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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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
MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF REGISTRATION
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE
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Common Stock, $0.001 par value per share.................... $50,000,000 $13,900
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
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 , 1999
[BROADBASE LOGO]
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SHARES
COMMON STOCK
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This is the initial public offering of Broadbase Software, Inc. and we are
offering shares of our common stock. We anticipate that the
initial public offering price will be between $ and $ 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 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*TRADE SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 3
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 is a leading provider of customer-centric analytic solutions that
enable businesses to maximize customer value across Internet and traditional
business channels. Our Broadbase EPM software creates a comprehensive
understanding of the customer lifecycle by integrating and analyzing numerous
points of customer interaction, from Internet-based systems, front and back
office applications and demographic data sources. Using Broadbase EPM,
businesses can translate this analysis into specific actions, such as targeting
profitable customers, identifying cross-sell opportunities and personalizing
customer interactions. By integrating, analyzing and acting on valuable customer
information, our solutions enable businesses to build long lasting and
profitable customer relationships.
The Internet is emerging as an important channel for both traditional
"bricks and mortar" and Internet-only businesses to interact with, market to and
sell to customers. To succeed in this environment, both types of companies are
adapting many business functions to specifically leverage the Internet, defining
a new category of enterprise called the electronic business, or e-business. With
this new business channel, the points of customer interaction, or touch points,
have increased dramatically. Today, they include not only traditional touch
points such as 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. Because of low barriers to entry
and insignificant switching costs, customers enjoy a growing number of competing
choices, both on and off the Internet. To win the battle for customer loyalty,
companies must meet each customer's individual requirements across all business
channels and touch points.
Successful e-businesses need to develop a complete understanding of
individual customers and actively use this knowledge to maximize the
effectiveness of every customer interaction. Broadbase EPM is an integrated
solution that addresses this need, incorporating the Broadbase EPM/Foundation
platform and the Broadbase EPM suite of analytic applications. EPM/ Foundation
creates a comprehensive view of the customer lifecycle by integrating and
analyzing valuable real-time and historic customer data, which has traditionally
been isolated within individual business functions. Our Broadbase EPM suite of
applications provides specific business functions with actionable analysis to
improve customer targeting, acquisition, conversion and retention. Our solutions
can be deployed in less than 30 days, allowing our customers to quickly capture
revenue benefits and achieve rapid return on investment. In addition, Broadbase
EPM requires fewer resources to implement, support and adapt than competing,
services-based alternatives. To date we have licensed our solutions to over 80
customers, including both traditional "bricks and mortar" and Internet-only
companies such as Eastman Kodak, Fidelity Investments, Hewlett-Packard, InsWeb,
Mercata, The Sharper Image and United Airlines.
We believe that our solutions enable e-businesses to build profitable, long
lasting and individualized customer relationships, unleashing the potential of
real-time Internet interactions, while also increasing the power of traditional
customer channels.
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.......................... shares
Common stock to be outstanding
after this offering................ 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 May 31, 1999 and assumes the
conversion into common stock of all our preferred stock and convertible
debentures outstanding on that date. It includes 2,189,681 shares issuable on
conversion of shares of our preferred stock that we issued after May 31, 1999,
but excludes 2,065,468 shares subject to outstanding options and warrants as of
May 31, 1999 at a weighted-average exercise price of $0.55 per share and 201,635
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 THREE MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED MARCH 31,
(INCEPTION) TO ------------------ -----------------
DECEMBER 31, 1996 1997 1998 1998 1999
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STATEMENT OF OPERATIONS DATA:
Net revenue.................... $ -- $ -- $ 3,439 $ 482 $ 1,486
Gross margin................... -- -- 2,472 272 835
Loss from operations........... (1,273) (5,575) (11,452) (2,346) (4,428)
Net loss....................... $(1,272) $(5,487) $(11,343) $(2,353) $(4,575)
Basic and diluted net loss per
share........................ $ (4.30) $ (6.19) $ (8.85) $ (2.27) $ (2.69)
Weighted-average common
shares -- basic and
diluted...................... 296 887 1,281 1,038 1,703
Pro forma basic and diluted net
loss per share............... $ (1.51) $ (0.49)
Pro forma weighted-average
common shares -- basic and
diluted...................... 7,535 9,315
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<CAPTION>
MARCH 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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BALANCE SHEET DATA
Cash and cash equivalents.............................. $10,855 $10,855
Working capital........................................ 5,039 5,039
Total assets........................................... 14,557 14,557
Long-term debt and capital lease obligations, net of
current portion...................................... 9,177 927
Stockholders' equity (net capital deficiency).......... $(2,408) $ 5,842
</TABLE>
The pro forma balance sheet data summarized above gives effect to the
conversion of all our preferred stock and convertible debentures outstanding as
of March 31, 1999 into common stock upon the completion of this offering, but
does not give effect to the issuance or conversion of preferred stock and
convertible debentures issued after March 31, 1999. See Notes 3, 5 and 9 of
Notes to Consolidated Financial Statements. The pro forma as-adjusted balance
sheet data summarized above reflects the receipt of the net proceeds from the
sale of shares of common stock offered by Broadbase at an assumed
initial public offering price of $ per share after deducting the
estimated underwriting discounts and commissions and offering expenses.
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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 whether to purchase shares of our common stock. The risks set
out below may not be exhaustive.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
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. 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 first
quarter of 1998, we began licensing our first product, EPM/ Foundation, which
was designed to enable organizations to build and manage datamarts to analyze
their customer information. In the third quarter of 1998, we began licensing
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-centric e-business applications. We also released
new versions of existing Broadbase EPM applications in May 1999. Because our
operating history is limited and our product offerings are evolving, it is
difficult to evaluate our business and our future prospects.
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 have licensed these e-business applications. Through the
first quarter of 1999, we obtained substantially all of our license revenue from
licenses of our EPM/ Foundation product. 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 EXPECT OUR QUARTERLY REVENUE AND OPERATING RESULTS TO FLUCTUATE
Our revenue and operating results are likely to vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
including:
- the demand for our products, particularly our recently-introduced
Broadbase EPM applications;
- the size and timing of customer orders for our products and services;
- the timing of introductions of new and enhanced products and services by
us and our competitors;
- increased expenses for sales and marketing, product development and
administration;
- changes in our rapidly evolving market;
- changes in the mix of products and services we provide;
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- changes in the mix of our domestic and international sales;
- seasonal fluctuations in demand for our products due to customers'
purchasing cycles and other factors; and
- changes in general economic and market conditions.
Accordingly, we believe that quarter-to-quarter comparisons of our operating
results may not be meaningful.
OUR OPERATING EXPENSES ARE INCREASING AND WE WOULD NOT BE ABLE TO REDUCE THEM
QUICKLY
We plan to significantly increase our operating expenses as we expand our
sales, marketing, research and development, professional services, customer
support and administrative groups. 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 that contributes
to the uncertainty of our future operating results. Potential customers often
require 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. Our products can also have an unpredictable implementation cycle.
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. As a
result, we typically do not recognize the license revenue from an application
license until one to three months after the sale is completed. The actual
connection process can often be completed in one or two 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. Uncertainty as to when this connection can be
completed makes it more difficult to forecast our operating results and can
result in significant variability in our period to period results.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE MAY NOT ACHIEVE PROFITABILITY
We incurred net losses and losses from operations for each period from our
inception through the first quarter of 1999. As of March 31, 1999, we had an
accumulated deficit of approximately $22.7 million. We have not achieved
profitability and we expect to continue to incur 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.
TO BE SUCCESSFUL, WE MUST ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED
PERSONNEL
Our success depends on our ability to attract, train and retain qualified,
experienced employees. There is substantial competition for experienced
management, engineering, sales
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and marketing personnel, particularly in the market segments 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
senior management team and other key personnel. The loss of any of our senior
management team could harm our business. Certain key members of our senior
management team 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 we are
currently seeking to hire a Vice President of Marketing. 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.
IN ORDER TO INCREASE MARKET AWARENESS OF OUR PRODUCTS AND INCREASE REVENUE, WE
NEED TO EXPAND 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 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. 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.
IF OUR RELATIONSHIPS WITH CHANNEL PARTNERS ARE NOT SUCCESSFUL OR IF WE CANNOT
RECRUIT ADDITIONAL CHANNEL PARTNERS, OUR GROWTH MAY BE LIMITED
We rely on relationships with a variety of channel partners who generate
leads and, in some cases, resell our products. If we cannot maintain successful
relationships with our channel partners or cannot recruit additional channel
partners, we may have difficulty expanding the sales of our products. Our
channel partners include e-business and enterprise application vendors, systems
integrators and distributors located in the United States, Japan and the
Netherlands. Sales through indirect distribution channels accounted for
approximately 28.7% of our total revenue for 1998 and 52.0% for the three months
ended March 31, 1999. Indus, which integrates our EPM/Foundation into certain of
its enterprise solutions for the energy and utility industries, accounted for
18.4% of our total revenue in 1998, and 11.5% in the first quarter of 1999. All
of our sales in Japan have been made through distributors. In addition to our
sales through indirect distribution channels, a substantial portion of our
direct sales depend on leads generated by vendors of e-business and enterprise
applications that work with our
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products. Our relationships with our channel partners are generally informal, or
are governed by agreements that can be terminated by them with little or no
prior notice.
Our channel partners may promote products of several different companies,
including, in some cases, products that compete with our products. These channel
partners may not devote adequate resources to selling our products. We may not
be able to maintain these relationships and attract additional channel partners
that will be qualified to provide timely and cost-effective customer support and
service. See "Business -- Strategic Relationships" for a description of our
channel partners.
IF WE FAIL TO ADEQUATELY EXPAND OUR PROFESSIONAL SERVICES GROUP, OUR ABILITY TO
ASSIST OUR CUSTOMERS WITH THE IMPLEMENTATION OF OUR PRODUCTS COULD BE HARMED
We may not be able to attract or retain a sufficient number of highly
qualified professional services personnel. Businesses that license our software
typically engage our professional services organization to assist with support,
training, consulting and initial implementation of our products. We believe that
growth in our product sales depends on our ability to provide our customers with
these services 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 meet these needs. New professional services personnel will require
training and take time to reach full productivity. In addition, 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.
CHANGES IN TECHNOLOGY AND OPERATING SYSTEM STANDARDS MAY IMPEDE MARKET
ACCEPTANCE OF OUR PRODUCTS
Rapidly changing technology and operating system standards may impede
market acceptance of our products. Our new applications have been designed based
upon currently prevailing Internet technology. If new Internet technologies
emerge that are incompatible with Broadbase EPM, 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.
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Additionally, we have designed our products to work with databases such as
Oracle and Microsoft SQL Server. Any changes to those 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 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.
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. Our ability to increase sales of our
products will depend on the continued acceptance of the Windows NT operating
system. 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 these new products 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. Our customers' requirements and the
technology available to satisfy those requirements are continually changing. We
expect competition to persist and intensify in the future. 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
Epiphany;
- 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 decision support, customer relationship management, enterprise
resource planning and 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. We also expect that competition will
increase as a result of industry consolidation.
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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.
OUR PROPRIETARY TECHNOLOGY MAY BE SUBJECTED TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON BY OTHERS
Our intellectual property is important to 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. We have no patents,
although patents may become increasingly important in software and e-business
applications. Unauthorized use or misappropriation of our intellectual property
could seriously harm our business.
We could also be subject to intellectual property infringement claims as
the number of our competitors grows and the functionality of our applications
overlaps with competitive offerings. These claims, even if not meritorious,
could be expensive and divert our attention from operating our company. If we
become liable to third parties for infringing their intellectual property
rights, we 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.
FAILURE TO LICENSE NECESSARY THIRD PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS
MAY CAUSE DELAYS OR REDUCTIONS IN OUR SALES
We rely on software that we have licensed from Brio Technology to perform
certain reporting and information delivery functions of Broadbase EPM. Our
license agreement with Brio terminates in June 2000. We also rely on software we
have licensed from Intersolv for connecting our products to relational
databases. Our license agreement with Intersolv terminates in December 2000. In
addition, we rely on technology we license from Microsoft, including Microsoft
Site Server and Microsoft Internet Information Server. These licenses may not
continue to be available to us on commercially reasonable terms or at all. The
loss of any of these licenses 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 the future, we may need to license other
third party technologies to enhance our products, meet evolving customer needs
or adapt to changing technology standards. 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. We
test our products extensively prior to releasing them. However, in the past we
have discovered software errors in some of our products after their
introduction. Despite extensive testing, we may not be able to detect and
correct errors in products or releases before commencing commercial shipments,
which may result in loss of revenue or delays in market acceptance. 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. Although we have
not experienced any significant product liability claims to date, we may
encounter such claims in the future. Product liability claims brought against us
could divert
9
<PAGE> 12
the attention of management and key personnel, could be expensive to defend and
may result in adverse settlements and judgments.
WE MAY ENCOUNTER BARRIERS TO INTERNATIONAL EXPANSION, WHICH 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 31.5% of our total revenue in the first quarter
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. Localizing our products for
foreign markets is difficult and may take longer than we anticipate. We may
experience difficulties in recruiting and training international staff. We
currently have limited experience in developing local versions of our products,
as well as marketing, selling and supporting our products and services overseas.
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.
WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND CONTROLS TO SUPPORT OUR ANTICIPATED
GROWTH
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 94 at May 31, 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 enterprise
resource planning 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.
10
<PAGE> 13
POTENTIAL YEAR 2000 PROBLEMS MAY INVOLVE SIGNIFICANT TIME AND EXPENSE AND MAY
REDUCE OUR FUTURE SALES
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.
Although we have not been a party to any litigation or arbitration proceeding
involving our products or services related to year 2000 compliance issues, we
may in the future be required to defend our products or services in such
proceedings, or to negotiate resolutions of claims based on year 2000 issues.
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. 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 MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS
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. We may need to raise additional funds, and we cannot be
certain that we would be able to obtain additional financing on favorable terms,
if at all. Further, if we issue 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, 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.
OUR PERFORMANCE WILL DEPEND ON THE GROWTH IN THE USE OF THE INTERNET FOR
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
11
<PAGE> 14
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
As Internet commerce continues to evolve, federal, state and foreign
governments may adopt laws and regulations covering issues such as user privacy,
taxation of goods and services provided over the Internet, pricing, content and
quality of products and services. 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. Legislation could dampen the growth in Internet usage and decrease
its acceptance as a communications and commercial medium. If enacted, these laws
and regulations could limit the market for our products.
GOVERNMENT REGULATION OF THE COLLECTION AND USE OF PERSONAL DATA COULD REDUCE
DEMAND FOR OUR PRODUCTS
Our products work with Internet applications that enable businesses to
capture and use information about their customers. 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.
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, the stock market has experienced extreme price and volume
fluctuations, and the market prices of securities of technology companies,
particularly Internet-related companies,
12
<PAGE> 15
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
Our executive officers, directors and major stockholders will beneficially
own an aggregate of approximately % of our outstanding common stock
following the completion of this offering. These stockholders, if acting
together, would be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers or similar transactions, even if other stockholders
disagree. See "Principal Stockholders" for information regarding the shares
beneficially owned by our executive officers, directors and major stockholders.
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
Provisions of our certificate of incorporation, bylaws, other agreements
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. 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 investment-grade, interest-bearing securities. These investments may
not yield a favorable return.
OUR STOCK PRICE COULD BE AFFECTED BY SHARES OF OUR COMMON STOCK BECOMING
ELIGIBLE FOR PUBLIC SALE IN THE FUTURE
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 May 31,
1999, upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of outstanding options or warrants
after May 31, 1999. Of these shares, the shares sold in this offering
will be freely tradable, additional shares of common stock will be
available for sale in the public market 180 days after the date of this
prospectus, and more shares will become available for sale in the
public market on subsequent dates.
After this offering, the holders of approximately million shares of
common stock, which represent % 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.
13
<PAGE> 16
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," "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," "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 place undue reliance on
these statements.
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. Forrester Research does not guarantee the
accuracy or completeness of their information and estimates. We have not
independently verified the information and assumptions on which these market
growth estimates are based. If Forrester Research is wrong about any of their
assumptions, then their market estimates may also be wrong.
14
<PAGE> 17
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common
stock offered by us will be approximately $ , at an assumed initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses. If
the underwriters' over-allotment option is exercised in full, our net proceeds
will be approximately $ . 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.
15
<PAGE> 18
CAPITALIZATION
The following table shows:
- our actual capitalization as of March 31, 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 March 31, 1999 into common stock upon the closing of this
offering; 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 $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses.
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term liabilities, less current portion................. $ 9,177 $ 927 $ 927
Stockholders' equity (net capital deficiency):
Preferred stock, no par value; 7,964,065 shares
authorized, 6,474,277 shares issued and outstanding,
actual; 7,964,065 shares authorized, no shares issued
or outstanding, pro forma and as adjusted.............. 18,575 -- --
Common stock, no par value; 30,000,000 shares authorized,
2,749,027 shares issued and outstanding, actual;
30,000,000 shares authorized, 10,361,235 shares issued
and outstanding, pro forma; 30,000,000 shares
authorized, shares issued and outstanding, as
adjusted............................................... 8,358 35,183
Deferred stock compensation............................... (5,999) (5,999) (5,999)
Notes receivable from stockholders........................ (637) (637) (637)
Accumulated other comprehensive loss...................... (28) (28) (28)
Accumulated deficit....................................... (22,677) (22,677) (22,677)
-------- -------- --------
Total stockholders' equity (net capital deficiency).... (2,408) 5,842
-------- -------- --------
Total capitalization.............................. $ 6,769 $ 6,769 $
======== ======== ========
</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 March 31, 1999, at a weighted-average per share exercise
price of $2.34;
- 1,667,183 shares of common stock issuable upon the exercise of
outstanding stock options as of March 31, 1999, at a weighted-average per
share exercise price of $0.50;
- 672,790 shares of common stock available for future grant under our 1996
Equity Incentive Plan as of March 31, 1999;
- 3,500,000 shares of common stock to be initially available for future
grant under our 1999 Equity Incentive Plan;
- 500,000 shares of common stock to be initially available for issuance
under our 1999 Employee Stock Purchase Plan;
- $1,275,000 principal amount of convertible debentures issued in April
1999 which are convertible into 175,862 shares of common stock upon the
closing of this offering, at the option of the holder or of Broadbase;
and
- 2,189,681 shares of preferred stock issued in June 1999 which are
automatically convertible into common stock upon the closing of this
offering.
See "Management -- Employee Benefit Plans" and Notes 5 and 9 of Notes to
Consolidated Financial Statements for a description of our stock plans.
16
<PAGE> 19
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was $5.8
million, or $0.56 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 10,361,235 shares of common stock outstanding as of
March 31, 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 shares of our common stock at an assumed
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses, our
pro forma net tangible book value as of March 31, 1999 would have been
approximately $ million, or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ 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............. $
Pro forma net tangible book value per share as of
March 31, 1999......................................... $0.56
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after
offering..................................................
Dilution per share to new investors......................... $
</TABLE>
The following table summarizes, as of March 31, 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..... 10,361,235 % $27,126,000 % $2.62
New investors.............
---------- ----- ----------- ----- -----
Total................... 100.0% 100.0%
========== ===== =========== ===== =====
</TABLE>
The above discussion and tables assume no exercise of any stock options or
warrants outstanding as of March 31, 1999 and do not reflect the issuance of
convertible debentures and preferred stock after March 31, 1999. As of March 31,
1999, there were options and warrants outstanding to purchase a total of
1,703,947 shares of our common stock with a weighted-average exercise price of
$0.54 per share. If any of these options or warrants are exercised, there will
be further dilution to new public investors. Please see "Capitalization,"
"Management -- Employee Benefit Plans" and Notes 5 and 9 of Notes to Financial
Statements for more information about these options and warrants and our stock
plans.
17
<PAGE> 20
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 March 31, 1999 and the
consolidated statement of operations data for the three months ended March 31,
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 March 31,
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 THREE MONTHS ENDED
NOVEMBER 28, 1995 DECEMBER 31, MARCH 31,
(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 $ 482 $ 1,126
Maintenance and professional services........... -- -- 443 -- 360
------- ------- -------- ------- -------
Total net revenue........................ -- -- 3,439 482 1,486
Cost of revenue:
License......................................... -- -- 713 210 260
Maintenance and professional services........... -- -- 254 -- 391
------- ------- -------- ------- -------
Total cost of revenue.................... -- -- 967 210 651
------- ------- -------- ------- -------
Gross margin...................................... -- -- 2,472 272 835
Operating expenses:
Sales and marketing............................. 130 2,851 7,888 1,595 2,656
Research and development........................ 928 1,980 3,738 742 1,188
General and administrative...................... 215 744 1,165 219 494
Amortization of deferred stock compensation..... -- -- 1,133 62 925
------- ------- -------- ------- -------
Total operating expenses................. 1,273 5,575 13,924 2,618 5,263
------- ------- -------- ------- -------
Loss from operations.............................. (1,273) (5,575) (11,452) (2,346) (4,428)
Interest income................................... 30 154 335 53 113
Interest expense.................................. (29) (66) (226) (60) (260)
------- ------- -------- ------- -------
Net loss.......................................... $(1,272) $(5,487) $(11,343) $(2,353) $(4,575)
======= ======= ======== ======= =======
Basic and diluted net loss per share.............. $ (4.30) $ (6.19) $ (8.85) $ (2.27) $ (2.69)
======= ======= ======== ======= =======
Weighted-average shares used in computing basic
and diluted net loss per share.................. 296 887 1,281 1,038 1,703
======= ======= ======== ======= =======
Pro forma basic and diluted
net loss per share.............................. $ (1.51) $ (0.49)
======== =======
Weighted-average shares used in computing pro
forma basic and diluted net loss per share...... 7,535 9,315
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1999
----------------- --------------------
1997 1998 ACTUAL PRO FORMA
------ ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $1,153 $13,990 $10,855 $10,855
Working capital............................................. 61 8,801 5,039 5,039
Total assets................................................ 2,113 17,173 14,557 14,557
Long-term debt and capital lease obligations, net of current
portion................................................... 916 9,360 9,177 927
Stockholders' equity (net capital deficiency)............... (75) 1,226 (2,408) 5,842
</TABLE>
18
<PAGE> 21
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain consolidated statement of operations
data for each of the five quarters ended March 31, 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,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License.................................... $ 482 $ 867 $ 888 $ 759 $ 1,126
Maintenance and professional services...... -- 98 104 241 360
------- ------- ------- ------- -------
Total net revenue................... 482 965 992 1,000 1,486
Cost of revenue:
License.................................... 210 156 180 167 260
Maintenance and professional services...... -- 83 84 87 391
------- ------- ------- ------- -------
Total cost of revenue............... 210 239 264 254 651
------- ------- ------- ------- -------
Gross margin................................. 272 726 728 746 835
Operating expenses:
Sales and marketing........................ 1,595 2,046 1,975 2,272 2,656
Research and development................... 742 923 1,030 1,043 1,188
General and administrative................. 219 303 315 328 494
Amortization of deferred stock
compensation............................. 62 266 374 431 925
------- ------- ------- ------- -------
Total operating expenses............ 2,618 3,538 3,694 4,074 5,263
------- ------- ------- ------- -------
Loss from operations......................... (2,346) (2,812) (2,966) (3,328) (4,428)
Interest income.............................. 53 105 94 83 113
Interest expense............................. (60) (40) (47) (79) (260)
------- ------- ------- ------- -------
Net loss..................................... $(2,353) $(2,747) $(2,919) $(3,324) $(4,575)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
PERCENT OF TOTAL NET REVENUE
Net revenue:
License.................................... 100.0% 89.8% 89.5% 75.9% 75.8%
Maintenance and professional services...... -- 10.2 10.5 24.1 24.2
------- ------- ------- ------- -------
Total net revenue................... 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License.................................... 43.6 16.2 18.1 16.7 17.5
Maintenance and professional services...... -- 8.6 8.5 8.7 26.3
------- ------- ------- ------- -------
Total cost of revenue............... 43.6 24.8 26.6 25.4 43.8
------- ------- ------- ------- -------
Gross margin................................. 56.4 75.2 73.4 74.6 56.2
Operating expenses:
Sales and marketing........................ 330.9 212.0 199.1 227.2 178.7
Research and development................... 153.9 95.6 103.8 104.3 79.9
General and administrative................. 45.4 31.4 31.8 32.8 33.2
Amortization of deferred stock
compensation............................. 12.9 27.6 37.7 43.1 62.2
------- ------- ------- ------- -------
Total operating expenses............ 543.1 366.6 372.4 407.4 354.0
------- ------- ------- ------- -------
Loss from operations......................... (486.7) (291.4) (299.0) (332.8) (297.8)
Interest income.............................. 11.0 10.9 9.5 8.3 7.6
Interest expense............................. (12.5) (4.1) (4.7) (7.9) (17.5)
------- ------- ------- ------- -------
Net loss..................................... (488.2)% (284.6)% (294.2)% (332.4)% (307.7)%
======= ======= ======= ======= =======
</TABLE>
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<PAGE> 22
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
Broadbase is a leading provider of customer-centric analytic solutions that
enable businesses to maximize customer value across Internet and traditional
business channels. 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 first quarter of 1998, we began licensing our first
product, EPM/Foundation, which was designed to enable organizations to build and
manage datamarts for their customer information. In the third quarter of 1998,
we began licensing Broadbase/EPM applications designed to operate with EPM/
Foundation to 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-centric
e-business applications, as well as new versions of our existing applications.
As a result, substantially all of our license revenue through the first quarter
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 94 full-time employees at May 31, 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. As a result, we typically do not recognize the license revenue
from an application license until one to three months after the sale is
completed. The actual connection process can often be completed in one or two
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. License revenue generated by
distributors and other distribution partners 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.
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<PAGE> 23
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 license to use our 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
distribution channels. Direct sales are made by our direct sales force in North
America, Germany, the United Kingdom and the Netherlands. Our indirect
distribution channels include software application vendors, resellers and
distributors located in the United States, Japan and the Netherlands. Sales
through indirect distribution channels accounted for approximately 28.7% of our
total revenue for 1998 and 52.0% for the three months ended March 31, 1999.
Although a significant portion of our revenue to date has been generated by our
indirect distribution 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
revenue for 1998 and 31.5% for the three months ended March 31, 1999. A majority
of our international revenue is derived from sales of our products 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 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 March 31, 1999, we had an accumulated
deficit of $22.7 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 $482,000 in the first quarter of 1998 to $1.1
million in the first quarter of 1999, representing an increase of 133.6%. This
increase in license revenue is attributable to increases in the number of
licenses sold, reflecting the results of the expansion of our direct sales force
and our indirect distribution channels. We intend to continue to expand both
these channels. In addition, we expect the average size of our revenue per
license 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 distribution
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 first quarter of 1999.
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<PAGE> 24
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 was $443,000 in 1998 and $360,000 in the first
quarter of 1999.
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 $210,000 in the first quarter of 1998 to
$260,000 in the first quarter 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. The
increase in cost of maintenance and professional services between 1998 and the
first quarter of 1999 was due to the hiring, in December 1998, of a vice
president of professional services and four 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, commission, travel and promotional expenses and the
facilities cost for the various domestic and international field sales offices.
Sales and marketing expenses increased from $2.9 million in 1997 to $7.9 million
in 1998 and from $1.6 million in the first quarter of 1998 to $2.7 million in
the first quarter of 1999. The increase 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 March 31, 1998 to 30 at March 31, 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 $2.0 million in 1997 to $3.7 million in 1998 and from $742,000 in
the first quarter of 1998 to $1.2 million in the first quarter of 1999. The
increases in 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 19 at March 31, 1998 to 27 at March 31, 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 $744,000 in 1997 to $1.2 million in 1998
and from $219,000 in the first quarter of 1998 to $494,000 in the first quarter
of 1999. The increases in general and administrative expenses were primarily due
to
22
<PAGE> 25
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 eight at
March 31, 1998 to 11 at March 31, 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 876,110 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 on a graded
vesting method over the vesting periods of the options. In addition, we granted
options to purchase common stock in the first quarter of 1999 for which we
recorded additional deferred compensation of approximately $4.6 million which
will be amortized on a graded vesting method over the vesting periods of the
options. The amortization of deferred compensation recorded through March 31,
1999 will be approximately $3.7 million for 1999, $1.9 million for 2000, $1.0
million for 2001 and $390,000 for 2002.
Interest income. Interest income consists of interest earned on our cash
and cash equivalents. Interest income from inception to December 31, 1997 was
$184,000, 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 to the investment of the proceeds of our Series C preferred stock
financing.
Interest expense. Interest expense consists primarily of interest on our
notes payable, bank line of credit and convertible debentures. Interest expense
from inception to December 31, 1998 was due to interest payments on our notes
payable. The increase in interest expense in the first quarter of 1999 was
primarily due to interest payments on $8.3 million in debt financing secured in
December 1998.
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. 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 $18.6 million, sales of convertible
debentures, with net proceeds of $8.3 million, and bank borrowings. As of March
31, 1999, we had $10.9 million in cash and cash equivalents and $5.0 million in
working capital.
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<PAGE> 26
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 $2.8 million in the
three months ended March 31, 1999. The increase in use of cash from operating
activities in 1998 compared to 1997 was due primarily to our net loss in 1998,
offset in part by a $3.3 million increase in deferred revenue and a $1.6 million
increase in accrued expenses. 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 $205,000 in the first three 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 and $20.4
million in 1998. 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 quarter of 1999, our financing
activities used cash of $178,000 due primarily to the repayment of long-term
debt.
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 bear interest at the bank's prime lending rate plus
0.5%. Borrowings under this agreement are secured by certain assets of
Broadbase. As of March 31, 1999, no borrowings were outstanding and $2.0 million
was available for borrowing under the line of credit, and $944,000 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 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 March 31, 1999, we were in
compliance with these covenants.
On June 30, 1999, we received proceeds of $19,989,326 from our issuance of
2,189,681 shares of our Series E preferred stock. We believe that with the net
proceeds from this offering, existing cash and cash equivalents and the proceeds
generated from this Series E preferred stock financing, we will have sufficient
cash and cash equivalents to meet our working capital and capital expenditure
requirements for at least the next 12 months. We may, however, need to raise
additional funds, and 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We are exposed to market risk from changes in interest rates on borrowings
under our revolving line of credit and equipment line of credit that bear
interest at a variable rate based on a prime rate. As of March 31, 1999, no
borrowings were outstanding under our revolving line of credit and $944,000 was
outstanding under the equipment line of credit.
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<PAGE> 27
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.
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 the current 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 information of 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 third-party consultants 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.
The results of these readiness assessment initiatives indicate that the
majority of our internal information systems are currently year 2000 compliant
and that all of our significant vendors' information systems are also year 2000
compliant. For those internal information systems identified as not year 2000
compliant, we have obtained or 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. These costs include fees paid to an external
consulting firm assisting us with our year 2000 readiness assessment initiatives
and expenses associated with our salaried employees who have devoted some of
their time to our year 2000 assessment and remediation
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<PAGE> 28
efforts, and have not been material. We do not expect the total cost of year
2000 problems to be material to our business. However, during 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 to address the risks associated with unremediated year 2000 problems.
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 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 developed any contingency plans. The results of
our year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the
nature and extent of any contingency plans we adopt.
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<PAGE> 29
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, 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. 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,
results of operations or cash flows.
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<PAGE> 30
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 is a leading provider of customer-centric analytic solutions that
enable businesses to maximize customer value across Internet and traditional
business channels. Our Broadbase EPM software creates a comprehensive
understanding of the customer lifecycle by integrating and analyzing numerous
points of customer interaction, from Internet-based systems, front and back
office applications and demographic data sources. Using Broadbase EPM,
businesses can translate this analysis into specific actions, such as targeting
profitable customers, identifying cross-sell opportunities and personalizing
customer interactions. By integrating, analyzing and acting on valuable customer
information, our solutions enable businesses to build long lasting and
profitable customer relationships.
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 driving increasing
numbers of businesses 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 traditional business functions to
specifically leverage the Internet, defining a new category of enterprise called
the e-business. Forrester Research estimates that the number of large companies
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
$170 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 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-centric 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 retention. E-businesses need to analyze and act on
customer information gathered from all channels, including direct sales
organizations, storefronts, catalogs and websites. By using real-time and
historic customer intelligence to personalize business
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<PAGE> 31
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
solutions 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 enterprise solutions 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 and point tools such as data extraction tools to
access data, online analytical processing, or OLAP, tools to analyze and model
data, data mining technologies to identify patterns in data and report
generators to present the information. These approaches typically require
significant custom programming, take a long time to build and are very difficult
and costly to maintain. Because these patchwork systems are inflexible and
costly to maintain, they are poorly suited to the ever-changing business and
technology requirements of e-businesses.
Moreover, patchwork systems and point tools cannot provide e-businesses
with a comprehensive understanding of the customer's entire 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 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 data from e-commerce and Internet-based
systems, front office customer relationship management applications, back office
applications and external information sources. They also must provide business
users in different functional areas with packaged applications that analyze this
data using best practices, 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.
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OUR SOLUTION
Broadbase is a leading provider of customer-centric analytic solutions that
enable businesses to maximize customer value across Internet and traditional
business channels. Our Broadbase EPM, or E-Business Performance Management,
offering consists of two components -- the EPM/Foundation platform and the
Broadbase EPM suite of analytic applications. EPM/Foundation is a robust and
extensible platform that integrates and analyzes customer interactions and
operational data from multiple sources. The Broadbase EPM suite of packaged
applications is 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 enable businesses to
proactively 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
Broadbase EPM provides an open, adaptive and scalable architecture that
assimilates numerous interactions from all channels and touch points throughout
the entire customer lifecycle. EPM/Foundation transforms, cleanses and loads
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 deploying our solutions leverage analysis of the entire
customer lifecycle to more effectively 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, improve
conversion rates by personalizing web content and advertising, and enhance
customer retention by streamlining customer service bottlenecks. In doing so,
our solutions enable e-businesses to more effectively use both the Internet and
traditional business channels to build profitable, long-lasting customer
relationships.
IDENTIFY AND TARGET MOST PROFITABLE CUSTOMERS
Broadbase EPM 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, our solution allows companies to maintain and enhance
the value of their most profitable customers as well as to increase the
profitability of lower performing customer segments.
RESPOND RAPIDLY TO OPPORTUNITIES AND RISKS
Broadbase EPM allows business decision makers to respond rapidly and
effectively to new opportunities and risks by providing timely, actionable
intelligence, best practice metrics and suggested actions. These capabilities
help close the loop between a customer interaction and the business response.
Examples of closed-loop actions include utilizing prior customer behavior to
recommend cross-sell opportunities or personalize web content. In addition, our
solutions
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<PAGE> 33
incorporate business logic to monitor performance, identify exceptions and alert
users of key events such as ineffective promotions or service backlogs.
ACHIEVE FAST RETURN ON INVESTMENT THROUGH RAPID IMPLEMENTATION
Because Broadbase EPM can be deployed in less than 30 days, businesses can
quickly realize the increased revenue resulting from personalized customer
interactions. 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
Broadbase EPM requires fewer resources than the development and
implementation of alternatives such as in-house patchwork systems and consulting
services-based approaches. In addition, our easy-to-use applications are
specifically designed for business decision makers, minimizing training and
support costs. Finally, businesses can easily adapt and extend our open modular
solutions to meet their changing business and technical requirements with
minimal additional investment.
CASE STUDIES
MERCATA
Mercata is a web-based retailer that offers an online group buying system
through which groups of buyers exercise volume purchasing power and drive prices
lower. To be successful 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 Broadbase EPM to analyze the traffic and buying habits
of its users, leveraging the seamless integration between Broadbase and
BroadVision, which is Mercata's e-commerce system. By analyzing their users'
habits, Mercata can discover trends and patterns, such as how often 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.
With this information, Mercata can then close the loop to customize and
personalize its content to attract new users and retain current ones. In
addition, Broadbase will enable Mercata to understand and determine the growing
purchasing leverage of Mercata's e-consumer community. Mercata also plans to use
Broadbase EPM to integrate with and analyze data from Mercata's customer service
call center, its PeopleSoft enterprise resource planning system and its Kana
e-mail management system.
PLYMOUTH ROCK
The Plymouth Rock Company is a leading provider of property, casualty and
auto insurance in New England. Since the state of Massachusetts sets automobile
insurance rates and mandates insurers cannot deny 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 reduce insurance claim expenses. By
generating an enterprise-wide, customer-centric view of Plymouth's lines of
business, and by analyzing factors that contribute to reduced claims expenses,
Plymouth can target low risk customers. In addition, Plymouth is incorporating
low risk sales as a compensation criterion for its agents, and will automate
this process by closing the loop between Broadbase EPM and its payroll
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<PAGE> 34
applications. Broadbase EPM currently serves more than 100 internal business
users and over 150 external insurance agents.
OUR STRATEGY
Our objective is to be the leading provider of customer-centric 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 architecture enables rapid development of new products and
enhancements. 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 also work closely with our application, technology and system
integration partners 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 PARTNERSHIPS
We believe a strong network of business partners will broaden our product
adoption, market presence and ability to deliver complete solutions to our
customers. We enhance the value of our application vendor partners' 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 our partners. 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 for ensuring
customer success and driving increased sales. Our professional services group
assists businesses in developing innovative ways to implement our solution,
leading to increased product adoption. 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 solution. 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.
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BROADBASE PRODUCTS AND SERVICES
OVERVIEW OF BROADBASE EPM
Broadbase EPM is an integrated e-business solution that consists of two
components, the EPM/Foundation platform and the Broadbase EPM suite of analytic
applications.
The primary characteristics of Broadbase EPM are:
Data integration across multiple systems. Broadbase EPM works with and
connects to leading e-commerce systems provided by vendors such as Allaire,
BroadVision, InterWorld, Microsoft, Open Market and Vignette. In addition, our
solution works with and connects to leading customer interaction systems such as
those offered by Clarify, Siebel and Vantive; back office systems such as those
offered by Baan, Oracle, PeopleSoft and SAP; custom and legacy applications;
external data providers such as Acxiom and Dun & Bradstreet; and leading
enterprise data warehouses. Our solutions enable businesses to integrate and
analyze data from multiple customer touch points.
Application-specific data models. Each Broadbase EPM application features
its own specific and pre-built data model that captures the key business metrics
required for robust analysis. Our data models enable dynamic and interactive
analysis along several parameters, such as time, sales channel or user location
in the website. Our data models are also easily customized to support an
e-business' unique application requirements.
Application-specific logic. Broadbase EPM features packaged analysis,
business views, metrics and reports specific to each application. In addition,
each application offers guided decisionmaking for specific business processes,
which enables users to identify key risks and opportunities and consider
suggested actions. Applications can be readily customized by e-businesses to
best address their specific needs.
User-friendly browser-based interface. Our easy-to-use browser-based
interface enables business users to take full advantage of Broadbase EPM from
any computer, in any location and with minimal training. Our intuitive interface
guides all business users through the e-business analysis process, while
providing sophisticated users with more robust functionality.
[INSERT GRAPHICS HERE]
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BROADBASE EPM APPLICATIONS
Each Broadbase EPM application is designed specifically for critical
e-business functions. The Broadbase EPM applications are:
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BROADBASE EPM
APPLICATION DESCRIPTION
<S> <C> <C>
-------------------------------------------------------------------------------------------------
EPM/Customer Service - Analyzes service costs and case queues
- Measures workforce readiness and service level management
- Prioritizes support cases and optimizes resource
allocation
-------------------------------
EPM/Sales - Measures profitability and bookings, billings and backlog
- Analyzes sales leads, pipeline, forecasting accuracy and
competitive wins/losses
- Evaluates sales representative and channel productivity
-------------------------------
EPM/E-Marketing - Recommends cross-sell and up-sell opportunities
- Analyzes return on investment of campaigns and promotions
- Profiles customers and generates lists for campaign
management
-------------------------------
EPM/E-Commerce - Analyzes customer purchasing behavior and online shopping
processes
- Quantifies e-commerce performance, including shop-to-buy
conversion rates, channel profitability and order
fulfillment
- Measures commerce website metrics and key session activity
-------------------------------
EPM/E-Content - Analyzes the performance of website content and online
advertising
- Evaluates content location and identifies impact of
content changes
- Measures content website metrics and key session activity
-------------------------------
EPM/E-Personalization - 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)
-------------------------------
EPM/E-Knowledge - Analyzes the usage of intranet and extranet-based
corporate information and documents (not yet released)
-------------------------------
</TABLE>
EPM/Customer Service, EPM/Sales and EPM/E-Marketing were first released in
July 1998, and the most recent versions of each were released in May 1999.
EPM/E-Commerce, EPM/E-Content and EPM/E-Personalization were first released in
May 1999. EPM/E-Knowledge and a new version of EPM/E-Personalization are
anticipated to be released in the second half 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 --
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<PAGE> 37
We may be unable to attract new customers if we do not develop new products and
enhancements."
EPM/FOUNDATION
Broadbase EPM applications are delivered on top of EPM/Foundation, a
comprehensive analytic application platform. EPM/Foundation has the following
features:
Adapters for internal and external enterprise systems. EPM/Foundation
features adaptive and robust data extraction, transformation and load, or ETL,
capabilities that extract and transform data from key data sources and load that
data into Broadbase EPM. The ETL 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 BroadVision, InterWorld,
Kana, Microsoft, Open Market and Vignette;
- customer interaction systems such as those developed by Aurum, Baan,
Clarify, Onyx, Oracle, Pivotal, Rubric, Saratoga, Scopus, Siebel and
Vantive;
- enterprise resource planning applications 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 enterprise data warehouses such as those offered by IBM,
Informix/Red Brick, NCR, Oracle and Sybase.
The ETL 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 relational
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 OLAP, 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 analytic
applications.
Information delivery. EPM/Foundation supports a completely Internet-based,
publish-and-subscribe information delivery model with unified log-in and
role-based security. In addition, alerts and triggers can be set to
automatically deliver information only when and where needed.
Integrated graphical application management. EPM/Foundation features an
integrated graphical metadata-driven management environment for end-to-end
system administration and management of both EPM/Foundation and the Broadbase
EPM applications.
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SERVICE OFFERINGS
Our professional services group helps businesses define, design and rapidly
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 domain 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.
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
As of May 31, 1999, over 80 customers licensed our solutions, including:
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL SERVICES MANUFACTURING TECHNOLOGY
ADP Baxter Healthcare Brio Technology
BankBoston Eastman Kodak DG Systems
CommerzBank Merle Norman Cosmetics Hewlett-Packard
Fidelity Investments Nike Inprise
Nat'l. Insurance Crime Bureau Norgren Kana
Plymouth Rock Oakley Thomson Technology
PMA Group Rockwell Automation TPC
Putnam Investments Serfilco Vantive
INTERNET AND RETAIL ENERGY INDUSTRIES
COMMUNICATION SERVICES Bradco Supply Chevron
GetSmart.com Catalog Marketing Svcs. Idaho Power & Light
InsWeb Golden Books Los Alamos Nat'l. Lab
Mercata The Sharper Image Omaha Public Power
NECX Travers Tools
NTT United Natural Foods OTHER
Pointcast DSC Logistics
WebTV/Microsoft Harvard Pilgrim Healthcare
United Airlines
</TABLE>
Hewlett-Packard represented 10% of our net revenue in 1998 and 14% in the
first quarter of 1999.
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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 and Technology Solutions
Company. 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 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 all customer touch points,
and to target the installed customer base of these applications, we have formed
relationships with leading enterprise applications vendors. Our strategic
partnerships include Baan, 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 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 and fully support the
Microsoft Data Warehouse Framework, 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 a joint marketing agreement with Acxiom and are
integrating our products with Acxiom's products to enable our customers to
access and analyze Acxiom's demographic data.
SALES AND MARKETING
We sell our software through both our direct sales force and indirect sales
channels. As of May 31, 1999, our sales group consisted of 36 professionals, in
ten locations in the United States and in our offices in Germany, Japan, the
Netherlands and the United Kingdom. Sales consultants work closely with our
sales representatives to provide pre-sales technical support. We plan to
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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.
Our indirect sales channel partners include 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 11.5% of our revenue in the first quarter 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.
We focus our marketing efforts on sales lead generation, sales support,
creating market awareness of our solutions and establishing strategic
partnerships. 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
partners' sales and marketing programs.
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 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 $1.2 million in the three months ended March 31, 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 Epiphany; 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 and other vendors of customer relationship management, enterprise
resource planning and database applications.
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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."
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. 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 -- Our proprietary technology may be subjected to infringement claims or
may be infringed upon by others."
We license technology from Brio to perform certain reporting and
information delivery functions of Broadbase EPM. Our license agreement with Brio
expires in June 2000. We license technology from Rule Quest Research Pty. Ltd.
to provide some of the data mining functionality of our products. This license
agreement expires in November 1999. This third-party software may not continue
to be available on commercially reasonable terms, or continue to meet the
requirements of existing and potential customers. 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 May 31, 1999, we had 94 full-time employees, including 39 in sales
and marketing, 31 in research and development, 14 in administrative, six in
professional services and four 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.
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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.
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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
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 served as Director of North American Sales
Operations and 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 a co-founder and President of
Kelly Information Systems, a software company. Mr. Kelly holds a B.S. degree in
computer science from the University of Cincinnati.
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.,
41
<PAGE> 44
an entertainment and gaming technology company, and a director of 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 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. 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
recommendations to our board 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
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 or compensation committee.
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<PAGE> 45
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 the board 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 the board 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, but will generally terminate seven months
following the date the option-holder ceases to be a director or a consultant.
Each of these options will be immediately exercisable and fully vested.
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 a bonus 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.
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. Options were granted at an
43
<PAGE> 46
exercise price equal to the fair market value of our common stock, as determined
by our Board 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>
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.
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 $0 -- -- -- --
-- -- 86,000 -- $ 0 --
Bruce Armstrong....... 202,500 202,500 38,092 $35,045
</TABLE>
44
<PAGE> 47
EMPLOYEE BENEFIT PLANS
1996 EQUITY INCENTIVE PLAN
We adopted our 1996 Equity Incentive Plan in April 1996. As of May 31,
1999, there were outstanding options to purchase a total of 2,028,704 shares of
common stock under this plan, and 201,635 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 automatically as of the first day of
each January by an amount equal to 5% of our outstanding shares. 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 otherwise 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. No person will be eligible to receive more than
2,000,000 shares in any calendar year pursuant to awards under our 1999 Equity
Incentive Plan. 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." 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.
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<PAGE> 48
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 50% 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 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
compensation committee may allow exceptions to this restriction with respect to
awards that are not incentive stock options. Options granted under our 1999
Equity Incentive Plan generally expire three months after the termination of the
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 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 15% 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. A participant will not be able to purchase more than 750 shares
in any offering period.
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 May 1 and
November 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
46
<PAGE> 49
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.
EMPLOYMENT AGREEMENTS
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 of $225,000 and his targeted commission of $100,000 and describes his
eligibility for benefits. Under this offer letter, Mr. Doyle was granted an
option 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.
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 of $150,000 and describes his eligibility for
benefits. 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
the event of a change of control and Mr. Kelly's involuntary termination, 50% of
his unvested shares will immediately vest.
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 of $150,000 and describes his eligibility for benefits. 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 repurchase the
shares issued upon exercising 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.
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;
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<PAGE> 50
- 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 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> 51
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.
COMMON STOCK TRANSACTIONS
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 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 2,189,681
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
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 associated with Benchmark
Capital............................. 2,249,999 559,070 526,173 109,500
Entities associated with Mohr, Davidow
Ventures............................ -- 1,304,510 286,101 --
Entities associated with Accel
Partners............................ -- -- 902,527 27,375
Entities associated 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 general partner of Mohr, Davidow Ventures.
DEBENTURES
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
49
<PAGE> 52
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.
LOANS TO EXECUTIVE OFFICERS
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 March 31, 1999, the total amount
outstanding was $420,329.
Chuck Bay. In February 1998 and March 1999, Chuck Bay, our Chief Financial
Officer, executed promissory notes in the principal amounts of $43,000 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 a rate
of 8.5% and 7.5%, respectively, and are payable on or before March 19, 2000. As
of March 31, 1999, the total amount outstanding was $110,248.
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 March 31, 1999,
the total amount outstanding was $98,793.
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<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table presents information as to the beneficial ownership of
our common stock as of May 31, 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)....................................... 3,335,242 31.3%
c/o Benchmark Capital
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Nancy Schoendorf(2)................................... 1,590,611 14.9%
c/o Mohr, Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Mark Kremer(3)........................................ 1,282,500 12.0%
Chuck Bay(4).......................................... 259,000 2.4%
Bruce Armstrong(5).................................... 253,125 2.4%
Paul Levy(6).......................................... 96,750 *
OTHER 5% STOCKHOLDERS:
Entities affiliated with Benchmark Capital(1)......... 3,335,242 31.3%
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Entities affiliated with Mohr, Davidow Ventures(2).... 1,590,611 14.9%
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Entities affiliated with Charter Growth Capital(7).... 1,103,448 10.4%
525 University Avenue, Suite 1500
Palo Alto, CA 94301
Entities affiliated with Accel Partners(8)............ 902,527 8.5%
428 University Avenue
Palo Alto, CA 94301
All 7 current directors and executive officers as a
group(9)............................................ 6,894,428 64.7%
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Represents 2,967,819 and 367,423 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.
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<PAGE> 54
(3) Includes 144,276 shares subject to a repurchase right which lapses at a rate
of 24,046 shares per month until December 31, 1999. Mr. Kremer is our
President and Chief Executive Officer.
(4) Includes 115,333 shares subject to a repurchase right which lapses at a rate
of 3,604 shares per month until January 2002, and 77,041 shares subject to a
repurchase right which 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 former 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 which 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 May 31, 1999. Does not include up to
shares that may be purchased at the initial public offering price
upon exercise of contractual rights to purchase shares in this offering.
(8) Includes 708,484, 93,863, 43,321, 37,003 and 19,856 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 250,000 shares which are subject to a repurchase right which lapses
as to 31,256 shares in June 1999, as to an additional 6.25% per month
thereafter until December 2000 and as to an additional 2.083% per month
thereafter until December 2002, and includes 240,000 shares which 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 10,646,731 shares outstanding
as of May 31, 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 May 31,
1999, and shares of preferred stock subject to debentures that are currently
convertible or convertible within 60 days of May 31, 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> 55
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of Broadbase will consist of 60,000,000 shares of common stock, $0.001 par
value per share, and shares of preferred stock, $0.001 par value per
share. As of May 31, 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 10,646,731 shares of common stock held of
record by approximately 97 stockholders, and options to purchase 2,028,704
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 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
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,
to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
Board can also increase or decrease the number of shares of any series, but not
below the number of shares of such series then outstanding, without any further
vote or action by the stockholders.
The Board 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 common stock. We have no current plan to issue any shares of
preferred stock after the offering.
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<PAGE> 56
WARRANTS
As of May 31,1999, 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 8,641,458 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 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 amount of securities to be sold in that registration
exceeds $7,500,000. 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 so included in a 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
offering is completed. 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
The provisions of Delaware law, our certificate of incorporation and bylaws
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 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
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<PAGE> 57
of such stockholder, for three years following the date that stockholder became
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 of 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,
however, have the effect of discouraging others from making tender offers for
our shares and, consequently, may 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. See
"Risk Factors -- We have anti-takeover defenses that could delay or prevent an
acquisition of our company and diminish the voting rights of the holders of our
common stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
The address of our transfer agent and registrar is , and its
telephone number at this location is .
LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "BBSW."
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<PAGE> 58
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 shares of
common stock based on shares outstanding at , 1999, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants. Of this amount, shares, including the
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. The remaining shares held by
existing stockholders are subject to various resale restrictions. Of these
shares, shares are subject to lock-up agreements with the underwriters,
under which all of our directors and officers and most of our 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. may release the shares subject to the
lock-up agreements in whole or in part at any time with or without notice. An
additional shares are subject to a 180-day lock-up through agreements
directly with us that we have agreed to enforce if requested by the
underwriters. After expiration or release of the lock-up agreements, of
the shares held by our existing stockholders will be eligible for sale in the
public market under Rule 144 or Rule 701, although of these shares will
be subject to volume limitations. The remaining shares held by our
existing stockholders will become eligible for public sale, subject to volume
limitations, on , 2000.
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 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> 59
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
Upon completion of this offering, the holders of 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 and
upon expiration of the 180-day lock-up period, 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 March 31, 1999 this registration statement would
cover approximately 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 May 31, 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> 60
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*TRADE Securities, Inc., 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*TRADE Securities, Inc.....................................
Total.............................................
</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
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 shares are
being offered.
We have agreed 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 FULL EXERCISE OF
FEE PER OF OVER-ALLOTMENT 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 $ .
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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 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.
E*TRADE Securities, Inc. is making a prospectus in electronic format
available on its Internet website. Other than the prospectus in electronic
format, the information on this or any other website maintained by E*TRADE is
not part of this prospectus or the registration statement of which this
prospectus forms a part, has not been approved and/or endorsed by us or any
underwriter in such capacity and should not be relied on by prospective
investors.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to (1) shares for our officers, directors,
employees, family members of employees and other third parties and (2) up to
additional shares for certain current stockholders under their pre-existing
contractual rights to purchase shares in this offering. 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 41 filed
public offerings of equity securities, of which 22 have been completed, and has
acted as a syndicate member in an additional 18 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
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<PAGE> 62
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.
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 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.
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 schedules to
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<PAGE> 63
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
schedules 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 schedules, 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> 64
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 March 31, 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 Three Months Ended March 31, 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 Three Months Ended March 31, 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 Three Months Ended March 31, 1999 (unaudited)......... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 65
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> 66
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA AT
DECEMBER 31, MARCH 31, MARCH 31,
------------------ ----------- ------------
1997 1998 1999 1999
------- -------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,153 $ 13,990 $ 10,855 $ 10,855
Accounts receivable, net of allowances of $0, $50,000, and
$50,000 at December 31, 1997 and 1998 and March 31,
1999, respectively...................................... -- 1,072 1,416 1,416
Prepaid expenses and other current assets................. 180 326 556 556
------- -------- -------- --------
Total current assets................................ 1,333 15,388 12,827 12,827
Property and equipment, net................................. 702 1,610 1,614 1,614
Other assets................................................ 78 175 116 116
------- -------- -------- --------
Total assets........................................ $ 2,113 $ 17,173 $ 14,557 $ 14,557
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 486 $ 395 $ 409 $ 409
Accrued compensation...................................... 173 922 1,207 1,207
Accrued expenses.......................................... 242 1,142 1,606 1,606
Current portion of capital lease obligations.............. 24 30 31 31
Current portion of bank line of credit and notes
payable................................................. 347 768 765 765
Deferred revenue.......................................... -- 3,330 3,770 3,770
------- -------- -------- --------
Total current liabilities........................... 1,272 6,587 7,788 7,788
Capital lease obligations................................... 38 -- 15 15
Bank line of credit and notes payable....................... 878 1,110 912 912
Convertible debentures...................................... -- 8,250 8,250 --
------- -------- -------- --------
Total liabilities................................... 2,188 15,947 16,965 8,715
Commitments
Shareholders' equity (net capital deficiency):
Convertible preferred stock: no par value; 7,964,065
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 March 31, 1999, and none pro forma; aggregate
liquidation preference at December 31, 1998 and March
31, 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 March 31, 1999, and none pro forma; aggregate
liquidation preference at December 31, 1998 and March
31, 1999 of $5,160.................................... 5,110 5,110 5,110 --
Series C: 2,166,065 shares designated, 2,166,055 shares
issued and outstanding at December 31, 1998 and March
31, 1999, and none pro forma; aggregate liquidation
preference at December 31, 1998 and March 31, 1999 of
$12,000............................................... -- 11,906 11,906 --
Series D: 1,400,000 shares designated, none issued and
outstanding at December 31, 1998 and March 31, 1999,
and none pro forma.................................... -- -- -- --
Common stock: no par value; 30,000,000 shares authorized;
2,491,975, 2,704,800 and 2,749,027 shares issued and
outstanding at December 31, 1997 and 1998 and March 31,
1999, respectively, and 10,361,235 shares issued and
outstanding pro forma................................... 49 3,604 8,358 35,183
Deferred stock compensation............................... -- (2,338) (5,999) (5,999)
Notes receivable from shareholders........................ (34) (476) (637) (637)
Accumulated other comprehensive loss...................... -- (37) (28) (28)
Accumulated deficit....................................... (6,759) (18,102) (22,677) (22,677)
------- -------- -------- --------
Total shareholders' equity (net capital
deficiency)....................................... (75) 1,226 (2,408) 5,842
------- -------- -------- --------
Total liabilities and shareholders' equity (net
capital deficiency)............................... $ 2,113 $ 17,173 $ 14,557 $ 14,557
======= ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 67
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED THREE MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED MARCH 31,
(INCEPTION) TO ------------------- ------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------ ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue:
License..................................... $ -- $ -- $ 2,996 $ 482 $ 1,126
Maintenance and professional services....... -- -- 443 -- 360
------- ------- -------- ------- -------
Total net revenue..................... -- -- 3,439 482 1,486
Cost of revenue:
License..................................... -- -- 713 210 260
Maintenance and professional services....... -- -- 254 -- 391
------- ------- -------- ------- -------
Total cost of revenue................. -- -- 967 210 651
------- ------- -------- ------- -------
Gross margin.................................. -- -- 2,472 272 835
Operating expenses:
Sales and marketing......................... 130 2,851 7,888 1,595 2,656
Research and development.................... 928 1,980 3,738 742 1,188
General and administrative.................. 215 744 1,165 219 494
Amortization of deferred stock
compensation.............................. -- -- 1,133 62 925
------- ------- -------- ------- -------
Total operating expenses.............. 1,273 5,575 13,924 2,618 5,263
------- ------- -------- ------- -------
Loss from operations.......................... (1,273) (5,575) (11,452) (2,346) (4,428)
Interest income............................... 30 154 335 53 113
Interest expense.............................. (29) (66) (226) (60) (260)
------- ------- -------- ------- -------
Net loss...................................... $(1,272) $(5,487) $(11,343) $(2,353) $(4,575)
======= ======= ======== ======= =======
Basic and diluted net loss per share.......... $ (4.30) $ (6.19) $ (8.85) $ (2.27) $ (2.69)
======= ======= ======== ======= =======
Weighted-average shares used in computing
basic and diluted net loss per share........ 296 887 1,281 1,038 1,703
======= ======= ======== ======= =======
Pro forma basic and diluted net loss per
share....................................... $ (1.51) $ (0.49)
======== =======
Weighted-average shares used in computing pro
forma basic and diluted net loss per
share....................................... 7,535 9,315
======== =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 68
BROADBASE INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED THREE MONTHS
NOVEMBER 28, 1995 DECEMBER 31, ENDED MARCH 31,
(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) $(2,353) $(4,575)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization....................... 37 149 507 73 201
Amortization of deferred stock compensation......... -- -- 1,133 62 925
Changes in balance sheet items:
Accounts receivable................................. -- -- (1,072) (291) (344)
Prepaid expenses and other current assets........... (46) (212) (243) (149) (171)
Accounts payable.................................... 30 456 (91) 78 14
Accrued expenses.................................... 88 327 1,649 246 749
Deferred revenue.................................... -- -- 3,330 514 440
------- ------- -------- ------- -------
Net cash used in operating activities............. (1,163) (4,767) (6,130) (1,820) (2,761)
------- ------- -------- ------- -------
Investing activities:
Purchases of property and equipment..................... (148) (661) (1,415) (273) (205)
------- ------- -------- ------- -------
Net cash used in investing activities............. (148) (661) (1,415) (273) (205)
------- ------- -------- ------- -------
Financing activities:
Net proceeds from issuance of convertible preferred
stock................................................. 6,521 133 11,906 11,004 --
Proceeds from issuance of common stock.................. 2 10 41 1 15
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) (102) (169)
Principal payments on capital lease obligations......... -- -- (32) (14) (16)
Borrowings on equipment line of credit.................. -- -- 1,000 -- --
Proceeds from issuance of convertible debt.............. -- -- 8,250 -- --
------- ------- -------- ------- -------
Net cash provided by (used in) financing
activities...................................... 6,823 1,069 20,419 10,889 (178)
------- ------- -------- ------- -------
Effect of foreign exchange rate changes on cash and cash
equivalents........................................... -- -- (37) -- 9
Net increase (decrease) in cash and cash equivalents.... 5,512 (4,359) 12,837 8,796 (3,135)
Cash and cash equivalents:
Beginning of period..................................... -- 5,512 1,153 1,153 13,990
------- ------- -------- ------- -------
End of period........................................... $ 5,512 $ 1,153 $ 13,990 $ 9,949 $10,855
======= ======= ======== ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest.................................. $ 13 $ 82 $ 227 $ 44 $ 98
Supplemental schedule of noncash investing and financing
activities:
Issuance of convertible preferred stock
for services.......................................... $ 15 $ -- $ -- $ -- $ --
Purchase of equipment under capital leases.............. $ -- $ 64 $ -- $ -- $ 18
</TABLE>
See accompanying notes.
F-5
<PAGE> 69
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 $0.66 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............... -- -- 6,500 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 2,491,975 $ 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............... -- -- 292,239 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 2,704,800 $3,604 $(2,338) $(476)
Deferred stock compensation related
to certain options granted to
employees (unaudited)............. -- -- -- 4,586 (4,586) -- --
Amortization of deferred stock
compensation (unaudited).......... -- -- -- -- 925 -- --
Issuance of common stock upon
exercise of options (unaudited)... -- -- 58,394 176 -- (161) --
Repurchase of common stock
(unaudited)....................... -- -- (14,167) (8) -- --
Comprehensive income (loss):....... -- -- -- -- -- --
Net loss (unaudited).............. -- -- -- -- -- -- (4,575)
Foreign currency translation
adjustment (unaudited).......... -- -- -- -- -- -- 9
--------
Comprehensive loss (unaudited)..... -- -- -- -- -- -- $ (4,566)
--------- ------- --------- ------ ------- ----- ========
Balance at March 31, 1999
(unaudited)....................... 6,474,277 $18,575 2,749,027 $8,358 $(5,999) $(637)
========= ======= ========= ====== ======= =====
<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 $0.66 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
Deferred stock compensation related
to certain options granted to
employees (unaudited)............. -- -- --
Amortization of deferred stock
compensation (unaudited).......... -- -- 925
Issuance of common stock upon
exercise of options (unaudited)... -- -- 15
Repurchase of common stock
(unaudited)....................... -- -- (8)
Comprehensive income (loss):....... -- -- --
Net loss (unaudited).............. -- (4,575) (4,575)
Foreign currency translation
adjustment (unaudited).......... 9 -- 9
Comprehensive loss (unaudited)..... -- -- --
---- -------- --------
Balance at March 31, 1999
(unaudited)....................... $(28) $(22,677) $ (2,408)
==== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 70
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 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 is a leading provider of customer-centric analytic
software products that enable businesses to maximize customer value across
Internet and traditional business channels. 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 March 31, 1999 and for the three months
ended March 31, 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 three month period ended March 31, 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 services. Maintenance
F-7
<PAGE> 71
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
includes telephone technical support, bug fixes and rights to upgrades and
enhancements on a when-and-if available basis. 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 who 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 the software
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 and trade accounts receivable. The Company
maintains its cash and cash equivalents principally in domestic financial
institutions of high credit standing. The Company's 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 have accounted for a substantial portion of
the Company's revenues. The Company had no revenue for the year ended December
31, 1997. Two customers accounted for 18% and 10%, respectively, of total
revenue for the year ended December 31, 1998 and the same customers accounted
for 12% and 14%, respectively, of total revenue for the three months ended March
31, 1999. 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> 72
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 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 substantially equal to their carrying value at December 31,
1997 and 1998 and March 31, 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 three months ended March
31, 1999 were approximately $0, $57,000 and $0, 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.
F-9
<PAGE> 73
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
Resulting translation adjustments are reflected as a separate component of
shareholders' equity (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 March 31, 1999 will be
converted into an aggregate of 6,474,277 and 1,137,931 shares, respectively, of
common stock. Pro forma shareholders' equity at March 31, 1999, as adjusted for
conversion of the convertible preferred stock and
F-10
<PAGE> 74
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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 THREE MONTHS
NOVEMBER 28, 1995 YEARS ENDED ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
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) $(2,353) $(4,575)
======= ======= ======== ======= =======
Basic and diluted shares:
Weighted-average shares of common
stock outstanding................ 1,339 2,689 2,615 2,527 2,711
Less weighted-average shares
subject to repurchase............ (1,043) (1,802) (1,334) (1,489) (1,008)
------- ------- -------- ------- -------
Weighted-average shares of common
stock outstanding used in
computing basic and diluted net
loss per share................... 296 887 1,281 1,038 1,703
------- ------- -------- ------- -------
Basic and diluted net loss per
share............................ $ (4.30) $ (6.19) $ (8.85) $ (2.27) $ (2.69)
======= ======= ======== ======= =======
Pro forma:
Net loss........................... $(11,343) $(4,575)
======== =======
Weighted-average shares of common
stock outstanding used in
computing basic and diluted net
loss per share................... 1,281 1,703
Adjusted to reflect the assumed
conversion of convertible
preferred stock and convertible
debentures from the date of
issuance......................... 6,254 7,612
-------- -------
Weighted-average shares used in
computing pro forma basic and
diluted net loss per share....... 7,535 9,315
-------- -------
Pro forma basic and diluted net
loss per share................... $ (1.51) $ (0.49)
======== =======
</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 1,703,947 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 three
months ended March 31, 1999, respectively. The common equivalent shares from
options and warrants would be determined on a weighted-average basis using the
treasury stock method.
F-11
<PAGE> 75
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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 three months ended March
31, 1999 other comprehensive income totaled $9,000. 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 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 consists 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 includes amounts held under
capital leases of $60,941 and a related accumulated amortization of $30,584.
F-12
<PAGE> 76
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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 which are
incurred during the application development stage and amortize them over the
software's estimated useful life. The Company is required to adopt SOP 98-1
effective January 1, 1999. The Company does not currently expect the adoption of
SOP 98-1 to be material to its 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 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 will 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 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,
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Notes payable............................... $1,225 $ 878 $ 733
Bank line of credit......................... -- 1,000 944
------ ------ ------
1,225 1,878 1,677
Less current portion........................ (347) (768) (765)
------ ------ ------
Noncurrent portion.......................... $ 878 $1,110 $ 912
====== ====== ======
</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 $878,000 in principal amount of notes payable
outstanding at December 31, 1998, $436,000 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
a price of $1.67 and $2.68 per share, respectively. These warrants are
immediately exercisable and expire in
F-13
<PAGE> 77
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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. Any
borrowings under the line of credit bear interest at the institution's prime
lending rate, and any borrowings under the equipment line of credit bear
interest at the institution's prime lending rate plus 0.5% (14.09% 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, was outstanding 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 minimum tangible net
worth, and restricts the Company from paying cash dividends. The Company was in
compliance with these financial covenants at December 31, 1998 and March 31,
1999.
3. CONVERTIBLE DEBENTURES
In December 1998, the Company issued to investors an aggregate of
$8,250,000 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. 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, 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 $214,000 for the years ended December 31, 1997 and 1998,
and the three months ended March 31, 1999, respectively. Rental expense, net of
reimbursements from
F-14
<PAGE> 78
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
sublessees, was approximately $114,000, $73,000 and $126,000 in 1997 and 1998
and the three months ended March 31, 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 ended 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>
5. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock consists of the following at December 31, 1998:
<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 -- --
--------- --------- -----------
7,964,065 6,474,277 $18,750,000
========= ========= ===========
</TABLE>
Each share of Series A, B, C and D 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 with a minimum offering
price of $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 are 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 and $0.58 per
F-15
<PAGE> 79
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
share of Series A, B, C and D 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. The shares are
subject to certain transfer restrictions. These shares are 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 March 31, 1999, 553,078, 264,516 and
192,375 shares, respectively, remained subject to repurchase.
STOCK OPTION PLAN
During 1996, the Company adopted the 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 three months ended March 31, 1999: risk-free interest
F-16
<PAGE> 80
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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 ------------------ THREE MONTHS
DECEMBER 31, 1996 1997 1998 ENDED MARCH 31, 1999
------------------ ------- -------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Pro forma net loss.......... $(1,274) $(5,496) $(11,702) $(4,951)
Pro forma basic and diluted
net loss per share........ $ (4.30) $ (6.20) $ (9.14) $ (2.91)
</TABLE>
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
Granted (unaudited)..................... (747,650) 747,650 0.73
Exercised (unaudited)................... -- (279,394) 0.63
Canceled (unaudited).................... 43,198 (43,198) 0.47
Repurchased (unaudited)................. 14,167 -- 0.55
---------- ---------- -----
Balance at March 31, 1999 (unaudited)..... 672,790 1,667,183 $0.50
========== ========== =====
</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,
F-17
<PAGE> 81
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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.
In connection with the grant of certain options to employees during the
year ended December 31, 1998 and the three months ended March 31, 1999, the
Company recorded deferred stock compensation of approximately $3,471,000 and
$4,586,000, 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
$925,000 during 1998 and the three months ended March 31, 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 March 31, 1999, the Company has reserved common
shares for issuance as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
<S> <C> <C>
Stock options:
Outstanding........................................... 1,242,125 1,667,183
Available for grant................................... 1,363,075 672,790
Upon conversion of:
Preferred stock warrants outstanding.................. 36,764 36,764
Preferred stock outstanding........................... 6,474,277 6,474,277
Convertible debentures outstanding.................... 1,137,931 1,137,931
---------- ---------
10,254,172 9,988,945
========== =========
</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.
F-18
<PAGE> 82
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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>
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.
F-19
<PAGE> 83
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
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)
ISSUANCE OF CONVERTIBLE DEBENTURES
In April 1999, the Company issued to investors an aggregate of $1,275,000
principal amount of convertible debentures on the same terms as the $8,250,000
convertible debentures issued in December 1998. See Note 3.
DEFERRED COMPENSATION
In April and May 1999, the Company granted options to employees to purchase
approximately 701,000 shares of common stock at an exercise price of $0.73 per
share. The Company estimates that it will record additional deferred
compensation of approximately $4,900,000 with regard to these grants.
AUTHORIZATION OF SHARES UNDER 1996 STOCK OPTION PLAN
On June 28, 1999, the Board of Directors authorized, subject to shareholder
approval, an additional 500,000 shares of common stock for issuance pursuant to
exercises of stock options under the Company's 1996 Equity Incentive Plan.
ADDITIONAL EQUITY FINANCING
On June 30, 1999, the Company issued 2,189,681 shares of Series E
convertible preferred stock to substantially new investors in exchange for net
proceeds of approximately $19,989,000. Each share of Series 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 with a minimum offering price of $11.08 per share.
Each holder of Series E preferred stock is entitled to the number of votes
equal to the number of shares of common stock into which such preferred stock
are convertible, and is entitled to receive, when and as decided by the Board of
Directors, noncumulative dividends at the annual rate of $0.73 per share,
payable in preference and priority to any payment of any dividend on common
stock.
INITIAL PUBLIC OFFERING
In June 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission that would
permit the Company to sell shares of the
F-20
<PAGE> 84
BROADBASE INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
Company's 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 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 January
1, 2000, annual increases equal to 5% of the outstanding shares on such date.
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 (50% 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 15% of their cash compensation, subject to certain maximum
purchase limitations. No more than 750 shares may be purchased by each employee
in any offering period. 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.
F-21
<PAGE> 85
DESCRIPTION OF GRAPHICS
[Description of graphics on Inside Cover Page]
This graphic is entitled "Maximizing Customer Value with Customer-centric
Analytic Solutions." In the center of the page, two three-dimensional
rectangles are stacked on top of each other. There is a small gap between the
rectangles. The top rectangle contains the BroadBase logo. The left side of the
bottom rectangle is labeled "EPM/Foundation." To the left of the rectangles is
a graphic of a human running with an exclamation point over its head, entitled
"Customer Touch Points." Surrounding this person in the form of a circle are a
series of graphics depicting the following labels: "Direct sales," "Store
fronts," "Direct mail," "Call centers," "Online service," "Email" and
"Websites." Directly to the right of the rectangles is a circular graphic
labeled, from top-to-bottom, "Internet," "Intranets" and "Extranets." To the
right of this graphic is the image of a woman running with a briefcase in her
hand, entitled "Business User Actions." Forming a semi-circle outside the image
of the woman is a series of graphics depicting the following labels:
"E-commerce and online content," "Sales," "Marketing" and "Customer Service."
Below the rectangles is a column entitled "Act...," followed by three bullet
points. The first point reads, "...To close the loop between complete customer
knowledge and maximum customer value." The second point reads, "...By targeting
profitable customers, differentiating offerings and personalizing customer
interactions." The third point reads, "...To build long lasting and profitable
customer relationships." Above the rectangles are two columns of text. The left
column is entitled "Integrate...," followed by three bullet points. The first
point reads, "...Comprehensive customer information, from multiple channels and
customer touch points." The second bullet reads, "...Front and back office
applications, Internet based systems and demographic databases." The third
point reads, "...Historic and real time data." The right column is entitled
"Analyze..." followed by three bullet points. The first point reads, "...For
the needs of functional departments and business users." The second point
reads, "...To deliver customer knowledge that can be rapidly acted upon." A
counter-clockwise arrow moves from the two columns to the "Business User
Actions" graphic. At that point, a second, counter-clockwise arrow moves
through the "Act" column to the "Customer Touch Points" graphic. From that
graphic, an arrow moves through the top rectangle to reach the circular
graphic. From there, an arrow moves through the bottom rectangle to reach the
"Customer Touch Points" graphic.
[Description of Graphics on Page 33]
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 Management." The vertical axis is labeled "Adapters & ETL
Layer." The top edges of the six segments are labeled "E-Commerce," "E-Content,"
"E-Marketing," "E-Personalization," "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 U1." The remainder of the front segment is
divided into four sections. The upper left section is labeled "Analytic Data
Models," the upper right section is labeled "Business Logic," the lower left
section is labeled "Data Store," with the words "SQL Server, Oracle" in
parenthesis, centered below the phrase "Data Store." The lower right section is
labeled "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 Views and Metrics," and the
right section is labeled, "Business Processes and Workflow." 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: "HOLAP," "Data Mining," "Ad
Hoc" and "Statistical." The middle column is horizontally divided into two
portions. The top portion is labeled, "Workflow Engine" and the bottom portion
is labeled, "Application Components Library." The right column is labeled, "Web
Server." Above this box is the heading "EPM/Foundation." Above the six segments
is the heading "Broadbase EPM Application Modules."
<PAGE> 86
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................................ 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial
Data................................ 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 28
Management............................ 41
Certain Transactions.................. 49
Principal Stockholders................ 51
Description of Capital Stock.......... 53
Shares Eligible for Future Sale....... 56
Underwriting.......................... 58
Legal Matters......................... 60
Experts............................... 60
Where You Can Find Additional
Information......................... 60
Index to 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
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
THOMAS WEISEL PARTNERS LLC
E*TRADE SECURITIES, INC.
PROSPECTUS
, 1999
<PAGE> 87
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............................................. 5,500
Nasdaq National Market filing fee........................... 17,500
Accounting fees and expenses................................
Legal fees and expenses.....................................
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...............................................
--------
Total............................................. $
========
</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> 88
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 officers
may be sufficiently broad to permit indemnification of the Registrant's
directors and officers for liabilities arising under the Securities Act.
The Registrant expects to obtain directors' and officers' liability
insurance which 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>
II-2
<PAGE> 89
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
Lighthouse Capital 12/16/96 Warrant to purchase N/A -- --(1)
Partners II, 12,537.30 shares of
L.P................ 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
Lighthouse Capital 9/11/97 Warrant to purchase N/A -- --
Partners II, 24,227 shares of
L.P................ 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
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 1,137,931 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 175,862 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
</TABLE>
II-3
<PAGE> 90
<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>
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......... 6/30/98 Series E preferred stock 2,188,812 19,989,325.13 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 consummation of this offering.
All sales of common stock made pursuant to the exercise of stock options
were made in reliance on Rule 701 under the Securities Act or on Section 4(2) of
the Securities Act.
All other sales were made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act. These sales were made
without general solicitation or advertising. Each purchaser was a sophisticated
investor with access to all relevant information necessary to evaluate the
investment and represented to the Registrant that the shares were being acquired
for investment.
- -------------------------
(1) The warrant expires on 11/30/03 and has an exercise price of $1.675 per
share.
(2) The warrant expires on 07/31/04 and has an exercise price of $2.683 per
share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<C> <S>
1.01 Form of Underwriting Agreement.*
3.01 Registrant's Certificate of Incorporation.
3.02 Registrant's Bylaws.
4.01 Form of Specimen Certificate for Registrant's common stock.*
4.02 Amended and Restated Investors' 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.
10.03 1999 Equity Incentive Plan.
10.04 1999 Employee Stock Purchase Plan.
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.
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. See page II-6
27.01 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
II-4
<PAGE> 91
(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.
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-5
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this 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 2nd day of July, 1999.
BROADBASE SOFTWARE, INC.
By: /s/ MARK KREMER
-----------------------------------------------
Mark Kremer
Chairman of the Board, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Mark Kremer and Chuck Bay, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by the Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done or by
virtue hereof.
Pursuant to the requirements of the Securities Act, this 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:
/s/ MARK KREMER Chairman of the Board, President July 2, 1999
- ------------------------------------------------ and Chief Executive Officer
Mark Kremer
PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ CHUCK BAY Chief Financial Officer, General July 2, 1999
- ------------------------------------------------ Counsel, Executive Vice
Chuck Bay President Business Development
and Corporate Secretary
</TABLE>
II-6
<PAGE> 93
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
ADDITIONAL DIRECTORS:
/s/ KEVIN HARVEY Director July 2, 1999
- ------------------------------------------------
Kevin Harvey
/s/ PAUL LEVY Director July 2, 1999
- ------------------------------------------------
Paul Levy
/s/ NANCY SCHOENDORF Director July 2, 1999
- ------------------------------------------------
Nancy Schoendorf
</TABLE>
II-7
<PAGE> 94
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> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<C> <S>
1.01 Form of Underwriting Agreement.*
3.01 Registrant's Certificate of Incorporation.
3.02 Registrant's Bylaws.
4.01 Form of Specimen Certificate for Registrant's common stock.*
4.02 Amended and Restated Investors' 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.
10.03 1999 Equity Incentive Plan.
10.04 1999 Employee Stock Purchase Plan.
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.
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. See page II-6
27.01 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE> 1
Exhibit 3.01
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/28/1999
991262101 - 3062317
BROADBASE SOFTWARE, INC.
CERTIFICATE OF INCORPORATION
ARTICLE I
The name of the corporation is Broadbase Software, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 E. North Street, City of Dover 19901, County of Kent. The name of
its registered agent at that address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. Authorization of Shares. The total number of shares of all classes of
stock which the corporation has authority to issue is seventy million one
hundred fifty-four thousand and forty-six (70,154,046) shares, consisting of two
classes: sixty million (60,000,000) shares of Common Stock, $0.001 par value per
share, and ten million one hundred fifty-four thousand and forty-six
(10,154,046) shares of Preferred Stock, $0.001 par value per share.
B. Designation of Future Series of Preferred Stock. The Board of Directors
is authorized, subject to any limitations prescribed by the law of the State of
Delaware, to provide for the issuance of the shares of Preferred Stock in one or
more series, and, by filing a certificate of designation pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, to fix the designation,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof, and to increase or decrease
the number of shares of any such series (but not below the number of shares of
such series then outstanding). Subject to approval by the Board of Directors,
the number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the corporation entitled to
vote, unless a vote of any other holders is required pursuant to a certificate
or certificates establishing a series of Preferred Stock.
Except as expressly provided in any certificate of designation designating
any series of Preferred Stock pursuant to the foregoing provisions of this
Article IV, any new series of Preferred Stock may be designated, fixed and
determined as provided herein by the Board of Directors without approval of the
holders of Common Stock or the holders of Preferred Stock, or any series
thereof, and any such new series may have powers, preferences and rights,
including, without
<PAGE> 2
Broadbase Software, Inc.
Certificate of Incorporation
rights, senior to, junior to or pari passu with the rights of the Common Stock,
the Preferred Stock, or any future class or series of Preferred Stock or Common
Stock.
If the certificate of designation creating a series of Preferred Stock
so provides, any shares of a series of Preferred Stock that are acquired by the
corporation, whether by redemption, purchase, conversion or otherwise, so that
such shares are issued but not outstanding, may not be reissued as shares of
such series or as shares of the class of Preferred Stock. Upon the retirement of
any such shares and the filing of a certificate of retirement pursuant to
Sections 103 and 243 of the Delaware General Corporation Law with respect
thereto, the shares of such series shall be eliminated and the number of shares
of Preferred Stock shall be reduced accordingly.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation.
ARTICLE VI
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
(A) The conduct of the affairs of the corporation shall be managed under
the direction of its Board of Directors. The number of directors shall be fixed
from time to time exclusively by resolution of the Board of Directors.
(B) Notwithstanding the foregoing provision of this Article VI, each
director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(C) Subject to the rights of the holders of any series of Preferred
Stock, any vacancy occurring in the Board of Directors for any cause, and any
newly created directorship resulting from any increase in the authorized number
of directors, shall, unless (i) the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by the
stockholders, or (ii) as otherwise provided by law, be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and not by the stockholders. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the director for which the vacancy was created
or occurred.
(D) Subject to the rights of the holders of any series of Preferred
Stock, any director or the entire Board of Directors may be removed, with or
without cause, by the holders of at least a majority of the shares then entitled
to vote at an election of directors; provided, however, that a director may not
be removed without cause if the votes cast against removal of the director, or
not consenting in writing to the removal, would be sufficient to elect the
director if voted cumulatively (without regard to whether shares may otherwise
be voted cumulatively) at an election at which the
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<PAGE> 3
Broadbase Software, Inc.
Certificate of Incorporation
same total number of votes were cast (or, if the action is taken by written
consent, all shares entitled to vote were voted) and either the number of
directors elected at the most recent annual meeting of stockholders, or if
greater, the number of directors for whom removal is being sought, were then
being elected.
(E) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the corporation's initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "INITIAL PUBLIC
OFFERING"), the directors shall be divided, with respect to the time for which
they severally hold office, into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors,
with the number of directors in each class to be divided as equally as
reasonably possible. The term of office of the Class I directors shall expire at
the corporation's first annual meeting of stockholders following the closing of
the Initial Public Offering, the term of office of the Class II directors shall
expire at the corporation's second annual meeting of stockholders following the
closing of the Initial Public Offering, and the term of office of the Class III
directors shall expire at the corporation's third annual meeting of stockholders
following the closing of the Initial Public Offering. At each annual meeting of
stockholders commencing with the first annual meeting of stockholders following
the closing of the Initial Public Offering, directors elected to succeed those
directors of the class whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election.
(F) Election of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
(G) Following the closing of the Initial Public Offering, no action
shall be taken by the stockholders of the corporation except at an annual or
special meeting of stockholders called in accordance with the Bylaws of the
corporation, and no action shall be taken by the stockholders by written
consent.
(H) Advance notice of stockholder nominations for the election of
directors of the corporation and of business to be brought by stockholders
before any meeting of stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation. Business transacted at special
meetings of stockholders shall be confined to the purpose or purposes stated in
the notice of meeting.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
-3-
<PAGE> 4
Broadbase Software, Inc.
Certificate of Incorporation
Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE IX
The name and mailing address of the incorporator is John F. Platz, c/o
Fenwick & West LLP, Two Palo Alto Square, Suite 700, Palo Alto, California
94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: June 28, 1999
/s/ JOHN F. PLATZ
-------------------------------
John F. Platz, Incorporator
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<PAGE> 1
EXHIBIT 3.02
BYLAWS
OF
BROADBASE SOFTWARE, INC.
(A DELAWARE CORPORATION)
As Adopted June 28, 1999
<PAGE> 2
BYLAWS
OF
BROADBASE SOFTWARE, INC.
a Delaware corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I - STOCKHOLDERS........................................................ 1
Section 1.1: Annual Meetings.......................................... 1
Section 1.2: Special Meetings......................................... 1
Section 1.3: Notice of Meetings....................................... 1
Section 1.4: Adjournments............................................. 1
Section 1.5: Quorum................................................... 2
Section 1.6: Organization............................................. 2
Section 1.7: Voting; Proxies.......................................... 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record................................................ 3
Section 1.9: List of Stockholders Entitled to Vote.................... 3
Section 1.10: Action by Written Consent of Stockholders................. 3
Section 1.11: Inspectors of Elections.................................. 4
Section 1.12: Notice of Stockholder Business; Nominations.............. 5
ARTICLE II - BOARD OF DIRECTORS................................................. 7
Section 2.1: Number; Qualifications................................... 7
Section 2.2: Election; Resignation; Removal; Vacancies................ 7
Section 2.3: Regular Meetings......................................... 8
</TABLE>
i
<PAGE> 3
BYLAWS
OF
BROADBASE SOFTWARE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 2.4: Special Meetings......................................... 8
Section 2.5: Telephonic Meetings Permitted............................ 9
Section 2.6: Quorum; Vote Required for Action......................... 9
Section 2.7: Organization............................................. 9
Section 2.8: Written Action by Directors.............................. 9
Section 2.9: Powers................................................... 9
Section 2.10: Compensation of Directors................................ 9
ARTICLE III - COMMITTEES........................................................ 9
Section 3.1: Committees............................................... 9
Section 3.2: Committee Rules.......................................... 10
ARTICLE IV - OFFICERS ......................................................... 10
Section 4.1: Generally................................................ 10
Section 4.2: Chief Executive Officer.................................. 10
Section 4.3: Chairperson of the Board................................. 11
Section 4.4: President................................................ 11
Section 4.5: Vice President........................................... 11
Section 4.6: Chief Financial Officer.................................. 11
Section 4.7: Treasurer................................................ 12
Section 4.8: Secretary................................................ 12
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
BROADBASE SOFTWARE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.9: Delegation of Authority.................................. 12
Section 4.10: Removal.................................................. 12
ARTICLE V - STOCK ......................................................... 12
Section 5.l: Certificates............................................. 12
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate.............................. 12
Section 5.3: Other Regulations........................................ 13
ARTICLE VI - INDEMNIFICATION.................................................... 13
Section 6.1: Indemnification of Officers and Directors................ 13
Section 6.2: Advance of Expenses...................................... 13
Section 6.3: Non-Exclusivity of Rights................................ 14
Section 6.4: Indemnification Contracts................................ 14
Section 6.5: Effect of Amendment...................................... 14
ARTICLE VII - NOTICES ......................................................... 14
Section 7.l: Notice................................................... 14
Section 7.2: Waiver of Notice......................................... 14
ARTICLE VIII - INTERESTED DIRECTORS............................................. 15
Section 8.1: Interested Directors; Quorum............................. 15
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
BROADBASE SOFTWARE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IX - MISCELLANEOUS...................................................... 15
Section 9.1: Fiscal Year.............................................. 15
Section 9.2: Seal..................................................... 15
Section 9.3: Form of Records.......................................... 15
Section 9.4: Reliance Upon Books and Records.......................... 16
Section 9.5: Certificate of Incorporation Governs..................... 16
Section 9.6: Severability............................................. 16
ARTICLE X - AMENDMENT ......................................................... 16
Section 10.1: Amendments............................................... 16
</TABLE>
iv
<PAGE> 6
BYLAWS
OF
BROADBASE SOFTWARE, INC.
(a Delaware corporation)
As Adopted June 28, 1999
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as the Board of Directors shall each year fix.
Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, and
shall be called upon the request of the Chairperson of the Board of Directors,
the Chief Executive Officer, the President, the holders of shares of the
Corporation that are entitled to cast not less a majority of the total number of
votes entitled to be cast by all stockholders at such meeting, or by a majority
of the members of the Board of Directors. Special meetings may not be called by
any other person or persons. If a special meeting of stockholders is called at
the request of any person or persons other than by a majority of the members of
the Board of Directors, then such person or persons shall request such meeting
by delivering a written request to call such meeting to each member of the Board
of Directors, and the Board of Directors shall then determine the time, date and
place of such special meeting, which shall be held not more than one hundred
twenty (120) nor less than thirty-five (35) days after the written request to
call such special meeting was delivered to each member of the Board of
Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
that if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, then a
<PAGE> 7
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting the Corporation may
transact any business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall fail
to attend any meeting, the chairperson of the meeting or the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
at the meeting may adjourn the meeting. Shares of the Corporation's stock
belonging to the Corporation (or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
are held, directly or indirectly, by the Corporation), shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation or any other corporation
to vote any shares of the Corporation's stock held by it in a fiduciary
capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairperson of the Board of Directors, or, in the absence
of such person, the President of the Corporation, or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting. Such
person shall be chairperson of the meeting and, subject to Section 1.11 hereof,
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seems to him or her to be in order. The Secretary of the Corporation shall
act as secretary of the meeting, but in such person's absence the chairperson of
the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; provided, however,
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken by
written ballot, then each such ballot shall state the name of the stockholder or
proxy voting and such other information as the chairperson of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon
-2-
<PAGE> 8
that are present in person or represented by proxy at the meeting and are voted
for or against the matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action. If no record date is fixed by the Board of Directors, then the
record date shall be as provided by applicable law. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Action by Written Consent of Stockholders.
(a) Procedure. Unless otherwise provided by the Certificate of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Written stockholder consents shall bear the date of signature
of each stockholder who signs the consent and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, to
its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. No written consent
shall be effective to take the action set forth therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
-3-
<PAGE> 9
(b) Notice of Consent. Prompt notice of the taking of corporate action
by stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of holders to take
the action were delivered to the Corporation. In the case of a Certificate
Action (as defined below), if the Delaware General Corporation Law so requires,
such notice shall be given prior to filing of the certificate in question. If
the action which is consented to requires the filing of a certificate under the
Delaware General Corporation Law (a "CERTIFICATE ACTION"), then if the Delaware
General Corporation Law so requires, the certificate so filed shall state that
written stockholder consent has been given in accordance with Section 228 of the
Delaware General Corporation Law and that written notice of the taking of
corporate action by stockholders without a meeting as described herein has been
given as provided in such section.
Section 1.11: Inspectors of Elections.
(a) Applicability. Unless otherwise provided in the Corporation's
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an automated interdealer
quotation system of a registered national securities association; or (iii) held
of record by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional, and at the discretion of the
Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
such inspector's ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors
of election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
-4-
<PAGE> 10
(e) Opening and Closing of Polls. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced by the chairperson of the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
Section 1.12: Notice of Stockholder Business; Nominations.
(a) Annual Meeting of Stockholders.
(i) Nominations of persons for election to the Board of Directors
and the proposal of business to be considered by the stockholders shall be made
at an annual meeting of stockholders (A) pursuant to the Corporation's notice of
such meeting, (B) by or at the direction of the Board of Directors or (C) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of the notice provided for in this Section 1.12, who is entitled to vote
at such meeting and who complies with the notice procedures set forth in this
Section 1.12.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of subparagraph
(a)(i) of this Section 1.12, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual meeting
(except in the case of the first annual meeting following the Corporation's
Initial Public Offering (as defined hereinafter) for which such notice shall be
timely if delivered in the same time period as if such meeting were a special
meeting governed by subparagraph (b) of this Section 1.12); provided, however,
that in the event that the date of the annual meeting is more than thirty (30)
days before or more than sixty (60) days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting and not later
than the close of business on the
-5-
<PAGE> 11
later of the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation. Such stockholder's
notice shall set forth: (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(1) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, and (2) the class and number
of shares of the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
subparagraph (a)(ii) of this Section 1.12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased board of
directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.12 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary of the Corporation at the principal executive office
of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.12. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.12 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close
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<PAGE> 12
of business on the later of the sixtieth (60th) day prior to such special
meeting or the tenth (10th) day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
(c) General.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.12. Except as otherwise provided by law or these
Bylaws, the chairperson of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 1.12 and, if any proposed nomination or
business is not in compliance herewith, to declare that such defective proposal
or nomination shall be disregarded.
(ii) For purposes of this Section 1.12, the term "PUBLIC
ANNOUNCEMENT" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
1.12, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall
consist of one or more members. The initial number of directors shall be four
(4), and thereafter shall be fixed from time to time by resolution of the Board
of Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, following the closing of the
corporation's initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock to the public (the "INITIAL PUBLIC OFFERING"), the
directors shall be divided, with respect to the time for which they severally
hold office, into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors, with the number of
directors in each class to be divided as equally as reasonably possible. The
term of
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office of the Class I directors shall expire at the corporation's first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class II directors shall expire at the corporation's
second annual meeting of stockholders following the closing of the Initial
Public Offering, and the term of office of the Class III directors shall expire
at the corporation's third annual meeting of stockholders following the closing
of the Initial Public Offering. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders following the closing
of the Initial Public Offering, directors elected to succeed those directors of
the class whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. Prior to the closing of the Initial Public Offering, each director
shall hold office until the next annual meeting of stockholders and until such
director's successor is elected and qualified, or until such director's earlier
death, resignation or removal. Any director may resign at any time upon written
notice to the Corporation. Subject to the rights of the holders of any series of
Preferred Stock, any vacancy occurring in the Board of Directors for any cause,
and any newly created directorship resulting from any increase in the authorized
number of directors, shall, unless (i) the Board of Directors determines by
resolution that any such vacancies or newly created directorships shall be
filled by the stockholders, or (ii) as otherwise provided by law, be filled only
by the affirmative vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred. Subject to the rights of any holders of
Preferred Stock, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors; provided, however, that a director may not
be removed without cause if the votes cast against removal of the director, or
not consenting in writing to the removal, would be sufficient to elect the
director if voted cumulatively (without regard to whether shares may otherwise
be voted cumulatively) at an election at which the same total number of votes
were cast (or, if the action is taken by written consent, all shares entitled to
vote were voted) and either the number of directors elected at the most recent
annual meeting of stockholders, or if greater, the number of directors for whom
removal is being sought, were then being elected.
Section 2.3: Regular Meetings. Regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine.
Notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of
Directors may be called by the Chairperson of the Board of Directors, the
President or a majority of the members of the Board of Directors then in office
and may be held at any time, date or place, within or without the State of
Delaware, as the person or persons calling the meeting shall fix. Notice of the
time, date and place of such meeting shall be given, orally or in writing, by
the person or persons calling the meeting to all directors at least four (4)
days before the meeting if the notice is mailed, or at least twenty-four (24)
hours before the meeting if such notice is given by telephone, hand delivery,
telegram, telex, mailgram, facsimile or similar communication method. Unless
otherwise indicated in the notice, any and all business may be transacted at a
special meeting.
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Section 2.5: Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
presided over by the Chairperson of the Board of Directors, or in such person's
absence by the President, or in such person's absence by a chairperson chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in such
person's absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.8: Written Action by Directors. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and
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may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority in reference to the following
matters: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by the Delaware General Corporation Law to
be submitted to stockholders for approval or (ii) adopting, amending or
repealing any bylaw of the Corporation.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of
a Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairperson of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
Chief Executive Officer of the Corporation to appoint officers other than the
Chairperson of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until such
person's successor is elected and qualified or until such person's earlier
resignation or removal. Any number of offices may be held by the same person.
Any officer may resign at any time upon written notice to the Corporation. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled by the Board of Directors.
Section 4.2: Chief Executive Officer. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances,
mortgages, guarantees, leases, obligations, bonds, certificates and other papers
and instruments in writing
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which have been authorized by the Board of Directors or which, in the judgment
of the Chief Executive Officer, should be executed on behalf of the Corporation;
to sign certificates for shares of stock of the Corporation; and, subject to the
direction of the Board of Directors, to have general charge of the property of
the Corporation and to supervise and control all officers, agents and employees
of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not designated
any other officer to be the Chief Executive Officer, then the Chairperson of the
Board of Directors shall be the Chief Executive Officer.
Section 4.3: Chairperson of the Board. The Chairperson of the Board of
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation (other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President) and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall
be the Treasurer of the Corporation unless the Board of Directors shall have
designated another officer as the Treasurer of the Corporation. Subject to the
direction of the Board of Directors and the Chief Executive Officer, the Chief
Financial Officer shall perform all duties and have all powers that are commonly
incident to the office of Chief Financial Officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The
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Treasurer shall also perform such other duties and have such other powers as are
commonly incident to the office of Treasurer, or as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
all authorized notices for, and shall keep, or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of Secretary, or as the Board of Directors or the Chief Executive Officer
may from time to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at the
pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
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ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Officers and Directors. Each person who
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "PROCEEDING"), by reason of the fact that
such person (or a person of whom such person is the legal representative), is or
was a director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, provided such person acted in
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. Such indemnification shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of such
person's heirs, executors and administrators. Notwithstanding the foregoing, the
Corporation shall indemnify any such person seeking indemnity in connection with
a Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
As used herein, the term "REINCORPORATED PREDECESSOR" means a corporation that
is merged with and into the Corporation in a statutory merger where (a) the
Corporation is the surviving corporation of such merger; (b) the primary purpose
of such merger is to change the corporate domicile of the Reincorporated
Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses
(including attorneys' fees) incurred by such a director or officer in defending
any such Proceeding as they are incurred in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law then so
requires, the payment of such expenses incurred by such a director or officer in
advance of the final disposition of such Proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or
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consent of stockholders or disinterested directors, or otherwise. Additionally,
nothing in this Article VI shall limit the ability of the Corporation, in its
discretion, to indemnify or advance expenses to persons whom the Corporation is
not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein or
required by law, all notices required to be given pursuant to these Bylaws shall
be in writing and may in every instance be effectively given by hand delivery
(including use of a delivery service), by depositing such notice in the mail,
postage prepaid, or by sending such notice by prepaid telegram, telex, overnight
express courier, mailgram or facsimile. Any such notice shall be addressed to
the person to whom notice is to be given at such person's address as it appears
on the records of the Corporation. The notice shall be deemed given (i) in the
case of hand delivery, when received by the person to whom notice is to be given
or by any person accepting such notice on behalf of such person, (ii) in the
case of delivery by mail, upon deposit in the mail, (iii) in the case of
delivery by overnight express courier, when dispatched, and (iv) in the case of
delivery via telegram, telex, mailgram or facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
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ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his, her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any
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other person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
majority of the Corporation's outstanding voting stock then entitled to vote at
an election of directors shall have the power to adopt, amend or repeal Bylaws.
To the extent provided in the Corporation's Certificate of Incorporation, the
Board of Directors of the Corporation shall also have the power to adopt, amend
or repeal Bylaws of the Corporation.
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EXHIBIT 4.02
FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Fourth Amended and Restated Investors' 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"), Mark Kremer (the "Shareholder") and Lighthouse Capital Partners
II, L.P. ("Lighthouse").
R E C I T A L S
A. Certain Investors, the Shareholder, the Company and Lighthouse
have entered into a Third Amended and Restated Investors' Rights Agreement dated
as of December 9, 1998, as amended and supplemented prior to the date hereof
(the "Amended Rights Agreement") in connection with the purchase by such
Investors of the Company's Series A Preferred Stock ("Series A Stock") pursuant
to that certain Series A Preferred Stock Purchase Agreement dated December 26,
1995, as amended and supplemented, the Company's Series B Preferred Stock (the
"Series B Stock") pursuant to that certain Series B Preferred Stock Purchase
Agreement dated December 16, 1996, as amended and supplemented, the Company's
Series C Preferred Stock (the "Series C Stock") pursuant to that certain Series
C Preferred Stock Purchase Agreement dated February 17, 1998, as amended and
supplemented, and senior unsecured convertible debentures (the "Debentures")
which are convertible into shares of the Company's Series D Preferred Stock
("Series D Stock") on the terms and conditions set forth in that certain Series
D Preferred Stock Convertible Debenture Purchase Agreement, dated December 9,
1998 (the "Debenture Agreement"), as supplemented and amended. The Amended
Rights Agreement replaced earlier Investors' Rights Agreements among various
investors and the Company.
B. Lighthouse has been issued by the Company warrants dated December
16, 1996 and September 11, 1997 (the "Lighthouse Warrants") to purchase Series A
Stock and Series B Stock, respectively, and under which Lighthouse is to have
certain information and registration rights.
C. Certain of 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").
D. The Series E Agreement provides that the Investors under that
Agreement shall be granted certain information and registration rights and
rights of first refusal by amending and restating the Amended Rights Agreement
all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises
<PAGE> 2
hereinafter set forth, the Amended Rights Agreement is hereby amended and
restated as follows:
1. INFORMATION RIGHTS.
1.1 Financial Information. The Company covenants and agrees that,
commencing on the date of this Agreement, for so long as any Investor holds at
least 245,000 shares of Series A Stock, Series B Stock, Series C Stock, Series D
Stock and/or Series E Stock ("Preferred Stock") and/or the equivalent number (on
an as-converted basis) of shares of Common Stock of the Company issued upon the
conversion of such shares of Preferred Stock ("Conversion Stock") the Company
will, unless waived by the Board of Directors of the Company:
(a) Annual Reports. Furnish to such Investor, as soon as
practicable and in any event within 120 days after the end of each fiscal year
of the Company, a consolidated Balance Sheet and Statement of Shareholders'
Equity as of the end of such fiscal year, a consolidated Statement of Income and
a consolidated Statement of Cash Flows of the Company and its subsidiaries for
such year, setting forth in each case in comparative form the figures from the
Company's previous fiscal year (if any), all prepared in accordance with
generally accepted accounting principles and practices and audited by nationally
recognized independent certified public accountants;
(b) Quarterly Reports. Furnish to such Investor as soon as
practicable, and in any case within forty-five (45) days of the end of each
fiscal quarter of the Company (except the last quarter of the Company's fiscal
year), quarterly unaudited financial statements, including an unaudited Balance
Sheet and Statement of Shareholders' Equity, an unaudited Statement of Income
and an unaudited Statement of Cash Flows, together with a comparison to the
Company's operating plan and budget and statements of the Chief Financial
Officer of the Company explaining any significant differences in the statements
from the Company's operating plan and budget for the period and stating that
such statements fairly present the consolidated financial position and
consolidated financial results of the Company for the fiscal quarter covered;
(c) Monthly Reports. Furnish to such Investor as soon as
practicable, and in any case within forty-five (45) days of the end of each
calendar month (except the last month of the Company's fiscal year), monthly
unaudited financial statements, including an unaudited Balance Sheet and
Statement of Shareholders' Equity, an unaudited Statement of Income and an
unaudited Statement of Cash Flows, together with a comparison to the Company's
operating plan and budget and statements of the Chief Financial Officer of the
Company explaining any significant differences in the statements from the
Company's operating plan and budget for the month covered and stating that such
statements fairly present the consolidated financial position and consolidated
financial results of the Company for the month covered;
(d) Annual Budget. Furnish to such Investor as soon as
practicable and in any event no later than thirty (30) days after the close of
each fiscal year of the Company, an annual operating plan and budget, prepared
on a monthly basis, for the next immediate fiscal year. The Company shall also
furnish to such Investor, within a reasonable time of its
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preparation, amendments to the annual budget, if any;
(e) Other Information. Furnish to such Investor such other
information relating to the financial condition, business, prospects or
corporate affairs of the Company as the Investor or any assignee of the Investor
may from time to time reasonably request; and
(f) Confidentiality. Each Investor agrees to hold all
information received pursuant to this Section in confidence, and not to use or
disclose any of such information to any third party, except to the extent such
information may be made publicly available by the Company.
1.2 Inspection Rights. The Company shall permit each Investor
holding at least 245,000 shares of Preferred Stock and/or the equivalent number
(on an as-converted basis) of shares of Conversion Stock, or any combination
thereof, at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by such Investor. Each Investor agrees to
hold all information received from such inspections in confidence, and not to
use or disclose any of such information to any third party, except to the extent
such information may be made publicly available by the Company.
1.3 Termination of Certain Rights. The Company's obligations under
Sections 1.1 and 1.2 above will terminate (i) immediately before the closing of
the first underwritten sale of Common Stock of the Company to the public
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), covering the offer and sale of Common Stock
to the public, or (ii) upon (a) the acquisition of all or substantially all the
assets of the Company or (b) an acquisition of the Company by another
corporation or entity by consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) or more of the voting power of the corporation or
other entity surviving such transaction (or the parent corporation of such
surviving corporation if the surviving corporation is wholly-owned by the
parent).
1.4 Rights of Lighthouse and the Debenture Investors. For purposes
of this Section 1 only, (i) Lighthouse shall be treated as an "Investor" and
shall be considered to hold the number of shares of Series A Stock and Series B
Stock issuable upon exercise of the Lighthouse Warrants, in determining its
rights to the information described in such section and (ii) Investors who have
purchased Debentures (or to whom Debentures have been duly assigned under this
Agreement) (the "Debenture Investors") shall be considered to hold the number of
shares of Series D Stock issuable upon conversion of the Debentures, in
determining their rights to the information described in this Section.
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered," and
"registration"
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refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities"
means: (1) all the shares of Common Stock of the Company issued or issuable upon
the conversion of any shares of Preferred Stock that are now owned or may
hereafter be acquired by any Investor or any Investor's permitted successors and
assigns; (2) the 1,282,500 shares of Common Stock now held by the Shareholder
(the "Shareholder's Shares"); (3) all the shares of Common Stock of the Company
issued or issuable upon conversion of the shares of Series A Stock or Series B
Stock now or hereafter held by Lighthouse (including the Series A Stock or
Series B Stock issuable upon exercise of the Lighthouse Warrants (together, the
"Lighthouse Shares")); and (4) any shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, all such shares of Common Stock
described in clause (1), (2) or (3) of this subsection (b); excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which rights under this Section 2 are not assigned in accordance with this
Agreement or any Registrable Securities sold to the public or sold pursuant to
Rule 144 promulgated under the Securities Act; provided, however, that
notwithstanding anything herein to the contrary, the Shareholder's Shares and
any shares of Common Stock described in clause (4) of this Section 2.1(b) that
are issued in respect of any Shareholder's Shares (which with the Shareholder's
Shares are collectively hereinafter referred to as the "Excluded Shares"), shall
not be Registrable Securities for purposes of Section 2.2, 2.4 or 3 of this
Agreement, and provided further that the Lighthouse Shares and any shares of
Common Stock described in clause (4) of this Section 2.1(b) that are issued in
respect of any Lighthouse Shares shall not be Registrable Securities for
purposes of Section 3 of this Agreement.
(c) Registrable Securities Then Outstanding. The number of
shares of "Registrable Securities then outstanding" shall mean the number of
shares of Common Stock which are Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of then outstanding and then exercisable options, warrants or convertible
securities.
(d) Holder. For purposes of this Section 2 and Sections 3 and
4 hereof, the term "Holder" means any person owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 2 have been duly
assigned in accordance with this Agreement; provided, however, that for purposes
of this Agreement, a record holder of shares of Preferred Stock convertible into
such Registrable Securities shall be deemed to be the Holder of such Registrable
Securities; provided further, that a Holder of Excluded Shares (as defined in
Section 2.1(b)) shall not be a Holder with respect to such Excluded Shares for
purposes of Sections 2.2, 2.4 or 3 of this Agreement; provided further, that a
Holder of Lighthouse Shares shall not be a Holder with respect to such
Lighthouse Shares for purposes of Section 3 of this Agreement; and provided
further, that the Company shall in no event be obligated to register shares of
Preferred Stock, and that Holders of Registrable Securities will not be required
to convert their shares of Preferred Stock into Common Stock in order to
exercise the registration rights granted hereunder until immediately before the
closing of
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the offering to which the registration relates.
(e) Form S-3. The term "Form S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
2.2 Demand Registration.
(a) Request by Holders. If the Company shall receive at any
time after the earlier of (i) the date that is eighteen (18) months after the
date of this Agreement, or (ii) six (6) months after the effective date of the
Company's initial public offering of its securities pursuant to a registration
statement filed under the Securities Act, a written request from the Holders of
at least 30% of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities Act covering the registration
of Registrable Securities pursuant to this Section 2.2, then the Company shall,
within ten (10) business days of the receipt of such written request, give
written notice of such request ("Request Notice") to all Holders, and use its
best efforts to effect as soon as practicable, and in any event within ninety
(90) days of the receipt of such Request Notice, the registration under the
Securities Act of all Registrable Securities which Holders request to be
registered and included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject only to the limitations of this Section 2.2; provided that the
Registrable Securities requested by all Holders to be registered pursuant to
such request must have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $7,500,000.
(b) Underwriting. If the Holders initiating the registration
request under this Section 2.2 ("Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In such event, the right of any
Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company, which agreement
shall be reasonably acceptable to a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 2.2, if the
underwriter(s) advise(s) the Company in writing that marketing factors require a
limitation of the number of securities to be underwritten then the Company shall
so advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of Registrable
Securities that may be included in the underwriting shall be reduced as
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<PAGE> 6
required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company is
obligated to effect only two (2) such registrations pursuant to this Section
2.2.
(d) Deferral. Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting the filing of a registration statement
pursuant to this Section 2.2, a certificate signed by the President or Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be filed and it
is therefore essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing for a period of not more
than 120 days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(e) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered, unless the Holders of a majority of the Registrable Securities then
outstanding agree to forfeit their right to one (1) demand registration pursuant
to this Section 2.2 (in which case such right shall be forfeited by all Holders
of Registrable Securities); provided, further, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least twenty (20) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
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<PAGE> 7
securities of the Company, but excluding registration statements relating to any
registration under Section 2.2 or Section 2.4 of this Agreement or to any
employee benefit plan or a corporate reorganization) and will afford each such
Holder an opportunity to include in such registration statement all or any part
of the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall, within fifteen (15) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company, and second, to each of the Holders (other than the Shareholder)
requesting inclusion of their Registrable Securities in such registration
statement on a pro rata basis based on the total number of Registrable
Securities then held by each such Holder and third, to the Shareholder; provided
however, that the right of the underwriters to exclude shares (including
Registrable Securities) from the registration and underwriting as described
above shall be restricted so that the number of Registrable Securities included
in any such registration is not reduced below twenty-five percent (25%) of the
shares included in the registration, except for a registration relating to the
Company's initial public offering from which all Registrable Securities may be
excluded. If any Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
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<PAGE> 8
(b) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
2.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of at least twenty percent (20%) of all Registrable
Securities then outstanding a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2.4:
(1) if Form S-3 is not available for such offering by
the Holders;
(2) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000;
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of not
more than 120 days after receipt of the request of the Holder or Holders under
this Section 2.4;
(4) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected a registration on
Form S-3 for the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the Company
would
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<PAGE> 9
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Expenses. Subject to the foregoing, the Company shall file
a Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Section 2.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with the
first three registrations requested pursuant to this Section 2.4 (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders and counsel for the Company. All expenses incurred in
connection with any subsequent registration requested pursuant to this Section
2.4 shall be borne by the Holders who participate in such registration on a pro
rata basis according to the number of Registrable Securities owned by the
Holders that are included in such registration at the time it goes effective.
(d) Not Demand Registration. Form S-3 registrations shall not
be deemed to be demand registrations as described in Section 2.2 above.
2.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days,
provided however, that such 120-day period shall be extended for a period of
time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
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(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all Registrable
Securities, in each case not later than the effective date of such registration.
2.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
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(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 Act"), against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act,
the l934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"):
(i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or
(iii) any violation or alleged violation by the Company
of the Securities Act, the 1934 Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the 1934 Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with
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written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 2.8(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; and provided further, that the total
amounts payable in indemnity by a Holder under this Section 2.8(b) in respect of
any Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 2.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in
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such case notwithstanding the fact that this Section 2.8 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(g) Underwriting Agreement. Notwithstanding the foregoing, to
the extent that the provisions on indemnification and contribution contained in
the underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall control.
2.9 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners of the Holder who agree to be
similarly bound) for up to one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement;
(b) all executive officers and directors of the Company then
holding Common Stock of the Company enter into similar agreements; and
(c) the foregoing shall not apply to any shares of stock of
the Company purchased by a Holder (i) in the Company's initial public offering
of its securities pursuant to a registration statement filed under the
Securities Act or (ii) in the public securities market following such initial
public offering.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop
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transfer instructions with respect to the Registrable Securities and such other
shares of stock of each Holder (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
2.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11 Termination of the Company's Obligations. The Company shall
have no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i)
any request or requests for registration made by any Holder on a date more than
five (5) years after the closing date of the Company's initial public offering;
or (ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel
to the Company, all such Registrable Securities proposed to be sold by a Holder
may be sold in a three-month period without registration under the Securities
Act pursuant to Rule 144 under the Securities Act.
2.12 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
2.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included, or (b) to make a demand
registration which could result in such registration statement being declared
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<PAGE> 15
effective prior to the earlier of either of the dates set forth in subsection
2.2(a), or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 2.2.
3. RIGHT OF FIRST REFUSAL.
3.1 General. Each Holder (as defined in Section 2.1(d)) and any
party to whom such Holder's rights under this Section 3 have been duly assigned
in accordance with Section 4.1(b) (each such Holder or assignee being
hereinafter referred to as a "Rights Holder") has the right of first refusal to
purchase such Rights Holder's Pro Rata Share (as defined below), of all (or any
part) of any "New Securities" (as defined in Section 3.2) that the Company may
from time to time issue after the date of this Agreement. A Rights Holder's "Pro
Rata Share" for purposes of this right of first refusal is the ratio of (a) the
number of Registrable Securities as to which such Rights Holder is the Holder
(and/or is deemed to be the Holder under Section 2.1(d)), to (b) a number of
shares of Common Stock of the Company equal to the sum of (i) the total number
of shares of Common Stock of the Company then outstanding plus (ii) the total
number of shares of Common Stock of the Company into which all then outstanding
shares of Preferred Stock of the Company are then convertible plus (iii) the
total number of shares of capital stock of the Company (on an as-converted to
Common Stock basis) issuable upon exercise of all outstanding warrants to
purchase shares of the Company's stock or upon conversion of the Debentures plus
(iv) the number of shares of Common Stock of the Company reserved for issuance
under stock purchase and stock option plans of the Company.
3.2 New Securities. "New Securities" shall mean any Common Stock or
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
the term "New Securities" does not include:
(i) any shares of the Company's Common Stock (and/or options
or warrants therefor) issued to employees, officers, directors, contractors,
advisors or consultants of the Company pursuant to incentive agreements or plans
approved by the Board of Directors of the Company;
(ii) the Debentures and any shares of Series D Preferred Stock
issued upon conversion of the Debentures;
(iii) any shares of Series E Stock issued pursuant to the
Series E Agreement, as such agreement may be amended;
(iv) any securities issuable upon conversion of or with
respect to any then outstanding shares of Preferred Stock of the Company or
Common Stock or other securities issuable upon conversion thereof;
(v) shares of the Company's Common Stock or Preferred Stock
issued in connection with any stock split or stock dividend;
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(vi) securities offered by the Company to the public pursuant
to a registration statement filed under the Securities Act;
(vii) any shares of the Company's stock (and/or options or
warrants therefor) issued or issuable to parties providing the Company with
equipment leases, real property leases, loans, credit lines, guaranties of
indebtedness, cash price reductions or similar financing, provided such
issuances are for other than primarily equity financing purposes and provided
that at the time of any such issuance, the aggregate of such issuance and
similar issuances in the preceding twelve month period do not exceed 3% of the
then outstanding Common Stock of the Company (assuming full conversion and
exercise of all convertible and exercisable securities); or
(viii) securities issued pursuant to the acquisition of
another corporation or entity by the Company by consolidation, merger, purchase
of all or substantially all of the assets, or other reorganization in which the
Company acquires, in a single transaction or series of related transactions, all
or substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity.
3.3 Procedures. In the event that the Company proposes to undertake
an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the "Notice"), describing the
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Rights Holder shall have
fifteen (15) days from the date of mailing of any such Notice to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holder's Pro Rata Share). If any
Rights Holder fails to so agree in writing within such fifteen (15) day period
to purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase.
3.4 Failure to Exercise. In the event that the Rights Holders fail
to exercise in full the right of first refusal within such fifteen (15) day
period, then the Company shall have 120 days thereafter to sell the New
Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such 120 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.
3.5 Termination. This right of first refusal shall terminate (i)
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public, or (ii) upon (a) the
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acquisition of all or substantially all the assets of the Company or (b) an
acquisition of the Company by another corporation or entity by consolidation,
merger or other reorganization in which the holders of the Company's outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) or more of
the voting power of the corporation or other entity surviving such transaction
(or the parent corporation of such surviving corporation if the surviving
corporation is wholly-owned by the parent).
3.6 Separate Series E Right of First Refusal. Nothing in this
Agreement shall be deemed to limit or supersede the right of first refusal of
the purchasers of Series E Stock set forth in that certain Series E Rights
Agreement dated of even date herewith by and among the Company and the
purchasers of such Series E Stock (the "Series E Rights Agreement"). In the
event of any conflict between the terms of the Series E Rights Agreement and
this Agreement, the terms of the Series E Rights Agreement shall control.
4. ASSIGNMENT AND AMENDMENT.
4.1 Assignment. Notwithstanding anything herein to the contrary:
(a) Information Rights. The rights of an Investor under
Section 1.1 or 1.2 hereof may be assigned in connection with any transfer of
shares of Preferred 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, or (iii) by any Investor to a
transferee who acquires thereby a number of shares of Preferred Stock or shares
of Conversion Stock equal to at least the lesser of (1) that number of shares
described in Sections 1.1 and 1.2 hereof and (2) that number of shares that
results from dividing One Million Dollars ($1,000,000) by the then current
Conversion Price for the series of Preferred Stock being transferred (or, with
respect to Conversion Shares, the then current Conversion Price for the series
of Preferred Stock from which such Conversion Shares were converted).
Notwithstanding the foregoing (i) no such transferee shall
have rights under Section 1.1 or 1.2 hereof as a result of such transfer except
to the extent that from time to time after such transfer the transferee holds,
or is deemed to hold for aggregation purposes as set forth in Section 5.11, the
minimum number of shares described in Sections 1.1. and 1.2, (ii) 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 (iii) 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 4.
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(b) Registration Rights; Refusal Rights. The registration
rights of a Holder under Section 2 hereof and the rights of first refusal of a
Rights Holder under Section 3 hereof may be assigned in connection with any
transfer of shares of Preferred 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 Preferred
Stock or shares of Conversion Stock equal to at least the lesser of (1) 100,000
shares of Preferred Stock (and/or an equivalent number (on an as-converted
basis) of Registrable Securities issued upon conversion thereof and/or
Debentures convertible into an equivalent number of (on an as-converted basis)
of Registrable Securities issued upon conversion of the Preferred Stock issuable
upon conversion thereof and (2) that number of shares that results from dividing
One Million Dollars ($1,000,000) by the then current "Conversion Price" (as
defined the the Company's Articles of Incorporation) for the series of Preferred
Stock being transferred (or, with respect to Conversion Shares, the then current
Conversion Price for the series of Preferred Stock from which such Conversion
Shares were converted), or (iv) by an Investor that is a partnership,
corporation or limited liability company to an affiliate thereof.
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 4.
4.2 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 Investors (and/or any of their permitted
successors or assigns) holding shares of Preferred Stock and/or Conversion Stock
representing and/or convertible into a majority of all the Investors' Shares (as
defined below). Notwithstanding the foregoing (i) no amendment or waiver
effected pursuant to the foregoing provisions of this Section 4.2 shall be
binding upon any Investor who does not give written consent thereto (a
"Nonconsenting Investor") if such amendment or waiver, by its express terms,
materially and adversely changes or waives the rights of such Nonconsenting
Investor set forth in this Agreement in a substantially different manner than
the rights of the Investors consenting thereto and (ii) no amendment of Section
3.6, or amendment of Section 2.9 to expand the scope of the market stand-off"
provided for therein, shall be binding upon any Investor with respect to shares
of Series E Stock (or Conversion Stock issued upon conversion of such Series E
Stock) without the consent of the holders of a majority of the then outstanding
shares of such Series E Stock (and Conversions Stock issued upon conversion of
such Series E Stock). As used herein, the term "Investors' Shares" shall mean
the shares of Common Stock then issuable upon conversion of all then outstanding
shares of Preferred Stock held by Investors (and/or any of their permitted
successors or assigns), plus all shares of Common Stock then
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issuable upon conversion of the Preferred Stock that is then issuable upon
conversion of all then outstanding Debentures held by the Investors (and/or any
of their permitted successors or assigns) plus all then outstanding shares of
Conversion Stock held by Investors (and/or any of their permitted successors or
assigns) that were issued upon the conversion of any shares of Preferred Stock.
Any amendment or waiver effected in accordance with this Section 4.2 shall be
binding upon each Investor and each Holder (including Lighthouse), and each
permitted successor or assignee of such Investor or Holder and the Company.
5. GENERAL PROVISIONS.
5.1 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, (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 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 copies, in the case where the Investor is
a holder of shares of Series E Stock or Conversion Stock issued upon conversion
of Series E Stock) to:
Rick Cohen, Esq.
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street, Ste. 2400
Los Angeles, CA 90017
Tel. (213) 896-0700
Fax. (213) 896-0400
and 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.
(c) if to the Shareholder, at 172 Constitution Drive, Menlo
Park, California 94025.
(d) if to Lighthouse at 100 Drakes Landing Road, Suite 260,
Greenbrae, California 94904-3121, Attn: Contract Administration, Phone (415)
925-3370,
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Fax (415) 925-3387.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder.
5.2 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 the Amended
Rights Agreement any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the subject
matter hereof. This Agreement will amend and restate the Amended Rights
Agreement to read as set forth herein, when it has been duly executed by parties
having the right to so amend and restate the Amended Rights Agreement. Nothing
in this Agreement will be deemed to supersede the Series E Rights Agreement.
5.3 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.
5.4 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.
5.5 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.
5.6 Successors And Assigns. Subject to the provisions of Section
4.1, 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.
5.7 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.
5.8 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.
5.9 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.
5.10 Adjustments for Stock Splits, Etc. Wherever in this Agreement
there is a
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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.
5.11 Aggregation of Stock. All shares 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.
5.12 Amended Rights Agreement Superseded. Pursuant to Section 4.2 of
the Amended Rights Agreement, the undersigned parties who are parties to such
Amended Rights Agreement hereby amend and restate the Amended Rights Agreement
to read in its entirety as set forth in this Agreement, all with the intent and
effect that the Amended Rights Agreement shall be hereby terminated and entirely
replaced and superseded by this Agreement. By such amendment, all rights of
first refusal under Section 3 of the Amended Rights Agreement in respect of the
issuance of any shares of Series E Stock are hereby expressly waived.
5.13 Confidentiality. The following section shall only apply with
respect to the Investors under the Series C Agreement: The terms of this
Agreement, the Series C Agreement and the Investors' investment in the Company
shall be considered confidential information and shall not be disclosed by the
Company or any Investor except in accordance with the provisions of this Section
5.13. From and after the Closing under the Series C Agreement, except as
provided below, the Company and each Investor may disclose the existence of this
Agreement, the Series C Agreement and the general terms thereof, solely to the
Company's or such Investor's investors, investment bankers, lenders,
accountants, legal counsel and bona fide prospective investors, employees and
lenders, in each case only where such persons or entities are under appropriate
nondisclosure obligations. In addition, except as provided below, the Company or
any Investor may disclose solely the fact that the Investors are investors in
the Company to any third parties through any means, including but not limited
to, direct oral communications, written materials and electronic media, such as
through the Company's Web site, without obtaining the consent of any other
party, and without such third parties being bound by nondisclosure obligations.
Within sixty (60) days of the Closing under the Series C Agreement, the Company
may issue a press release disclosing that the Investors have invested in the
Company; provided that the release does not disclose the amount or other
specific terms of the investment and is approved in advance in writing by the
Investors. Intel Corporation ("Intel"), at its sole discretion, may provide an
executive quote or other material regarding its investment in the Company.
Notwithstanding any other provision of this paragraph, no other announcement
regarding any Investor's investment in the Company in a press release, in any
advertisement or announcement in a professional or trade publication or in any
mass marketing materials to the general public (excluding the Company's Web site
as referenced above) may be made without the prior written consent of such
Investor, which consent may be withheld at the sole discretion of such Investor.
Notwithstanding the foregoing, Intel may disclose its investment in the Company
and the terms thereof to third parties or to the public at its discretion, and
the Company and the Investors shall have the right to disclose to third parties
any such information disclosed by Intel in a press release or other public
announcement. In the event that the Company or any
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other party becomes legally compelled (by statute or regulation or by oral
questions, interrogatories, request for information or documents, subpoena,
criminal or civil investigative demand or similar process, including without
limitation, in connection with any public or private offering of the Company's
capital stock) to disclose any confidential information, including the terms of
the Series C Agreement, such party (the "Disclosing Party") shall provide the
other party (the "Non-Disclosing Party") with prompt written notice of that fact
so that the appropriate party may seek (with the cooperation and reasonable
efforts of the other parties) a protective order, confidential treatment or
other appropriate remedy. In such event, the Disclosing Party shall furnish only
that portion of the Confidential Information which is legally required and shall
exercise reasonable efforts to attempt to obtain reliable assurance that
confidential treatment will be accorded the Confidential Information to the
extent reasonably requested by the Non-Disclosing Party. The provisions of this
Section 5.13 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transaction contemplated by the Series C Agreement.
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[INSERT SIGNATURE PAGES]
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EXHIBIT A
LIST OF INVESTORS
<PAGE> 1
EXHIBIT 10.01
BROADBASE SOFTWARE, INC.
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement"), dated as of _____________,
1999, is made by and between Broadbase Software, Inc., a Delaware corporation
(the "Company"), and _________________, a director and/or officer of the Company
(the "Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware, under which the
Company is organized ("Section 145"), empowers the Company to indemnify by
agreement its officers, directors, employees and agents, and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
1.1 Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign
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Indemnity Agreement
or domestic corporation, partnership, joint venture, trust or other enterprise
or an affiliate of the Company; or was a director or officer of a foreign or
domestic corporation which was a predecessor corporation of the Company,
including, without limitation, eBay Inc., a California corporation, or was a
director or officer of another enterprise or affiliate of the Company at the
request of, for the convenience of, or to represent the interests of such
predecessor corporation. The term "enterprise" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "expenses" includes
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other
out-of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement, "proceeding"
means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
1.4 Subsidiary. For purposes of this Agreement, "subsidiary" means
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more of
its subsidiaries or by one or more of the Company's subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue to
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, faithfully and to the best of his ability, so
long as he is duly appointed or elected and qualified in accordance with the
applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that the Indemnitee may at any time and for
any reason resign from such position (subject to any contractual obligation that
the Indemnitee may have assumed apart from this Agreement), and the Company or
any subsidiary shall have no obligation under this Agreement to continue the
Indemnitee in any such position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the extent
that the Board determines it to be economically reasonable, maintain a policy of
directors' and officers' liability insurance ("D&O Insurance"), on such terms
and conditions as may be approved by the Board.
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
shall indemnify the Indemnitee:
4.1 Third Party Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the
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Indemnity Agreement
Company) by reason of the fact that he is or was an agent of the Company, or by
reason of anything done or not done by him in any such capacity, against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company; except that no
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding the
foregoing, the Company shall not be obligated to indemnify the Indemnitee for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) to the extent such have been paid directly to the Indemnitee by D&O
Insurance.
5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
5.1 Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but is not entitled, however, to indemnification for all
of the total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware General Corporation Law, then in respect
of any threatened, pending or completed proceeding in
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which the Company is jointly liable with the Indemnitee (or would be if joined
in such proceeding), the Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by the Indemnitee in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Indemnitee on the other hand from the
transaction from which such proceeding arose and (ii) the relative fault of the
Company on the one hand and of the Indemnitee on the other hand in connection
with the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Indemnitee on the other hand
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
6. MANDATORY ADVANCEMENT OF EXPENSES.
6.1 Advancement. Subject to Section 9 below, the Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the General Corporation
Law of Delaware or otherwise. The advances to be made hereunder shall be paid by
the Company to the Indemnitee within thirty (30) days following delivery of a
written request therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
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twenty (20) percentage points without advance Board approval.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the commencement
of a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such D&O Insurance policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee (which approval shall not be unreasonably withheld),
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided that:
(a) the Indemnitee shall have the right to employ his own counsel in any such
proceeding at the Indemnitee's expense; (b) the Indemnitee shall have the right
to employ his own counsel in connection with any such proceeding, at the expense
of the Company, if such counsel serves in a review, observer, advice and
counseling capacity and does not otherwise materially control or participate in
the defense of such proceeding; and (c) if (i) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of the Indemnitee's counsel shall be at
the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
8.1 To the extent the Indemnitee has been successful on the merits
or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of
this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not apply
to the entire
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Indemnity Agreement
proceeding, the Company shall nonetheless indemnify the Indemnitee unless the
Company shall prove by clear and convincing evidence to a forum listed in
Section 8.3 below that the Indemnitee has not met the applicable standard of
conduct required to entitle the Indemnitee to such indemnification.
8.3 The Indemnitee shall be entitled to select the forum in which
the validity of the Company's claim under Section 8.2 hereof that the Indemnitee
is not entitled to indemnification will be heard from among the following,
except that the Indemnitee can select a forum consisting of the stockholders of
the Company only with the approval of the Company:
(a) A quorum of the Board consisting of directors who are not
parties to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel mutually agreed upon by the Indemnitee and
the Board, which counsel shall make such determination in a written opinion;
(d) A panel of three arbitrators, one of whom is selected by
the Company, another of whom is selected by the Indemnitee and the last of whom
is selected by the first two arbitrators so selected; or
(e) The Court of Chancery of Delaware or other court having
jurisdiction of subject matter and the parties.
8.4 As soon as practicable, and in no event later than thirty (30)
days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.
8.5 If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of Chancery
of Delaware, the court in which the proceeding giving rise to the Indemnitee's
claim for indemnification is or was pending or any other court of competent
jurisdiction, for the purpose of appealing the decision of such forum, provided
that such right is executed within sixty (60) days after the final decision of
such forum is rendered. If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.
8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between
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the Company and the Indemnitee involving the interpretation or enforcement of
the rights of the Indemnitee under this Agreement unless a court of competent
jurisdiction finds that each of the material claims and/or defenses of the
Indemnitee in any such proceeding was frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
proceedings specifically authorized by the Board or brought to establish or
enforce a right to indemnification and/or advancement of expenses arising under
this Agreement, the charter documents of the Company or any subsidiary or any
statute or law or otherwise, but such indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board finds it to be
appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder
for any amounts paid in settlement of a proceeding unless the Company consents
in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
9.3 Securities Law Actions. To indemnify the Indemnitee on account
of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful. In this respect, the Company and the Indemnitee
have been advised that the Securities and Exchange Commission takes the position
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the Indemnitee may have under any provision of law, the Company's
Certificate of Incorporation or Bylaws, the vote of the Company's stockholders
or disinterested directors, other agreements or otherwise, both as to action in
the Indemnitee's official capacity and to action in another capacity while
occupying his position as an agent of the Company, and the Indemnitee's rights
hereunder shall continue after the Indemnitee has ceased acting as an agent of
the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
11. GENERAL PROVISIONS
11.1 Interpretation of Agreement. It is understood that the parties
hereto intend
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Indemnity Agreement
this Agreement to be interpreted and enforced so as to provide indemnification
and advancement of expenses to the Indemnitee to the fullest extent now or
hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
then: (a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.
11.4 Subrogation. In the event of full payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary or desirable to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind,
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
11.7 Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given: (a) if
delivered by hand and receipted for by the party addressee; or (b) if mailed by
certified or registered mail, with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement or as subsequently modified by written notice.
11.8 Governing Law. This Agreement shall be governed exclusively by
and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each
hereby
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irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement.
11.10 Attorneys' Fees. In the event Indemnitee is required to bring
any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity
Agreement effective as of the date first written above.
BROADBASE SOFTWARE, INC. INDEMNITEE:
By: By:
---------------------------- ----------------------------
Title:
---------------------------- ----------------------------
Address: Address:
---------------------------- ----------------------------
9
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EXHIBIT 10.02
BROADBASE INFORMATION SYSTEMS, INC.
1996 EQUITY INCENTIVE PLAN
As adopted March 4, 1996 and amended November 17, 1998
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.
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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.
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(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:
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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;
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(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
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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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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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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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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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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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"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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(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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"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> 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
__________ 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.
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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.
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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
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1999 Equity Incentive Plan
Disability, or (b) twelve (12) months after the Termination
Date when the Termination is for Participant's death or
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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1999 Equity Incentive Plan
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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1999 Equity Incentive Plan
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, no
Award and no interest therein may be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will and by the laws of
descent and distribution and no Award may be made subject to execution,
attachment or similar process:
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; and
11.3 NQSOs. Unless otherwise restricted by the Committee, an
NQSO Option 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 Option by
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Permitted Transfer; and (ii) after Participant's death, by the legal
representative of the Participant's heirs or legatees.
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 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.
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
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Broadbase Software, Inc.
1999 Equity Incentive Plan
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 anything in this Plan to the
contrary, the Committee may, in its sole discretion, 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
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Broadbase Software, Inc.
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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.
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.
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Broadbase Software, Inc.
1999 Equity Incentive Plan
"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 Information Systems, 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 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;
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1999 Equity Incentive Plan
(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;
(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.
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1999 Equity Incentive Plan
"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 Information Systems, 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.
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EXHIBIT 10.04
BROADBASE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted July 2, 1999
1. ESTABLISHMENT OF PLAN. Broadbase Information Systems, 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
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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 January 31, 2002. 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.
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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.
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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
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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.
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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> 1
EXHIBIT 10.05
CORNISH & CAREY COMMERCIAL
C&C
ONCOR INTERNATIONAL
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SUBLEASE AGREEMENT
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1. PARTIES:
This Sublease is made and entered into as of June 1, 1998, by and
between SaRonix, a California Corporation ("Sublandlord"), and Broadbase
Information Systems, Inc., a California Corporation ("Subtenant"), under
the Master Lease dated November 18, 1997, between WHSUM Real Estate
Limited Partnership, a Delaware Limited Partnership, as "Lessor" and
Sublandlord under this Sublease as "Lessee." A copy of the Master Lease
is attached hereto as Attachment I and incorporated herein by this
reference.
2. PROVISIONS CONSTITUTING SUBLEASE:
2.1 This Sublease is subject to all of the terms and conditions of
the Master Lease. Subtenant hereby assumes and agrees to perform
all of the obligations of "Lessee" under the Master Lease to the
extent said obligations apply to the Subleased Premises and
Subtenant's use of the Common Areas, except as specifically set
forth herein. Sublandlord hereby agrees to cause Lessor under the
Master Lease to perform all of the obligations of Lessor
thereunder to the extent said obligations apply to the Subleased
Premises and Subtenant's use of the Common Areas. Subtenant shall
not commit or permit to be committed on the Subleased Premises or
on any other portion of the Project any act or omission which
violates any term or condition of the Master Lease. Except to the
extent waived or consented to in writing by the other party or
parties hereto who are affected thereby, neither of the parties
hereto will, by renegotiation of the Master Lease, assignment,
subletting, default or any other voluntary action, avoid or seek
to avoid the observance or performance of the terms to be
observed or performed hereunder by such party, but will at all
times in good faith assist in carrying out all the terms of this
Sublease and in taking all such action as may be necessary or
appropriate to protect the rights of the other party or parties
hereto who are affected thereby against impairment. Nothing
contained in this Section 2.1 or elsewhere in this Sublease shall
prevent or prohibit Sublandlord (a) from exercising its right to
terminate the Master Lease pursuant to the terms thereof or (b)
from assigning its interest in this Sublease or subletting the
Premises to any other third party. If Sublandlord exercises its
right, if any, to terminate the Master Lease, the Sublandlord
shall reimburse Subtenant for the remaining portion of
unamortized (on straight line basis) Tenant Improvement costs as
outlined on Addendum #1 Paragraph 2. The full unamortized Tenant
Improvement costs are to be paid by Sublandlord when Subtenant is
required to vacate the Subleased Premises.
<PAGE> 2
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SUBLEASE AGREEMENT
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2.2 All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and
the terms and conditions specifically set forth in this Sublease,
shall constitute the complete terms and conditions of this
Sublease, except that the following paragraphs shall be
superseded by this Sublease Agreement:
Section 1, 2.1, 2.2, 3, 4, 5, 15.1, 15.2, 24, 31.10 with
modification, 38, Exhibit B, Exhibit F and Addendum 1.
2.3 Notwithstanding anything to the contrary contained in the Master
Lease, the Consent to Subletting or in this Sublease (by
incorporation of provisions of the Master Lease such as Section
29.5 of the Master Lease or otherwise), no officer and no
director of Sublessee has agreed or does agree to defend,
indemnify or hold harmless Sublandlord, Landlord or anyone else
with respect to any claims, judgments, damages, penalties, fines,
liabilities, losses, suits, administrative proceedings, costs, or
other matters arising at any time in connection with or related
to, directly or indirectly, the use, presence, transportation,
storage, disposal, migration, removal, spill, release or
discharge of "Hazardous Materials" (as defined in the Master
Lease) on, in or about the "Premises," the "Common Areas," the
"Building," the "Lot," and/or the "Park" (as such terms are
defined in the Master Lease). Accordingly, without limitation,
the references to "Tenant's officers and directors" in Section
29.5 of the Prime Lease are not incorporated into the Sublease.
This is acceptable as long as Subtenant's use does not change
with regard to Hazardous Materials.
3. SUBLEASED PREMISES AND RENT:
3.1 Subleased Premises:
Sublandlord leases to Subtenant and Subtenant leases from
Sublandlord the Subleased Premises upon all of the terms,
covenants and conditions contained in this Sublease. The
Subleased Premises consist of approximately 20,941+/- square
feet, located at 141 Jefferson Drive, Menlo Park, CA. (Fronting
Constitution Drive.) The Sublease shall be that portion of
Exhibit A to the Master Lease as designated in Exhibit A to this
Sublease Agreement.
3.2 Rent
Subtenant shall pay to Sublandlord as Base NNN Rent for the
Subleased Premises the sum of Forty Thousand Two Hundred Six and
72/100 Dollars ($40,206.72) per month, without deductions,
offset, prior notice or demand. One month's Base Rent shall be
paid upon the Commencement Date. Rent shall be payable by
Subtenant to Sublandlord in consecutive monthly installments on
or before the first day of each calendar month during the
Sublease Term. If the Sublease
2
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SUBLEASE AGREEMENT
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Commencement Date or the termination date of the Sublease occurs
on a date other than the first day or the last day, respectively,
of a calendar month, then the Rent for such partial month shall
be prorated and the prorated Rent shall be payable on the
Sublease Commencement Date or on the first day of the calendar
month in which the Sublease termination date occurs,
respectively. Additionally, Subtenant shall pay all operating
expenses on a prorated basis per the Master Lease. Utilities
shall be paid monthly by Subtenant on a prorated basis using a
formula of $0.173/square foot ($3,619.00 per month - See attached
algorithm). The Base Rent shall be adjusted per the following
schedule.
<TABLE>
Month Monthly Base Rent
----- -----------------
<S> <C>
01-12 $40,207.00
13-24 $41,714.75
25-36 $43,282.81
37-45 $44,913.59
</TABLE>
3.3 Security Deposit:
In addition to the Rent specified above, Subtenant shall pay to
Sublandlord One Hundred Sixty Five Thousand Five Hundred Thirty
Four and 59/100 Dollars ($165,534.59) as a non-interest bearing
Security Deposit upon the execution of the Sublease Agreement.
Said Security Deposit shall be split into two categories (i)
$120,621.00 which shall be credited against rent accruing with
respect to periods prior to November 1, 1998 in the event the
Commencement Date occurs before November 1, 1998 and (ii)
$44,913.59 which will be held throughout the Sublease Term.
Sublandlord shall return to Subtenant, within ten days after
Subtenant has vacated the Subleased Premises, the Security
Deposit (category ii) less any sums due and owing to Sublandlord.
The balance of the category (i) security deposit which was not
credited against rent accruing prior to November 1, 1998 shall be
applicable to the monthly base rent beginning in the first month
of the lease term occurring after October 1998 and every month
thereafter at a monthly rate equal to the balance divided by the
number of months in the Sublease Term.
4. RIGHTS OF ACCESS AND USE:
4.1 Use:
Subtenant shall use the Subleased Premises only for those
purposes permitted in the Master Lease, unless Sublandlord and
Master Landlord consent in writing to other uses prior to the
commencement thereof.
3
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SUBLEASE AGREEMENT
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5. SUBLEASE TERM:
5.1 Sublease Term:
The Sublease Term shall be for the period commencing on the later
of (i) the date Sublandlord offers possession of the entire
Subleased Premises to Subtenant, or (ii) November 1, 1998 (the
"Commencement Date") subject to the provisions of Addendum
Paragraph 1, and continuing through July 31, 2002. In no event
shall the Sublease Term extend beyond the Term of the Master
Lease.
5.2 Inability to Deliver Possession:
In the event Sublandlord is unable to deliver possession of the
entire Subleased Premises at the commencement of the term,
Sublandlord shall not be liable for any damage caused thereby,
nor shall this Sublease be void or voidable but Subtenant shall
not be liable for Rent until such time as Sublandlord offers to
deliver possession of the entire Subleased Premises to Subtenant,
but the term hereof shall not be extended by such delay. If
Subtenant, with Sublandlord's consent, takes possession of the
entire Subleased Premises prior to commencement of the term,
Subtenant shall do so subject to all the covenants and conditions
hereof and shall pay Rent for the period from the beginning of
possession and ending with the commencement of the term at the
same rental as that prescribed for the first month of the term
prorated at the rate of 1/30th thereof per day. In the event
Sublandlord has been unable to deliver possession of the entire
Subleased Premises within 120 days from the Commencement Date,
Subtenant, at Subtenant's option, may terminate this Sublease. In
the event that Subtenant accepts possession of a portion of the
Sublease Premises prior to the Commencement Date, no base rent
shall be charged and its right to quiet enjoyment of the Premises
shall be subject to the reasonable needs of the contractor in
completing the Tenant Improvements under the Master Lease, and
this Sublease; (Subtenant shall pay its prorata share of expenses
in the event of occupancy prior to November 1, 1998).
6. NOTICES:
All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be given in the
manner provided in the Master Lease, at the addresses shown on the
signature page hereof. Sublandlord shall notify Subtenant of any Event
of Default under the Master Lease, or of any other event of which
Sublandlord has actual knowledge which will impair Subtenant's ability
to conduct its normal business at the Subleased Premises, as soon as
reasonably practicable following Sublandlord's receipt of notice from
the Landlord of an Event of Default or actual knowledge of such
impairment. If Sublandlord elects to terminate the Master Lease,
Sublandlord shall so notify Subtenant by giving at least 30 days notice
prior to the effective date of such termination.
4
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SUBLEASE AGREEMENT
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7. BROKER FEE.
Upon execution of the Sublease, Sublandlord shall pay Cornish & Carey
Commercial, a licensed real estate broker, fees set forth in a separate
agreement between Sublandlord and Broker.
8. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Subtenant shall be responsible for the installation and cost of any and
all improvements, alterations or other work required on or to the
Subleased Premises or to any other portion of the property and/or
building of which the Subleased Premises are a part, required or
reasonably necessary because of: (1) Subtenant's use of the Subleased
Premises or any portion thereof; (2) the use by a subtenant by reason of
assignment or sublease; or (3) both, including any improvements,
alterations or other work required under the Americans With Disabilities
Act of 1990. Compliance with the provisions of this Section 8 shall be a
condition of Sublandlord granting its consent to any assignment or
Sublease of all or a portion of this Sublease and the Subleased Premises
described in this Sublease.
9. COMPLIANCE WITH NONDISCRIMINATION REGULATIONS:
It is understood that it is illegal for Sublandlord to refuse to display
or sublease the Subleased Premises, or to assign, surrender or sell the
Master Lease, to any person because of race, color, religion, national
origin, sex, sexual orientation, marital status or disability.
10. TOXIC CONTAMINATION DISCLOSURE:
Sublandlord and Subtenant each acknowledge that they have been advised
that numerous federal, state, and/or local laws, ordinances and
regulations ("Laws") affect the existence and removal, storage,
disposal, leakage of and contamination by materials designated as
hazardous or toxic ("Toxics"). Many materials, some utilized in everyday
business activities and property maintenance, are designated as
hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by
landowners, future landowners or former landowners without regard to
whether the party required to pay for "clean up" caused the
contamination, owned the property at the time the contamination occurred
or even knew about the contamination. Some items, such as asbestos or
PCBs, which were legal when installed, now are classified as Toxics, and
are subject to removal requirements. Civil lawsuits for damages
resulting from Toxics may be filed by third parties in certain
circumstances.
Sublandlord and Subtenant each acknowledge that Broker has no specific
expertise with respect to environmental assessment or physical condition
of the Subleased Premises, including, but not limited to, matters
relating to: (i) problems which may be posed by the presence or disposal
of hazardous or toxic substances on or from the Subleased Premises, (ii)
problems which may be posed by the Subleased Premises being within the
Special
5
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SUBLEASE AGREEMENT
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Studies Zone as designated under the Alquist-Priolo Special Studies Zone
Act (Earthquake Zones), Section 2621-2630, inclusive of California
Public Resources Code, and (iii) problems which may be posed by the
Subleased Premises being within a HUD Flood Zone as set forth in the
U.S. Department of Housing and Urban Development "Special Flood Zone
Area Maps," as applicable.
Sublandlord and Subtenant each acknowledge that Broker has not made an
independent investigation or determination of the physical or
environmental condition of the Subleased Premises, including, but not
limited to, the existence or nonexistence of any underground tanks,
sumps, piping, toxic or hazardous substances on the Subleased Premises.
Subtenant agrees that it will rely solely upon its own investigation
and/or the investigation of professionals retained by it or Sublandlord,
and neither Sublandlord nor Subtenant shall rely upon Broker to
determine the physical and environmental condition of the Subleased
Premises or to determine whether, to what extent or in what manner, such
condition must be disclosed to potential sublessees, assignees,
purchasers or other interested parties.
11. RENT ABATEMENT AND DAMAGES TO PERSONAL PROPERTY:
In the event Sublandlord, pursuant to the terms of the Master Lease, is
entitled to and receives rent abatement, then to the extent such rent
abatement affects the Subleased Premises, Subtenant shall be entitled to
rent abatement in an amount that the net rentable area of the subleased
premises bears to the total net rentable area of the Master Lease, and
only to the extent any such abatement applies to the sublease term. In
addition, any amounts paid or credited to Sublandlord under the terms of
the Master Lease for damage to personal property shall be credited to
Subtenant, subject to the same limitations set forth above.
SUBLANDLORD: SARONIX, A CALIFORNIA CORPORATION
By: /s/ James Obendorf Date:
------------------------------------ ------------------
James Obendorf, Vice President
141 Jefferson Drive
Menlo Park, CA 94025
SUBTENANT: BROADBASE INFORMATION SYSTEMS, INC., A CALIFORNIA
CORPORATION
By: /s/ Chuck Bay Date:
------------------------------------ ------------------
Chuck Bay, Chief Financial Officer
141 Jefferson Drive
Menlo Park, CA 94025
6
<PAGE> 7
C&C
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SUBLEASE AGREEMENT
------------------------------------------------------------------------------
NOTICE TO SUBLANDLORD AND SUBTENANT: CORNISH & CAREY COMMERCIAL, IS NOT
AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUBLEASE OR
ANY DISCUSSIONS BETWEEN CORNISH & CAREY AND SUBLANDLORD AND SUBTENANT SHALL BE
DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY CORNISH & CAREY COMMERCIAL,
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES ARE ENCOURAGED TO
CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR ATTORNEYS REGARDING
THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.
7
<PAGE> 8
[INSERT 4 PAGES OF GRAPHICS]
<PAGE> 9
CORNISH & CAREY COMMERCIAL
C&C
ONCOR INTERNATIONAL
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SUBLEASE AGREEMENT ADDENDUM #1
------------------------------------------------------------------------------
ADDENDUM #1 TO THE SUBLEASE AGREEMENT DATED JUNE 1, 1998, BY AND BETWEEN
SARONIX, A CALIFORNIA CORPORATION, SUBLANDLORD, AND BROADBASE INFORMATION
SYSTEMS, INC., A CALIFORNIA CORPORATION, SUBTENANT, FOR THOSE PREMISES LOCATED
AT 141 JEFFERSON DRIVE, MENLO PARK, CALIFORNIA.
1. EARLY POSSESSION: Sublandlord shall use its best efforts to complete the
Tenant Improvements and to have the entire Subleased Premises ready for
occupancy by Subtenant by August 1, 1998. Sublandlord shall notify
Subtenant as soon as the Subleased Premises are so ready. Subtenant, in
its sole discretion, may then take possession of the entire Subleased
Premises at any time prior to November 1, 1998. Subtenant shall be
allowed access at least one (1) week prior to the commencement date, and
after the substantial completion of the tenant improvements, to set up
its operation in the Sublease Premises subject to the construction
process and scheduling. Subtenant shall indemnify Sublandlord against
any issues arising from the early occupancy.
2. TENANT IMPROVEMENTS: Sublandlord shall cause to be constructed the
following tenant improvements per Exhibit C which includes the items
listed below:
Alternate #1 - Duct work, plugs, carpet, lighting at open area
Alternate #3 - Change roll-up door to storefront glass
Alternate #4 - Office 174 to kitchen
Alternate #5 - Add 4 conference rooms at north wall 182
Alternate #6 - Build 15' wall from the M-O line on 44 line
Alternate #7 - New stair and railing to mezzanine
Alternate #8 - New coffee counter room 178
The cost of the tenant improvements including architectural, permit,
construction management and other associated fees shall be split on the
basis of 60% Sublandlord and 40% Subtenant up to $250,000. Costs above
$250,000 shall be mutually approved by Sublandlord and Subtenant in
writing in advance and such costs shall be shared equally by both
parties.
3. SIGNAGE: Subtenant at Subtenant's cost shall be allowed signage subject
to Sublandlord's and City approval.
<PAGE> 10
CORNISH & CAREY COMMERCIAL
C&C
ONCOR INTERNATIONAL
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SUBLEASE AGREEMENT
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4. CONDITION OF PREMISES: Sublandlord shall deliver the Premises to
Subtenant with the roof, HVAC, electrical, plumbing and lighting in good
working condition, sufficient to support Subtenant's intended use. Said
costs associated with delivery of premises in good working condition
shall not be subtracted from Sublandlord's contribution to the Tenant
Improvements described in Paragraph 2 of Addendum #1.
5. PARKING: Subtenant shall be granted sixty (60) designated parking stalls
(as designated in Exhibit B to this Sublease Agreement).
6. ASSIGNMENT & SUBLEASING: Subtenant shall have the right to assign or sublease
the Subleased Premises, in accordance with the Master Lease, subject to
Sublandlord's approval which shall not be unreasonably withheld. Any bonus rent
shall be split 75/25 in favor of Sublandlord. Further, Sublandlord shall have
the right to recapture the premises in the event of a Sublease after the first
twelve (12) months of the Sublease term. Subtenant may sublease the Premises to
Uroquest at any time during the Sublease term. Subtenant shall pay all costs of
such Sub-Sublease or assignment, including brokerage commissions and tenant
improvements. The brokerage commissions and tenant improvements costs of such
Sub-Sublease or assignment shall be deducted in computing bonus rent and shall
be charged against any portion of the bonus rent to which Sublandlord is
entitled.
SUBLANDLORD: SARONIX, A CALIFORNIA CORPORATION
By: /s/ JAMES OBENDORF Date: 6/12/98
------------------------------------- -----------------
James Obendorf, Vice President
SUBTENANT: BROADBASE INFORMATION SYSTEMS, INC., A CALIFORNIA
CORPORATION
By: /s/ CHUCK BAY Date: 6/11/98
------------------------------------- -----------------
Chuck Bay, Chief Financial Officer
10
<PAGE> 11
SUBTENANT IMPROVEMENT AGREEMENT
THIS SUBTENANT IMPROVEMENT AGREEMENT, dated as of June ____, 1998
("Subtenant Improvement Agreement"), is made and entered into by and between
SARONIX, a California corporation ("Sublessor"), and BROADBASE INFORMATION
SYSTEMS, INC., a California corporation ("Subtenant"), under that certain
sublease dated as of June 1, 1998 between them, affecting that real property
commonly known as 141 Jefferson Drive, Menlo Park, California ("Sublease"). In
the event of a conflict between this Subtenant Improvement Agreement and the
Sublease, the Sublease shall govern.
1. DEFINITIONS
Wherever used in this Subtenant Improvement Agreement,
capitalized terms that are not defined herein shall have the meaning given to
them in the Sublease. The following terms shall have the meanings set forth
below:
A. ALLOWANCE is the maximum amount Subtenant is required to pay
toward the Construction Cost of the Initial Improvements, which amount is One
Hundred Thousand Dollars ($100,000.00), plus 50% of overages above $250,000.00.
Said costs above $250,000.00 shall be mutually approved in advance in writing by
Sublandlord and Subtenant.
B. ARCHITECT(S) collectively means SIGMATECH and LINCOLN's
architect, each of whom shall be duly licensed by the State of California and in
good professional standing.
C. COMPLETION of the Initial Improvements is defined in Section
5.B.
D. CONTRACTOR(S) means the General Contractor which is E.W.
Thorpe and all other general contractors, design-build contractors,
subcontractors, and material suppliers who provide labor and materials for
construction of the Initial Improvements. To the extent required by Laws and
Restrictions, each Contractor shall be duly licensed by the State of California
insured as required by the Lease and Landlord and in good professional standing.
E. CONSTRUCTION COST means the total for the following: (i)
payments to Contractor(s) for labor, material, equipment, and fixtures supplied
for the construction of the Initial Improvements pursuant to any construction
contract entered into in accordance with this Subtenant Improvement Agreement,
(ii) payments to Architect(s) for design of Initial Improvements, and
proportionately costs of project management fees and (iii) payments to
governmental and quasi-governmental agencies for permits or for inspections of
the Initial Improvements.
F. CONSTRUCTION DOCUMENTS are (1) the Final Plans, (2) the
construction contract(s) with Contractor(s), and (3) the agreement(s) with
Architect(s).
G. DESIGN & CONSTRUCTION SCHEDULE is the schedule for design,
commencement, prosecution and Completion of the Initial Improvements which is
attached to
<PAGE> 12
this Subtenant Improvement Agreement as Attachment I and incorporated herein by
this reference.
H. FINAL PLANS are those working drawings, plans, and
specifications, and elevations prepared by the Architects and Subcontractors and
approved by the parties and Landlord pursuant to this Subtenant Improvement
Agreement which are identified in Attachment 2 which is attached to this
Subtenant Improvement Agreement as Attachment 2 and incorporated herein by this
reference.
I. FORCE MAJEURE DELAY is a delay caused by a force majeure event
beyond the reasonable control of the party required to perform, including,
without limitation, general strikes, inclement weather, utility curtailments,
and acts of God.
J. INITIAL IMPROVEMENTS are all of those alterations,
modifications, and improvements described on the Final Plans.
K. SUBLESSOR'S REPRESENTATIVE is James Obendorf, or such other
person as the Sublessor shall designate in writing to Subtenant as its
authorized representative to administer this Subtenant Improvement Agreement.
L. LAWS AND RESTRICTIONS means all laws (including without
limitation the Americans with Disabilities Act and environmental laws), building
codes, ordinances, regulations, title covenants, conditions, and restrictions,
and casualty underwriters' requirements applicable to the Subleased Premises and
the construction of improvements therein.
M. PERMITS are all of the permits, approvals and consents of
governmental authorities and third parties having jurisdiction over the work
that are required for commencement and Completion of the Initial Improvements.
N. SCHEDULED COMPLETION DATE is the scheduled date for Completion
of the Initial Improvements specified in the Construction Schedule, except to
the extent that such date is modified pursuant to Section 3.
O. SUBTENANT'S REPRESENTATIVE is Chuck Bay, or such other person
as the Subtenant shall designate in writing to Sublessor as its authorized
representative to administer this Subtenant Improvement Agreement.
2. DESIGNATION OF REPRESENTATIVES
Sublessor and Subtenant hereby respectively appoint the
Sublessor's Representative and the Subtenant's Representative as their sole
representatives for this Subtenant Improvement Agreement. Until replaced by
written notice, the Sublessor's Representative and the Subtenant's
Representative will have the full authority and responsibility to act for
Sublessor and Subtenant respectively, as required by this Subtenant Improvement
Agreement.
12
<PAGE> 13
3. CONTRACT DOCUMENTS AND PERMITS
A. PREPARATION & APPROVAL OF FINAL PLANS AND COST ESTIMATE.
Subtenant shall cause the Architect to prepare (i) proposed Final Plans, and
(ii) any adjustment(s) to the Construction Schedule occasioned by the Final
Plans on or before June ____, 1998. Sublessor and Subtenant shall review the
Final Plans and any revisions to the Construction Schedule, and deliver to the
other party and to the Architect, the party's written approval or disapproval
thereof on or before June __, 1998. If disapproved in any respect, the parties
shall confer and negotiate in good faith to agree upon the Final Plans and any
modifications to the Construction Schedule, using all reasonable efforts to
achieve final agreement on such items by June ___, 1998. Both parties shall
initial each page of the approved Final Plans and any modifications of the
Construction Schedule.
Sublessor's and Subtenant's approval of the Final Plans and any
Construction Schedule (subject to Landlord approval) modifications shall not be
unreasonably withheld or delayed, provided, however, that Sublessor may withhold
its approval in its sole discretion to any work which adversely affects the
Building structure.
Any disapproval by Sublessor or Subtenant shall be accompanied by
a written statement of the disapproved item, the reasons for disapproval, and
the specific changes required to make the item acceptable. If a party's written
notice of disapproval is not delivered in accordance with the time limits and
standards set forth in this Section, approval shall be deemed given.
B. APPLICATION FOR APPROVALS. When Sublessor and Subtenant
approve the Final Plans, Sublandlord shall submit them to all appropriate
governmental agencies and third parties for issuance of the Permits required for
the construction of the Initial Improvements. Subtenant shall put forth all
reasonable cooperative efforts to obtain the Permits so as not to delay
Completion of the Subtenant Improvements beyond the Scheduled Completion Date.
C. CHANGES TO FINAL PLANS. The Final Plans and Construction
Schedule established in accordance with this Section 3 may be modified only by a
written change order ("Change Order") executed by Sublessor and Subtenant, which
clearly describes (i) the change (subject to Landlord approval) (ii) the party
required to perform the change, and (iii) any revision of the Construction
Schedule occasioned by the change. Neither Sublessor nor Subtenant shall
unreasonably withhold or delay its approval of a change (whether requested by a
party or required by an applicable Law or Restriction ). If the parties are
unable to agree upon any requested Change Order within five (5) days following
written demand for such agreement, then either party may demand immediate
commencement of mediation to resolve the dispute. Landlord shall not be
obligated to go to mediation.
4. PERFORMANCE OF THE WORK
A. SELECTION OF CONTRACTOR(S) AND SUPPLIERS. Construction of the
Initial Improvements shall be performed by a General Contractor selected by
Sublessor and approved by Subtenant, which approval shall not be unreasonably
withheld.
13
<PAGE> 14
B. COMMENCEMENT AND COMPLETION OF SUBLESSOR'S WORK. When all
Permits for the Initial Improvements have been obtained, Sublessor shall cause
its Contractor(s) to commence and thereafter diligently to construct the Initial
Improvements so that all of the Initial Improvements will be Completed (as
hereinafter defined) on or before the Scheduled Completion Date.
C. STANDARDS FOR PERFORMANCE OF THE WORK. Sublessor shall cause
all the Initial Improvements to be constructed by well trained, adequately
supervised workers, in a good and workmanlike manner, with new materials, free
from design, material and workmanship defects, and in accordance with ail
Construction Documents and all Laws and Restrictions.
5. COMPLETION OF THE WORK
A. INSPECTION. Subtenant's Representative shall have the right to
enter the Subleased Promises at all reasonable times to inspect the progress of
the Initial Improvements.
B. COMPLETION. The Initial Improvements shall be deemed
"Complete" when (i) construction of the Initial Improvements has been completed
in accordance with the Final Plans and applicable Laws and Restrictions; (ii)
the General Contractor has certified in writing to Sublessor that the Initial
Improvements have been constructed in accordance with the Final Plans and all
applicable Laws and Restrictions; and (iii) all necessary governmental approvals
for occupancy of the entire Subleased Premises have been obtained (including. if
applicable, a Certificate of Occupancy).
6. PAYMENT OF CONSTRUCTION COST
Not more frequently than once each week, Sublessor may deliver to
Subtenant an application for reimbursement of Construction Costs incurred since
the last application for reimbursement, accompanied by reasonable documentary
evidence of the amount. On or before the seventh (7th) day following delivery of
the application for reimbursement, Subtenant shall pay to Sublessor an amount
equal to the amount set forth in such application for reimbursement if Sublessor
also has delivered to Subtenant evidence and documentation adequately
establishing that Sublessor has paid 60% of the aggregate Construction Cost
incurred to such point, provided, any costs in excess of $250,000.00 shall be
paid 50/50 by Sublandlord and Subtenant. Said excess costs shall be mutually
approved in advance in writing.
7. OWNERSHIP & SURRENDER OF INITIAL IMPROVEMENTS
All Initial Improvements shall be surrendered to Sublessor in the
surrender condition required by the Sublease upon the expiration or earlier
termination of the Sublease. Notwithstanding the foregoing, if Subtenant has
paid directly or reimbursed Sublessor for any portion of the Construction Cost
of the Initial Improvements, then as soon as possible after the Completion of
the Initial Improvements, Sublessor and Subtenant shall designate as Subtenant's
property ("Subtenant's Property") those Initial Improvements having a total cost
approximately equal to the portion of the Construction Cost paid by Subtenant.
In determining which Initial Improvements will be designated as Subtenant's
Property, the parties shall confer in good faith
14
<PAGE> 15
and shall give preference for designation as Subtenant's Property to those
Initial Improvements that are most readily removable from the Subleased Premises
and those likely to have the most utility for Subtenant outside the Subleased
Premises. Initial Improvements so designated as Subtenant's Property may be
removed from the Subleased Premises subject to Master Lease and Sublease at any
time by Subtenant. Subtenant also shall be entitled to all tax benefits,
depreciation, insurance and condemnation proceeds, assignment and subletting
value, and other ownership attributes of the Initial Improvements designated as
Subtenant's Property. Upon request the Sublessor shall execute documents in form
reasonably acceptable to Subtenant, acknowledging the Subtenant s right, title
and interest in the Initial Improvements designated as Subtenant's Property. At
the expiration or earlier termination of the Sublease, Subtenant shall not be
required to remove any of the Initial Improvements. At the expiration or earlier
termination of the Sublease, all Initial Improvements designated as Subtenant's
Property, at Subtenant's election, may be (i) surrendered to Sublessor in the
surrender condition required by the Sublease, or (ii) removed by Subtenant,
provided Subtenant repairs all damage caused by removal of such Initial
Improvements, provided, however Landlord shall not be bound by the provisions of
this Section 7.
IN WITNESS WHEREOF, the Sublessor and Subtenant have executed this
Subtenant Improvement Agreement, intending to be bound thereby as of the date
first above written.
Subtenant: Sublessor:
BROADBASE INFORMATION SARONIX
SYSTEMS, INC., a California corporation a California corporation
By: /s/ Chuck Bay By: /s/ James Obendorf
-------------------------------- --------------------------------
Name: Chuck Bay Name: James Obendorf
----------------------------- -----------------------------
Title: Title:
----------------------------- ----------------------------
15
<PAGE> 16
ATTACHMENT 1
DESIGN & CONSTRUCTION SCHEDULE
<TABLE>
<CAPTION>
DATE OR DAYS
A. DESIGN SCHEDULE TO COMPLETE
--------------- -----------
<S> <C> <C>
1. Architect completes the proposed Final Plans. June ___, 1998
2. Sublessor and Subtenant approve/disapprove the _____ days after
proposed Final Plans, and any modifications to Item 1.
the Construction Schedule
3. Last day for Sublessor and Subtenant to agree
upon and initial the Final Plans and any
modifications to the Construction Schedule
B. CONSTRUCTION SCHEDULE
4. Scheduled Completion Date for Initial _________, 1998
Improvements
</TABLE>
<PAGE> 17
SARONIX/BROADBASE
UTILITY CHARGE ALGORITHM
A. BACKGROUND
Broadbase, a subtenant of Saronix will occupy approximately 20,941
sq.ft. of the facility at 141 Jefferson, Menlo Park, CA. The gross area
of the whole facility is approximately 63,931 sq.ft. Broadbase will
operate a software development operation with the majority of its space
occupied by modular furniture cubicles. Saronix will operate its
headquarters, development and manufacturing activities including
significant process and Clean Room activities.
In recognition of the differences between the two operation modes of the
companies, it has been agreed to that an algorithm for sharing the
aggregated utility cost is to be developed.
B. UTILITY ALGORITHM
The issues of property tax, janitorial and facilities maintenance have
been dealt with separately in the subtenant lease between Broadbase and
Saronix.
Broadbase will contract and pay directly for its voice and data
communication services in support of the facility.
Utilities to be covered by the algorithm are: 1) electrical, 2) natural
gas, 3) water.
C. ALGORITHM ELEMENTS
<TABLE>
<CAPTION>
Anticipated Bases for Broadbase
Monthly Cost Allocation Cost
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Electricity Total anticipated 18% $2,952
$16,400/month
Natural Gas Total anticipated 28% $546
$1,950/month
Water Total anticipated 24% $116
bill $485/month
----------------------------------------------------------------------------------------
$3,619
(17.30cents/sq.ft./month)
</TABLE>
<PAGE> 18
D. BASE POINT ADJUSTMENT
In February 1999, an adjustment to the utility algorithm shall be made
on the basis of actual experience taken from prior billings for the
various utilities based on joint occupancy since November 1998. The
charges paid by Broadbase prior to the base point adjustment shall be
those agreed to in the initial algorithm. Going forward, Broadbase shall
pay the adjusted utility cost as determined from the base point
adjustment.
18
<PAGE> 1
Exhibit 10.06
November 10, 1998
Brian Kelly
2497 Pacific Ave.
San Francisco, CA 94115
Dear Brian,
I am pleased to offer you the position of Vice President of Application
Development for Broadbase Information Systems, Inc., reporting directly to me.
This letter outlines the proposed terms of your employment with Broadbase. Your
annual salary will be $150,000 paid bi-monthly. In addition you will qualify for
an MBO bonus of $30,000. Your start date will be on or before Tuesday, December
1, 1998.
I will recommend that you will be granted an option to purchase 135,000 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 subject to a six month cliff and would be governed by the terms set forth
in the Company's standard form of stock agreement. 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. On your
first anniversary date with Broadbase, an additional option of 20,000 shares
will be granted to you upon achieving performance objectives.
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 on or before, Friday November 13, 1998. 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 the employment relationship at any
time for any reason, so long as there is not violation of applicable state or
federal law.
Brian, 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) 614-8305.
Sincerely,
/s/ Mark Kremer
- -----------------------------
Mark Kremer
President and CEO
Signature: /s/ Brian Kelly
--------------------------
Name: Brian Kelly
--------------------------
Start Date: December 1, 1998
--------------------------
<PAGE> 2
EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
In consideration of, and as a condition of my employment with BroadBase
Information Systems, Inc., a California corporation (the "COMPANY"), I hereby
represent to, and agree with the Company as follows:
1. PURPOSE OF AGREEMENT. I understand that the Company is engaged in a
continuous program of research, development, production and marketing in
connection with its business and that it is critical for the Company to preserve
and protect its Proprietary information (as defined below), its rights in
Inventions and in all related intellectual property rights. Accordingly, I am
entering into this Agreement as a condition of my employment with the Company,
whether or not I am expected to create inventions of value for the Company.
2. DISCLOSURE OF INVENTIONS. I will promptly disclose in confidence to
the Company all inventions, improvements, designs, original works of authorship,
formulas, processes, compositions of matter, computer software programs,
databases, mask works and trade secrets ("INVENTIONS") that I make or conceive
or first reduce to practice or create, either alone or jointly with others,
during the period of my employment, whether or not in the course of my
employment, and whether or not such Inventions are patentable, copyrightable or
protectible as trade secrets.
3. WORK FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge and agree that
any copyrightable works prepared by me within the scope of my employment are
"works for hire" under the Copyright Act and that the Company will be considered
the author and owner of such copyrightable works. I agree that all Inventions
that (a) are developed using equipment, supplies, facilities or trade secrets of
the Company, (b) result from work performed by me for the Company, or (c)
related to the Company's business or current or anticipated research and
development, will be the sole and exclusive property of the Company, and are
hereby irrevocably assigned by me to the Company.
4. LABOR CODE 2870 NOTICE. I have notified and understand that the
provisions of paragraphs 3 and 5 of this Agreement do not apply to any Invention
that qualifies fully under the provisions of Section 2870 of the California
Labor Code, which states as follows:
ANY PROVISION IN ANY EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE
SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO
HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED
ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT,
SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS
THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUALLY OR DEMONSTRABLY
ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2) RESULT FROM ANY WORK
PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE EXTENT A PROVISION IN AN
EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION
OTHERWISE EXCLUDED FROM BEING
<PAGE> 3
REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.
5. ASSIGNMENT OF OTHER RIGHTS. In addition to the foregoing assignment of
Inventions to the Company, I hereby irrevocably transfer and assign to the
Company: (a) all worldwide patents, patent applications, copyrights, mask works,
trade secrets and other intellectual property rights in any Invention; and (b)
any and all "Moral Rights" (as defined below) that I may have in or with respect
to any Invention. I also hereby forever waive and agree never to assert any and
all Moral Rights I may have in or with respect to any Invention, even after
termination of my work on behalf of the Company. "MORAL RIGHTS" means any rights
to claim authorship of an Invention to object to or prevent the modification of
any Invention, or to withdraw from circulation or control the publication or
distribution of any Invention, and any similar right, existing under judicial or
statutory law of any country in the world, or under any treaty, regardless of
whether or not such right denominated or generally referred to as a "moral
right".
6. ASSISTANCE. I agree to assist the Company in every proper way to
obtain for the Company and enforce patents, copyrights, mask work rights, trade
secret rights and other legal protections for the Company's inventions in any
and all countries. I will execute any documents that the Company may reasonably
request for use in obtaining or enforcing such patents, copyrights, mask work
rights, trade secrets and other legal protections. My obligations under this
paragraph will continue beyond the termination of my employment with the
Company, provided that the Company will compensate me at a reasonable rate after
such termination for time or expenses actually spent by me at the Company's
request on such assistance. I appoint the Secretary of the Company as my
attorney-in-fact to execute documents on my behalf for this purpose.
7. PROPRIETARY INFORMATION. I understand that my employment by the
Company creates a relationship of confidence and trust with respect to any
information of a confidential or secret nature that may be disclosed to me by
the Company that relates to the business of the Company or to the business of
any parent, subsidiary, affiliate, customer or supplier of the Company or any
other party with whom the Company agrees to hold information of such party in
confidence ("PROPRIETARY INFORMATION"). Such Proprietary Information includes
but is not limited to inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information and customer
lists.
8. CONFIDENTIALITY. At all times, both during my employment and after its
termination, I will keep and hold all such Proprietary Information in strict
confidence and trust, and I will not use or disclose any of such Proprietary
Information without the prior written consent of the Company, except as may be
necessary to perform my duties as an employee of the Company for the benefit of
the Company. Upon termination of my employment with the Company, I will promptly
deliver to the Company all documents and materials of any nature pertaining to
my work with the Company and I will not take with me any documents or materials
or copies thereof containing any Proprietary Information.
2
<PAGE> 4
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all
the terms of this Agreement and my duties as an employee of the company will not
breach any invention assignment, proprietary information or similar agreement
with any former employer or other party. I represent that I will not bring with
me to the Company or use in the performance of my duties for the Company any
documents or materials of a former employer that are not generally available to
the public or have not been legally transferred to the Company.
10. DUTY NOT TO COMPETE. I understand that my employment with the Company
requires my undivided attention and effort. As a result, during my employment, I
will not, without the Company's express written consent, engage in any
employment or business other than for the Company, or invest in or assist in any
manner any business which directly or indirectly competes with the business or
future business plans of the Company.
11. NOTIFICATION. I hereby authorize the Company to notify my actual or
future employers of the terms of this Agreement and my responsibilities
hereunder.
12. NON-SOLICITATION. During, and for a period of one (1) year after
termination of, my employment with the Company, I will not directly or
indirectly solicit or take away suppliers, customers, employees or consultants
of the Company for my own benefit or for the benefit of any other party.
13. NAME & LIKENESS RIGHTS, ETC. I hereby authorize the Company to use,
reuse, and to grant others the right to use and reuse, my name, photograph,
likeness (including caricature), voice, and biographical information, and any
reproduction or simulation thereof, in any media now known or hereafter
developed (including but not limited to film, video and digital or other
electronic media), both during and after my employment, for whatever purposes
the Company deems necessary.
14. INJUNCTIVE RELIEF. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and will therefore be entitled to injunctive relief to enforce this
Agreement.
15. GOVERNING LAW; SEVERABILITY. This Agreement will be governed and
interpreted in accordance with the internal laws of the State of California,
without regard to or application of choice of law rules or principles. In the
event that any provision of this Agreement is found by a court, arbitrator or
other tribunal to be illegal, invalid or unenforceable, then such provision
shall not be voided, but shall be enforced to the maximum extent permissible
under applicable law, and the remainder of this Agreement shall remain in full
force and effect.
16. NO DUTY TO EMPLOY; "AT-WILL" EMPLOYMENT. I understand that this
Agreement does not constitute a contract of employment or obligate the Company
to employ me for any stated period of time. I understand that I am an "at-will"
employee of the Company and that my employment can be terminated at any time,
for any reason or for no reason, by either the
3
<PAGE> 5
Company or myself. This Agreement shall be effective as of the first day of my
employment by the Company, namely: December 1, 1998.
COMPANY: EMPLOYEE:
BroadBase Information Systems, Inc.
By: /s/ Mark Kremer /s/ Brian Kelly
------------------------------- -------------------------------
(Signature)
Name: Brian Kelly
------------------------------ -------------------------------
(Printed Name)
Title:
------------------------------
4
<PAGE> 1
Exhibit 10.07
April 12, 1999
Tom Doyle
Dear Tom:
I am pleased to offer you the position of Executive VP of Sales for Broadbase
Information Systems, Inc., reporting directly to me. This letter outlines the
proposed terms of employment with Broadbase. Your start date will be on or
before May 1, 1999.
Your annual salary will be $225,000 paid bi-monthly, to be reviewed on an annual
basis. Your target compensation including base salary and commission will be
$325,000. You will receive a sign-on bonus of $250,000 payable on your first day
of employment and an additional bonus of $250,000 payable on July 1, 1999.
Bonuses are subject to repayment should you voluntarily terminate within 18
months of the bonus payment.
I will recommend that you will be granted an option to purchase 240,000 shares
of stock (60,000 of which will be subject to contingent vesting, under which
normal vesting will occur if the 1999 sales quota is achieved and will not vest
if quota is not achieved). Quota will need to be set immediately upon joining
the company. In the event of Change of Control of at least 50% and your
involuntary termination (not including an IPO) 50% of your options will
immediately vest.
This grant is subject to approval by the Board of Directors at its first meeting
after your employment begins. Normal vesting is as follows, the option would
vest over four years subject to a six month cliff and would be governed by the
terms set forth in the Company's standard form of stock options agreement. 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.
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 to us. 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
<PAGE> 2
Tom Doyle
April 12, 1999
Page 2
Company, to terminate the employment relationship at any time for any reason, so
long as there is not violation of applicable state or federal law.
Tom, 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) 614-8305.
Sincerely,
/s/ Mark Kremer
- ----------------------------
Mark Kremer
President and CEO
Signature: Thomas H. Doyle 4/13/99
---------------------------
Name: Tom Doyle
---------------------------
Start Date: May 1, 1999
----------------------------
<PAGE> 3
EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
In consideration of, and as a condition of my employment with BroadBase
Information Systems, Inc., a California corporation (the "COMPANY"), I hereby
represent to, and agree with the Company as follows:
1. PURPOSE OF AGREEMENT. I understand that the Company is engaged in a
continuous program of research, development, production and marketing in
connection with its business and that it is critical for the Company to preserve
and protect its Proprietary Information (as defined below), its rights in
Inventions and to all related intellectual property rights. Accordingly, I am
entering into this Agreement as a condition of my employment with the Company,
whether or not I am expected to create inventions of value for the Company.
2. DISCLOSURE OF INVENTIONS. I will promptly disclose in confidence to
the Company all inventions, improvements, designs, original works of authorship,
formulas, processes, compositions of matter, computer software programs,
databases, mask works and trade secrets ("INVENTIONS") that I make or conceive
or first reduce to practice or create, either alone or jointly with others,
during the period of my employment, whether or not in the course of any
employment, and whether or not such Inventions are patentable, copyrightable or
protectible as trade secrets.
3. WORK FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge and agree that
any copyrightable works prepared by me within the scope of my employment are
"works for hire" under the Copyright Act and that the Company will be considered
the author and owner of such copyrightable works. I agree that all Inventions
that (a) are developed using equipment, supplies, facilities or trade secrets of
the Company, (b) result from work performed by me for the Company, or (c) relate
to the Company's business or current or anticipated research and development,
will be the sole and exclusive property of the Company and are hereby
irrevocably assigned by me to the Company.
4. LABOR CODE 2870 NOTICE. I have been notified and understand that the
provisions of paragraphs 3 and 5 of this Agreement do not apply to any Invention
that qualifies fully under the provisions of Section 2870 of the California
Labor Code, which states as follows:
ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE
SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO
HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED
ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT,
SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS
THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUALLY OR DEMONSTRABLY
ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2) RESULT FROM ANY WORK
PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE EXTENT A PROVISION IN AN
EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION
OTHERWISE EXCLUDED FROM BEING
<PAGE> 4
REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.
5. ASSIGNMENT OF OTHER RIGHTS. In addition to the foregoing assignment of
Inventions to the Company, I hereby irrevocably transfer and assign to the
Company: (a) all world-wide patents, patent applications, copyrights, mask
works, trade secrets and other intellectual property rights in any Invention;
and (b) any and all "Moral Rights" (as defined below) that I may have in or with
respect to any Invention. I also hereby forever waive and agree never to assert
any and all Moral Rights I may have in or with respect to any Invention, even
after termination of my work on behalf of the Company. "MORAL RIGHTS" mean any
rights to claim authorship of an Invention to object to or prevent the
modification of any Invention, or to withdraw from circulation or control the
publication or distribution of any Invention, and any similar right, existing
under judicial or statutory law of any country in the world, or under any
treaty, regardless of whether or not such right denominated or generally
referred to as a "moral right".
6. ASSISTANCE. I agree to assist the Company in every proper way to
obtain for the Company and enforce patents, copyrights, mask work rights, trade
secret rights and other legal protections for the Company's inventions in any
and all countries. I will execute any documents that the Company may reasonably
request for use in obtaining or enforcing such patents, copyrights, mask work
rights, trade secrets and other legal protections. My obligations under this
paragraph will continue beyond the termination of my employment with the
Company, provided that the Company will compensate me at a reasonable rate after
such termination for time or expenses actually spent by me at the Company's
request on such assistance. I appoint the Secretary of the Company as my
attorney-in-fact to execute documents on my behalf for this purpose.
7. PROPRIETARY INFORMATION. I understand that my employment by the
Company creates a relationship of confidence and trust with respect to any
information of a confidential or secret nature that may be disclosed to me by
the Company that relates to the business of the Company or to the business of
any parent, subsidiary, affiliate, customer or supplier of the Company or any
other party with whom the Company agrees to hold information of such party in
confidence ("PROPRIETARY INFORMATION"). Such Proprietary Information includes
but is not limited to inventions, marketing plans, product plans, business
strategies, financial information, forecasts, personnel information and customer
lists.
8. CONFIDENTIALITY. At all times, both during my employment and after its
termination, I will keep and hold all such Proprietary Information in strict
confidence and trust, and I will not use or disclose any of such Proprietary
Information without the prior written consent of the Company, except as may be
necessary to perform my duties as an employee of the Company for the benefit of
the Company. Upon termination of my employment with the Company, I will promptly
deliver to the Company all documents and materials of any nature pertaining to
my work with the Company and I will not take with me any documents or materials
or copies thereof containing any Proprietary Information.
2
<PAGE> 5
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance of all
the terms of this Agreement and my duties as an employee of the company will not
breach any invention assignment, proprietary information or similar agreement
with any former employer or other party. I represent that I will not bring with
me to the Company or use in the performance of my duties for the Company any
documents or materials of a former employer that are not generally available to
the public or have not been legally transferred to the Company.
10. DUTY NOT TO COMPETE. I understand that my employment with the Company
requires my undivided attention and effort. As a result, during my employment, I
will not, without the Company's express written consent, engage in any
employment or business other than for the Company, or invest in or assist in any
manner any business which directly or indirectly competes with the business or
future business plans of the Company.
11. NOTIFICATION. I hereby authorize the Company to notify my actual or
future employers of the terms of this Agreement and my responsibilities
hereunder.
12. NON-SOLICITATION. During, and for a period of one (1) year after
termination of, my employment with the Company, I will not directly or
indirectly solicit or take away suppliers, customers, employees or consultants
of the Company for my own benefit or for the benefit of any other party.
13. NAME & LIKENESS RIGHTS, ETC. I hereby authorize the Company to use,
reuse, and to grant others the right to use and reuse, my name, photograph,
likeness (including caricature), voice, and biographical information, and any
reproduction or simulation thereof, in any media now known or hereafter
developed (including but not limited to film, video and digital or other
electronic media), both during and after my employment, for whatever purposes
the Company deems necessary.
14. INJUNCTIVE RELIEF. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and will therefore be entitled to injunctive relief to enforce this
Agreement.
15. GOVERNING LAW; SEVERABILITY. This Agreement will be governed and
interpreted in accordance with the internal laws of the State of California,
without regard to or application of choice of law rules or principles. In the
event that any provision of this Agreement is found by a court, arbitrator or
other tribunal to be illegal, invalid or unenforceable, then such provision
shall not be voided, but shall be enforced to the maximum extent permissible
under applicable law, and the remainder of this Agreement shall remain in full
force and effect.
16. NO DUTY TO EMPLOY; "AT-WILL" EMPLOYMENT. I understand that this
Agreement does not constitute a contract of employment or obligate the Company
to employ me for any stated period of time. I understand that I am an "at-will"
employee of the Company and that my employment can be terminated at any time,
for any reason or for no reason, by either the
3
<PAGE> 6
Company or myself. This Agreement shall be effective as of the first day of my
employment by the Company, namely: May 1, 1999.
COMPANY: EMPLOYEE:
BroadBase Information Systems, Inc.
By: /s/ Mark Kremer /s/ Thomas H. Doyle
-------------------------------- --------------------------------
(Signature)
Name Thomas H. Doyle
-------------------------------- --------------------------------
(Printed Name)
Title:
------------------------------
4
<PAGE> 1
Exhibit 10.08
January 18, 1998
Mr. Charles Bay
755 Arroyo Rd.
Los Altos, CA 94024
I am very pleased to offer you the position of Chief Financial Officer and
General Counsel for Broadbase Information Systems, reporting to myself. This
letter outlines the proposed terms of your employment with Broadbase:
o Your base salary is $150,000 paid semi-monthly
o You will be paid a $40,000 annual bonus on a personal and corporate MBO
plan
In addition, I will recommend that you be granted an option to purchase 173,000
of Broadbase common stock. This grant is subject to approval by the Board of
Directors at its first meeting after your employment begins. The option will
vest over four years and will be governed by the terms set forth in the
Company's standard form of stock options agreement. You will be vesting monthly
for 48 months starting at the first of the month following your first day of
employment subject to a six months cliff. The purchase price of your options
will be the one effective on your first day of employment.
In the event of Change of Control of at least 50% (not including an IPO) 50% of
your yet unvested options will immediately vest.
The Company will also provide to you the health, holiday, vacation, 401K and
other benefits available to all employees. Please signify acceptance of this
offer by signing below, indicating your start date on January 19, 1998.
Employment at Broadbase is subject to your signing the attached nondisclosure
and inventions agreements. 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 the
employment relationship at any time for any reason, so long as there is no
violation of applicable state or federal law.
Chuck, all of us welcome you in joining Broadbase, and we look forward to having
you on the team. If you have any questions, please do not hesitate to call me at
my office at (650) 614-8305. My office fax number is (650) 614-8301.
Sincerely,
Signed: /s/ Charles J. Bay
/s/ Mark Kremer -------------------------
- -------------------------------- Name: Chuck Bay
Mark Kremer -------------------------
President and CEO Date: 1-19-98
Broadbase Information Systems Inc. -------------------------
<PAGE> 1
Exhibit 21.01
List of Subsidiaries
Broadbase Software K.K.
Broadbase Software BV
Broadbase Software Ltd.
Broadbase Software GmbH
<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 the Registration Statement (Form S-1 No. 333-_____) 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
July 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND MARCH 31, 1999 AND
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 13,990 10,855
<SECURITIES> 0 0
<RECEIVABLES> 1,122 1,466
<ALLOWANCES> 50 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,388 12,827
<PP&E> 2,288 2,493
<DEPRECIATION> 678 879
<TOTAL-ASSETS> 17,173 14,557
<CURRENT-LIABILITIES> 6,587 7,788
<BONDS> 9,360 9,177
0 0
18,575 18,575
<COMMON> 3,604 8,358
<OTHER-SE> (20,953) (29,341)
<TOTAL-LIABILITY-AND-EQUITY> 17,173 14,557
<SALES> 2,996 1,126
<TOTAL-REVENUES> 3,439 1,486
<CGS> 713 260
<TOTAL-COSTS> 967 651
<OTHER-EXPENSES> 3,738 1,188
<LOSS-PROVISION> 50 0
<INTEREST-EXPENSE> 226 260
<INCOME-PRETAX> (11,343) (4,575)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,343) (4,575)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,343) (4,575)
<EPS-BASIC> (1.51) (0.49)
<EPS-DILUTED> (1.51) (0.49)
</TABLE>
