND (III) PREPARING AND FILING NECESSARY
DOCUMENTS SUCH AS UCC-1'S AND PATENT/ TRADEMARK/ COPYRIGHT MEMORANDA, OR, (IV)
IF REQUIRED, TAKING POSSESSION OF THE COLLATERAL TO PERFECT THE SECURITY
INTEREST IN IT.]
3. EVENTS OF DEFAULT. Purchaser will be deemed to be in default
under this Note upon the occurrence of any of the following events (each an
"EVENT OF DEFAULT"): (i) upon Purchaser's failure to make any payment when due
under this Note; [ADD IF DESIRED: WHICH FAILURE SHALL CONTINUE FOR A PERIOD OF
_______________ (_____) DAYS AFTER SUCH DUE DATE]; (ii) Purchaser is Terminated
(as defined in the Plan) [ADD IF DESIRED: FOR CAUSE (AS DEFINED IN THE PLAN)]
[FOR ANY REASON] [AND THE COMPANY EXERCISES ITS REPURCHASE OPTION TO PURCHASE
ALL OR SOME OF THE SHARES UNDER THE TERMS OF THE PURCHASE AGREEMENT]; (iii) the
failure of any representation or warranty in the Pledge Agreement [ADD IF
APPLICABLE: OR THE TRUST DEED] to have been true, the failure of Purchaser to
perform any obligation under the Pledge Agreement [ADD IF APPLICABLE: OR THE
TRUST DEED], or upon any other [OPTIONAL: MATERIAL] breach by the Purchaser of
the Pledge Agreement [ADD IF APPLICABLE: OR THE TRUST DEED]; (iv) any voluntary
or involuntary transfer of any of the Shares or any interest therein (except a
transfer to the Company); (v) upon the filing regarding the Purchaser of any
voluntary or involuntary petition for relief under the United States Bankruptcy
Code or the initiation of any proceeding under federal law or law of any other
jurisdiction for the general relief of debtors; or (vi) upon the execution by
Purchaser of an assignment for the benefit of creditors or the appointment of a
receiver, custodian, trustee or similar party to take possession of Purchaser's
assets or property.
4. ACCELERATION; REMEDIES ON DEFAULT. Upon the occurrence of any
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement [ADD IF APPROPRIATE:
OR THE TRUST DEED], full recourse against any real, personal, tangible or
intangible assets of Purchaser, and may pursue any legal or equitable remedies
that are available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE
HOLDING PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE
COMMISSION WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE
UNTIL EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY
OTHER PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY
COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH,
HAVING A FAIR
2
<PAGE> 48
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or other amounts owed
under this Note may be made at any time without penalty. Unless otherwise agreed
in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order: (i) first to the
accrued and unpaid costs and expenses under the Note or the Pledge Agreement
[ADD IF APPLICABLE: OR TRUST DEED], (ii) then to accrued but unpaid interest,
and (iii) lastly to the outstanding principal.
7. GOVERNING LAW; WAIVER. The validity, construction and
performance of this Note will be governed by the internal laws of the State of
California, excluding that body of law pertaining to conflicts of law. Purchaser
hereby waives presentment, notice of non-payment, notice of dishonor, protest,
demand and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this
Note, Purchaser agrees to pay all reasonable expenses, including attorneys'
fees, incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the
date and year first above written.
- -------------------------------- ---------------------------------------
Purchaser's Name [type or print] Purchaser's Signature
[SIGNATURE PAGE TO ______________________________ [INSERT COMPANY NAME] SECURED
FULL RECOURSE PROMISSORY NOTE]
3
<PAGE> 49
EXHIBIT 4
STOCK PLEDGE AGREEMENT
<PAGE> 50
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement (the "PLEDGE AGREEMENT") is made and
entered into as of _______________, _____ [INSERT DATE] between
_____________________________ [ADD COMPANY'S NAME], a California [DELAWARE]
corporation (the "COMPANY"), and _________________________ (the "PLEDGOR").
Capitalized terms that are not defined herein shall have the meanings ascribed
to them in the Secured Full Recourse Promissory Note of even date herewith
delivered by Pledgor to the Company (the "NOTE").
R E C I T A L S
A. In exchange for delivery of the Note to the Company, the
Company has issued and sold to Pledgor __________ shares of its Common Stock [IF
A DELAWARE CORPORATION ADD: $__________ [ADD PAR VALUE] PAR VALUE PER SHARE,]
(the "SHARES") pursuant to the terms and conditions of that certain Purchase
Agreement.
B. Pledgor has agreed that repayment of the Note will be secured
by the pledge of the Shares pursuant to this Pledge Agreement [ADD IF
APPROPRIATE: AND BY CERTAIN OTHER COLLATERAL PURSUANT TO
______________________________ [DESCRIBE WRITTEN INSTRUMENTS HERE]].
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the provisions of
the California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in (i) the Shares,
(ii) all Dividends (as defined in Section 5 hereof), [AND] (iii) all Additional
Securities (as defined in Section 6 hereof) [ADD IF APPROPRIATE: AND (IV)
______________________________ [DESCRIBE ADDITIONAL PERSONAL PROPERTY COLLATERAL
EITHER BY CATEGORY UNDER ARTICLE 9 OF THE UCC, E.G. FIXTURES, DEPOSIT ACCOUNTS,
ETC., OR WITH SUFFICIENT SPECIFICITY TO IDENTIFY SUCH COLLATERAL. DO NOT USE
"ALL PERSONAL PROPERTY" BECAUSE IT IS NOT SUFFICIENTLY SPECIFIC TO GRANT
SECURITY INTERESTS (COLLECTIVELY, THE "ADDITIONAL SECURITY")], to secure payment
of the Note and performance of all Pledgor's obligations under this Pledge
Agreement. Pledgor herewith delivers to the Company Common Stock certificate(s)
No(s). __________, [COMPLETE] representing all the Shares, together with one or
more stock power(s) for each certificate so delivered in the form attached as an
Exhibit to the Purchase Agreement, duly executed (with the date and number of
shares left blank) by Pledgor and Pledgor's spouse, if any. For purposes of this
Pledge Agreement, the Shares, all Dividends [, AND] all Additional Securities
[ADD IF APPLICABLE: AND ALL ADDITIONAL COLLATERAL] will hereinafter be
collectively referred to as the "COLLATERAL." Pledgor agrees that the Collateral
[IF ADDITIONAL COLLATERAL EXISTS, CONSIDER IF IT REQUIRES POSSESSION TO PERFECT,
E.G. IF IT IS OTHER SHARES OF STOCK OR A CERTIFICATE OF DEPOSIT (AN
"INSTRUMENT") FROM A BANK, ADD AND MODIFY ACCORDINGLY: WITH THE EXCEPTION OF
ADDITIONAL COLLATERAL,] will be deposited with and held by the Escrow Holder (as
defined in the Purchase Agreement) and that, notwithstanding anything to the
contrary in the Purchase Agreement, for purposes of carrying out the provisions
of this Pledge Agreement, Escrow Holder will act solely for the Company as its
agent.
1
<PAGE> 51
[IF ADDITIONAL COLLATERAL EXISTS, BE SURE THAT YOU HAVE PERFECTED
THE SECURITY INTEREST PROPERLY BY FILING OR TAKING POSSESSION, AS REQUIRED UNDER
ARTICLE 9 OF THE UCC OR UNDER THE COPYRIGHT ACT].
2. REPRESENTATIONS AND WARRANTIES AND COVENANTS REGARDING
COLLATERAL. Pledgor hereby represents and warrants to the Company that Pledgor
has good title (both record and beneficial) to the Collateral, free and clear of
all claims, pledges, security interests, liens or encumbrances of every nature
whatsoever, and that Pledgor has the right to pledge and grant the Company the
security interest in the Collateral granted under this Pledge Agreement. Pledgor
further agrees that, until all sums due under the Note have been paid in full,
and all of Purchaser's obligations under this Pledge Agreement have been
performed, Purchaser will not, without the Company's prior written consent, (i)
sell, assign or transfer, or attempt to sell, assign or transfer, any of the
Collateral, or (ii) grant or create, or attempt to grant or create, any security
interest, lien, pledge, claim or other encumbrance with respect to any of the
Collateral or (iii) suffer or permit to continue upon any of the Collateral
during the term of this Pledge Agreement, an attachment, levy, execution or
statutory lien. [IF THERE IS ADDITIONAL COLLATERAL, PLEDGOR SHOULD AGREE TO
ADDITIONAL COVENANTS CONCERNING THE MAINTENANCE AND CONDITION OF THAT
COLLATERAL, E.G. INSURING AN AUTOMOBILE AGAINST LOSS, ETC.]
3. RIGHTS ON DEFAULT. Upon an occurrence of an Event of Default
under the Note, the Company will have full power to sell, assign and deliver or
otherwise dispose the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of the Company,
in order to satisfy any part of the obligations of Pledgor now existing or
hereinafter arising under the Note or under this Pledge Agreement. On any such
sale, the Company or its assigns may purchase all or any part of the Collateral.
In addition, at its sole option, the Company may elect to retain all the
Collateral in full satisfaction of Pledgor's obligation under the Note, in
accordance with the provisions and procedures set forth in the California
Uniform Commercial Code. Pledgor agrees at the Company's request, to cooperate
with the Company in connection with the disposition of any and all of the
Collateral and to execute and deliver any documents which the Company shall
reasonably request to permit disposition of the Collateral.
4. ADDITIONAL REMEDIES. The rights and remedies granted to the
Company herein upon an Event of Default will be in addition to all the rights,
powers and remedies of the Company under the California Uniform Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral. Pledgor agrees that the
Company's reasonable expenses of holding the Collateral, preparing it for resale
or other disposition, and selling or otherwise disposing of the Collateral,
including attorneys' fees and other legal expenses, will be deducted from the
proceeds of any sale or other disposition and will be included in the amounts
Pledgor must tender to redeem the Collateral. All rights, powers and remedies of
the Company will be cumulative and not alternative. Any forbearance or failure
or delay by the Company in exercising any right, power or remedy hereunder will
not be deemed to be a waiver of any such right, power or remedy and any single
or partial exercise of any such right, power or remedy hereunder will not
preclude the further exercise thereof.
2
<PAGE> 52
5. DIVIDENDS; VOTING. All dividends hereinafter declared on or
payable with respect to any Collateral during the term of this Pledge Agreement
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as no Event of Default has occurred under the Note) (the "DIVIDENDS") will
be immediately delivered to the Company to be held in pledge under this Pledge
Agreement. Notwithstanding this Pledge Agreement, so long as Pledgor owns the
Shares and no Event of Default has occurred under the Note, Pledgor will be
entitled to vote any shares comprising the Collateral, subject to any proxies
granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of this Pledge
Agreement, any stock dividend, reclassification, readjustment, stock split or
other change is declared or made with respect to the Collateral, or if warrants
or any other rights, options or securities are issued in respect of the
Collateral, (the "ADDITIONAL SECURITIES") then all new, substituted and/or
additional shares or other securities issued by reason of such change or by
reason of the exercise of such warrants, rights, options or securities, will be
(if delivered to Pledgor, immediately surrendered to the Company and) pledged to
the Company to be held under the terms of this Pledge Agreement as and in the
same manner as the Collateral is held hereunder.
7. RIGHTS UNDER PURCHASE AGREEMENT; SETOFF. Pledgor understands
and agrees that the Company's rights to repurchase the Collateral under the
Purchase Agreement, if any, will continue for the periods and on the terms and
conditions specified in the Purchase Agreement, whether or not the Note has been
paid in full during such period of time, and that to the extent that the Note is
not paid in full during such period of time, the repurchase by the Company of
the Collateral may be made by way of cancellation of all or any part of
Pledgor's indebtedness under the Note.
8. REDELIVERY OF COLLATERAL; NO RELEASE FOR PARTIAL PAYMENT.
(a) Until all obligations of Pledgor under the Note and
under this Pledge Agreement have been satisfied in full, all Collateral will
continue to be held in pledge under this Pledge Agreement. If Pledgor prepays
all or a portion of the principal amount of the Note, the portion of the Shares
for which such pre-payment would represent the purchase price under the Purchase
Agreement (the "PAID SHARES") will be treated as independent collateral for the
remaining balance of the Note for the purpose of commencing the holding period
under Rule 144(d) of the Securities and Exchange Commission with respect to
other Shares purchased with the Note.
(b) Upon performance of all Pledgor's obligations under
the Note and this Pledge Agreement, and subject to the terms and conditions of
the Purchase Agreement, the Company will immediately redeliver the Collateral to
Pledgor and this Pledge Agreement will terminate; provided, however, that all
rights of the Company to retain possession of the Shares pursuant to the
Purchase Agreement will survive termination of this Pledge Agreement.
9. FURTHER ASSURANCES. Pledgor shall, at the Company's request,
execute and deliver such further documents and take such further actions as the
Company shall reasonably request to perfect and maintain the Company's security
interest in the Collateral, or in any part thereof.
3
<PAGE> 53
10. SUCCESSORS AND ASSIGNS. This Pledge Agreement will inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
11. GOVERNING LAW; SEVERABILITY. This Pledge Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of law relating to conflicts of law. Should one
or more of the provisions of this Pledge Agreement be determined by a court of
law to be illegal or unenforceable, the other provisions nevertheless will
remain effective and will be enforceable.
12. MODIFICATION; ENTIRE AGREEMENT. This Pledge Agreement will
not be amended without the written consent of both parties hereto. This Pledge
Agreement, together with the Note [ADD IF APPLICABLE: THE TRUST DEED, AND THE
UCC-1 FINANCING STATEMENTS [AND _________________________ ADD ANY ADDITIONAL
DOCUMENTS FILED WITH GOVERNMENTAL AUTHORITIES TO PERFECT THE SECURITY INTEREST,
IF APPLICABLE]] constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings related to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as of the date and year first above written.
[COMPANY NAME] PLEDGOR
By:
------------------------------- --------------------------------------
(Signature)
- ---------------------------------- --------------------------------------
(Please print name) (Please print name)
- ---------------------------------- --------------------------------------
(Please print title)
[SIGNATURE PAGE TO ______________________________ [INSERT COMPANY NAME] STOCK
PLEDGE AGREEMENT]
<PAGE> 54
EXHIBIT 5
SECTION 83(b) ELECTION
<PAGE> 55
[FOR REGULAR INCOME TAX - NONQUALIFIED OPTIONS]
[FOR AMT AND DISQUALIFYING DISPOSITION PURPOSES - INCENTIVE STOCK OPTION]
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME:
--------------------------------------------------
TAXPAYER'S ADDRESS:
--------------------------------------------------
--------------------------------------------------
SOCIAL SECURITY NUMBER:
--------------------------------------------------
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of
______________________________ [ADD COMPANY NAME HERE], a California
[DELAWARE] corporation (the "COMPANY") which were transferred upon
exercise of an option by Company, which is Taxpayer's employer or the
corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise
of the option was ____________________, _____ and this election is made
for calendar year _____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of
the shares at the Taxpayer's original purchase price under certain
conditions at the time of Taxpayer's termination of employment or
services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$_____ per share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $_____
per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated:
---------------------- --------------------------------
Taxpayer's Signature
1
<PAGE> 1
EXHIBIT 10.03
BROADBASE SOFTWARE, INC.
1999 EQUITY INCENTIVE PLAN
As Adopted July 2, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 3,500,000 Shares plus Shares that are subject to:
(a) issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option; (b) an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price; and (c) an Award that otherwise terminates without Shares being
issued. In addition, any authorized shares not issued or subject to outstanding
grants under the Broadbase Information Systems, Inc. 1996 Equity Incentive Plan
(the "PRIOR PLAN") on the Effective Date (as defined below) and any shares
issued under the Prior Plan that are forfeited or repurchased by the Company or
that are issuable upon exercise of options granted pursuant to the Prior Plan
that expire or become unexercisable for any reason without having been exercised
in full, will no longer be available for grant and issuance under the Prior
Plan, but will be available for grant and issuance under this Plan. In addition,
on December 31, 1999 and each anniversary thereafter, the aggregate number of
Shares reserved and available for grant and issuance pursuant to this Plan will
be increased automatically by a number of Shares equal to 5% of the total
outstanding shares of the Company as of the immediately preceding December 31,
provided that no more than 20,000,000 shares shall qualify as ISOs (as defined
in Section 5 below). At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 2,000,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 3,000,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.
<PAGE> 2
Broadbase Software, Inc.
1999 Equity Incentive Plan
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, the
Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Except for automatic grants to Outside
Directors pursuant to Section 9 hereof, any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and, except as otherwise
required by the terms of Section 9 hereof, will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.
2
<PAGE> 3
Broadbase Software, Inc.
1999 Equity Incentive Plan
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable within the times
or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer
time period not exceeding five (5) years as may be determined by
the Committee, with any exercise beyond three (3) months after
the Termination Date deemed to be an NQSO), but in any event, no
later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death
or Disability (or the Participant dies within three (3) months
after a Termination other than for Cause or because of
Participant's Disability), then Participant's Options may be
exercised only to the extent that such Options would have been
exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal representative
or authorized assignee) no later than twelve (12) months after
the Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the Committee,
with any such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other
than the Participant's death or Disability, or (b) twelve (12)
months after the Termination Date when the Termination is for
Participant's death or
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Disability, deemed to be an NQSO), but in any event no later
than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant,
the Participant's estate nor such other person who may then hold
the Option shall be entitled to exercise any Option with respect
to any Shares whatsoever, after termination of service, whether
or not after termination of service the Participant may receive
payment from the Company or Subsidiary for vacation pay, for
services rendered prior to termination, for services rendered
for the day on which termination occurs, for salary in lieu of
notice, or for any other benefits. In making such determination,
the Board shall give the Participant an opportunity to present
to the Board evidence on his behalf. For the purpose of this
paragraph, termination of service shall be deemed to occur on
the date when the Company dispatches notice or advice to the
Participant that his service is terminated.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value
of Shares on the date of grant with respect to which ISO are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date of this Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISO, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time
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approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Terms of Restricted Stock Awards. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set out
in advance in the Participant's individual Restricted Stock Purchase Agreement.
Restricted Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Restricted Stock Award, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Restricted Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance Periods
may overlap and Participants may participate simultaneously with respect to
Restricted Stock Awards that are subject to different Performance Periods and
having different performance goals and other criteria.
6.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant. If the Stock Bonus is being
earned upon the satisfaction of performance goals pursuant to a Performance
Stock Bonus Agreement, then the Committee will: (a) determine the nature, length
and starting date of any Performance Period for each Stock Bonus; (b) select
from among the Performance Factors to be used to measure the performance, if
any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and
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criteria as may be determined by the Committee. The Committee may adjust the
performance goals applicable to the Stock Bonuses to take into account changes
in law and accounting or tax rules and to make such adjustments as the Committee
deems necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash
or whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such
note has been fully paid with respect to such shares); or (2)
were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms
as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Sections 483
and 1274 of the Code; provided, however, that Participants who
are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the
note is adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(2) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects
to exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
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9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
9.1 Types of Options and Shares. Options granted under this Plan
and subject to this Section 9 shall be NQSOs.
9.2 Eligibility. Options subject to this Section 9 shall be
granted only to Outside Directors.
9.3 Annual Grants. Each Outside Director who was a member of the
Board before the Effective Date will automatically be granted an Option for
10,000 Shares on the Effective Date, unless such Outside Director received a
grant of Options before the Effective Date. Each Outside Director who first
becomes a member of the Board on or after the Effective Date will automatically
be granted an Option for 10,000 Shares on the date such Outside Director first
becomes a member of the Board. Immediately following each annual meeting of
stockholders, all Outside Directors will automatically be granted an Option for
10,000 Shares, provided the Outside Director is a member of the Board on such
date and has served continuously as a member of the Board for a period of at
least one year since the date when such Outside Director first became a member
of the Board (the "ANNUAL GRANT").
9.4 Vesting. Each Annual Grant shall be 100% vested and
immediately exercisable as of the date of grant.
9.5 Exercise Price. The exercise price of an Annual Grant shall
be the Fair Market Value of the Shares, at the time that the Option is granted.
10. WITHHOLDING TAXES.
10.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
10.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
11. TRANSFERABILITY.
11.1 Except as otherwise provided in this Section 11, Awards
granted under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.
11.2 All Awards other than NQSO's. All Awards other than NQSO's
shall be exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and (ii)
after Participant's death, by the legal representative of the Participant's
heirs or legatees.
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11.3 NQSOs. Unless otherwise restricted by the Committee, an
NQSO shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees. "Permitted transfer" means, as authorized
by this Plan and the Committee in an NQSO, any transfer effected by the
Participant during the Participant's lifetime of an interest in such NQSO but
only such transfers which are by gift or domestic relations order. A permitted
transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order in
settlement of marital property rights or (b) a transfer to an entity in which
more than fifty percent of the voting interests are owned by Family Members or
the Participant in exchange for an interest in that entity.
12. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES..
12.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.
12.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
12.3 Restrictions on Shares. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure
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the payment of Participant's obligation to the Company under the promissory
note; provided, however, that the Committee may require or accept other or
additional forms of collateral to secure the payment of such obligation and, in
any event, the Company will have full recourse against the Participant under the
promissory note notwithstanding any pledge of the Participant's Shares or other
collateral. In connection with any pledge of the Shares, Participant will be
required to execute and deliver a written pledge agreement in such form as the
Committee will from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a pro rata basis as the
promissory note is paid. Notwithstanding the foregoing, only Shares that have
been pledged as provided above and/or that are Unvested Shares shall be held in
escrow.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participants, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 18.1,
such Awards will expire on such transaction at such time and on such conditions
as the Committee will determine. [Notwithstanding
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anything in this Plan to the contrary, the Committee may, in its sole discretion
and only on or after the date on which the registration statement filed by the
Company with the SEC under the Securities Act registering the initial public
offering of the Company's Common Stock is declared effective by the SEC, provide
that the vesting of any or all Awards granted pursuant to this Plan will
accelerate upon a transaction described in this Section 18. If the Committee
exercises such discretion with respect to Options, such Options will become
exercisable in full prior to the consummation of such event at such time and on
such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate at such time as determined by the Committee.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.
18.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "EFFECTIVE DATE").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Committee may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial stockholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the stockholders of the
Company; (c) in the event that initial stockholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
cancelled, any Shares issued pursuant to any Awards shall be cancelled and any
purchase of Shares issued hereunder shall be rescinded; and (d) in the event
that stockholder approval of such increase is not obtained within the time
period provided herein, all Awards granted pursuant to such increase will be
cancelled, any Shares issued pursuant to any Award granted pursuant to such
increase will be cancelled, and any purchase of Shares pursuant to such increase
will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
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22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the commission of an act of theft, embezzlement,
fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Broadbase Software, Inc. or any successor
corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The
Wall Street Journal;
(d) in the case of an Award made on the Effective Date, the price
per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
11
<PAGE> 12
Broadbase Software, Inc.
1999 Equity Incentive Plan
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with the
SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
"FAMILY MEMBER" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law of the Participant, including any such person with
such relationship to the Participant by adoption;
(b) any person (other than a tenant or employee) sharing the
Participant's household;
(c) a trust in which the persons in (a) and (b) have more than fifty
percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b) or the
Participant own more than fifty percent of the voting interest.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"OUTSIDE DIRECTOR" means a member of the Board who is not an
employee of the Company or any Parent, Subsidiary or Affiliate of the Company.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PERFORMANCE FACTORS" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;
(c) Operating income and/or operating income growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share growth;
(f) Total stockholder return and/or total stockholder return
growth;
12
<PAGE> 13
Broadbase Software, Inc.
1999 Equity Incentive Plan
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on income;
(j) Economic value added; and
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.
"PLAN" means this Broadbase Software, Inc. 1999 Equity Incentive
Plan, as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
13
<PAGE> 14
NO.____________
BROADBASE SOFTWARE, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "AGREEMENT") is made and
entered into as of the Date of Grant set forth below (the "DATE OF GRANT") by
and between Broadbase Software, Inc., a Delaware corporation (the "COMPANY"),
and the Optionee named below ("OPTIONEE"). Capitalized terms not defined herein
shall have the meanings ascribed to them in the Company's 1999 Equity Incentive
Plan (the "PLAN").
OPTIONEE:
-------------------------------
SOCIAL SECURITY NUMBER:
-------------------------------
OPTIONEE'S ADDRESS:
-------------------------------
-------------------------------
TOTAL OPTION SHARES:
-------------------------------
EXERCISE PRICE PER SHARE:
-------------------------------
DATE OF GRANT:
-------------------------------
VESTING START DATE:
-------------------------------
EXPIRATION DATE:
-------------------------------
(unless earlier terminated
under Section 3 hereof)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(this "OPTION") to purchase up to the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (collectively, the "SHARES")
at the Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject
to all of the terms and conditions of this Agreement and the Plan. If designated
as an Incentive Stock Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE"), to the extent permitted
under Code Section 422.
2. VESTING; EXERCISE PERIOD.
2.1 Vesting of Shares. This Option shall be exercisable as it
vests. Subject to the terms and conditions of the Plan and this Agreement, this
Option shall vest and become exercisable as to portions of the Shares as
follows: (a) this Option shall not be exercisable with respect to any of the
Shares until _________________, 19___ (the "FIRST
<PAGE> 15
Stock Option Agreement
1999 Equity Incentive Plan
VESTING DATE"); (b) if Optionee has continuously provided services to the
Company, or any Parent or Subsidiary of the Company, then on the First Vesting
Date, this Option shall become exercisable as to twenty-five percent (25%) of
the Shares; and (c) thereafter this Option shall become exercisable as to an
additional 2.08333% of the Shares on each monthly anniversary of the First
Vesting Date, provided that Optionee has continuously provided services to the
Company, or any Parent or Subsidiary of the Company, at all times during the
relevant month. This Option shall cease to vest upon Optionee's Termination and
Optionee shall in no event be entitled under this Option to purchase a number of
shares of the Company's Common Stock greater than the "Total Option Shares."
2.2 Vesting of Options. Shares that are vested pursuant to the
schedule set forth in Section 2.1 hereof are "Vested Shares." Shares that are
not vested pursuant to the schedule set forth in Section 2.1 hereof are
"Unvested Shares."
2.3 Expiration. This Option shall expire on the Expiration Date
set forth above and must be exercised, if at all, on or before the earlier of
the Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3 hereof.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or Cause.
If Optionee is Terminated for any reason except Optionee's death, Disability or
Cause, then this Option, to the extent (and only to the extent) that it is
vested in accordance with the schedule set forth in Section 2.1 hereof on the
Termination Date, may be exercised by Optionee no later than three (3) months
after the Termination Date, but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Optionee is
Terminated because of death or Disability of Optionee (or the Optionee dies
within three (3) months after Termination other than for Cause or because of
Disability), then this Option, to the extent that it is vested in accordance
with the schedule set forth in Section 2.1 hereof on the Termination Date, may
be exercised by Optionee (or Optionee's legal representative or authorized
assignee) no later than twelve (12) months after the Termination Date, but in
any event no later than the Expiration Date. Any exercise after three months
after the Termination Date when the Termination is for any reason other than
Optionee's death or disability, within the meaning of Code Section 22(e)(3),
shall be deemed to be the exercise of a nonqualified stock option.
3.3 Termination for Cause. If Optionee is Terminated for Cause,
this Option will expire on the Optionee's date of Termination.
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Optionee any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Optionee's employment or other relationship at any time,
with or without Cause.
2
<PAGE> 16
Stock Option Agreement
1999 Equity Incentive Plan
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Optionee (or in the case of exercise after Optionee's death, Optionee's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as Exhibit A, or in such other form as may be approved by the Company
from time to time (the "EXERCISE AGREEMENT"), which shall set forth, inter alia,
Optionee's election to exercise this Option, the number of shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Optionee's investment intent and access to
information as may be required by the Company to comply with applicable
securities laws. If someone other than Optionee exercises this Option, then such
person must submit documentation reasonably acceptable to the Company that such
person has the right to exercise this Option.
4.2 Limitations on Exercise. This Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. This Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which this Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:
(a) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Optionee for more than six (6)
months and have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to
such shares); or (2) were obtained by Optionee in the open
public market; and (3) are clear of all liens, claims,
encumbrances or security interests;
(b) provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby Optionee
irrevocably elects to exercise this Option and to sell a portion
of the Shares so purchased to pay for the Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the exercise price directly to the Company; or
(2) through a "margin" commitment from Optionee and an NASD
Dealer whereby Optionee irrevocably elects to exercise this
Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer
in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company;
(c) by any combination of the foregoing.
3
<PAGE> 17
Stock Option Agreement
1999 Equity Incentive Plan
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Option, Optionee must pay or provide for any applicable federal
or state withholding obligations of the Company. If the Committee permits,
Optionee may provide for payment of withholding taxes upon exercise of this
Option by requesting that the Company retain Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to the Optionee by deducting the
Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Optionee, Optionee's
authorized assignee, or Optionee's legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. To the extent this
Option is an ISO, if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Optionee upon exercise of this Option, then Optionee shall
immediately notify the Company in writing of such disposition.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Optionee with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Optionee understands that the Company is under no obligation to
register or qualify the Shares with the SEC, any state securities commission or
any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of this
Option shall be binding upon the executors, administrators, successors and
assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
the Board adopted the Plan of some of the federal tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
8.1 Exercise of Incentive Stock Option. To the extent this Option
qualifies as an ISO, there will be no regular federal income tax liability upon
the exercise of this Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise
4
<PAGE> 18
over the Exercise Price will be treated as a tax preference item for federal
income tax purposes and may subject the Optionee to the alternative minimum tax
in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. To the extent this
Option does not qualify as an ISO, there may be a regular federal income tax
liability upon the exercise of this Option. Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price. The Company may be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
8.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
a. Incentive Stock Options. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as capital gain for federal income tax purposes. If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two (2) year
period, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the excess, if any,
of the fair market value of the Shares on the date of exercise over the Exercise
Price.
b. Nonqualified Stock Options. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long-term capital gain.
c. Withholding. The Company may be required to withhold
from Participant's compensation or collect from the Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to Optionee.
10. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Optionee.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by reference. This
Agreement and the Plan and the Exercise Agreement constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior understandings and agreements with respect
to such subject matter.
12. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of
5
<PAGE> 19
Stock Option Agreement
1999 Equity Incentive Plan
the Company at its principal corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated above or to such other address as such party may designate in
writing from time to time to the Company. All notices shall be deemed to have
been given or delivered upon: personal delivery; three (3) days after deposit in
the United States mail by certified or registered mail (return receipt
requested); one (1) business day after deposit with any return receipt express
courier (prepaid); or one (1) business day after transmission by facsimile.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Optionee and Optionee's heirs, executors, administrators, legal representatives,
successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
that body of law pertaining to choice of law or conflict of law.
15. ACCEPTANCE. Optionee hereby acknowledges receipt of a copy of the
Plan and this Agreement. Optionee has read and understands the terms and
provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Optionee acknowledges that there may
be adverse tax consequences upon exercise of this Option or disposition of the
Shares and that the Company has advised Optionee to consult a tax advisor prior
to such exercise or disposition.
6
<PAGE> 20
Stock Option Agreement
1999 Equity Incentive Plan
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Optionee has executed
this Agreement in duplicate as of the Date of Grant.
BROADBASE SOFTWARE, INC. OPTIONEE
By:
------------------------------- -------------------------------
(Signature)
- ---------------------------------- -------------------------------
(Please print name) (Please print name)
- ----------------------------------
(Please print title)
7
<PAGE> 21
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
<PAGE> 22
EXHIBIT A
BROADBASE SOFTWARE, INC.
1999 EQUITY INCENTIVE PLAN (THE "PLAN")
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock of
BROADBASE SOFTWARE, INC. (the "Company") as set forth below:
<TABLE>
<S> <C>
Optionee Number of Shares Purchased:
------------------------------- ------------------------------
Social Security Number: Purchase Price per Share:
---------------- --------------------------------
Address: Aggregate Purchase Price:
------------------------------- --------------------------------
Date of Option Agreement:
------------------------------- --------------------------------
-------------------------------
Exact Name of Title to Shares:
Type of Option: [ ] Incentive Stock Option ---------------------------
[ ] Nonqualified Stock Option
---------------------------
</TABLE>
1. DELIVERY OF PURCHASE PRICE. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement (the
"Option Agreement") as follows (check as applicable and complete):
[ ] in cash (by check) in the amount of $_____________________, receipt of
which is acknowledged by the Company;
[ ] by delivery of ______________________________ fully-paid, nonassessable
and vested shares of the Common Stock of the Company owned by Optionee
for at least six (6) months prior to the date hereof (and which have
been paid for within the meaning of SEC Rule 144), or obtained by
Optionee in the open public market, and owned free and clear of all
liens, claims, encumbrances or security interests, valued at the current
Fair Market Value of $____________________ per share;
[ ] through a "same-day-sale" commitment, delivered herewith, from Optionee
and the NASD Dealer named therein, in the amount of
$_______________________________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and the
NASD Dealer named therein, in the amount of
$_________________________________________.
2. MARKET STANDOFF AGREEMENT. Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Optionee during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Securities Act, provided that all officers and directors
of the Company are required to enter into similar agreements. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.
3. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE SHARES.
OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S)
OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE
SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
4. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Agreement, the Plan and the Option Agreement constitute
the entire agreement and understanding of the parties and supersede in their
entirety all prior understandings and agreements of the Company and Optionee
with respect to the subject matter hereof, and are governed by California law
except for that body of law pertaining to choice of law or conflict of law.
Date:
------------------------------- -------------------------------
SIGNATURE OF OPTIONEE
<PAGE> 23
SPOUSAL CONSENT
I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "Agreement") and that I know its contents. I hereby consent to
and approve all of the provisions of the Agreement, and agree that the shares of
the Common Stock of Broadbase Software, Inc. purchased thereunder (the "Shares")
and any interest I may have in such Shares are subject to all the provisions of
the Agreement. I will take no action at any time to hinder operation of the
Agreement on these Shares or any interest I may have in or to them.
Date:
- ------------------------------- -----------------------------
SIGNATURE OF OPTIONEE'S SPOUSE
- ----------------------------------
SPOUSE'S NAME - TYPED OR PRINTED
- ----------------------------------
OPTIONEE'S NAME - TYPED OR PRINTED
<PAGE> 1
EXHIBIT 10.04
BROADBASE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted July 2, 1999
1. ESTABLISHMENT OF PLAN. Broadbase Software, Inc. (the "COMPANY")
proposes to grant options for purchase of the Company's Common Stock to eligible
employees of the Company and its Participating Subsidiaries (as hereinafter
defined) pursuant to this Employee Stock Purchase Plan (this "PLAN"). For
purposes of this Plan, "PARENT CORPORATION" and "SUBSIDIARY" shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"CODE"). "PARTICIPATING SUBSIDIARIES" are Parent Corporations or Subsidiaries
that the Board of Directors of the Company (the "BOARD") designates from time to
time as corporations that shall participate in this Plan. The Company intends
this Plan to qualify as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments to or replacements of such Section), and this
Plan shall be so construed. Any term not expressly defined in this Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. A total of 500,000 shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate number
of shares of the Company's Common Stock reserved for issuance under the Plan
shall be increased automatically by a number of shares equal to 1% of the total
number of outstanding shares of the Company Common Stock on the immediately
preceding December 31; provided that the aggregate number of shares issued over
the term of this Plan shall not exceed 5,000,000 shares. Such number shall be
subject to adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.
3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary (10) days before the beginning of such Offering Period, except that
employees who are employed on the Effective Date of the Registration Statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or
less in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries; and
<PAGE> 2
Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
(e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of twenty-four (24) months duration commencing on February 1
and August 1 of each year and ending on January 31 and July 31 of each year;
provided, however, that notwithstanding the foregoing, the first such Offering
Period shall commence on the first business day on which price quotations for
the Company's Common Stock are available on the Nasdaq National Market (the
"FIRST OFFERING DATE") and shall end on July 31, 2001. Except for the first
Offering Period, each Offering Period shall consist of four (4) six month
purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no more than five and no fewer than three
Purchase Periods, any of which may be greater or less than six months as
determined by the Committee. The first business day of each Offering Period is
referred to as the "OFFERING DATE". The last business day of each Purchase
Period is referred to as the "PURCHASE DATE". The Committee shall have the power
to change the duration of Offering Periods with respect to offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company's treasury department (the "TREASURY Department") not
later than five (5) days before such Offering Date. Notwithstanding the
foregoing, the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. An eligible employee who does not deliver a
subscription agreement to the Treasury Department by such date after becoming
eligible to participate in such Offering Period shall not participate in that
Offering Period or any subsequent Offering Period unless such employee enrolls
in this Plan by filing a subscription agreement with the Treasury Department not
later than five (5) days preceding a subsequent Offering Date. Once an employee
becomes a participant in an Offering Period, such employee will automatically
participate in the Offering Period commencing immediately following the last day
of the prior Offering Period unless the employee withdraws or is deemed to
withdraw from this Plan or terminates further participation in the Offering
Period as set forth in Section 11 below. Such participant is not required to
file any additional subscription agreement in order to continue participation in
this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (x) the maximum number of shares set by the Committee pursuant to
Section 10(c) below with respect to the applicable Purchase Date, or (y) the
maximum number of shares which may be purchased pursuant to Section 10(b) below
with respect to the applicable Purchase Date. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
below.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
2
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Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
For purposes of this Plan, the term "FAIR MARKET VALUE" means, as of
any date, the value of a share of the Company's Common Stock determined as
follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on
the date of determination as reported in The Wall Street
Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the
date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of
the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Board in
good faith, which in the case of the First Offering Date
will be the price per share at which shares of the
Company's Common Stock are initially offered for sale to
the public by the Company's underwriters in the initial
public offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean all W-2 cash compensation,
including, but not limited to, base salary, wages, commissions, overtime, shift
premiums and bonuses, plus draws against commissions, provided, however, that
for purposes of determining a participant's compensation, any election by such
participant to reduce his or her regular cash remuneration under Sections 125 or
401(k) of the Code shall be treated as if the participant did not make such
election. Payroll deductions shall commence on the first payday of the Offering
Period and shall continue to the end of the Offering Period unless sooner
altered or terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
fifteen (15) days before the beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction percentage
to zero during an Offering Period by filing with the Treasury Department a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period commencing more than fifteen (15) days
after the Treasury Department's receipt of the request and no further payroll
deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date of
the request shall be used to purchase shares of Common Stock of the Company in
accordance with Section (e) below. A participant may not resume making payroll
deductions during the Offering Period in which he or she reduced his or her
payroll deductions to zero.
3
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Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
(d) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(e) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which may
be purchased by any employee at any single Purchase Date (hereinafter the
"MAXIMUM SHARE AMOUNT"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. In no event shall the Maximum Share Amount
exceed the amounts permitted under Section 10(b) above. If a new Maximum Share
Amount is set, then all participants must be notified of such Maximum Share
Amount prior to the commencement of the next Offering Period. The Maximum Share
Amount shall continue to apply with respect to all succeeding Purchase Dates and
Offering Periods unless revised by the Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Com-
4
<PAGE> 5
Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
mittee shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares to be purchased under a
participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Treasury Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.
(c) If the Fair Market Value on the first day of the current Offering
Period in which a participant is enrolled is higher than the Fair Market Value
on the first day of any subsequent Offering Period, the Company will
automatically enroll such participant in the subsequent Offering Period. Any
funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
5
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Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that this Plan
shall terminate as of a date fixed by the Committee and give each participant
the right to purchase shares under this Plan prior to such termination. In the
event of (i) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iii)
the sale of all or substantially all of the assets of the Company or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, the Plan will continue with
regard to Offering Periods that commenced prior to the closing of the proposed
transaction and shares will be purchased based on the Fair Market Value of the
surviving corporation's stock on each Purchase Date, unless otherwise provided
by the Committee consistent with pooling of interests accounting treatment.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
6
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Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the First Offering Date (as defined above).
This Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this Plan; or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to the
Plan as the Board determines to be advisable, if the continuation of the Plan or
any Offering Period would result in financial accounting treatment
7
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Broadbase Software, Inc.
1999 Employee Stock Purchase Plan
for the Plan that is different from the financial accounting treatment in effect
on the date this Plan is adopted by the Board.
8
<PAGE> 9
BROADBASE SOFTWARE, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN
ENROLLMENT FORM
Check One: Complete:
[ ] New Enrollment or Re-enrollment Social Security No.
--------------
[ ] Change Employee No.
----------------------
[ ] Change in How Shares Are to Be Held in Account
[ ] Increase in Payroll Deduction Level [ ] this Purchase Period
[ ] next Offering Period
[ ] Decrease in Payroll Deduction Level [ ] this Purchase Period
[ ] next Offering Period
[ ] Suspension of Payroll Deductions for Open Offering Period (Attach
Completed Suspension Form)
[ ] Withdrawal (Attach Completed Withdrawal Form)
[ ] Beneficiary Change
1. Name of Participant
-----------------------------------------------------
2. Shares purchased under the Plan should be held in account with the Plan
Broker in my name or in my name together with the name(s) indicated
below:
Name Social Security No.
------------------------- --------------------
Name Social Security No.
------------------------- --------------------
There may be tax consequences for naming individuals other than your
spouse on the account in which Shares purchased under the Plan are held.
If spouse (circle one): Joint Tenants/Community Property.
PLEASE NOTIFY THE PLAN BROKER DIRECTLY TO TRANSFER OR SELL YOUR STOCK.
3. Payroll Deduction Level (from 2% to 10% in whole percentages):_________
(the percentage deduction will be made from your total cash compensation
paid by the Company including base salary, commissions, bonuses and
incentive compensation)
4. I confirm my spouse's interest (if married) in the community property
herein, and I hereby designate the following person(s) as my
beneficiary(ies) to receive all payments and/or stock attributable to my
interest under the Plan:
<TABLE>
<CAPTION>
NAME *To be divided ADDRESS
as follows:
<S> <C> <C>
------------------------------------ ---------------- -------------------------------
Last First M.I. Number Street
------------------------------------ -------------------------------
Social Security No. Relationship City State Zip
------------------------------------ ---------------- -------------------------------
Last First M.I. Number Street
------------------------------------ -------------------------------
Social Security No. Relationship City State Zip
</TABLE>
* If more than one beneficiary: (1) insert "in equal shares", or (2)
insert percentage to be paid to each beneficiary.
5. The information provided on this Enrollment Form will remain in effect
unless and until I complete and submit to the Company a new enrollment
form.
BROADBASE SOFTWARE, INC. OFFICE USE:
Signature: Date received by the Company:
--------- ---------------
Name: Date entered into system:
-------------- -------------------
Date: PLEASE RETURN THIS COMPLETED FORM TO THE COMPANY.
--------------
<PAGE> 10
BROADBASE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
1. I elect to participate in the Broadbase Software, Inc. (the "COMPANY")
1999 Employee Stock Purchase Plan (the "PLAN") and to subscribe to
purchase shares of the Company's Common Stock (the "SHARES") in
accordance with this Subscription Agreement and the Plan.
2. I authorize payroll deductions from each of my paychecks in that
percentage of my base salary, commissions, bonuses and incentive
compensation as shown on my Enrollment Form, in accordance with the
Plan.
3. I understand that such payroll deductions shall be accumulated for the
purchase of Shares under the Plan at the applicable purchase price
determined in accordance with the Plan. I further understand that except
as otherwise set forth in the Plan, Shares will be purchased for me
automatically at the end of each Purchase Period unless I withdraw from
the Plan or otherwise become ineligible to participate in the Plan.
4. I understand that this Subscription Agreement will automatically
re-enroll me in all subsequent Offering Periods unless I withdraw from
the Plan or I become ineligible to participate in the Plan.
5. I acknowledge that I have a copy of and am familiar with the Company's
most recent Prospectus which describes the Plan. A copy of the complete
Plan and the Prospectus is on file with the Company. (In the case of the
initial Plan Purchase Period, the Prospectus will be on file on the
first day of the Offering Period.)
6. I understand that Shares purchased for me under the Plan will be held in
a personal account with the Plan Broker unless I request otherwise.
7. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
8. I have read and understood this Subscription Agreement.
Signature:
-------------------------------
Name:
------------------------------------
Date:
------------------------------------
PLEASE RETURN THIS COMPLETED FORM TO THE COMPANY.
<PAGE> 11
BROADBASE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, _________________________, the undersigned participant in the
Offering Period of the Broadbase Software, Inc. 1999 Employee Stock Purchase
Plan (the "PLAN") which began on _______________, hereby notify Broadbase
Software, Inc. (the "COMPANY") that I wish to withdraw from the Offering Period.
I direct the Company to pay to me as promptly as practicable all payroll
deductions credited to my account with respect to such Offering Period. I
understand and agree that my participation in the Plan will terminate and no
shares will be purchased for me at the end of the Purchase Period so long as I
submit this Notice of Withdrawal to the Company at least 15 days prior to the
end of the Purchase Period. I understand and agree that if I submit this Notice
of Withdrawal to the Company less than 15 days prior to the end of the Purchase
Period, shares will be purchased for me at the end of the Purchase Period, and
my participation in the Plan will end at the beginning of the next Purchase
Period or Offering Period, as the case may be. I further understand that no
additional payroll deductions will be made for the purchase of shares in the
current Offering Period, and I shall be eligible to participate in succeeding
Offering Periods only by timely delivering to the Company a new Subscription
Agreement and Enrollment Form.
Name and address of Participant (please print):
Name:
----------------------------------------------------------------------
Street Address or P.O. Box:
------------------------------------------------
City, State ZIP:
-----------------------------------------------------------
- ------------------------------------- ------------------------------
Signature Date
PLEASE RETURN THIS FORM TO THE COMPANY.
<PAGE> 12
BROADBASE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF SUSPENSION
I, _________________________, the undersigned participant in the
Offering Period of the Broadbase Software, Inc. 1999 Employee Stock Purchase
Plan (the "PLAN") which began on _______________, hereby notify Broadbase
Software, Inc. (the "COMPANY") that I wish to suspend my payroll deductions to
the Plan for the remainder of the Offering Period. I understand and agree that
my request will be effective beginning with the next payroll period commencing
more than 15 days after the Company receives this Notice of Suspension. I
understand and agree that payroll deductions credited to my account prior to the
date this Notice of Suspension is effective will be used to purchase shares on
the next Purchase Date. I further understand that no additional payroll
deductions will be made for the purchase of shares in the current Offering
Period, and I will be eligible to participate in succeeding Offering Periods
only by timely delivering to the Company a new Subscription Agreement and
Enrollment Form.
Name and address of Participant (please print):
Name:
----------------------------------------------------------------------
Street Address or P.O. Box:
------------------------------------------------
City, State ZIP:
-----------------------------------------------------------
- ------------------------------------- ------------------------------
Signature Date
PLEASE RETURN THIS FORM TO THE COMPANY.
<PAGE> 1
EXHIBIT 10.10
AGREEMENT BETWEEN INDUS AND BROADBASE
Understanding that Indus and Broadbase are, and will continue to, make good
faith efforts toward the successful conclusion of an OEM relationship, both
parties agree to the following:
Broadbase agrees to take an active role in the development, testing and release
of the Indus Knowledge Warehouse (IKW).
In consideration for Broadbase's efforts Indus agrees to commit to a prepayment
of OEM royalties in the amount of $[*] on or before March 31, 1999.
This prepay balance can be used to offset royalty payments due from Indus to
Broadbase on sales of the IKW on or after the general availability release of
the product at a rate of [*]% of the amounts owed.
The amounts of the royalty payments owed will be calculated in accordance with
whatever OEM agreement is in effect at the time the amount owed is incurred.
The prepay balance may not be used to offset amounts owed for consulting,
training, maintenance, or technical support.
The $[*] prepayment of royalties will be due upon the General Availability
release of the IKW product (expected on July 1).
INDUS BROADBASE
By: /s/ Kerry Larson By: /s/ Chuck Bay
Name: Kerry Larson Name: Chuck Bay
Title: SVP Marketing Title: CFO & EVP
[*] Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE> 2
BROADBASE PARTNER TERMS AND CONDITIONS
THESE BROADBASE PARTNER TERMS AND CONDITIONS ("Terms and Conditions")
are entered into between Broadbase Information Systems, Inc. ("Broadbase") and
the party identified below ("Partner") as of ____________, 199_ (the "Effective
Date").
The parties desire to have Partner participate in Broadbase partner
programs pursuant to the terms and conditions set forth herein and any amendment
hereto.
The parties expect to execute a Broadbase Partner Agreement setting
forth the details of the partner relationship established herein.
NOW, THEREFORE, in consideration of the promises and mutual obligations
of the parties set forth herein, and for other good and valuable consideration,
the parties hereby agree as follows:
1. TERM AND TERMINATION.
1.1. Term Any Broadbase Partner Agreement document signed by the parties
relating to these Terms and Conditions ("BPA") will remain in effect until it
terminates or expires in accordance with its terms.
1.2 Termination. Either party may terminate a BPA upon written notice if the
other party materially breaches a material term thereof and fails to cure the
breach within thirty (30) days following written notice.
1.3. Rights and Duties Upon Termination. Termination of a BPA will not limit
either party from pursuing any other remedies available to it, including but not
limited to injunctive relief, nor will such termination relieve Partner's
obligation to pay all fees that accrued prior to such termination. Upon
termination of any BPA; Partner will (a) fully comply with all terms and
conditions in the BPA regarding termination; (b) cease any and all use of
Broadbase software provided by Broadbase to Partner (the "Software") and all
Confidential Information (as defined herein) of Broadbase; and (c) certify to
Broadbase within thirty (30) days that Partner has destroyed or returned to
Broadbase all copies of the Software and Confidential Information of Broadbase.
1.4 No Damages for Termination. BROADBASE SHALL NOT BE LIABLE TO PARTNER FOR
DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, ON ACCOUNT OF THE TERMINATION OF ANY BPA IN ACCORDANCE WITH ITS TERMS.
PARTNER WAIVES ANY RIGHT IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS
ON TERMINATION OF ANY BPA UNDER THE LAW OF THE TERRITORY DESIGNATED IN THE BPA
OR OTHERWISE, OTHER THAN EXPRESSLY PROVIDED THEREIN. Broadbase will not be
liable to Partner on account of termination of any BPA for reimbursement or
damages for the loss of goodwill, prospective profits or anticipated income, or
on account of any expenditures, investments, leases or commitments made by
Broadbase or for any other reason whatsoever based upon or growing out of such
termination or expiration. Partner acknowledges that (i) Partner has no
expectation and has received no assurances that any investment by Partner in the
promotion of Broadbase products will be recovered or recouped or that Partner
will obtain any anticipated amount of profits by virtue of any BPA, and (ii)
Partner will not have or acquire by virtue of any BPA or otherwise any vested,
proprietary or other right in the promotion of Broadbase products or in
"goodwill" created by its efforts thereunder. THE PARTIES ACKNOWLEDGE THAT THIS
SECTION 1.4 HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR BROADBASE TO ENTER
INTO ANY BPA AND THAT BROADBASE WOULD NOT HAVE ENTERED INTO ANY BPA BUT FOR THE
LIMITATIONS OF LIABILITY SET FORTH HEREIN.
1.5 Survival. Sections 1.3, 1.4, 3.4, 3.5, 5, and 7 of these Terms and
Conditions will survive any expiration or termination of any BPA.
2. PROPRIETARY RIGHTS.
2.1 Software Ownership. Partner hereby acknowledges that, as between
Broadbase and Partner, Broadbase is the owner of all right and title in and to
the Software, and Partner shall acquire no rights in or to the Software.
2.2 No Other Rights. Partner acknowledges and agrees that, except as
otherwise provided in any BPA, Partner has no and will acquire no proprietary
rights in the Software, whether express or implied. Partner will not at any time
during or after the term of any BPA do anything that may adversely affect the
validity or enforceability of, or infringe or contribute to the infringement of,
any proprietary right of Broadbase. Partner will not modify the Software except
as expressly authorized in any BPA. Partner will not reverse engineer,
decompile, or disassemble the Software or other Broadbase product or authorize
anyone else to do so.
2.3 Obligation to Protect. Partner agrees to use best efforts to protect
Broadbase's proprietary rights and to cooperate in Broadbase's efforts to
protect its proprietary rights. Partner agrees to promptly notify Broadbase of
any known or suspected breach of any such proprietary right that comes to
Partner's attention.
3. INDEMNITY, WARRANTIES, REMEDIES, LIMITATION OF LIABILITY.
3.1 Infringement Indemnification.
(a) Broadbase will defend and indemnify Partner
<PAGE> 3
against a claim that the Software as furnished by Broadbase and used within the
scope of these Terms and Conditions (and any BPA) infringes a copyright or trade
secret, provided that: (i) Partner promptly notifies Broadbase in writing of the
claim, (ii) Broadbase has sole control of the defense and all related settlement
negotiations, and (iii) Partner provides Broadbase with the assistance,
information and authority necessary to perform the above.
(b) Broadbase will have no liability for any claim of infringement based
on: (i) use of a superseded release of the Software if such infringement would
have been avoided by the use of a current release of the Software; (ii) the
combination, operation, or use of any Software furnished under any BPA with
programs or data not provided by Broadbase, if such infringement would have been
avoided by the use of the Software without such programs or data; or (iii)
modifications to the Software by any party other thanthan Broadbase, if such
infringement would have been avoided in the absence of such modifications.
(c) In the event that the Software is held, or is believed by Broadbase,
to infringe a copyright or trade secret, Broadbase will have the option, at its
expense, to: (i) modify the Software to be noninfringing, (ii) obtain for
Partner a license to continue its use of the Software; or (iii) terminate the
affected BPA for the infringing Software and refund any license fees paid by
Partner attributable to that Software, amortized over a five year term from the
Effective Date of the affected BPA on a straight-line basis.
(d) THIS SECTION 3.1 STATES PARTNER'S SOLE AND EXCLUSIVE REMEDY AND
BROADBASE'S ENTIRE LIABILITY FOF INFRINGEMENT.
3.2. Software Warranty. Broadbase warrants that, for a period of ninety (90)
days from the effective date of the relevant BPA, the Software will conform to
the applicable product documentation provided by Broadbase in all material
respects. The foregoing warranty does not apply to modifications or improper use
of the Software by Partner. Broadbase does not warrant that the Software will
meet Partner's requirements, that the Software will operate in the combinations
that Partner may select or use, that the operation of the Software will be
uninterrupted or error-free, or that all Software errors will be corrected. FOR
ANY BREACH OF THE FOREGOING WARRANTY, PARTNER'S SOLE AND EXCLUSIVE REMEDY WILL
BE, AT BROADBASE'S OPTION: (I) THE REPLACEMENT OR CORRECTION OF THE DEFECTIVE
SOFTWARE; OR (ii) THE TERMINATION OF ANY BPA AS TO THE DEFECTIVE SOFTWARE AND
THE REFUND OF THE LICENSE FEE PAID TO BROADBASE FOR SUCH SOFTWARE.
3.3. Warranties of Authority and Rights. Broadbase warrants that it has the
authority to enter into these Terms and Conditions and any BPA, and that it has
sufficient rights to the Software to grant to Partner the rights set forth in
these Terms and Conditions and any BPA.
3.4. Warranty Limitations. EXCEPT AS SPECIFICALLY SET FORTH ABOVE, BROADBASE
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, TO PARTNER OR ANY OTHER PERSON OR
ENTITY WITH RESPECT TO THE SOFTWARE, AND HEREBY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
3.5. Limitation of Liability. IN NO EVENT WILL BROADBASE BE LIABLE FOR ANY
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS,
REVENUE, DATA, OR USE, INCURRED BY PARTNER OR ANY THIRD PARTY, WHETHER IN AN
ACTION IN CONTRACT OR TORT (INCLUDING NEGLIGENCE), EVEN IF IT HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. BROADBASE'S LIABILITY FOR DAMAGES UNDER
THESE TERMS AND CONDITIONS AND ALL BPAS WILL IN NO EVENT EXCEED THE LESSER OF
(i) FIFTY THOUSAND DOLLARS ($50,000); OR (ii) THE AMOUNT OF FEES PAID BY PARTNER
TO BROADBASE UNDER ANY BPA IN THE TWELVE (12) MONTH PERIOD PRIOR TO THE DATE OF
PARTNER'S CLAIM.
4. PAYMENT.
4.1. Payment. Invoices for payment of any amounts due to Broadbase under any
BPA will be payable net 30 days. All payments will be nonrefundable and
nonrecoupable when paid. Amounts unpaid when due will accrue interest at the
rate of one and one half percent (1.5%) per month or the maximum rate allowed by
law, whichever is less.
4.2. Taxes. Partner agrees to pay all present or future sales, excise, use,
value-added, foreign withholding, or other similar taxes or duties (not
including taxes on the net income of Broadbase) owed in connection with these
Terms and Conditions, on any BPA, or on the Software in regard to its use by
Partner.
5. CONFIDENTIALITY AND PUBLICITY.
5.1 Confidentiality. Partner will not disclose to any third party or, except
as expressly permitted under the BPA, use any Software or other confidential or
proprietary information disclosed to it by Broadbase ("Confidential
Information"), and will use best efforts to maintain the confidentiality of all
Confidential Information in its possession or control, which will in no event be
less than the measures it uses to maintain the confidentiality of its own
information of equal importance. Confidential Information will not include
2
<PAGE> 4
information that: (a) is in or enters the public domain without breach of these
Terms and Conditions, any BPA or any other confidentiality agreement between the
parties; (b) Partner received from a third party without restriction on
disclosure and without breach of a nondisclosure obligation; or (c) Partner
develops independently, which it can prove with written evidence. PartnerPartner
agrees not to disclose to any third party any benchmarks, tests, or other
evaluations of the Software without the prior written consent of Broadbase.
5.2 Software. Partner acknowledges that the Software is a trade secret of
Broadbase, the disclosure or which would cause substantial harm to Broadbase
that could not be remedied by the payment of damages alone. Accordingly, the
parties agree that Broadbase will be entitled to seek preliminary and permanent
injunctive relief and other equitable relief for any breach of this Section 5.
5.3 Publicity. Partner agrees to permit, and hereby authorizes, Broadbase to
use Partner's name and/or trademarks and services marks, and to identify Partner
as a Broadbase partner in Broadbase's publicity, promotional and/or marketing
materials.
6. INDEMNITY. Partner will indemnify Broadbase and hold it harmless from
any claims, losses or damages (including but not limited to court costs and
reasonable attorneys' fees) for personal injury, tangible or intangible property
damage or any other liability, arising from any act or omission of Partner, its
employees or agents relating to Broadbase, the Software, or any Broadbase
product.
7. GOVERNMENT RIGHTS. The Software is provided with restricted rights. Use,
duplication, or disclosure by the U.S. Government is subject to restrictions as
set forth in any BPA and as provided in DFARS 227.7202-1(a) and 227.7202-3(a)
(1991), DFARS 212.227-7013(c)(1)(ii) (OCT 1988), FAR 12.212(a)(1991), FAR
12.227-19, or FAR 12.227-14 (ALT III), as applicable. Broadbase Information
Systems, Inc., 173 Constitution Avenue, Menlo Park, CA 94025.
8. GENERAL TERMS. This Agreement and all BPAs will be governed by the laws
of the State of California, without regard to choice of law principles. Any
litigation arising under these Terms and Conditions or any BPA will be brought
in the federal or state courts of the Northern District of California, and
Partner agrees and hereby submits to the exercise of jurisdiction over it in
such courts. The relationship of the parties is solely that of independent
contractors, and not partners, joint venturers or agents. All notices required
to be sent hereunder will be in writing and will be deemed to have been given
when mailed by certified mail, overnight express, or sent by confirmed facsimile
to the recipient's address listed in the cover page hereto. In the event any
provision of these Terms and Conditions is held to be unenforceable, the
remaining provisions of these Terms and Conditions will remain in full force and
effect. The waiver by either party of any default or breach of these Terms and
Conditions will not constitute a waiver of any other or subsequent default or
breach. Any waiver, amendment or other modification to these Terms and
Conditions will be effective only if in writing and signed by the parties.
Neither party will be liable by reason of failure of performance (except failure
to pay) if the failure arises out of causes beyond the party's reasonable
control. Each party agrees to comply with all applicable laws, rules and
regulations in connection with its activities under these Terms and Conditions.
Partner agrees to comply fully with all relevant regulations of the U.S.
Department of Commerce and with the U.S. Export Administration Act to ensure
that the Software and media are not exported in violation of U.S. law. This
Agreement combined with any BPA, is the complete and exclusive statement of the
agreement between the parties relating to the subject matter of these Terms and
Conditions and any such BPA which supersedes any proposal or prior agreement,
written or oral, and any other communications between the parties regarding such
subject matter. To the extent there is a conflict between these Terms and
Conditions any BPA, the terms and conditions of the BPA shall override these
Terms and Conditions. It is expressly agreed that any terms and conditions of
Partner's purchase orders and/or other forms will be superseded by the relevant
BPA and these Terms and Conditions.
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute these Terms and Conditions as of the Effective Date.
<TABLE>
<S> <C>
BROADBASE INFORMATION SYSTEMS, INC. Indus International
------------------------------------
(PARTNER)
By: By: /s/ Lou Perrelli
--------------------------------- ---------------------------------
Name: Name: Lou Perrelli
------------------------------- -------------------------------
Title: Title: GM Channels
------------------------------ ------------------------------
Address: Address: 60 Spear St.
---------------------------- ----------------------------
San Francisco, CA 94105
- ------------------------------------ ------------------------------------
</TABLE>
3
<PAGE> 5
BROADBASE PARTNER AGREEMENT
AUTHORIZED SOLUTIONS PROVIDER
THIS BROADBASE AUTHORIZED SOLUTIONS PROVIDER PARTNER AGREEMENT (the
"Agreement") is made as of __________, 199_ (the "Effective Date"), by and
between Broadbase Information Systems, Inc., a California corporation
("Broadbase"), and Indus International ("ASP Partner").
A. The parties desire to define a mechanism by which ASP Partner may
market and distribute Broadbase software products to its customers.
B. The parties have previously or are concurrently executing a document
setting forth the terms and conditions of Broadbase's partner program (the
"Terms and Conditions"). Broadbase and ASP Partner desire to incorporate the
Terms and Conditions into this Agreement. Capitalized terms not otherwise
defined herein have the meanings ascribed to them in the Terms and Conditions.
C. The parties agree that in the event of a conflict between this
Agreement and the Terms and Conditions, this Agreement will prevail.
NOW, THEREFORE, in consideration of the promises and mutual obligations
of the parties set forth herein, and for other good and valuable consideration,
the parties hereby agree as follows:
1. DEFINITIONS.
1.1 "End User" means a customer of ASP Partner that is licensed by ASP
Partner to use the Products for its internal business purposes.
1.2 "Products" means the Broadbase object code products specified in Exhibit
B and shall also include any documentation that is normally included as part of
the product.
2. APPOINTMENT, GRANT OF LICENSE.
2.1 Appointment. Subject to the terms and conditions of this Agreement,
Broadbase appoints ASP Partner, and ASP Partner accepts such appointment, as an
independent non-exclusive distributor of the Products and hereby grants ASP
Partner a limited, nonexclusive, nontransferable license solely for the purposes
of demonstration, display, marketing and distribution of the Products to End
Users during the term of this Agreement. Pursuant to the terms hereof, Broadbase
shall sell to ASP Partner, and ASP Partner shall purchase from Broadbase, the
Products ordered by ASP Partner at the purchase prices and upon the payment
terms described below. ASP Partner will not use the Products for general
internal use. ASP Partner will have no right under this Agreement to reproduce
or copy any Products for internal use, distribution to third parties or
otherwise.
2.2 Demonstration Licenses. ASP Partner shall have the right to use the
Product to (i) demonstrate Product on ASP Partner's premises, (ii) demonstrate
Product at a prospective End User's site provided that all copies of the Product
are removed within 5 days of when they are installed and provided further that
ASP Partner shall be responsible for protecting the confidentiality of the
Products while on the prospective End User's site.)
2.3 Evaluation Copies. ASP Partner may deliver copies of the Product for
evaluation purposes only (an "Evaluation Copy") to a prospective End User after
it has signed a evaluation license with at a minimum the provisions contained in
Exhibit C (except that back-up and/or archival copies may not be made and upon
termination of the evaluation license, all copies of the Product must be
returned to ASP Partner [i.e., certification of destruction will not be
enough]). All such Evaluation Copies shall be reported in the Quarterly Reports
Exhibit D contemplated by Section 4.1 but will show no royalty owing. Any
Evaluation Copies not removed at the completion of the evaluation period or 90
days from delivery to End User (whichever occurs first) are deemed to be
perpetually licensed, and End-User License Fees shall be due to Broadbase from
ASP Partner as of that date.
3. OBLIGATIONS OF ASP PARTNER.
3.1 Startup License Configuration. Upon execution of this document, ASP
Partner agrees to acquire at least one Startup License as well as a support
contract for that license from Broadbase. ASP Partner also agrees to purchase a
quantity of nonrefundable Product as inventory from Broadbase. The prices and
terms thereof to be defined in Exhibit A.
3.2 Sales, Demonstration and Implementation Certification. Within six months
of the signing of this document, ASP Partner agrees to cause at least one of its
employees to complete the Broadbase Sales and Demonstration Certification and
the Broadbase Implementation Certification (a description of which can be found
on Exhibit B). ASP Partner also agrees to maintain at least one certified
employee in each of these areas throughout the term of the agreement.
3.3 Support Certification. In order to enable the ASP Partner to effectively
provide first level post-sales service and support for all the Products
distributed by ASP Partner, ASP Partner is encouraged but not required to cause
a sufficient number of its personnel to complete the
1
<PAGE> 6
Broadbase Support Certification. Until such time as this certification is
complete, Broadbase agrees to provide support as per its then-current published
support policies for all customers for whom a valid support agreement is in
place.
3.4 Broadbase Packaging. ASP Partner will distribute the Products with all
packaging, any and all warranties and disclaimers, intact as shipped from
Broadbase.
3.5 Compliance with Law. ASP Partner will comply with all applicable
international, national, state, regional and local laws and regulations in
performing its duties hereunder and in any of its dealings with respect to the
Products.
3.6 Export and Re-export. ASP Partner will not, and will require its
customers to agree to refrain from, any and all export or re-export of any
Product (including documentation and other technical data) in violation of U.S.
export laws.
3.7 Covenants of ASP Partner. ASP Partner will: (i) conduct business in a
manner that reflects favorably at all times on the Products and on the good
name, goodwill and reputation of Broadbase; (ii) avoid deceptive, misleading or
unethical practices that are or might be detrimental to Broadbase or the
Products; and (iii) make no representations, warranties or guarantees with
respect to Broadbase or the Products that are inconsistent with those
customarily provided by Broadbase.
4. INSPECTIONS, RECORDS AND REPORTING.
4.1 Quarterly Reports. Within [thirty (30)] days of the end of each quarter
during the term of this Agreement, ASP Partner will provide to Broadbase a
written report, a template of which is provided as Exhibit D, (which Broadbase
will keep strictly confidential) showing, for such quarter:
(a) the identity of each customer to whom ASP Partner has distributed
any Product during such quarter, including company name, complete address and
both business and technical contact information for each such customer.
(b) the license configuration for each of the Products distributed,
including number of licenses, number of users, current discount percentage, and
license and support fees due Broadbase.
4.2 Notification. ASP Partner will: (i) notify Broadbase in writing of any
claim or proceeding involving the Products within ten (10) days after ASP
Partner learns of such claim or proceeding; (ii) report promptly to Broadbase
all claimed or suspected product defects; and (iii) notify Broadbase in writing
not more than thirty (30) days after any transfer of more than twenty-five
percent (25%) of ASP Partner's voting control or a transfer of substantially all
its assets.
4.3 Records. ASP Partner will maintain, for at least [two] years after
expiration or termination of this Agreement, its records, contracts and accounts
relating to distribution of the Products, and will permit examination thereof by
authorized representatives of Broadbase at all reasonable times.
5. ORDER PROCEDURE.
5.1 Broadbase Acceptance. All orders for the Products by ASP Partner will be
subject to acceptance in writing by Broadbase at its principal place of business
and will not be binding until the earlier of such acceptance or shipment, and,
in the case of acceptance by shipment, only as to the portion of the order
actually shipped. Broadbase agrees that it will not unreasonably withhold its
acceptance and it will notify ASP Partner promptly of any partial shipments.
5.2 License Requirements. For each Product distributed to its End Users, ASP
Partner agrees to, at its option, execute with such End User either Broadbase's
standard, then-current end user license agreement, or substantially include
mandatory minimum terms and conditions, as defined in Exhibit C, within its own
licensing document.
5.3 Cancellation. Broadbase reserves the right to cancel any orders placed
by ASP Partner and accepted by Broadbase as set forth above, or to refuse or
delay shipment thereof, if ASP Partner: (i) fails to make any payment as
provided in this Agreement or under the terms of payment set forth in any
invoice or otherwise agreed to by Broadbase and ASP Partner, (ii) fails to meet
reasonable credit or financial requirements established by Broadbase, including
any limitations on allowable credit, or (iii) otherwise fails to comply with the
Terms and Conditions or the terms and conditions of this Agreement. Broadbase
also reserves the right to discontinue the manufacture or distribution of any or
all Products at any time, and to cancel any orders for such discontinued
Products without liability of any kind to ASP Partner or to any other person. No
such cancellation, refusal or delay will be deemed a termination (unless
Broadbase so advises ASP Partner) or breach of this Agreement by Broadbase.
6. PRICES AND PAYMENT.
6.1 Prices to ASP Partner. Prices to ASP Partners for the Products are
calculated by applying the distribution discount, as defined on Exhibit A, to
the applicable product price, as defined in the then-current Broadbase Price
List for the country in which the Broadbase Product(s) will be installed and/or
used. Distribution discounts are also applicable to the purchase by the ASP
Partner and re-distribution to its End Users of Broadbase Support, Training
Credits, and Documentation. Broadbase may change its list prices from time to
time upon at least thirty (30) days' prior written notice. Notwithstanding the
foregoing, Broadbase will not change its prices for any order that has been
accepted by it.
2
<PAGE> 7
6.3 Taxes, Tariffs, Fees. Broadbase's list prices do not include any
national, state or local sales, use, value added or other taxes, customs duties,
or similar tariffs and fees which Broadbase may be required to pay or collect
upon the delivery of the Products or upon collection of the payments due or
otherwise. Should any tax or levy be owed or made, ASP Partner agrees to pay
such tax or levy and indemnify Broadbase for any claim for such tax or levy
demanded. ASP Partner represents and warrants to Broadbase that all Products
acquired hereunder are for redistribution in the ordinary course of ASP
Partner's business, and ASP Partner agrees to provide Broadbase with appropriate
resale certificate numbers and other documentation satisfactory to the
applicable taxing authorities to substantiate any claim of exemption from any
such taxes or fees.
6.3 Payment. ASP Partner will pay to Broadbase the amounts owed it in United
States dollars and at the address designated by Broadbase.
6.4 No Setoff. ASP Partner will not setoff or offset against Broadbase's
invoices amounts that ASP Partner claims are due to it. ASP Partner will bring
any claims or causes of action it may have in a separate action and waives any
right it may have to offset, setoff or withhold payment for the Products and
delivered by Broadbase.
7. SHIPMENT, RISK OF LOSS AND DELIVERY.
7.1 Shipment. All Products will be shipped F.O.B. Broadbase's point of
shipment. Shipments will be made to ASP Partner's identified warehouse
facilities or freight forwarder, subject to approval in writing by Broadbase in
advance of shipment. Unless specified in ASP Partner's order, Broadbase will
select the mode of shipment and the carrier. ASP Partner will be responsible for
and pay all packing, shipping, freight and insurance charges.
7.2 Title and Risk of Loss. Title and all risk of loss of or damage to the
Products will pass to ASP Partner upon delivery by Broadbase to the carrier,
freight forwarder or ASP Partner, whichever first occurs.
8. ASP PARTNER DETERMINES ITS OWN PRICE.
Although Broadbase may publish suggested wholesale or retail prices, these are
suggestions only and ASP Partner will be entirely free to determine the actual
prices at which the Products will be licensed to its customers.
9. TRADEMARKS, TRADE NAMES, LOGOS, DESIGNATIONS AND COPYRIGHTS.
9.1 Use During Agreement. During the term of this Agreement, ASP Partner is
authorized by Broadbase to use the trademarks, trade names, logos and
designations Broadbase uses for the Products in connection with ASP Partner's
advertisement, promotion and distribution of the Products. ASP Partner's use of
such trademarks, trade names, logos and designations will be in accordance with
Broadbase's policies in effect from time to time, including but not limited to
trademark usage and cooperative advertising policies. ASP Partner agrees not to
attach any additional trademarks, trade names, logos or designations to any
Product. ASP Partner further agrees not to use any Broadbase trademark, trade
name, logo or designation in connection with any non-Product.
9.2 Copyright and Trademark Notices. ASP Partner will include on each
Product that it distributes, and on all containers and storage media therefore,
all trademark, copyright and other notices of proprietary rights included by
Broadbase on such Product. ASP Partner agrees not to alter, erase, deface or
overprint any such notice on anything provided by Broadbase. ASP Partner also
will include the appropriate trademark notices when referring to any Product in
advertising and promotional materials.
9.3 ASP Partner Does Not Acquire Proprietary Rights. ASP Partner has paid no
consideration for the use of Broadbase's trademarks, trade names, logos,
designations or copyrights, and nothing contained in this Agreement will give
ASP Partner any right, title or interest in any of them. ASP Partner
acknowledges that Broadbase owns and retains all goodwill, trademarks, trade
names, logos, designations, copyrights and other proprietary rights in or
associated with the Products, and agrees that it will not at any time during or
after this Agreement assert or claim any interest in or do anything that may
adversely affect the validity of any trademark, trade name, logo, designation or
copyright belonging to or licensed to Broadbase (including, without limitation
any act or assistance to any act, which may infringe or lead to the infringement
of any of Broadbase's proprietary rights).
9.4 No Continuing Rights. Upon expiration or termination of this Agreement,
ASP Partner will immediately cease all display, advertising and use of all
Broadbase trademarks, trade names, logos and designations and will not
thereafter use, advertise or display any trademark, trade name, logo or
designation which is, or any part of which is, similar to or confusing with any
trademark, trade name, logo or designation associated with any Product.
9.5 Obligation to Protect. ASP Partner agrees to promptly notify Broadbase
of any known or suspected breach of Broadbase's proprietary rights that comes to
its attention. ASP Partner agrees to cooperate at Broadbase's expense in
Broadbase's efforts to protect its proprietary rights.
10. COSTS.
Except as may be agreed in writing by Broadbase and ASP Partner, each party will
pay all costs and expenses incurred in the performance of its obligations and
the exercise of its rights under this Agreement.
3
<PAGE> 8
11 TERM AND TERMINATION.
11.1. This Agreement commences on the Effective Date and will remain in effect
for a term of [one (1)] year unless earlier terminated in accordance with the
terms of the Partner Agreement. At the end of the initial term (and each
subsequent renewal term), this Agreement will automatically renew for an
additional [one (1) year] term, unless either party provides the other party
with written notice of termination, at least thirty (30) days prior to the date
of any such automatic renewal.
11.2. Rights and Duties Upon Termination. Upon termination or expiration of
this Agreement, in addition to the obligations of each party set forth in the
Terms and Conditions:
(a) Broadbase, at its option, may reacquire any or all Products then in
ASP Partner's possession at prices not greater than the prices paid by ASP
Partner for such Products (or, if the Products are not in unopened factory
sealed boxes, fifty percent (50%) of such prices). Upon receipt of any Products
so reacquired from ASP Partner, Broadbase will issue an appropriate credit to
ASP Partner's account.
(b) The due dates of all outstanding invoices to ASP Partner for the
Products automatically will be accelerated so they become due and payable on the
effective date of termination, even if longer terms had been agreed previously.
All orders or portions thereof remaining unshipped as of the effective date of
termination will automatically be canceled.
11.3 Survival. The rights and obligations of the parties contained in
Sections 4 and 11 will survive any termination or expiration of this Agreement.
11.4. Entire Agreement. This Agreement, the Exhibits attached hereto, and the
Terms and Conditions which are incorporated herein by this reference, is the
sole and entire agreement between the parties hereto pertaining to the subject
matter hereof and supersedes all prior communications or agreements, written or
oral pertaining to such subject matter.
IN WITNESS WHEREOF the parties have caused their authorized
representatives to execute this Agreement as of the Effective Date.
BROADBASE INFORMATION SYSTEMS, INC. Indus International
--------------------------------------
(ASP PARTNER)
By: By: /s/ Lou Perrelli
---------------------------- -------------------------------
Name: Name: Lou Perrelli
---------------------------- -------------------------------
Title: Title: GM Channels
---------------------------- -------------------------------
Exhibits:
EXHIBIT A:_____ASP Partner Order Form
EXHIBIT B:_____License and Discount Types
EXHIBIT C:_____Mandatory Terms of End User License
EXHIBIT D:_____Quarterly Sales Reconciliation Report Template
EXHIBIT E:_____Special Terms and Conditions
4
<PAGE> 9
EXHIBIT A
ASP PARTNER ORDER FORM
<TABLE>
<CAPTION>
MAXIMUM FIRST YEAR
NUMBER OF NAME OF SOFTWARE OR SERVICE CONCURRENT UNIT EXTENDED SUPPORT AND
UNITS USERS PRICE PRICE MAINTENANCE
[*]
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Partner Startup License $[*] $[*] $[*]
Broadbase Workgroup License $[*] $[*] $[*]*
DISTRIBUTION DISCOUNT = [*]% ($[*]) $[*]*
SUB TOTAL: ($[*]) $[*]*
TOTAL: ($[*])
</TABLE>
*First Year Support to be reported and paid within 30 days of the end of the
quarter in which Product(s) are distributed to ASP Partner's End Users (Section
4.1).
<TABLE>
<S> <C>
BILLING CONTACT TECHNICAL SUPPORT CONTACT
Contact Name Contact Name
Title: Title:
Address Address
City, State, ZIP City, State, ZIP
Phone Phone
SHIP TO CONTACT MARKETING CONTACT
Contact Name Contact Name
Title: Title:
Address Address
City, State, ZIP City, State, ZIP
Phone Phone
</TABLE>
[*] Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
5
<PAGE> 10
EXHIBIT B
LICENSE AND DISCOUNT TYPES
ASP PARTNER TRAINING - ASP Partners are eligible to attend any regularly
scheduled Broadbase training classes for no charge, the amount of training time
will be reasonable and appropriate in Broadbase's judgment and ASP Partner will
bear all travel and living expenses for such personnel sent to Broadbase for
training.
PRODUCTS ELIGIBLE FOR DISTRIBUTION -Broadbase Workgroup Server, Broadbase
Departmental Server, Brio Designer for Broadbase, Brio Query for Broadbase,Brio
Insight for Broadbase Web, Brio Quickview for Broadbase Web
PRODUCT DISCOUNTS FOR END-USER DISTRIBUTION - End-User distribution discounts
are tiered based on unit volume commitments. Prices to the ASP Partner are
calculated by applying the distribution discount, as defined on the following
discount schedule, to the applicable product price (as defined in the
then-current Broadbase Price List) for the country in which the Broadbase
Product(s) will be installed and/or used.
<TABLE>
<CAPTION>
Number of Units* 2 5 10 20
----- ----- ----- -------
<S> <C> <C> <C> <C>
Cumulative List Price* $[*] $[*] $[*] $[*]
(Distribution Discount) [*]% [*]% [*]% [*]%
Prepaid License Fees $[*] $[*] $[*] $[*]
</TABLE>
*Number of actual units may vary. Calculations are based on an average per unit
list price of $[*].
OTHER DISCOUNTS FOR END-USER DISTRIBUTION - The then-current distribution
discount, is also applicable to Support, Training, and Documentation. As with
the Product discounts, the price to the ASP Partner is derived by applying the
distribution discount to the applicable support fees (as defined in the
then-current Broadbase Price List).
SALES AND DEMONSTRATION CERTIFICATION - To ensure that ASP Partner is able to
effectively communicate the Broadbase value proposition to their customers,
Broadbase makes available sales and demonstration materials that offer step by
step instruction on the presentation and demonstration of the Broadbase
products. Broadbase also offers coaching and education to ensure a smooth
knowledge transfer. Sales and Demonstration Certifications are available to
individuals within the partner's organization that have satisfactorily completed
a short presentation and demonstration to a Broadbase representative. Partners
to are encouraged to certify as many of their employees as possible.
IMPLEMENTATION CERTIFICATION - Broadbase makes available training materials that
educate our Partners on the most efficient ways to implement a Broadbase
solution. As part of the certification process, Broadbase will provide a test
case, whereby individuals within the partner's organization will be encouraged
to construct a Broadbase data mart from beginning to end. Implementation
Certification can be achieved by submitting the finished results to a Broadbase
representative for approval. Partners to are encouraged to certify as many of
their employees as possible.
SUPPORT CERTIFICATION - For partners that provide front-line Broadbase product
support, Broadbase makes available training materials, documentation and access
to an on-line knowledge base that educates our Partners on the most efficient
way to provide Broadbase support to their end customers. To be designated as a
Certified Broadbase Support Engineer, individuals within the partner's
organization are required to have completed the Implementation Certification as
well as pass a written Support Certification exam. Partners are encouraged to
certify as many of their employees as possible.
6
[*] Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE> 11
EXHIBIT C
MANDATORY TERMS OF END USER LICENSES
All Agreements covering the distribution of the Program shall include
substantially the following provisions (i.e. ASP Partner will include these
terms in its agreements with End Users):
(1) ASP Partner licensor retains all title to the Program, and all copies
thereof, and no title to the Program, or any intellectual property therein, is
transferred to the licensee;
(2) The licensee may not copy the Program, except for backup and archival
purposes only, and the licensee shall include on all copies of the Program all
copyright and other proprietary notices or legends included on the Program when
it was shipped to such licensee;
(3) The licensee agrees not to reverse assemble, decompile or otherwise
attempt to derive source code from the Program;
(4) The licensee agrees to comply with all export and re-export restrictions
and regulations ("Export Restrictions") imposed by the government of the United
States;
(5) Although copyrighted, the Program is unpublished and contains
proprietary and confidential information of licensor and is considered by such
licensor to constitute valuable trade secrets. The licensee will hold the
Program in confidence and shall protect the Program with at least the same
degree of care with which the licensee protects its own similar confidential
information;
(6) ASP Partner's licensor is a direct and intended third party beneficiary
of the license agreement and may enforce it directly against the licensee;
provided however that such licensors shall not be liable to the licensee for any
general, special, direct, indirect, consequential, incidental or other damages
arising out of or related to the Program;
(7) Upon termination of the license for the Program, the licensee shall
return to ASP Partner all copies of the Program, or certify to ASP Partner that
the licensee has destroyed all such copies;
(8) ASP Partner and/or ASP Partner licensor shall have the right to direct a
recognized accounting firm to conduct, during normal business hours, an audit of
(and to copy) the appropriate records of the licensee to verify the number of
copies of the Program in Use by the licensee, the computer systems on which such
copies are installed and in the case of limited user licenses, the number of
users Using such copies. Representatives of the auditing firm shall protect the
confidentiality of the licensee's Confidential Information and abide by the
licensee's reasonable security regulations while on licensee's premises. If the
number of copies or users is found to be greater than that contracted for or the
computer system on which the Program is in use differs from the single computer
system for which license rights have been granted to the licensee, the licensee
shall be invoiced for the additional copies, users or computer systems at the
prices quoted in the then current price list of Broadbase (subject to any
applicable discounts to which ASP Partner may have agreed). The additional
license fees shall be payable within thirty (30) days of such invoice;
(9) The licensee shall not release the results of any benchmark of the
Program to any third party without the prior written approval of ASP Partner's
licensor for each such release;
(10) Licensee acknowledges its responsibility to (i) regularly back-up data
maintained on any computer system using the Program, and (ii) adequately test
prior to deployment each production version of the Program in a configuration
which reasonably simulates licensee's planned production environment.
7
<PAGE> 12
EXHIBIT D
Quarterly Reconciliation Report
_____ Quarter, 19_98__
<TABLE>
<CAPTION>
Customer Name and Support Contact Broadbase Number of Broadbase Support Fees
Site Address And Products Concurrent List Prices ([*]**)
Phone Number of Users And Dates
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C>
DATE: 1. Total of List Prices
NAME OF ASP Partner: 2. Subtract Distribution
Discount (See Exhibit A)
[*]%
SPECIAL DISCOUNT***
BY: (please print) 3. DISCOUNTED TOTAL
(Signature) 4. BEGINNING PREPAID BALANCE
TITLE: 5. ENDING PREPAID BALANCE
PHONE: 6. AMOUNT OWED TO BROADBASE
</TABLE>
* SPECIAL ONE TIME CHEVRON PRICING allows unlimited users but limits data
source to Passport only. See Chevron-Indus agreement for details.
** SPECIAL ONE TIME DISCOUNT OF SUPPORT from [*]% to [*]%.
*** EXTRA $[*] Discount only good if Purchase Order is received by Broadbase
on or before May 8, 1998.
[*] Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
8
<PAGE> 13
EXHIBIT E
This Exhibit E ("Exhibit E ") dated ______________, 199__, entered into by
_________________ ("Partner") and BROADBASE INFORMATION SYSTEMS (Broadbase)
supplements the terms of the Broadbase Partner Agreement dated
__________________, 199__ between Partner and Broadbase (the "Agreement").
Capitalized terms not otherwise defined in this Exhibit shall have the same
meaning as in the Agreement.
1. SECTION 1.4 OF THE BROADBASE TERMS AND CONDITIONS IS DELETED AND
REPLACED WITH THE FOLLOWING:
1.4 No Damages for Termination. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OF
ANY BPA IN ACCORDANCE WITH ITS TERMS. BOTH PARTIES WAIVE ANY RIGHT THEY
MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OF
ANY BPA UNDER THE LAW OF THE TERRITORY DESIGNATED IN THE BPA OR
OTHERWISE, OTHER THAN EXPRESSLY PROVIDED THEREIN. Neither party will be
liable to the other party on account of termination of any BPA for
reimbursement or damages for the loss of goodwill, prospective profits
or anticipated income, or on account of any expenditures, investments,
leases or commitments made by either party or for any other reason
whatsoever based upon or growing out of such termination or expiration.
Partner acknowledges that (i) Partner has no expectation and has
received no assurances that any investment by Partner in the promotion
of Broadbase products will be RECOVERED OR RECOUPED OR THAT PARTNER WILL
OBTAIN ANY ANTICIPATED AMOUNT OF PROFITS BY VIRTUE OF ANY BPA, AND (II)
PARTNER will not have or acquire by virtue of any BPA or otherwise any
vested, proprietary or other right in the promotion of Broadbase
products or in "goodwill" created by its efforts thereunder. THE PARTIES
ACKNOWLEDGE THAT THIS SECTION 1.4 HAS BEEN INCLUDED AS A MATERIAL
INDUCEMENT FOR BROADBASE TO ENTER INTO ANY BPA AND THAT BROADBASE WOULD
NOT HAVE ENTERED INTO ANY BPA BUT FOR THE LIMITATIONS OF LIABILITY SET
FORTH HEREIN.
2. SECTION 2.1 OF THE BROADBASE TERMS AND CONDITIONS IS DELETED AND
REPLACED WITH THE FOLLOWING:
2.1 Software Ownership. Partner hereby acknowledges that, as between
Broadbase and Partner, Broadbase is the owner of all right and title in
and to the Software, and Partner shall acquire no rights in or to the
Software. Both parties agree that, unless otherwise agreed upon in
writing, any models, scripts, structures and/or business metrics that
are developed as part of this agreement shall remain the sole property
of the Partner.
3. IN SECTION 3.2 OF THE BROADBASE TERMS AND CONDITIONS, THE WARRANTY
PERIOD IS CHANGED FROM 90 DAYS TO 6 MONTHS.
4. SECTION 5.1 OF THE BROADBASE TERMS AND CONDITIONS IS DELETED AND
REPLACED WITH THE FOLLOWING:
5.1 Confidentiality. Neither party will disclose to any third party or,
except as expressly permitted under the BPA, use any Software or other
confidential or proprietary information disclosed to it by the other
party ("Confidential Information"), and will use best efforts to
maintain the confidentiality of all Confidential Information in its
possession or control, which will in no event be less than the measures
it uses to maintain the confidentiality of its own information of equal
importance. Confidential Information will not include information that:
(a) is in or enters the public domain without breach of these Terms and
Conditions, any BPA or any other confidentiality agreement between the
parties; (b) either party received from a third party without
restriction on disclosure and without breach of a nondisclosure
obligation; or (c) either party develops independently, which it can
prove with written evidence. Both parties agree not to disclose to any
third party any benchmarks, tests, or other evaluations of the Software
without the prior written consent of the other party.
5. SECTION 2.1 OF THE BROADBASE PARTNER AGREEMENT IS DELETED AND REPLACED
WITH THE FOLLOWING:
2.1 Appointment. Subject to the terms and conditions of this Agreement,
Broadbase appoints ASP Partner, and ASP Partner accepts such
appointment, as an independent non-exclusive distributor of the Products
and hereby grants ASP Partner a limited, nonexclusive, nontransferable
license solely for the purposes of demonstration, display, marketing,
distribution and development of the Products to End Users during the
term of this Agreement. Pursuant to the terms hereof, Broadbase shall
sell to ASP Partner, and ASP Partner shall purchase from Broadbase, the
Products ordered by ASP Partner at the purchase prices and upon the
payment terms described below. Except as
9
<PAGE> 14
described above, ASP Partner will not use the Products for general
internal use. ASP Partner will have no right under this Agreement to
reproduce or copy any Products for distribution to third parties.
6. SECTION 4.1 OF THE BROADBASE PARTNER AGREEMENT, IS DELETED AND REPLACED
WITH:
4.1 Semi-Annual Reports. Within [thirty (30)] days of the end of
each calendar quarter that a distribution of the Product period
has occurred, and during the term of this Agreement, ASP Partner
will provide to Broadbase a written report, a template of which
is provided as Exhibit D, (which Broadbase will keep strictly
confidential) showing, for such period:
(a) the identity of each customer to whom ASP Partner has
distributed any Product during such period, including
company name, complete address and both business and
technical contact information for each such customer.
(b) the license configuration for each of the Products
distributed, including number of licenses, number of
users, current discount percentage, and license and
support fees due Broadbase.
7. SECTION 4.2, SUBSECTION (III) OF THE BROADBASE PARTNER AGREEMENT IS
DELETED
8. TO SECTION 6.1 OF THE BROADBASE PARTNER AGREEMENT, THE FOLLOWING IS APPENDED:
. . . or in an active proposal stage, but not to exceed 180 days from
the notification to Partner of the change of the Broadbase list price.
9. SECTION 6.4 OF THE BROADBASE PARTNER AGREEMENT IS DELETED AND REPLACED
WITH THE FOLLOWING:
6.4 No Setoff. ASP Partner will not setoff or offset against Broadbase's
invoices amounts that ASP Partner claims are due to it. ASP Partner will
bring any claims or causes of action it may have in a separate action
and waives any right it may have to offset, setoff or withhold payment
for the Products and delivered by Broadbase, except for valid warranty
claims by Partner's customers.
<TABLE>
<S> <C>
NAME OF CUSTOMER: Indus International
- --------------------------------------------------------------------------------
By: By: /s/ Lou Perrelli
- --------------------------------------------------------------------------------
(Authorized Signature) (Authorized Signature)
- --------------------------------------------------------------------------------
Name: Name: Lou Perrelli
- --------------------------------------------------------------------------------
Title: Title: GM Channels
- --------------------------------------------------------------------------------
Date of this Exhibit:
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 15
EXHIBIT F
This Exhibit F ("Exhibit F") dated June 30, 1999, entered into by Indus
International, Inc. ("Partner") and BROADBASE INFORMATION SYSTEMS (Broadbase)
supplements the terms of the Broadbase Partner Agreement dated June 2, 1998
between Partner and Broadbase (the "Agreement"). Capitalized terms not otherwise
defined in this Exhibit shall have the same meaning as in the Agreement.
TERM: Term of the Agreement shall be extended to 2 years from the date of this
Exhibit and will automatically renew for an additional [one (1) year] term per
the terms defined in section 11 in the Agreement. License and distribution
rights for the Brio products are excluded from this agreement unless mutually
agreed upon on a case-by-case basis.
TERMINATION: Upon termination or expiration of this Agreement, license and
distribution rights of the Broadbase products (excluding Brio) will survive
until all prepaid royalties are used up.
PREPAYMENT ROYALTY: Partner agrees to make a nonrefundable prepayment of future
royalties in the amount of $[*] on net 30 day terms from the execution
date of this Exhibit. (This prepayment brings the total prepay balance to
$[*]).
ROYALTY: Partner agrees to pay a royalty to Broadbase equaling a percentage of
the actual selling price of the Derivative Offering. (For the purposes of this
agreement "Derivative Offering" means both the Partner software which contains
Broadbase Products and any annual software maintenance and/or support fees.)
Cumulative revenue shall include all revenue from the sale of the Derivative
Offering from the execution of this Exhibit forward. Royalty amounts will be
calculated on the following graduated scale.
[*]
ROYALTY REPORTING: Partner agrees to report royalty and/or royalty burn down on
an Exhibit D within 10 business days after the end of the same calendar quarter
that the royalty or royalty burn-down has occurred.
BURN-DOWN RATE: Prepaid royalties are decremented at 100% of royalty amounts
due.
MINIMUM ROYALTY: Notwithstanding the above, in no event shall the pricing per
End User be less than $[*].
MAXIMUM ROYALTY: Notwithstanding the above, in no event shall royalty be paid on
amounts in excess of $[*] of the actual selling price for each End User
transaction. The parties may mutually agree to exceptions to the Maximum and
Minimum Royalty.
1
[*] Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE> 16
USE LIMITATIONS: End User license rights exclude the use of the Broadbase
software independently of the Derivative Offering. License rights do include the
ability to access, extract, transform, or contain data from data sources other
than those owned or controlled by the Partner but only insofar as data from
these sources is added to the Derivative Offering. If an End User customer
wishes to use the Broadbase software as a general purpose tool (and to build
applications that are independent of the Derivative Offering), they will be
required to contract directly with Broadbase.
<TABLE>
<S> <C>
NAME OF CUSTOMER:
- --------------------------------------------------------------------------------
By: By: Indus International, Inc.
- --------------------------------------------------------------------------------
(Authorized Signature) /s/ Joan P. Platt
- --------------------------------------------------------------------------------
Name: Name: Joan P. Platt
- --------------------------------------------------------------------------------
Title: Title: CFO
- --------------------------------------------------------------------------------
Date of this Exhibit: June 30, 1999
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 1
EXHIBIT 10.11
[BROADBASE LETTERHEAD]
August 3, 1999
Anil K. Gupta
497 Walsh Road
Atherton, CA 94027
(650) 561-9504
Dear Anil,
I am pleased to offer you the position of VP of Marketing for Broadbase
Software, Inc. This letter outlines the proposed terms of employment with
Broadbase. Your start date will be effective immediately.
Your annual salary will be $150,000 paid bi-monthly, to be reviewed on an
annual basis. There is an incentive bonus associated with this position
allowing you to make an additional $40,000. Your bonus will be based on
achievement of your objectives and is paid on a quarterly basis.
I will recommend that you will be granted an option to purchase 170,000 shares
of stock. This grant is subject to approval by the Board of Directors at its
first meeting after your employment begins. The option would vest over four
years and would be governed by the terms set forth in the Company's standard
form of stock options agreement. The options shall vest over a 4 year period
with a 6 month cliff. The purchase price of each of the shares covered by the
option will be the closing price of the Company's common stock on the date of
the approval of the grant by the Board. In the event of a change in control of
over 50% of the stock of Broadbase and termination of your position, 50% of your
unvested shares shall vest.
The Company will provide to you the health, holiday, vacation and other
benefits available to all its employees. Enclosed, for your review, is
information related to some of the benefits.
To indicate your acceptance of this offer of employment, please sign below and
return me by fax at (650) 614-8302. Employment at Broadbase is subject to your
signing the attached nondisclosure and inventions agreement, as well. Please
also understand that your employment is not governed by any written or oral
contract and is considered an "at-will" agreement. This means that you are
free, as is the Company, to terminate your employment relationship at any time
for any reason, so long as there is not violation of applicable state or
federal law.
Anil, all of us welcome you in joining Broadbase and we look forward to having
you on our team. Meanwhile, if you have any questions, please do not hesitate
to call me at (650) 614-8304.
Sincerely,
/s/ Chuck Bay
- ---------------------------
Chuck Bay
CFO & EVP of Business Development
Signature: /s/ Anil K. Gupta
------------------------
Name: Anil K. Gupta
------------------------
Start Date: August 4, 1998
-----------------------
<PAGE> 1
Exhibit 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
March 5, 1999, in Amendment No. 1 to the Registration Statement (Form S-1 No.
333-82251) and related Prospectus of Broadbase Software, Inc. for the
registration of shares of its common stock.
Our audits also included the financial statement schedule of Broadbase
Software, Inc. listed in Item 16(b). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
San Jose, California
August 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND JUNE 30, 1999 AND
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 13,990 27,981
<SECURITIES> 0 0
<RECEIVABLES> 1,122 1,768
<ALLOWANCES> 50 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,388 30,652
<PP&E> 2,288 2,925
<DEPRECIATION> 678 1,129
<TOTAL-ASSETS> 17,173 32,561
<CURRENT-LIABILITIES> 6,587 9,295
<BONDS> 9,360 10,302
0 0
18,575 38,554
<COMMON> 3,604 14,970
<OTHER-SE> (20,953) (40,560)
<TOTAL-LIABILITY-AND-EQUITY> 17,173 32,561
<SALES> 2,996 2,693
<TOTAL-REVENUES> 3,439 3,539
<CGS> 713 428
<TOTAL-COSTS> 967 1,360
<OTHER-EXPENSES> 3,738 2,800
<LOSS-PROVISION> 50 0
<INTEREST-EXPENSE> 226 561
<INCOME-PRETAX> (11,343) (10,887)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,343) (10,887)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,343) (10,887)
<EPS-BASIC> (8.85) (6.30)
<EPS-DILUTED> (8.85) (6.30)
</TABLE>
