<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 2000
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
------------------------
BROADBASE SOFTWARE, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
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 AND TELEPHONE NUMBER OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RUSTY THOMAS
CHIEF FINANCIAL OFFICER
172 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 614-8300
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
GORDON K. DAVIDSON ROBERT M. MATTSON, JR.
DAVID K. MICHAELS CRAIG S. MORDOCK
THOMAS J. HALL 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, 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
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Common Stock, $0.001 par value
per share.................... 3,450,000 $85.53 $295,082,813 $77,902
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</TABLE>
(1) Includes 450,000 shares of Common Stock issuable upon exercise of the
underwriters' over-allotment option, if any.
(2) Estimated solely for the purpose of calculating the amount of registration
fee based on the average of the high and low trading price for the Common
Stock on January 20, 2000 pursuant to Rule 457(c) under the Securities Act.
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 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.
UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion. Dated January 21, 2000.
3,000,000 Shares
BROADBASE SOFTWARE, INC.
[BROADBASE LOGO]
Common Stock
-------------------------
Broadbase is offering 1,500,000 of the shares to be sold in the offering.
The selling stockholders identified in this prospectus are offering an
additional 1,500,000 shares. Broadbase will not receive any of the proceeds from
the sale of shares by the selling stockholders.
The common stock is quoted on the Nasdaq National Market under the symbol
"BBSW". The last reported sale price of the common stock on January 20, 2000 was
$83.38 per share.
See "Risk Factors" beginning on page 5 to read about factors you should
consider before buying shares of the common stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Initial price to public..................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to Broadbase..................... $ $
Proceeds, before expenses, to the selling stockholders...... $ $
</TABLE>
To the extent that the underwriters sell more than 3,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
450,000 shares from Broadbase at the initial price to public less the
underwriting discount.
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
-------------------------
GOLDMAN, SACHS & CO.
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
THOMAS WEISEL PARTNERS LLC
-------------------------
Prospectus dated , 2000.
<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. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of the factors set forth under "Risk
Factors" and elsewhere in this prospectus.
OUR BUSINESS
Broadbase develops and markets software that integrates and analyzes
customer information from Internet and traditional business channels, enabling
businesses to improve their customer acquisition, retention and profitability.
Our software integrates information from numerous points of customer
interaction, or touch points, by pulling information from multiple data sources
and transforming it into a standard format that can be analyzed. Our software
then analyzes this reformatted information to provide a comprehensive
understanding of the customer lifecycle from initial identification through
acquisition and retention. Our products then allow businesses to translate this
analysis into specific actions such as targeting profitable customers,
personalizing customer interactions and identifying opportunities to sell
complementary or higher-end products and services. In addition, upon completion
of our pending acquisition of Rubric, Inc., we will offer Rubric's eMA
(eMarketing Automation) application, which enables businesses to act on this
analysis through automated marketing campaigns over the Internet and traditional
channels. By integrating, analyzing and acting on valuable customer information,
our products enable businesses to build long-lasting and profitable customer
relationships.
The Internet is emerging as an important channel for businesses to interact
with their customers. As a result, traditional "bricks and mortar" companies are
adapting many of their business activities to the Internet. In addition, a new
class of Internet-only companies is rapidly emerging. Together, these companies
represent a new category of enterprise called the e-business. The rise of the
Internet as a new business channel has led to a dramatic increase in the number
of ways that businesses interact with their customers. Today, these include not
only traditional storefronts, catalogs and call centers, but also websites,
e-mail marketing campaigns and online customer service. The Internet has also
created a highly competitive environment for businesses, where customers can
easily switch among alternative product and service offerings. To maintain
customer loyalty in this environment, e-businesses need to develop a complete
understanding of individual customers to maximize the effectiveness of every
customer interaction.
Broadbase software addresses this need. Our software consists of a suite of
applications that are built on Foundation, our software platform that provides a
wide range of analytic capabilities. Our software integrates information that
has traditionally been isolated in separate systems designed to support specific
types of customer interactions, such as customer service and Internet-based
sales. It provides decision-makers in sales, marketing, customer service and
e-commerce business functions with a more comprehensive view of the customer.
Each application provides these decision-makers with analysis of customer
information that is specifically designed for their particular business
function. Our solutions can generally be deployed in less than 30 days, allowing
our customers to quickly capture revenue opportunities and achieve rapid return
on investment. To date, over 150 end user customers have licensed our products
from us and our distributors and resellers. Traditional "bricks and mortar"
customers include Aon Innovative Solution, Boeing, Canon Computer, Chevron,
HealthSystem Minnesota, Hewlett-Packard, Honda, Inprise, Polaris Service, Telia
AB and Xerox. Internet-only customers include BizBuyer.com, CMP Media, InsWeb,
Onvia.com and Pets.com. Each of these end user customers has licensed products
and purchased services totaling at least $300,000.
1
<PAGE> 4
PENDING ACQUISITION OF RUBRIC
On December 9, 1999, we entered into a definitive merger agreement to
acquire privately-held Rubric. Rubric is a leading provider of e-marketing
software applications. Rubric's product, Rubric eMA, automates the planning,
execution and measurement of marketing campaigns. It streamlines campaign
planning by automating the process of requesting, reviewing, approving and
launching campaigns. The software enables the identification of prospect and
customer segments that can be targeted with personalized messages and offers.
Rubric eMA then automates the execution of Internet and traditional marketing
campaigns by generating personalized email and web pages, personalized letters
and faxes, and lists for direct mail and call center campaigns. It can manage
their campaigns concurrently over a number of different channels. In addition,
Rubric eMA can also automate other areas of customer interaction, such as
customer service. The software also provides a communications system that
facilitates personalized, targeted and interactive communications across the
Internet and traditional channels over an extended period of time. Following
execution of the marketing campaign, Rubric eMA's measurement capabilities allow
users to close the loop by tracking campaign results, costs and revenue. By
enabling users to more effectively generate leads and build customer
relationships, Rubric eMA is designed to generate revenue, reduce marketing
costs and improve marketing effectiveness. We believe that the combination of
Rubric eMA and our existing products will allow businesses to both analyze their
customer data and to plan, manage and execute marketing campaigns based on this
analysis.
Rubric's customers include BEA Systems, Cisco Systems, Citrix, DiTech.com,
Hewlett-Packard, Internet Appliance Network, LoanCity.com, MERANT, MSHOW.com,
N.E.T., Outpost.com, PeopleFirst.com, Rainmaker Systems, Sierra Atlantic and
Sybase. Each of these end users has licensed products and purchase services
totaling at least $100,000. Rubric had total revenue of approximately $343,000
in 1998 and approximately $3.4 million in 1999, and at December 31, 1999, Rubric
had an accumulated deficit of approximately $29.3 million. Rubric grew from 38
employees at December 31, 1998 to 78 employees at December 31, 1999.
In connection with this acquisition, we expect to issue approximately 2.9
million shares of our common stock in exchange for all outstanding shares of
Rubric capital stock, and convert outstanding options and warrants to acquire
Rubric capital stock into options and warrants to purchase approximately 700,000
shares of our common stock. Upon the completion of this acquisition, Anu Shukla,
who is currently the Chief Executive Officer of Rubric, will become our Chief
Marketing Officer, and Chris Maeda, who is currently the Chief Technical Officer
of Rubric, will become our Executive Vice President of Engineering.
We intend to account for the merger as a purchase, and the merger is
intended to qualify as a tax-free reorganization. The acquisition is subject to
customary closing conditions, including approval by Rubric's stockholders and
regulatory approvals. We expect to complete this acquisition in February 2000.
OUR BUSINESS HAS RISKS
We introduced Foundation in the fourth quarter of 1997, and began offering
our analytic applications in the third quarter of 1998. In May 1999, we expanded
our suite by introducing our first applications designed for e-business. We
expect that our future growth will depend significantly on revenue from licenses
of these new applications. We have incurred net losses in each period since our
inception and as of December 31, 1999 we had accumulated net losses of
approximately $41.7 million. We have not achieved profitability and we expect to
continue to incur losses for the foreseeable future. Our business is subject to
risks, and our market is subject to rapid technological change and intense
competition. In addition, our proposed acquisition of Rubric involves risks,
including the possibility that costs or difficulties related to the integration
of our businesses or products could be greater than expected.
2
<PAGE> 5
Broadbase and Foundation are our trademarks. Rubric and Rubric eMA are
trademarks of Rubric. This prospectus also contains trademarks and trade names
of other companies.
THE OFFERING
Common stock offered by
Broadbase.......................... 1,500,000 shares
Common stock offered by the selling
stockholders..................... 1,500,000 shares
Common stock to be outstanding
after this offering................ 19,550,087 shares
Use of proceeds.................... General corporate purposes, including
working capital. See "Use of Proceeds".
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 December 31, 1999, and
excludes:
- approximately 2.9 million shares to be issued in exchange for all
outstanding shares of Rubric capital stock in connection with our
acquisition of Rubric, and approximately 700,000 shares to be reserved
for issuance pursuant to the exercise of options and warrants to purchase
Rubric capital stock that will be converted into options and warrants to
purchase our common stock;
- 3,195,489 shares subject to options outstanding as of December 31, 1999,
at a weighted average exercise price of $10.12 per share;
- 300,000 shares subject to non-plan options granted on January 4, 2000, at
an exercise price of $54.00 per share;
- 2,764,695 shares available for issuance under our 1999 Equity Incentive
Plan as of December 31, 1999 which were increased by 902,504 shares on
January 1, 2000; and
- 500,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan as of December 31, 1999 which were increased by 180,500
shares on January 1, 2000.
CORPORATE INFORMATION
We incorporated in California in November 1995 under the name BroadBase
Information Systems, Inc., and reincorporated in Delaware in September 1999
under our current name. Our principal executive offices are located at 172
Constitution Drive, Menlo Park, California 94025. Our telephone number is (650)
614-8300. Rubric was incorporated in Delaware in September 1997 and its
principal executive offices are located in San Mateo, California.
3
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED YEAR ENDED
NOVEMBER 28, 1995 DECEMBER 31, DECEMBER 31, 1999
(INCEPTION) TO ------------------ --------------------
DECEMBER 31, 1996 1997 1998 ACTUAL PRO FORMA
------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue...................... $ -- $ -- $ 3,439 $ 10,442 $ 13,872
Gross margin..................... -- -- 2,472 6,395 6,437
Loss from operations............. (1,273) (5,575) (11,452) (24,135) (105,682)
Net loss......................... $(1,272) $(5,487) $(11,343) $(23,570) $(105,333)
Basic and diluted net loss per
share.......................... $ (4.30) $ (6.19) $ (8.85) $ (3.74) $ (11.45)
Weighted-average common
shares -- basic and diluted.... 296 887 1,281 6,296 9,196
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
------- --------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $76,642 $ 76,852
Working capital........................................... 69,362 64,526
Total assets.............................................. 84,770 444,779
Long-term debt and capital lease obligations, net of
current portion......................................... 333 548
Stockholders' equity...................................... $73,206 $426,093
</TABLE>
The unaudited pro forma information reflects our pending acquisition of
Rubric. The unaudited pro forma combined statement of operations data is derived
from our audited statement of operations data and audited statement of
operations data of Rubric, for the year ended December 31, 1999, giving effect
to the acquisition as if it had occurred on January 1, 1999. The unaudited pro
forma combined balance sheet data is derived from our audited balance sheet data
and the audited balance sheet data of Rubric as of December 31, 1999, giving
effect to the acquisition as if it had occurred on December 31, 1999. The
unaudited pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the transaction had been consummated at the dates
indicated, nor is it necessarily indicative of the future operating results or
financial position of the combined companies.
The unaudited pro forma as adjusted balance sheet data above reflects the
receipt of the net proceeds from the sale of the 1,500,000 shares of common
stock offered by Broadbase at an assumed initial price to public of $ per
share after deducting the estimated underwriting discounts and commissions and
estimated offering expenses.
Unless otherwise indicated, all information in this prospectus assumes that
the underwriters will not exercise their over-allotment option to purchase
additional shares in this offering, and does not give effect to the recently
announced two-for-one split of our common stock that is planned to occur after
this offering.
4
<PAGE> 7
RISK FACTORS
Before you invest in our common stock, you should carefully consider the
risks described below, together with all of the other information included in
this prospectus.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
We are still in the early stages of our development. Our revenue and income
potential is unproven and depends on emerging, rapidly changing markets and on
acceptance of products that we have only recently introduced. Because our
operating history is limited and our product offerings are evolving, it is
difficult to evaluate our business and our future prospects.
We incorporated in November 1995, and from that date through December 1997
were in the development stage, conducting research and developing our initial
products. We have only recently begun licensing our products and deriving
revenue. In the fourth quarter of 1997, we introduced our first product,
Foundation, which was designed to enable organizations to build and manage
datamarts -- a system for storing, retrieving and managing data for a specific
business function or department -- to analyze their customer information. In the
third quarter of 1998, we began offering applications designed to operate with
Foundation to provide analysis for customer relationship management. In May
1999, we introduced applications designed for Internet sales channels, Internet
marketing and other customer-focused e-business applications, and we also
released new versions of existing applications. Because we have only recently
introduced our products, it is difficult to predict whether our products will
continue to be accepted by the market and the level of revenues we can expect to
derive from sales of our products.
Rubric is also in the early stages of its development and has licensed its
eMA product to a limited number of customers. It is difficult to predict the
effect of our pending acquisition of Rubric on our business.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE
We incurred net losses and losses from operations for each period from our
inception through the end of 1999. As of December 31, 1999, we had accumulated
net losses of approximately $41.7 million, which represented 300% of our
cumulative revenue as of that date. As of December 31, 1999, Rubric had
accumulated net losses of approximately $29.3 million. We have not achieved
profitability and we expect to continue to incur substantial operating losses
for the foreseeable future. We expect to incur increasing sales and marketing,
research and development and general and administrative expenses. As a result,
we will need to significantly increase our revenue to achieve profitability.
Although our revenue grew significantly in 1999, our growth may not continue at
the current rate or at all.
WE EXPECT OUR QUARTERLY REVENUE AND OPERATING RESULTS TO FLUCTUATE
Our revenue and operating results are likely to vary significantly from
quarter to quarter. The factors that affect our quarterly operating results
include:
- the demand for our products, particularly our e-business applications;
- the size and timing of customer orders for our products and our
professional services;
- increased expenses for sales and marketing, product development and
administration;
- changes in the level of sales of professional services as compared to
product licenses;
- changes in the mix of our domestic and international sales; and
- changes in general economic and market conditions.
5
<PAGE> 8
Our quarterly revenue increased 314% from the fourth quarter of 1998 to the
fourth quarter of 1999. We do not believe that these rates of growth are
indicative of the growth in revenues, if any, that we can expect in the future.
Accordingly, we believe that period-to-period comparisons of our operating
results may not be meaningful and you should not rely on these comparisons as an
indication of our future performance. Our operating results may fall below the
expectations of investors. In this event, the market price of our common stock
would likely fall.
OUR OPERATING EXPENSES ARE INCREASING AND WE WOULD NOT BE ABLE TO REDUCE THEM
QUICKLY, WHICH COULD RESULT IN LOWER THAN EXPECTED OPERATING RESULTS IF WE DO
NOT ACHIEVE EXPECTED REVENUE LEVELS
We plan to significantly increase our operating expenses as we expand our
sales, marketing, research and development, professional services, customer
support and administrative groups. These expenses will be incurred before we
generate any revenues from this increased spending. If we do not significantly
increase revenues as a result of these efforts, we will not achieve
profitability. Our operating expenses are based on our expectations of future
revenues and are relatively fixed in the short term. As a result, we would not
be able to reduce spending quickly if our revenue were lower than we had
projected. Our ability to accurately forecast our quarterly revenue is limited
because of our limited operating history, the rapidly evolving nature of our
market and the sales cycle for our products, which can be long and
unpredictable. If our revenue falls below our expectations in any quarter, or if
we increase our spending ahead of our revenue growth, our operating results
would be lower than expected.
THE UNPREDICTABLE TIMING OF OUR SALES AND IMPLEMENTATION CYCLE MAKES IT
DIFFICULT TO FORECAST OUR OPERATING RESULTS
Our products can have a long and unpredictable sales cycle. Consequently,
we face difficulty predicting the quarter in which sales to expected customers
will occur. This contributes to the uncertainty of our future operating results.
Potential customers often require 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, particularly for sales to traditional
"bricks and mortar" companies.
In a typical application license transaction, a portion of the
implementation of our products is performed by our professional services group,
which connects our products to the customer's systems and data sources. Upon
completion of that connection, no significant obligations remain with respect to
implementation, and we recognize the revenue related to that license. The actual
connection process can often be completed in approximately two to four weeks.
However, the timing of the commencement and completion of this connection
process is subject to factors that may be beyond our control, as this process
requires access to the customer's facilities and coordination with the
customer's personnel after delivery of the software. As a result, we typically
do not recognize the license revenue from an application license until one to
three months after our product is shipped to the customer. Uncertainty as to
when our product can be connected at the customer's facilities makes it more
difficult to forecast our operating results and can result in significant
variability in our period to period results.
WE HAVE NOT YET COMPLETED OUR ACQUISITION OF RUBRIC, AND OUR FAILURE TO COMPLETE
THIS ACQUISITION COULD HARM OUR STOCK PRICE AND FUTURE BUSINESS AND OPERATIONS
Although we entered into an agreement to acquire Rubric in December 1999,
our completion of this acquisition is subject to several closing conditions,
including obtaining regulatory approvals and stockholder approval, the receipt
of specified legal assurances, and the absence of certain adverse changes.
Although we expect to complete this acquisition in February 2000, and the
definitive agreement provides for a closing by no later than June 15, 2000, it
is possible that this acquisition may not be completed prior to the completion
of this offering, or at all.
6
<PAGE> 9
OUR ACQUISITION OF RUBRIC MAY RESULT IN DISRUPTIONS TO OUR BUSINESS AND
MANAGEMENT DUE TO DIFFICULTIES IN ASSIMILATING PERSONNEL, TECHNOLOGY AND
OPERATIONS
If the Rubric acquisition is completed, we may not realize the benefits
from the acquisition to the extent that we anticipate, or at all. We may not be
able to successfully assimilate the additional personnel, operations, acquired
technology and products into our business. In particular, we will need to
assimilate and retain key professional services, engineering and marketing
personnel. Other key Rubric personnel may decide not to work for us. The
integration of Rubric into our operations will be a complex, time consuming and
expensive process and may disrupt our operations if it is not completed
efficiently or in a timely manner. Among the challenges we may face in this
regard are demonstrating to customers and suppliers that the merger will not
result in adverse changes in client service standards or dilution or distraction
to our business focus, retaining key personnel in the transition and ensuring
that Rubric's eMA product can be successfully integrated with our products.
Neither we nor Rubric has experience in integrating operations on a scale
similar to the pending merger, and the difficulties of integrating our
businesses could be larger than we anticipate. These difficulties could disrupt
our ongoing business, distract our management and employees and increase our
expenses.
OUR ACQUISITION OF RUBRIC WILL RESULT IN DILUTION TO EXISTING STOCKHOLDERS AND
MAY RESULT IN ADDITIONAL NET LOSSES IN THE SHORT TERM
In connection with our proposed acquisition of Rubric, we expect to issue
approximately 2.9 million shares of our common stock in exchange for all
outstanding shares of Rubric capital stock and to reserve approximately 700,000
shares of our common stock for issuance upon the exercise of Rubric options and
warrants that we will assume in the acquisition. The issuance of these
securities will be dilutive to our existing stockholders.
OUR PROFITABILITY WILL BE DELAYED AND THEREAFTER REDUCED AS A RESULT OF
ACCOUNTING CHARGES RELATING TO THE ACQUISITION OF RUBRIC
We will account for the Rubric acquisition using the purchase method of
accounting. Under the purchase method, the purchase price of Rubric will be
allocated to the assets acquired and liabilities assumed from Rubric. As a
result, we expect to record a charge to operations upon consummation of the
transaction related to acquired in-process research and development of
approximately $10.1 million. Also, we expect to record approximately $356.4
million of intangible assets and goodwill on our balance sheet which will result
in amortization expense of $72.0 million for 2000, $71.7 million for 2001, $71.7
million for 2002, $70.5 million for 2003, and $70.5 million for 2004. These
charges will delay and thereafter reduce our profitability.
WE NEED TO ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED PERSONNEL IN A
COMPETITIVE EMPLOYMENT MARKET
Our success depends on our ability to attract, train and retain qualified,
experienced employees. There is substantial competition for experienced
management, engineering, sales and marketing personnel, particularly in the
market segment in which we compete. If we are unable to retain our existing key
personnel, or to attract, train and retain additional qualified personnel, we
may experience inadequate levels of staffing to develop and sell our products
and perform services for our customers.
The market price of our common stock has increased substantially since our
September 1999 initial public offering. We have relied historically on our
ability to attract employees using equity incentives, and any perception by
potential and existing employees that our equity incentives are less attractive
could adversely affect our ability to attract and retain qualified employees.
We believe that our success will depend on the continued services of our
executive officers. These employees serve "at-will" and may elect to pursue
other opportunities at any time. The loss of any of our executive officers could
harm our business. Several of our executive officers joined us only recently and
have had a limited time to work together. For example, our Chief Financial
Officer joined
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<PAGE> 10
us in January 2000. We cannot assure you that our new executive officers or the
new executive officers that will join us as a result of our pending acquisition
of Rubric will be able to work effectively together to manage our growth and
continuing operations. If we are unable to expand our sales and marketing
organizations in a timely manner, our growth could be limited.
OUR GROWTH DEPENDS ON MARKET ACCEPTANCE OF OUR APPLICATIONS DESIGNED FOR
INTERNET-BASED SYSTEMS AND RUBRIC'S EMA PRODUCT
We first introduced applications designed for Internet-based systems in May
1999, and Rubric first introduced its eMA product in May 1998. We expect that
our future growth will depend significantly on revenue from licenses of these
applications, eMA and related services. There are significant risks inherent in
introducing these new products. Market acceptance of these new products will
depend on the growth of the market for e-business solutions. This growth may not
occur. We cannot assure you that our new e-business applications or Rubric eMA
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.
OUR BUSINESS WILL SUFFER IF WE DO NOT INCREASE MARKET AWARENESS OF OUR PRODUCTS
BY SIGNIFICANTLY EXPANDING OUR SALES CAPABILITIES
We sell our products primarily through our direct sales force. We must
significantly expand our direct sales operations to increase market awareness of
our products and increase revenue. We cannot be certain that we will be
successful in these efforts. Our products and services require sophisticated
sales efforts. As a result, our ability to increase our direct sales operation
will depend on our ability to recruit, train and retain top sales people with
advanced sales skills and technical knowledge. There is a shortage of sales
personnel with these qualifications, and competition for qualified personnel is
intense in our industry.
The introduction of our new e-business applications has required us to hire
new sales personnel with the skills required to sell these products. As a
result, most of our current direct sales force has been with us for a relatively
short period. During 1999, we added 12 direct sales representatives to our
direct sales force, which represents 52.2% of our total direct sales
representatives and 24.0% of our total sales personnel as of December 31, 1999.
New sales personnel require training and take time to achieve full productivity.
If we are unable to hire or retain qualified sales personnel, or if newly hired
personnel fail to develop the necessary skills or reach productivity more slowly
than anticipated, our business could be harmed.
WE ARE DEPENDENT ON MARKETING, TECHNOLOGY AND DISTRIBUTION RELATIONSHIPS THAT
MAY GENERALLY BE TERMINATED AT ANY TIME, AND IF OUR CURRENT AND FUTURE
RELATIONSHIPS ARE NOT SUCCESSFUL, OUR GROWTH MAY BE LIMITED
We rely on marketing and technology relationships with a variety of
companies which, in part, generate leads for the sale of our products. These
marketing and technology relationships include relationships with:
- system integrators and consulting firms;
- vendors of e-commerce and Internet software;
- vendors of software designed for customer relationship management or for
management of organizations' operational information;
- vendors of key technology and platforms;
- demographic data providers; and
- an application service provider and an Internet hoster.
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If we cannot maintain successful marketing and technology relationships or
cannot enter into additional marketing and technology relationships, we may have
difficulty expanding the sales of our products and our growth may be limited.
While these companies do not sell or distribute our products, we believe that
many of our direct sales are the result of leads generated by vendors of
e-business and enterprise applications that work with our products. Our
marketing and technology relationships are generally not documented in writing,
or are governed by agreements that can be terminated by either party with little
or no prior notice. Some of these agreements specify that payments are to be
made by us to these companies for providing us with qualifying customer leads.
The generation of leads to date by these companies has not generally satisfied
the specified criteria and therefore payments for leads have been immaterial in
amount.
In addition, we have distribution relationships with companies located in
the United States, Japan and the Netherlands that distribute or resell our
products -- our indirect sales channel. Sales through our indirect sales channel
accounted for approximately 28.7% of our total revenue for 1998 and 35.3% for
1999. Sales of our products to Indus, which integrates Foundation into certain
of its enterprise solutions for the energy and utility industries, represented
18.4% of our total revenue in 1998 and 11.2% in 1999. Substantially all of our
sales in Japan have been made through distributors. If we cannot maintain
successful relationships with our indirect sales channel, we may have difficulty
expanding the sales of our products and our growth may be limited.
Companies with which we have a marketing, technology or distribution
relationship may promote products of several different companies, including, in
some cases, products that compete with our products. These companies may not
devote adequate resources to selling our products. We may not be able to
maintain these relationships and enter into additional relationships that will
provide timely and cost-effective customer support and service.
CUSTOMER SATISFACTION AND DEMAND FOR OUR PRODUCTS WILL DEPEND ON OUR ABILITY TO
EXPAND OUR PROFESSIONAL SERVICES GROUP, WHICH ASSISTS OUR CUSTOMERS WITH THE
IMPLEMENTATION OF OUR PRODUCTS
We believe that growth in our product sales depends on our ability to
provide our customers with professional services to assist with support,
training, consulting and initial implementation of our products and to educate
third-party systems integrators in the use of our products. As a result, we plan
to increase the number of professional services personnel to meet these needs.
New professional services personnel will require training and take time to reach
full productivity. We may not be able to attract or retain a sufficient number
of highly qualified professional services personnel. Competition for qualified
professional services personnel with the appropriate knowledge is intense. We
are in a new market and there is a limited number of people who have the
necessary skills. To meet our customers' needs for professional services, we may
also need to use more costly third-party consultants to supplement our own
professional services group. In addition, we could experience delays in
recognizing revenue if our professional services group falls behind schedule in
connecting our products to customers' systems and data sources.
WE MAY BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO NOT DEVELOP NEW PRODUCTS AND
ENHANCEMENTS
If we do not continue to improve our products and develop new products that
keep pace with competitive product introductions and technological developments,
satisfy diverse and rapidly evolving customer requirements and achieve market
acceptance, we may be unable to attract new customers. For example, we are
developing new applications as well as new versions of a number of our existing
applications, which are scheduled for release in 2000. 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
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enhancements and may experience similar delays in the future. These delays or
problems in the installation or implementation of our new releases may cause
customers to forego purchases of our products.
MARKET ACCEPTANCE OF OUR PRODUCTS MAY SUFFER IF WE ARE UNABLE TO KEEP PACE WITH
RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY
Rapidly changing technology and operating system standards may impede
market acceptance of our products. Our new applications have been designed based
upon currently prevailing Internet technology. If new Internet technologies
emerge that are incompatible with our applications, our key products may become
obsolete and our existing and potential customers may seek alternatives to our
products. We may not be able to quickly adapt our products to any new Internet
technology.
Additionally, we have designed our products to work with databases such as
Oracle and Microsoft SQL Server. Any changes to those databases, or increasing
popularity of other databases, could require us to modify our products, and
could cause us to delay releasing future products and enhancements. Furthermore,
software adapters are necessary to integrate our products with other systems and
data sources used by our customers. We must develop and update these adapters to
reflect changes to these systems and data sources in order to maintain the
functionality provided by our products. As a result, uncertainties related to
the timing and nature of new product announcements, introductions or
modifications by vendors of operating systems, databases, customer relationship
management software, web servers and other enterprise and Internet-based
applications could delay our product development, increase our product
development expense or cause customers to delay evaluation, purchase and
deployment of our products.
WE ARE DEPENDENT ON THE ACCEPTANCE AND USE OF THE WINDOWS NT OPERATING SYSTEM
Our products currently run only on the Windows NT operating system. Any
change to this operating system could require us to modify our products and
could cause us to delay product releases. Any decline in the market acceptance
of the Windows NT operating system for any reason, including as a result of
errors or delayed introduction of enhancement or upgrades, could seriously harm
us. If potential customers do not want to use the Windows NT operating system,
we will need to develop products that run on other operating systems such as
UNIX. Rubic's eMA product currently runs on Windows NT and on UNIX operating
systems from Hewlett-Packard and Sun Microsystems.
The development of new products in response to these risks would require us
to commit a substantial investment of resources, and we may not be able to
successfully develop or introduce such products on a timely or cost-effective
basis, or at all, which could lead potential customers to choose alternatives to
our products.
FAILURE TO LICENSE NECESSARY THIRD PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS
MAY CAUSE DELAYS OR REDUCTIONS IN OUR SALES
We license third party software which we incorporate into our products.
Additionally, Rubric relies on web application server technology licensed from
BEA Systems. These licenses may not continue to be available or commercially
reasonable terms or at all. The loss of any such license could result in delays
or reductions of our applications, or Rubric's applications until equivalent
software is identified, licensed and integrated or developed by us or Rubric.
WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT TO ACQUIRE AND RETAIN
CUSTOMERS
Our market is intensely competitive, and we expect competition to intensify
in the future. Our failure to maintain and enhance our competitive position
could seriously harm our business. Our customers' requirements and the
technology available to satisfy those requirements are continually changing.
Therefore, we must be able to respond to these changes in order to remain
competitive. Our competitors vary in size and in the scope and breadth of
products and services offered.
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In addition, we face potential competition from vendors of other enterprise
applications as they expand the functionality of their product offerings,
including companies that design software for decision support, management of
customer relationships or of organizations' operational information, as well as
vendors of database applications. Accordingly, it is possible that new
competitors may emerge and acquire our market share.
Some of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we do, and thus may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements. Also, many
current and potential competitors have wider name recognition and more extensive
customer bases that they could leverage, thereby gaining market share to our
detriment. They may be able to undertake more extensive promotional activities,
adopt more aggressive pricing strategies, and offer purchasers more attractive
terms than we can. Our competitors may develop products that are superior to
ours or that achieve greater market acceptance. In addition, current and
potential competitors may establish cooperative relationships among themselves
or with third parties to enhance their products to address customer needs.
Competitive pressures may make it difficult for us to acquire and retain
customers and may require us to reduce the price of our products. We cannot be
certain that we will be able to compete successfully with existing or new
competitors. If we fail to compete successfully against current or future
competitors, our business would be seriously harmed.
WE DEPEND ON OUR INTELLECTUAL PROPERTY, AND LITIGATION REGARDING OUR
INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS
Our intellectual property is important to our business. Our intellectual
property includes our proprietary technology, our trade secrets, copyrights in
our software products, including Foundation and our applications, and our
trademarks. Our copyrights are important to the protection of our software, and
our trademarks are important to the protection of our company and product names.
These copyrights and trademarks discourage unauthorized use of our software and
our company and product names and provide us with a way to enforce our rights in
the event that this unauthorized use occurs. 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. Third parties may infringe upon our
intellectual property rights, and we may be unable to detect this unauthorized
use or effectively enforce our rights. In addition, any legal action that we may
bring to protect our intellectual property rights could be expensive and
distract management from day-to-day operations.
Our business activities may infringe upon the proprietary rights of others,
and other parties may assert infringement claims against us. In addition, in the
future, we may receive communications from other parties asserting that our
intellectual property infringes their proprietary rights. If we become liable to
any other third party for infringing its intellectual property rights, we could
be required to pay substantial damage awards and to develop non-infringing
technology, obtain licenses or cease selling the applications that contain the
infringing intellectual property. We could have to redesign our products, which
could be costly and time-consuming and could substantially delay product
shipments, assuming that a redesign is feasible. We may be unable to develop
non-infringing technology or obtain licenses on commercially reasonable terms,
if at all. Litigation is subject to inherent uncertainties and any of these
results in connection with a lawsuit could seriously harm our business.
Furthermore, we could incur substantial costs in defending against any
intellectual property litigation, and these costs could increase significantly
if any dispute were to go to trial. Our defense of any litigation, regardless of
the merits of the complaint, will likely be time-consuming, costly and a
distraction for our management personnel. Publicity related to any intellectual
property litigation could also harm the sale of our products.
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SOFTWARE DEFECTS COULD LEAD TO LOSS OF REVENUE OR DELAY IN MARKET ACCEPTANCE FOR
OUR PRODUCTS
Our software products are internally complex and may contain defects,
especially when they are first introduced or when new versions are released. In
the past we have discovered software errors in some of our products after their
introduction. If we are not able to detect and correct errors in products or
releases before commencing commercial shipments, we may experience loss of
revenue or delays in market acceptance for our products. We continue to evaluate
our products for errors following the commencement of commercial shipments and
receive information from customers regarding errors they detect, as well as
requests for future enhancements to our products. Our license agreements with
our customers typically contain provisions designed to limit our exposure to
potential product liability claims. However, all domestic and international
jurisdictions may not enforce these limitations. We may encounter product
liability claims in the future. Product liability claims brought against us
could divert the attention of management and key personnel, could be expensive
to defend and may result in adverse settlements and judgments.
BARRIERS TO INTERNATIONAL EXPANSION COULD LIMIT OUR FUTURE GROWTH
We intend to expand our international operations, but we may face
significant barriers to this expansion. Our failure to manage our international
operations effectively could limit the future growth of our business.
International sales represented approximately 5.1% of our total revenue for the
year ended December 31, 1998 and 23.2% of our total revenue in 1999,
substantially all of which consisted of sales to customers in Canada, Europe and
Japan. We conduct our international sales primarily through direct sales offices
in Germany, the Netherlands and the United Kingdom, through our Canadian
subsidiary and through distributors in Japan. The expansion of our existing
international operations and entry into additional international markets will
require significant management attention and financial resources.
Our international operations face numerous risks. Our products must be
localized -- customized to meet local user needs -- in order to be sold in
particular foreign countries. Developing local versions of our products for
foreign markets is difficult and can take longer than we anticipate. We
currently have limited experience in localizing products and in testing whether
these localized products will be accepted in the targeted countries. For
example, we are currently marketing localized products only in Germany and
Japan. We cannot assure you that our localization efforts will be successful. In
addition, we have only a limited history of marketing, selling and supporting
our products and services internationally. As a result, we must hire and train
experienced personnel to staff and manage our foreign operations. However, we
may experience difficulties in recruiting and training an international staff.
We must also be able to enter into strategic relationships with companies in
international markets, particularly in Japan where all of our sales have been
made through distributors. If we are not able to maintain successful strategic
relationships internationally or recruit additional companies to enter into
strategic relationships, our future growth could be limited.
We also face certain other risks inherent in conducting business
internationally, such as:
- difficulties and costs of staffing and managing international operations;
- language and cultural differences;
- difficulties in collecting accounts receivable and longer collection
periods;
- seasonal business activity in certain parts of the world;
- fluctuations in currency exchange rates;
- legal and governmental regulatory requirements;
- trade barriers; and
- potentially adverse tax consequences.
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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 ARE GROWING RAPIDLY, AND THE FAILURE TO MANAGE OUR GROWTH, INCLUDING
EXPANSION OF OUR MANAGEMENT SYSTEMS, COULD ADVERSELY AFFECT OUR BUSINESS
We have grown rapidly and will need to continue to grow in all areas of
operation in order to execute our business strategy. Our total number of
full-time employees grew from 75 at December 31, 1998 to 131 at December 31,
1999, and we anticipate further significant increases in the number of our
employees. In addition, Rubric grew from 38 employees as of December 31, 1998 to
78 employees as of December 31, 1999. 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
implement several new information 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.
IF WE ACQUIRE ADDITIONAL COMPANIES, PRODUCTS OR TECHNOLOGIES, WE MAY FACE RISKS
SIMILAR TO THOSE THAT WE CURRENTLY FACE IN CONNECTION WITH OUR ACQUISITION OF
RUBRIC
If we are presented with appropriate opportunities, we intend to make other
investments in complementary companies, products or technologies. We may not
realize the anticipated benefits of any other acquisition or investment. If we
acquire another company, we will likely face the same risks, uncertainties and
disruptions as discussed above with respect to our acquisition of Rubric.
Furthermore, we may have to incur debt or issue equity securities to pay for any
additional future acquisitions or investments, the issuance of which could be
dilutive to us or our existing stockholders. In addition, our profitability may
suffer because of acquisition-related costs or amortization costs for acquired
goodwill and other intangible assets.
OUR PROSPECTS FOR OBTAINING ADDITIONAL FINANCING, IF REQUIRED, ARE UNCERTAIN AND
FAILURE TO OBTAIN NEEDED FINANCING COULD AFFECT OUR ABILITY TO PURSUE FUTURE
GROWTH
We expect that our cash on hand, cash equivalents and proceeds from this
offering will be sufficient to meet our working capital and capital expenditure
needs for at least the next 12 months. However, we may need to raise additional
funds to fund expansion, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. We cannot assure you that we
would be able to obtain additional financing on favorable terms, if at all. If
we issue additional equity securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of common stock. If we cannot raise
necessary additional funds on acceptable terms, we may not be able to develop or
enhance our products, fund expansion, take advantage of future opportunities or
respond to competitive pressures or unanticipated requirements.
SOME OF OUR EXISTING INVESTORS MAY ASSERT CLAIMS AGAINST US FOR FAILING TO SELL
THEM SHARES IN OUR INITIAL PUBLIC OFFERING
In connection with our private financing in June 1999, we granted rights to
purchase up to 238,306 shares in our initial public offering to many of these
investors, subject to compliance with applicable laws, including federal
securities laws. Because the offering of the rights started privately in June
1999, the issuance of these shares could not be registered in connection with
our initial public offering or on any other registration statement. Although we
offered to sell the shares to these investors in a separate private placement at
the initial public offering price, only some of these
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investors accepted this offer as to 45,063 shares. We believe that we have
fulfilled our obligations under the agreement, but it is possible that the
investors who did not accept this offer could claim that we breached the
agreement by failing to sell them the shares in the initial public offering. If
they were successful in their claims, we could be obligated to pay damages,
which could equal the amount of any increase in the market value of our common
stock.
RISKS RELATED TO OUR INDUSTRY
WE DEPEND ON THE GROWTH IN THE USE OF THE INTERNET FOR OUR BUSINESS
Our future success depends heavily on the increased acceptance and use of
the Internet for business. Although the Internet is experiencing rapid growth in
the number of users and traffic, this growth is a recent phenomenon and may not
continue. Furthermore, despite this growth in usage, the use of the Internet for
business transactions is relatively new. If use of the Internet for business
does not continue to increase or increases more slowly than expected, our
business would be seriously harmed. Consumers and businesses may reject the
Internet as a viable commercial medium, or be slow to adopt it, for a number of
reasons, including potentially inadequate network infrastructure, slow
development of enabling technologies, concerns about the security of
transactions and confidential information and insufficient commercial support.
The Internet infrastructure may not be able to support the demands placed on it
by increased Internet usage and bandwidth requirements. In addition, delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity, or increased governmental regulation,
could cause the Internet to lose its viability as a commercial medium. If these
or any other factors cause use of the Internet for business to slow or decline,
our business would be harmed. Even if the required infrastructure, standards,
protocols or complementary products, services or facilities are developed, we
may incur substantial expenses adapting our products to changing or emerging
technologies.
INCREASING GOVERNMENTAL REGULATION OF THE INTERNET COULD LIMIT THE MARKET FOR
OUR PRODUCTS
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, such as user privacy,
taxation of goods and services provided over the Internet, pricing, content and
quality of products and services. Legislation could dampen the growth in
Internet usage and decrease or limit its acceptance as a communications and
commercial medium. If enacted, these laws and regulations could limit the market
for our products. In addition, existing laws could be applied to the Internet,
including consumer privacy laws. Legislation or application of existing laws
could expose companies involved in electronic commerce, or e-commerce, to
increased liability, which could limit the growth of e-commerce generally.
GOVERNMENT REGULATION OF THE COLLECTION AND USE OF PERSONAL DATA COULD REDUCE
DEMAND FOR OUR PRODUCTS
Our products connect to and analyze data from various applications,
including Internet applications, that enable businesses to capture and use
information about their customers. Government regulation which limits our
customers' use of this information could reduce the demand for our products. A
number of jurisdictions have adopted, or are considering adopting, laws that
restrict the use of customer information from Internet applications. The
European Union has required that its member states adopt legislation that
imposes restrictions on the collection and use of personal data, 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
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which our products operate, and could restrict the use of our products in some
e-commerce applications. This could reduce demand for our products.
POTENTIAL YEAR 2000 PROBLEMS MAY INVOLVE SIGNIFICANT TIME AND EXPENSE AND MAY
REDUCE OUR FUTURE SALES
If our technology or technology developed by third parties which is
incorporated into our products or which interacts with our products, is not year
2000 compliant, our business could be seriously harmed. The year 2000 problem
exists because many currently installed computer systems and software products
electronically store dates using only the last two digits of the calendar year.
As a result, these systems may not be able to distinguish whether "00" means
1900 or 2000, which may cause system failures or erroneous results. In addition,
currently installed computer systems and software products may not properly
recognize the date February 29, 2000. Year 2000 problems could subject us to
liability claims and disrupt our operations and customers' purchasing patterns,
any of which could harm our business.
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.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD LEAD TO LOSSES BY INVESTORS AND TO
SECURITIES LITIGATION
Our common stock has traded in a public market only since September 1999.
The 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 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
- the volume of trading in our common stock.
In addition, stock markets, particularly the Nasdaq National Market, have
experienced extreme price and volume fluctuations, and the market prices of
securities of technology companies, particularly Internet-related companies,
have been highly volatile. These fluctuations have often been unrelated to the
operating performance of such companies. Fluctuations such as these may affect
the market price of our common stock. Substantial sales of our common stock
could also cause our stock price to decline. As a result, investors may not be
able to resell their shares at or above the public offering price.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in their stock price. This
type of litigation could result in substantial costs and could divert our
management's attention and resources.
OUR OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL HAVE SIGNIFICANT CONTROL
OVER US, WHICH COULD DELAY OR PREVENT A CHANGE OF CONTROL
Our executive officers, directors and major stockholders will have
significant control over us following completion of this offering as they will
beneficially own an aggregate of approximately % of our outstanding common
stock at that time. This could limit the ability of our other stockholders to
influence matters requiring approval by our stockholders, including the election
of directors and the approval of mergers or similar transactions.
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WE HAVE ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT THE SALE OF
OUR COMPANY AND DIMINISH THE VOTING RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. For example, we have a classified board
of directors. In addition, our stockholders are unable to act by written consent
or to fill any vacancy on the board of directors. In addition, our stockholders
cannot call special meetings of stockholders for any purpose, including to
remove any director or the entire board of directors without cause. We will also
be subject to the provisions of Section 203 of the Delaware General Corporation
Law regulating corporate takeovers. These provisions could also limit the price
that investors might be willing to pay in the future for shares of our common
stock.
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING, AND OUR
INVESTMENT OF THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
Our management has broad discretion as to how to spend the proceeds from
this offering and may spend these proceeds in ways with which our stockholders
may not agree. Pending any such uses, we plan to invest the net proceeds of this
offering in short-term, investment-grade, interest-bearing securities. These
investments may not yield a favorable return.
FUTURE SALES OF SHARES OF OUR COMMON STOCK COULD CAUSE THE PRICE OF OUR SHARES
TO DECLINE
Our common stock began trading on the Nasdaq National Market on September
22, 1999; however, to date there have been a limited number of shares trading in
the public market. This offering will result in additional shares of our common
stock being available on the open market. In addition, our current stockholders
hold a substantial number of shares, which they will be able to sell in the
public market in the near future. Sales of a substantial number of shares of our
common stock in this offering and thereafter could cause our stock price to
fall. In addition, the sale of shares by our stockholders could impair our
ability to raise capital through the sale of additional stock. See
"Underwriting" and "Shares Eligible for Future Sale".
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT
The public offering price is substantially higher than the pro forma net
book value per share of the outstanding common stock. If you purchase shares of
our common stock, you will incur immediate and substantial dilution in the
amount of $ per share. If the holders of outstanding options exercise those
options, you will experience further dilution.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA
We make many statements in this prospectus under the captions "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere that are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements relate to our future
plans, objectives, expectations and intentions. We may identify these statements
by the use of words such as "believe", "expect", "anticipate", "intend" and
"plan" and similar expressions. These forward-looking statements involve a
number of risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including those we discuss in "Risk Factors" and elsewhere in
this prospectus. These forward-looking statements speak only as of the date of
this prospectus, and we caution you not to rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business that are addressed in this prospectus.
This prospectus contains estimates of market growth related to the
Internet. These estimates have been included in studies published by Forrester
Research, a market research firm. These estimates assume that certain events,
trends and activities will occur. If Forrester Research is wrong about any of
their assumptions, then their market estimates may also be wrong.
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USE OF PROCEEDS
We will not receive any proceeds from the shares sold by the selling
stockholders in this offering. We estimate that we will receive net proceeds
from the sale of the 1,500,000 shares of common stock offered by us of
approximately $ million, or $ if the underwriters exercise their
over-allotment option in full, based on an assumed public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses. 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. Except for the Rubric acquisition, we have no present plans or
commitments 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.
PRICE RANGE OF COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market under the
symbol "BBSW" since September 22, 1999. The following table sets forth, for the
periods indicated, the high and low closing prices for the common stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
Fiscal Year Ended December 31, 1999
Third Quarter (from September 22, 1999)................... $ 29.19 $15.50
Fourth Quarter............................................ 142.75 15.94
Fiscal Year Ending December 31, 2000
First Quarter (through January 20, 2000).................. 114.94 80.06
</TABLE>
On January 20, 2000, the last reported sale price on the Nasdaq National
Market for our common stock was $83.38 per share. As of December 31, 1999, there
were approximately 179 holders of record of our common stock.
18
<PAGE> 21
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect our pending acquisition of Rubric as if
it had occurred on December 31, 1999; and
- on a pro forma as adjusted basis to reflect the application of the net
proceeds from the sale of 1,500,000 shares of common stock offered by us
in this offering, based upon an assumed initial price to public of $
per share, after deducting the estimated underwriting discounts and
commissions and estimated offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ---------
<S> <C> <C> <C>
Long-term liabilities, less current portion................. $ 333 $ 548 $
Stockholders' equity:
Preferred stock, par value $0.001 per share; 5,000,000
shares authorized and none designated.................. -- --
Common stock, par value $0.001 per share; 90,000,000
shares authorized, 18,050,087 shares issued and
outstanding, actual; 20,950,087 shares issued and
outstanding, pro forma; 22,450,087 shares issued and
outstanding, pro forma as adjusted..................... 17 20
Additional paid-in capital................................ 124,297 487,239
Deferred stock compensation............................... (8,710) (8,710)
Notes receivable from stockholders........................ (693) (693)
Accumulated other comprehensive loss...................... (33) (33)
Accumulated deficit....................................... (41,672) (51,730)
-------- -------- --------
Total stockholders' equity............................. 73,206 426,093
-------- -------- --------
Total capitalization.............................. $ 73,539 $426,641 $
======== ======== ========
</TABLE>
The outstanding share information shown in the table above excludes:
- 3,195,489 shares of common stock issuable upon the exercise of
outstanding stock options as of December 31, 1999, at a weighted-average
per share exercise price of $10.12;
- 300,000 shares subject to non-plan options granted on January 4, 2000, at
an exercise price of $54.00 per share;
- 2,764,695 shares of common stock available for issuance under our 1999
Equity Incentive Plan as of December 31, 1999, which were increased by
902,504 shares on January 1, 2000;
- 500,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan as of December 31, 1999, which were increased by 180,500
shares on January 1, 2000; and
- approximately 700,000 shares to be reserved for issuance pursuant to the
exercise of options and warrants to purchase Rubric capital stock that
will be converted into options and warrants to purchase our common stock.
See "Management -- Employee Benefit Plans" for more information about our
stock plans.
19
<PAGE> 22
DILUTION
Our net tangible book value as of December 31, 1999 was $ million, or
$ per share of common stock. Our net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by 18,050,087 shares of common stock outstanding as of December 31,
1999. After giving effect to the receipt of the net proceeds from the sale of
1,500,000 shares of our common stock by us at the assumed initial price to
public of $ per share and after deducting estimated underwriting discounts
and commissions and the estimated offering expenses, our net tangible book value
as of December 31, 1999 would have been approximately $ million, or $
per share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to new investors purchasing shares at the assumed initial price to public.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial price to public per share................... $
Net tangible book value per share as of December 31, 1999... $
Increase per share attributable to new investors..........
-----
Net tangible book value per share after offering............
------
Dilution per share to new investors......................... $
======
</TABLE>
If the actual net tangible book value per share as of December 31, 1999 was
adjusted to give effect to the proposed acquisition of Rubric as if it was
completed on December 31, 1999, it would have been $ per share and the pro
forma net tangible book value per share after this offering would have been
$ , representing an increase in the pro forma net tangible book value per
share of $ and a dilution in net tangible book value per share of $ to
investors purchasing common stock in this offering.
The above discussion and table assumes no exercise of any stock options
outstanding as of December 31, 1999. As of December 31, 1999, there were options
outstanding to purchase a total of 3,195,489 shares of our common stock with a
weighted-average exercise price of $10.12 per share. If any of these options are
exercised, there will be further dilution to new public investors. Please see
Notes 4 and 10 of Notes to Financial Statements for more information about these
options.
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this prospectus. The consolidated
statement of operations data for each of the years ended December 31, 1997, 1998
and 1999 and the consolidated balance sheet data at December 31, 1998 and 1999,
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 statement of operations data for the period from
November 28, 1995 (inception) to December 31, 1996 and the consolidated balance
sheet data at December 31, 1997 are derived from our audited consolidated
financial statements not included in this prospectus. Historical results are not
necessarily indicative of future results.
The unaudited pro forma information reflects our pending acquisition of
Rubric, which we expect to be completed in February 2000 and has been derived
from the Broadbase unaudited pro forma combined condensed financial statements
included elsewhere in this prospectus. The unaudited pro forma combined
condensed statement of operations data is derived from our audited statement of
operations data combined with the audited statement of operations data of Rubric
for the year ended December 31, 1999, giving effect to the acquisition as if it
had occurred on January 1, 2000. The unaudited pro forma combined condensed
balance sheet data presents our unaudited balance sheet data combined with the
unaudited balance sheet data of Rubric, as of December 31, 1999, giving effect
to the acquisition as if it had occurred on December 31, 1999. The unaudited pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the transaction had been consummated at the dates indicated,
nor is it necessarily indicative of the future operating results or financial
position of the combined company.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 28, 1995 YEARS ENDED YEAR ENDED
(INCEPTION) TO DECEMBER 31, DECEMBER 31, 1999
DECEMBER 31, ------------------ --------------------
1996 1997 1998 ACTUAL PRO FORMA
----------------- ------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License.............................................. $ -- $ -- $ 2,996 $ 7,689 $ 9,557
Maintenance and professional services................ -- -- 443 2,753 4,315
------- ------- -------- -------- ---------
Total net revenue............................. -- -- 3,439 10,442 13,872
Cost of revenue:
License.............................................. -- -- 713 1,437 1,715
Maintenance and professional services................ -- -- 254 2,610 4,133
Amortization of core and developed technology........ -- -- -- -- 1,587
------- ------- -------- -------- ---------
Total cost of revenue......................... -- -- 967 4,047 7,435
------- ------- -------- -------- ---------
Gross margin........................................... -- -- 2,472 6,395 6,437
Operating expenses:
Sales and marketing.................................. 130 2,851 7,888 15,092 20,141
Research and development............................. 928 1,980 3,738 6,024 9,868
General and administrative........................... 215 744 1,165 2,011 4,288
Amortization of intangibles and goodwill............. -- -- -- -- 70,419
Amortization of deferred stock compensation.......... -- -- 1,133 6,403 6,403
Merger expenses...................................... -- -- -- 1,000 1,000
------- ------- -------- -------- ---------
Total operating expenses...................... 1,273 5,575 13,924 30,530 112,119
------- ------- -------- -------- ---------
Loss from operations................................... (1,273) (5,575) (11,452) (24,135) (105,682)
Interest income........................................ 30 154 335 1,454 1,586
Interest expense....................................... (29) (66) (226) (889) (1,237)
------- ------- -------- -------- ---------
Net loss............................................... $(1,272) $(5,487) $(11,343) $(23,570) $(105,333)
======= ======= ======== ======== =========
Basic and diluted net loss per share................... $ (4.30) $ (6.19) $ (8.85) $ (3.74) $ (11.45)
======= ======= ======== ======== =========
Weighted-average shares used in computing basic and
diluted net loss per share........................... 296 887 1,281 6,296 9,196
======= ======= ======== ======== =========
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 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 $76,642 $ 76,852
Working capital............................................. 61 8,801 69,362 64,526
Total assets................................................ 2,113 17,173 84,770 444,779
Long-term debt and capital lease obligations, net of current
portion................................................... 916 9,360 333 548
Stockholders' equity (net capital deficiency)............... (75) 1,226 73,206 426,093
</TABLE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain consolidated statement of operations
data for each of the eight quarters beginning with the quarter ended March 31,
1998 through the quarter ended December 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, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License.............................. $ 482 $ 867 $ 888 $ 759 $ 1,126 $ 1,567
Maintenance and professional
services........................... -- 98 104 241 360 486
------- ------- ------- ------- ------- -------
Total net revenue.............. 482 965 992 1,000 1,486 2,053
Cost of revenue:
License.............................. 210 156 180 167 260 168
Maintenance and professional
services........................... -- 83 84 87 391 541
------- ------- ------- ------- ------- -------
Total cost of revenue.......... 210 239 264 254 651 709
------- ------- ------- ------- ------- -------
Gross margin.......................... 272 726 728 746 835 1,344
Operating expenses:
Sales and marketing.................. 1,595 2,046 1,975 2,272 2,656 3,839
Research and development............. 742 923 1,030 1,043 1,188 1,612
General and administrative........... 219 303 315 328 494 438
Amortization of deferred stock
compensation....................... 62 266 374 431 925 1,547
Merger expenses...................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total operating expenses....... 2,618 3,538 3,694 4,074 5,263 7,436
------- ------- ------- ------- ------- -------
Loss from operations.................. (2,346) (2,812) (2,966) (3,328) (4,428) (6,092)
Interest income....................... 53 105 94 83 113 81
Interest expense...................... (60) (40) (47) (79) (260) (301)
------- ------- ------- ------- ------- -------
Net loss.............................. $(2,353) $(2,747) $(2,919) $(3,324) $(4,575) $(6,312)
======= ======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
License.............................. $ 2,114 $ 2,882
Maintenance and professional
services........................... 650 1,257
------- -------
Total net revenue.............. 2,764 4,139
Cost of revenue:
License.............................. 482 527
Maintenance and professional
services........................... 750 928
------- -------
Total cost of revenue.......... 1,232 1,455
------- -------
Gross margin.......................... 1,532 2,684
Operating expenses:
Sales and marketing.................. 4,062 4,535
Research and development............. 1,587 1,637
General and administrative........... 498 581
Amortization of deferred stock
compensation....................... 1,976 1,955
Merger expenses...................... -- 1,000
------- -------
Total operating expenses....... 8,123 9,708
------- -------
Loss from operations.................. (6,591) (7,024)
Interest income....................... 237 1,023
Interest expense...................... (275) (53)
------- -------
Net loss.............................. $(6,629) $(6,054)
======= =======
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
PERCENT OF TOTAL NET REVENUE
Net revenue:
License.............................. 100.0% 89.8% 89.5% 75.9% 75.8% 76.3%
Maintenance and professional
services........................... -- 10.2 10.5 24.1 24.2 23.7
------- ------- ------- ------- ------- -------
Total net revenue.............. 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License.............................. 43.6 16.2 18.1 16.7 17.5 8.2
Maintenance and professional
services........................... -- 8.6 8.5 8.7 26.3 26.4
------- ------- ------- ------- ------- -------
Total cost of revenue.......... 43.6 24.8 26.6 25.4 43.8 34.5
------- ------- ------- ------- ------- -------
Gross margin.......................... 56.4 75.2 73.4 74.6 56.2 65.5
Operating expenses:
Sales and marketing.................. 330.9 212.0 199.1 227.2 178.7 187.0
Research and development............. 153.9 95.6 103.8 104.3 79.9 78.5
General and administrative........... 45.4 31.4 31.8 32.8 33.2 21.3
Amortization of deferred stock
compensation....................... 12.9 27.6 37.7 43.1 62.2 75.4
Merger expenses...................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total operating expenses....... 543.1 366.6 372.4 407.4 354.0 362.2
------- ------- ------- ------- ------- -------
Loss from operations.................. (486.7) (291.4) (299.0) (332.8) (297.8) (296.7)
Interest income....................... 11.0 10.9 9.5 8.3 7.6 3.9
Interest expense...................... (12.5) (4.1) (4.7) (7.9) (17.5) (14.7)
------- ------- ------- ------- ------- -------
Net loss.............................. (488.2)% (284.6)% (294.2)% (332.4)% (307.7)% (307.5)%
======= ======= ======= ======= ======= =======
<CAPTION>
THREE MONTHS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
<S> <C> <C>
PERCENT OF TOTAL NET REVENUE
Net revenue:
License.............................. 76.5% 69.6%
Maintenance and professional
services........................... 23.5 30.4
------ ------
Total net revenue.............. 100.0 100.0
Cost of revenue:
License.............................. 17.4 12.7
Maintenance and professional
services........................... 27.1 22.4
------ ------
Total cost of revenue.......... 44.6 35.2
------ ------
Gross margin.......................... 55.4 64.9
Operating expenses:
Sales and marketing.................. 147.0 109.6
Research and development............. 57.4 39.6
General and administrative........... 18.0 14.0
Amortization of deferred stock
compensation....................... 71.5 47.2
Merger expenses...................... -- 24.2
------ ------
Total operating expenses....... 293.9 234.5
------ ------
Loss from operations.................. (238.5) (169.7)
Interest income....................... 8.6 24.7
Interest expense...................... (9.9) (1.3)
------ ------
Net loss.............................. (239.8)% (146.3)%
====== ======
</TABLE>
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
We incorporated in November 1995 and from that date through December 1997
were in the development stage, conducting research and developing our initial
products. In the fourth quarter of 1997, we introduced Foundation. This software
product was originally designed to enable organizations to build and manage
datamarts for their customer information. In the third quarter of 1998, we began
offering applications, built on Foundation, which provide analysis for customer
relationship management. In May 1999 we expanded our suite by introducing new
applications designed for Internet sales channels, Internet marketing and other
customer-focused e-business applications, as well as new versions of our
existing applications. 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 131 full-time
employees at December 31, 1999.
Our revenue comes principally from licenses of our software products, with
the balance coming from maintenance and professional services. We adopted the
provisions of Statement of Position ("SOP") No. 97-2 Software Revenue
Recognition, as amended by SOP No. 98-4, Deferral of the Effective Date of
Certain Provisions of SOP No. 97-2. Under SOP No. 97-2 we recognize license
revenue when persuasive evidence of an agreement exists, delivery of the product
has occurred, no significant company obligations with regard to installation or
implementation of the software remain, the fee is fixed or determinable and
collectibility is probable. In a typical application license transaction, our
professional services group connects our product to the customer's systems and
data sources. Upon completion of that connection, no significant obligations
remain with respect to implementation, and we recognize the revenue related to
that license. The actual connection process can often be completed in two to
four weeks. However, the timing of the commencement and completion of this
process is subject to factors that may be beyond our control, as this process
requires access to the customer's facilities and coordination with the
customer's personnel following delivery of the software. As a result, we
typically do not recognize the license revenue from an application license until
one to three months after our product is shipped to the customer. License
revenue generated by distributors and other resellers is recognized upon receipt
of a reseller report of sale and our shipment of the licensed software.
Maintenance and support revenue associated with new product licenses and
maintenance revenue resulting from renewed maintenance contracts are deferred
and recognized ratably over the contract period. Professional services revenue
is recognized when services are performed.
Currently, businesses that license our products generally license one or
more of our applications, together with Foundation and adapters to interface
with the customers' existing data sources. Customers generally receive
nonexclusive, perpetual licenses to use our products for a specified number of
servers and named 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.
24
<PAGE> 27
We sell our products through our direct sales force and through indirect
sales channels. Direct sales are made by our direct sales force in North
America, Germany, the United Kingdom and the Netherlands. Our indirect sales
channels include software application vendors, resellers and distributors
located in the United States, Japan and the Netherlands. Sales through indirect
sales channels accounted for approximately 28.7% of our total net revenue for
1998 and 35.3% of our total net revenue for 1999. Although a significant portion
of our revenue to date has been generated by our indirect sales channels, we
intend to continue increasing the size of our direct sales force, both in the
United States and internationally.
Revenue from customers outside the United States represented 5.1% of our
total net revenue for 1998 and 23.2% of our total revenue for 1999. We intend to
continue to expand our international operations and commit significant
management time and financial resources to developing our direct and indirect
international sales channels. International revenue may not, however, increase
as a percentage of total net revenue.
We have experienced substantial net losses since our inception due to the
significant costs incurred to develop our technology and products and to recruit
and train personnel for our engineering, sales, marketing, professional services
and administration departments. As of December 31, 1999, we had an accumulated
deficit of $41.7 million. We expect to continue to incur substantial operating
losses for the foreseeable future.
PENDING ACQUISITION OF RUBRIC
On December 9, 1999, we entered into a definitive merger agreement to
acquire privately-held Rubric. Rubric is a leading provider of e-marketing
software. Rubric's product, Rubric eMA, automates the planning, execution and
measurement of marketing campaigns. We intend to account for the transaction as
a purchase, and the merger is intended to qualify as a tax-free reorganization.
The acquisition is subject to customary closing conditions, including approval
by Rubric's stockholders and regulatory approvals. We expect to complete this
acquisition in February 2000.
In connection with this acquisition, we will issue approximately 2.9
million shares of our common stock in exchange for all outstanding shares of
Rubric capital stock, and convert outstanding options and warrants to acquire
Rubric capital stock into options and warrants to purchase approximately 700,000
shares of our common stock.
Rubric was incorporated in Delaware in September 1997, and introduced its
eMA product in May 1998. Rubric had total revenue of approximately $343,000 in
1998 and approximately $3.4 million in 1999. Rubric's cost of revenues increased
from approximately $318,000 in 1998 to approximately $2.4 million in 1999, and
its operating expenses increased from approximately $6.3 million in 1998 to
approximately $22.9 million in 1999. As of December 31, 1999, Rubric had
accumulated net losses of approximately $29.3 million. Rubric grew from 38
employees at December 31, 1998 to 78 employees at December 31, 1999.
We will account for the Rubric acquisition using the purchase method of
accounting. Under the purchase method, the purchase price of Rubric will be
allocated to the assets acquired and liabilities assumed from Rubric. As a
result we expect to record a charge to operations upon consummation of the
transaction related to acquired in-process research and development of
approximately $10.1 million. Also, we expect to incur merger-related costs of up
to $3.5 million, of which $1.0 million were included in our 1999 results of
operations. In addition, we expect to record approximately $356.4 million of
intangible assets and goodwill on our balance sheet, which will result in
amortization expense of $72.0 million for 2000, $71.7 million for 2001, $71.7
million for 2002, $70.5 million for 2003, and $70.5 million for 2004. These
charges will delay and thereafter reduce our profitability.
25
<PAGE> 28
RESULTS OF OPERATIONS
NET REVENUE
License. We began licensing our products in the first quarter of 1998. We
had no license revenue in 1997. License revenue increased from $3.0 million in
1998 to $7.7 million in 1999. This increase is attributable to increases in the
number of customers licensing our products, and the increase in the average
revenue per license transaction. The increase in customers reflects the
expansion of our direct sales force and our indirect sales channels, and the
increase in the average revenue per license transaction results from our
customers' licensing our applications together with Foundation. In addition,
both the increase in number of customers and the average revenue per license
transaction reflects our introductions of new e-business applications. We intend
to continue to expand both our direct and indirect sales channels in 2000.
Maintenance and professional services. 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 was first
recognized in the second quarter of 1998. Maintenance and professional services
revenue increased from $443,000 in 1998 to $2.8 million in 1999 which reflects
the expansion of our installed base of customers.
COST OF REVENUE
Cost of licenses. The cost of licenses consists primarily of royalties
payable to third parties as well as the cost of product manuals, media,
packaging and shipping. The cost of licenses increased from $713,000 in 1998 to
$1.4 million in 1999. This increase is primarily the result of increased license
revenue. Our cost of licenses as a percentage of license revenue has fluctuated
significantly from year to year and from quarter to quarter. These fluctuations
are due primarily to changes in the mix of products sold, since different
products require royalty payments at different 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. We
recorded no cost of maintenance and professional services in 1997. The cost of
maintenance and professional services increased from $254,000 in 1998 to $2.6
million in 1999. This increase is primarily the result of an increase in our
professional services personnel from three at December 31, 1998 to 14 at
December 31, 1999. We plan to continue expanding our professional services group
and, accordingly, expect the dollar amount of our cost of maintenance and
professional services to increase.
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions, travel and promotional expenses as
well as 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 to $15.1 million in 1999. These increases in sales
and marketing expenses resulted primarily from higher salary, recruiting,
benefits, travel and facilities costs associated with the hiring of additional
sales and marketing personnel and the expansion of our international sales
organization. Full time sales and marketing personnel grew from 17 at December
31, 1997 to 35 at December 31, 1998 and to 56 at December 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 to $6.0 million
26
<PAGE> 29
in 1999. These 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 18 at December 31, 1997 to 26 at December 31, 1998 and to 45
at December 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 to $2.0 million in 1999. These increases in general and administrative
expenses were primarily due to increased staffing required to support our
expanded operations in the United States and abroad and, to a lesser extent,
increased costs of outside professional services and costs to implement
additional management information systems. Our full time general and
administrative personnel grew from four at December 31, 1997 to 10 at December
31, 1998 and to 15 at December 31, 1999.
Amortization of deferred stock compensation. We recorded deferred stock
compensation of approximately $3.5 million in 1998 and $12.8 million in 1999,
representing the difference between the exercise prices of options granted to
acquire approximately 2.1 million shares of our common stock during 1998 and
1999 and the deemed fair value for financial reporting purposes of our common
stock on the grant dates. We are amortizing our deferred stock compensation
using a graded vesting method over the vesting periods of the options. We
amortized deferred compensation expense of approximately $1.1 million during
1998 and $6.4 million during 1999. This compensation expense relates to options
awarded to individuals in all operating expense categories. In addition, on
January 4, 2000, we granted options to acquire 300,000 shares of our common
stock at an exercise price per share that was less than the fair market value on
the date of grant, and we will record related compensation expense of $1.9
million in the first quarter of 2000. The amortization of deferred compensation
will be approximately $12.4 million for 2000, $5.0 million for 2001, $2.5
million for 2002 and $800,000 for 2003.
Merger expenses. On December 9, 1999 we entered into a definitive agreement
to acquire all the outstanding capital stock of Rubric. In connection with the
signing of the definitive agreement, we had loaned Rubric $1.0 million as of
December 31, 1999 under a note which is payable on June 9, 2000, or immediately
if the merger with Rubric is not consummated. The loan bears interest at a rate
of 8.5% per annum. The purpose of the loan is to fund Rubric's working capital
requirements until closing of the merger which is expected no later than
February 2000. This amount has been expensed in full on our statement of
operations as a direct expense of the merger. In January 2000, we loaned an
additional $1.0 million to Rubric under this note, and have agreed to lend an
additional $1.0 million to Rubric in February 2000. These amounts will be
expensed in full in the first quarter of 2000.
Interest income. Interest income consists of interest earned on our cash
and cash equivalents. Interest income for 1997 was $154,000, representing
interest earned on the cash proceeds of our Series A and Series B preferred
stock financings. Interest income increased to $335,000 in 1998, due primarily
to the investment of the proceeds of our Series C preferred stock financing. The
increase in interest income in 1999 to $1.5 million is due to higher invested
cash balances in 1999, primarily as a result of the investment of proceeds
received from the sale of $8.3 million and $1.2 million of Series D convertible
debentures in December 1998 and April 1999, respectively, the proceeds received
from the sale of $20.0 million of Series E preferred stock in June 1999 and the
proceeds from the sale of $57.8 million of our common stock in our initial
public offering in September and October 1999.
Interest expense. Interest expense consists primarily of interest on our
notes payable, bank line of credit and convertible debentures. Interest expense
was $66,000 in 1997 due to $300,000 in borrowings in 1997 under notes from a
financial institution. Interest expense was $226,000 in 1998
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due to $1.0 million in additional borrowing in 1998 under a bank line of credit.
Interest expense increased to $889,000 in 1999 due primarily to interest
payments on $8.3 million of convertible debentures issued in December 1998 and
$1.2 million of convertible debentures issued in April 1999. These debentures
were converted to common stock upon the closing of our initial public offering
in September 1999.
Income taxes. There was no federal income tax provision in any period
presented due to our net operating losses. We had deferred tax assets of
approximately $6.5 million as of December 31, 1998 and $13.2 million as of
December 31, 1999. 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, 1998 and 1999, 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, 1999, we had federal net operating loss
carryforwards of approximately $29.1 million and state net operating loss
carryforwards of approximately $13.6 million. We also had federal and state
research and development tax credit carryforwards of approximately $500,000 and
$300,000, 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
Net cash used in operating activities was $4.8 million in 1997, $6.1
million in 1998 and $13.7 million in 1999. In each period, net cash used in
operating activities resulted from our net loss, offset by non-cash charges
including depreciation and amortization of deferred stock compensation, and
increases in current liabilities, especially deferred revenue in 1998 and
accrued expenses in 1999. Deferred revenue consists primarily of prepayments of
licenses from distributors and OEM's and prepayment of maintenance fees which
are recognized ratably over the related support period.
Our investing activities used cash of $661,000 in 1997, $1.4 million in
1998 and $2.7 million in 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 and in 1999 the restriction of $580,000 of
cash used to secure a letter of credit on a facilities lease.
Our financing activities provided cash of $1.1 million in 1997, $20.4
million in 1998 and $79.0 million in 1999. In 1997, financing activities
provided cash primarily from issuance of $1.0 million of long-term debt. In
1998, financing activities provided cash of $11.9 million from the issuance of
preferred stock, $8.3 million from the issuance of convertible debentures and
$1.0 million from borrowings under our bank credit facility. This was offset in
part by long-term debt repayment of $380,000 and a $400,000 loan to an officer
and stockholder. In 1999, our financing activities provided cash primarily from
the issuance of $20.0 million of preferred stock, the issuance of $1.2 million
of convertible debentures, and $57.8 million from the issuance of common stock
in our initial public offering in September 1999.
In July 1998, we entered into a loan and security agreement with Silicon
Valley Bank, providing an accounts receivable line of credit of up to $2.0
million and an equipment line of credit of up to $1.0 million. The accounts
receivable line of credit expired on December 31, 1999, and no borrowings were
outstanding under this facility in 1999. Borrowings under the equipment line of
credit are due in equal monthly installments of principal, plus accrued
interest, beginning in January 1999 and ending in December 2001. Borrowings
under the equipment line of credit bear interest at the bank's prime lending
rate plus 0.5%. As of December 31, 1999, $667,000 was outstanding under the
equipment
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line of credit and these borrowings accrued interest at a rate of 9%. Borrowings
under this agreement are secured by certain assets of Broadbase. 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 December 31, 1999, we were in
compliance with these covenants. In addition, as of December 31, 1999, we had
outstanding indebtedness under two separate notes payable to a financial
institution aggregating $415,000, at a weighted-average interest rate of 14.5%
per year.
As of December 31, 1999, we had $76.6 million of cash and cash equivalents.
We believe that cash and cash equivalents on hand, together with the proceeds
from this offering, will be sufficient to fund our operations, including working
capital and capital equipment purchase requirements for at least the next 12
months. However, we may need to raise additional funds in future periods through
public or private financing, or other arrangements to fund our operations and
potential acquisitions, if any, over a long-term basis until we achieve
profitability, if ever. We cannot be certain that we would be able to obtain
additional financing on favorable terms, if at all. Failure to raise capital
when needed could seriously harm our business and results of operations. If
additional funds are raised through the issuance of equity securities, the
percentage of ownership of our stockholders would be reduced. Furthermore, these
equity securities might have rights, preferences or privileges senior to our
common stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt obligations. We primarily use proceeds from these debt
obligations to support general corporate requirements including capital
expenditures and working capital needs. We have interest rate exposure on
borrowings under our equipment line of credit which bear interest at variable
rates based on the prime interest rate. We have no interest rate exposure on our
notes payable to a financial institution, as the interest rate on this
obligation is fixed.
The table below presents principal amounts by year of maturity and related
weighted-average interest rates for our debt obligations as of December 31,
1999.
<TABLE>
<CAPTION>
FAIR
2000 2001 THEREAFTER TOTAL VALUE
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Notes payable
Fixed rate amounts................. $415,000 -- -- $415,000 $415,000
Average rate..................... 14.50%
Line of credit
Variable rate amounts............ $334,000 $333,000 -- $667,000 $667,000
Average rate..................... 9.00% 9.00%
</TABLE>
We have no derivative financial instruments in our cash and cash
equivalents. We invest our cash and cash equivalents in investment grade, highly
liquid investments, consisting of money market instruments and bank certificates
of deposit. We anticipate investing our net proceeds from this offering in
similar investment grade and highly liquid investments pending their use as
described in this prospectus.
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 December 31, 1999, we do not believe that a hypothetical 10% change
in foreign currency rates would materially adversely affect our financial
position.
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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. In addition,
currently installed computer systems and software products may not properly
recognize the date February 29, 2000. These problems collectively are referred
to as the "year 2000 issue".
State of readiness. We have completed our assessment of the potential
overall impact of the impending century change on our business. Based on our
current assessment, we believe current and prior versions of our software
products are year 2000 compliant. By year 2000 compliant, we mean that the use
or occurrence of dates on or after January 1, 2000, including February 29, 2000,
will not materially affect the performance of our software products or the
ability of our products to correctly create, store, process and output data
involving dates, provided that all other products, such as hardware and software
used with our products, are also year 2000 compliant. However, our products are
generally integrated into, and process data extracted from, other enterprise
systems involving sophisticated hardware and complex software products that we
cannot adequately evaluate for year 2000 compliance. We may face claims based on
year 2000 problems in other companies' products, or issues arising from the
integration of multiple products within an overall system even if our products
are otherwise year 2000 compliant.
Utilizing a combination of an external consulting firm and our information
systems department personnel, we have completed an assessment of our internal
management information systems and other computer systems' readiness for year
2000 issues. As part of this effort, we have communicated with the external
vendors that supply us with our software and information systems and with our
significant suppliers to determine their products' and organization's year 2000
compliance. We received a written response from a small percentage of the
external vendors and significant suppliers that were contacted indicating that
their systems are year 2000 compliant. Those who have not responded have
statements on their web sites indicating that their systems are year 2000
compliant with respect to the passing of January 1, 2000. As of the date of this
prospectus, we had not received notice of any material Year 2000 compliance
issues from our external vendors.
The results of these readiness assessment initiatives indicated that, with
the exception of our accounting system and software on a few of the computers
used by our sales representatives to demonstrate our products, all of our
internal information technology systems and other internal operating systems
were year 2000 compliant. For those internal systems that we identified as non-
compliant, we implemented the necessary upgrades.
Costs. To date, costs directly associated with our year 2000 compliance
efforts have not been material, amounting to less than $20,000. These costs
consist of fees paid to an external consulting firm assisting us with our year
2000 readiness assessment initiatives as well as costs incurred for consultants
to assist in our remediation efforts. In addition, we have incurred expenses in
amounts that are not material associated with our salaried employees who have
devoted some of their time to our year 2000 assessment and remediation efforts.
We do not expect the total cost of year 2000 problems to be material to our
business.
Risks. As of the date of this prospectus, we were not 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
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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.
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. We were required to adopt SOP 98-1 effective
January 1, 1999. The adoption of SOP 98-1 did not have a material impact on our
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 our consolidated financial
position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. We will be required to adopt
FAS 133 for our fiscal year ending December 31, 2001. However, because we do not
utilize derivative financial instruments, we do not believe the impact of FAS
133 will be material to our consolidated financial position or results of
operations.
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. We will be required to
comply with the provisions of SOP 98-9 for transactions entered into beginning
January 1, 2000. The adoption of SOP 98-9 is not expected to have a material
impact on our financial position or operating results. However, SOP 98-9 may
require more revenue to be deferred for certain types of transactions.
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BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in such
forward-looking statements.
Broadbase develops and markets software that integrates and analyzes
customer information from Internet and traditional business channels, enabling
businesses to improve their customer acquisition, retention and profitability.
Our software integrates information from numerous points of customer
interaction, or touch points, by pulling information from multiple data sources
and transforming it into a standard format that can be analyzed. Our software
then analyzes this reformatted information to provide a comprehensive
understanding of the customer lifecycle from initial identification through
acquisition and retention. Our products then allow businesses to translate this
analysis into specific actions such as targeting profitable customers,
personalizing customer interactions and identifying opportunities to sell
complementary or higher-end products and services. In addition, upon completion
of our pending acquisition of Rubric, we will offer Rubric's eMA (eMarketing
Automation) application, which enables businesses to act on this analysis
through automated marketing campaigns over the Internet and traditional
channels. By integrating, analyzing and acting on valuable customer information,
our products enable businesses to build long-lasting and profitable customer
relationships.
Our software consists of a suite of applications that are built on
Foundation, our software platform that provides comprehensive analytic
capabilities. Our software integrates information that has traditionally been
isolated in separate systems designed to support specific types of customer
interactions, such as customer service and Internet-based sales. It provides
decision-makers in sales, marketing, customer service and e-commerce business
functions with a more comprehensive view of the customer. Each application
provides these decision-makers with analysis of customer information that is
specifically designed for their particular business function. Our solutions can
generally be deployed in less than 30 days, allowing our customers to quickly
capture revenue opportunities and achieve rapid return on investment. To date,
over 150 end user customers have licensed our products from us and our
distributors and resellers. Traditional "bricks and mortar" customers include
Aon Innovative Solution, Boeing, Canon Computer, Chevron, HealthSystem
Minnesota, Hewlett-Packard, Honda, Inprise, Polaris Service, Telia AB and Xerox.
Internet-only customers include BizBuyer.com, CMP Media, InsWeb, Onvia.com and
Pets.com. Each of these end user customers has licensed products and purchased
services totaling at least $300,000.
On December 9, 1999, we entered into a definitive merger agreement to
acquire privately-held Rubric. Rubric is a leading provider of e-marketing
automation software. Rubric's product, Rubric eMA, automates the planning,
execution and measurement of marketing campaigns across the Internet and
traditional channels.
INDUSTRY BACKGROUND
The recent emergence and acceptance of the Internet as a medium for
commerce is fundamentally changing the way companies communicate, obtain
information, purchase goods and transact business with their customers. The
Internet offers a number of compelling benefits that are causing increasing
numbers of companies to transact business online, including opportunities to
increase revenue, reduce operating costs and improve customer retention. As a
result, the Internet has become an important new channel for both traditional
"bricks and mortar" and Internet-only businesses to interact with and market and
sell to customers. Both types of companies are adapting many of their business
activities for the Internet, defining a new category of enterprise called the
e-business. Forrester Research estimates that the number of U.S. companies with
5,000 or more employees using the Internet as a channel for e-commerce will
increase from 20% in 1998 to 92% in 2002. Across companies of all sizes,
Forrester Research estimates that online business-to-business and
business-to-consumer transactions will grow from $127 billion in 1999 to over
$1.4 trillion in 2003.
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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-focused business models founded on a comprehensive understanding of
individual customer relationships. Traditionally, businesses have managed these
relationships by functional departments, such as marketing, sales and customer
support, and customer information has been isolated within these departments. In
contrast, e-businesses must integrate customer information across functional
departments to maximize the value of the entire customer lifecycle, from initial
identification through acquisition and retention. E-businesses need to analyze
and act on customer information gathered from all sources, including direct
sales organizations, storefronts, catalogs and websites. By using real time and
historic customer intelligence to personalize business relationships, successful
e-businesses can maximize loyalty and profitability throughout the customer
lifecycle.
With the emergence of the Internet as a primary business channel, the
number of points of customer interaction, or touch points, has increased
dramatically. Internet sales systems, online customer service solutions, website
logs and e-mail management systems have multiplied the massive amounts of
customer interaction data already generated by conventional front office systems
such as sales force automation systems, telesales and customer support call
centers, marketing automation systems, and customer and field service
applications. In addition, traditional back office systems such as billing,
manufacturing and human resource systems, capture large volumes of important
customer and operational data. This increase in data sources makes the challenge
of integrating and analyzing the information generated throughout the customer
lifecycle more difficult. The sheer volume and variety of customer data creates
a competitive opportunity for businesses that can effectively integrate, analyze
and act on this information.
NEED FOR COMPREHENSIVE E-BUSINESS SOLUTIONS
Traditionally, businesses tried to analyze this valuable data by piecing
together generic technologies -- point tools -- that address narrow and discrete
analytical needs. These point tools include data extraction tools to access
data, online analytical processing tools to analyze and model data, data mining
technologies to identify patterns in data, and report generators to present the
information. Piecing together these point tools to create a patchwork system
typically requires significant custom programming and takes a long time to
complete. In addition, these patchwork systems are very difficult and costly to
maintain. Because patchwork systems are inflexible and costly to maintain, they
are poorly suited to the rapidly changing business and technology requirements
of e-businesses.
Moreover, patchwork systems and point tools cannot provide e-businesses
with a comprehensive understanding of the entire customer lifecycle. Instead,
they generally offer limited analysis based on a single element of a customer's
interaction with a business, focusing on a single channel, customer touch point
or period of time. For example, today's website monitoring tools completely
ignore historical customer activity across other channels, such as call centers
or traditional storefronts. As a
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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 information from e-commerce and Internet-based
systems, front office systems, back office applications and external information
sources. They also must provide business users in different functional areas
with packaged applications that analyze this information using industry
benchmarks, business logic and guided decision-making capabilities. In addition,
e-businesses require solutions that enable them to move quickly from analysis to
action, creating and enhancing customer relationships both online and offline.
Finally, both "bricks and mortar" and Internet-only business can realize
significant benefits from using this analysis to automate the planning,
execution and measurement of marketing campaigns.
OUR SOLUTION
Our software solution consists of two components: the Foundation software
platform and our suite of analytic applications. Foundation is a robust and
extensible software platform that integrates and analyzes customer interactions
and operational data from multiple sources. Our applications provide
decision-makers within various business functions with analysis of this
information to improve customer targeting, acquisition, conversion and
retention. These applications are designed for the specific and changing
analytic needs of decision makers in e-commerce, online publishing and
advertising, marketing, sales and customer service functions. Our solutions are
designed to enable businesses to target customer segments, personalize marketing
promotions and campaigns, differentiate product and service offerings and
leverage operational resources, resulting in more loyal and profitable
customers.
We believe our solutions represent an innovative and comprehensive approach
to analyzing and optimizing e-business customer interactions by providing the
following benefits:
UNDERSTAND THE ENTIRE CUSTOMER LIFECYCLE
Our software integrates information from multiple customer touch points to
provide a comprehensive view of the entire customer lifecycle, from initial
identification through acquisition and retention. Foundation transforms,
cleanses, loads and integrates large volumes of customer and operational data,
such as previous purchases, responses to promotions and service requests. Our
applications then use this integrated information to deliver analysis that is
designed to address the needs of specific business departments. In addition,
upon completion of our pending acquisition of Rubric, our combined solution will
enable businesses to act upon this analysis through automated marketing
campaigns over the Internet and traditional customer touch points throughout the
customer lifecycle.
IMPROVE CUSTOMER ACQUISITION, CONVERSION AND RETENTION RATES
E-businesses that deploy our solutions use analysis of the entire customer
lifecycle to target, personalize and differentiate all aspects of online and
offline customer interactions -- moving beyond the simple automation of customer
transactions. For instance, businesses use our solutions to increase customer
acquisition by targeting higher value customers, to improve conversion rates by
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personalizing web content and advertising, and to enhance customer retention by
streamlining customer service bottlenecks. In doing so, our solutions enable
e-businesses to use both the Internet and traditional business channels to build
profitable, long-lasting customer relationships.
IDENTIFY AND TARGET MOST PROFITABLE CUSTOMERS
Our software enables e-businesses to identify their most profitable
customers and to tailor promotions and marketing campaigns, sales efforts,
product offerings and customer service based on individual buying habits and
demographics. In doing so, it allows companies to maintain and enhance the value
of their most profitable customers as well as to increase the profitability of
other customer segments.
RESPOND RAPIDLY TO OPPORTUNITIES AND RISKS
Our software allows business decision makers to respond rapidly and
effectively to new opportunities and risks by providing timely information,
measuring results against industry targets and suggesting actions. These
capabilities help close the loop between a customer interaction and the business
response -- that is, they help the business react to information generated from
previous customer interactions. Examples of these capabilities include utilizing
prior customer behavior to personalize web content or identifying opportunities
to sell complementary products, or "cross-sell", and to sell higher-end
products, or "up-sell". In addition, our solutions incorporate business logic to
monitor performance, identify exceptions and alert users to key events such as
ineffective promotions or service backlogs.
ACHIEVE FAST RETURN ON INVESTMENT THROUGH RAPID IMPLEMENTATION
Because our software can generally be deployed in less than 30 days,
businesses can rapidly begin to realize the increased revenue resulting from
personalized customer interactions, without suffering the delays associated with
the creation of in-house patchwork systems and consulting services-based
approaches. In addition, our packaged adapters for integration with Internet and
enterprise systems, and our pre-built applications, support rapid implementation
with a lower investment than applications developed in-house.
REDUCE TOTAL COST OF OWNERSHIP
Our software requires fewer resources than the development and
implementation of alternatives such as in-house patchwork systems and consulting
services-based approaches. In addition, our applications are specifically
designed to be easily used by business decision makers, minimizing training and
support costs. Finally, because we offer an open platform, businesses can easily
adapt and extend our open modular solutions to meet their changing business and
technical requirements with minimal additional investment.
CASE STUDIES
The following case studies illustrate the use of our software by an
Internet-only company as well as a traditional "bricks and mortar" business.
Mercata is an Internet-only company that has licensed our new e-business
applications. Plymouth Rock is a traditional "bricks and mortar" company whose
use of our products is representative of how many companies use our products to
improve customer acquisition, retention and profitability. The revenues we have
derived from both Mercata and Plymouth Rock together represent less than 5% of
our total revenues to date. We continue to provide software upgrades and
technical support to both Mercata and Plymouth Rock under maintenance agreements
we have with these companies.
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MERCATA
Mercata is a web-based retailer that offers an online group buying system
through which groups of buyers can exercise volume purchasing power and drive
prices lower. As its e-commerce activity increases, Mercata must analyze and
optimize content, promotions and specific group purchases, as well as improve
customer targeting.
Mercata has implemented our software to analyze the traffic and buying
habits of its users by integrating our product with BroadVision, which is
Mercata's e-commerce system. By analyzing their users' habits, Mercata can
discover trends and patterns, such as how often consumers make offers and how
much they raise their offers. In addition, our software analyzes the optimal
product mix, price and length of each group purchase. Mercata uses this
information to customize and personalize its content to attract new users and
retain current ones. Our software enables Mercata to understand and determine
the growing purchasing leverage of Mercata's e-consumer community.
PLYMOUTH ROCK
The Plymouth Rock Company is a property, casualty and auto insurance
company headquartered in New England. Since the state of Massachusetts sets
automobile insurance rates and prohibits insurers from denying coverage to any
driver, Plymouth faces the challenge of providing coverage to high risk drivers
while minimizing costs and claims.
Plymouth selected our software to help it reduce insurance claim expenses.
By generating an enterprise-wide, customer-focused view of Plymouth's lines of
business, and by analyzing data about customers' insurance claims, Plymouth can
target low risk customers. In addition, Plymouth is incorporating sales to low
risk customers as a compensation criterion for its agents, and will automate
this process by integrating our software and its payroll applications. Our
software is currently used by more than 100 employees at Plymouth and over 150
of its external insurance agents.
OUR STRATEGY
Our objective is to be the leading provider of customer-focused e-business
solutions. To achieve this objective, we have adopted the following strategies:
EXPAND OUR PRODUCT OFFERINGS
Our underlying product architecture enables us to develop new products and
enhancements rapidly. We will continue to invest significantly in research and
development to expand our product offerings in the e-business analytic solutions
market. We utilize a customer-driven development cycle, focused on identifying
current and future e-business requirements, through frequent customer meetings
and customer programs. We will also continue to expand our product offerings to
include enhanced customer interaction capabilities such as those provided by the
Rubric eMA product line, which will allow us to offer additional execution
functionality to act upon the analysis provided by our current product line. We
intend to continue to work closely with other application, technology and system
integration companies to identify other opportunities to expand our product
offerings.
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 ours, 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.
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BROADEN PRODUCT ADOPTION THROUGH MARKETING AND TECHNOLOGY RELATIONSHIPS
We believe that marketing and technology relationships with a strong
network of companies will broaden our product adoption, increase our market
presence and enhance our ability to deliver complete solutions to our customers.
Our marketing and technology relationships with these companies provide value to
both parties. For example, our marketing and technology relationships with
application vendors enhance the value of their products by allowing their
customers to access, analyze and act upon the data within these products. We
plan to continue to invest in jointly integrating, marketing and selling our
solutions and services with these companies, and to form new relationships with
additional e-commerce software vendors. We also intend to continue to build
relationships with major systems integrators and consulting service providers.
EXPAND PROFESSIONAL SERVICES CAPABILITIES
We believe that our professional services group is important to ensure our
customers' success and to drive increased sales. Our professional services group
assists businesses in developing innovative ways to implement our solution,
leading to increased adoption of our products. We plan to continue to expand our
professional services group.
EXTEND OUR GLOBAL PRESENCE
We believe that there will continue to be significant international
opportunities for our solutions. We currently have offices in Germany, Japan,
the Netherlands and the United Kingdom, a Canadian subsidiary and distributors
in Japan. We plan to continue to invest in our sales infrastructure in order to
support a growing global sales force in both the United States and in
international markets, particularly Asia-Pacific and Europe.
BROADBASE PRODUCTS AND SERVICES
OVERVIEW
Our suite of e-business software solutions is designed to provide business
decision-makers in sales, marketing, customer service and e-commerce with
analysis of customer information that is specifically designed for their
business function. This suite is built on Foundation, our software platform that
provides comprehensive analytic capabilities. We introduced Foundation in the
fourth quarter of 1997, and began offering our analytic applications designed
for specific business functions in the third quarter of 1998. In May 1999, we
expanded our suite by introducing new applications designed for e-business, as
well as new versions of our existing applications. Our applications may be
licensed individually or in any combination. Many of our customers license our
"e-business suite", which consists of our E-Commerce, E-Marketing and
E-Personalize applications. A license for any one or more of our applications
also includes a license for Foundation and adapters to interface with the
customers' existing data sources.
Each application incorporates its own data model and business logic. The
data models organize the relevant data through Foundation into consistent
formats that can support dynamic and interactive analysis. The business logic
used in each application then analyzes this data using the rules that typically
govern the decision making process within each specific business function. It
can identify risks and opportunities and suggest actions for specific processes.
For example, our E-Personalize application organizes profiles of website
visitors, analyzes the content of the website, links information about visitors
and content and suggests types of content or products that should be presented
to the customer. Organizations can customize the data models and business logic
to support their specific and changing needs.
Foundation is the software platform upon which each of our analytic
applications is built. It enables the applications to extract data from multiple
sources, transform this data into a consistent format and
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store this data in widely used databases such as Microsoft SQL Server and
Oracle. This data can include both real time and historic data from sources such
as:
- Internet-based or e-commerce systems, including websites, e-mail and
online services;
- front-office customer relationship management applications including
sales, marketing and customer support systems;
- back-office enterprise resource planning applications including finance,
manufacturing and human resources; and
- sources of demographic data.
Foundation's analytic engine provides the capabilities that allow our
analytic applications to perform complex analysis.
Our software incorporates a browser-based interface that enables business
users to take advantage of all of its capabilities with minimal training. This
intuitive interface guides business users through the analysis process, while
providing sophisticated users with more extensive functionality.
The following graphic illustrates the architecture of our software:
[GRAPHICS]
After the completion of our pending acquisition of Rubric, we will offer
Rubric eMA. This product automates the planning, execution and measurement of
marketing campaigns. It streamlines campaign planning by automating the process
of requesting, reviewing, approving and launching campaigns. The software
enables the identification of prospect and customer segments that can be
targeted with personalized messages and offers. Rubric eMA then automates the
execution of Internet and
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traditional marketing campaigns by generating personalized email and web pages,
personalized letters and faxes, and lists for direct mail and call center
campaigns. It can manage their campaigns concurrently over a number of different
channels. In addition, Rubric eMA can also automate other areas of customer
interaction, such as customer service. The software also provides a
communications system that facilitates personalized, targeted and interactive
communications across the Internet and traditional channels over an extended
period of time. Following execution of the marketing campaign, Rubric eMA's
measurement capabilities allow users to close the loop by tracking campaign
results, costs and revenue. By enabling users to more effectively generate leads
and build customer relationships, Rubric eMA is designed to generate revenue,
reduce marketing costs and improve marketing effectiveness. We believe the
combination of Rubric eMA and our existing products will allow businesses to
both analyze their customer data and then plan, manage and execute marketing
campaigns based on this analysis.
Rubric eMA was introduced in the second quarter of 1998. Rubric eMA
currently interoperates with our current software in two stages. First, data
from Rubric is loaded into our software for analysis of customer segments. For
example, lists of customers developed with analysis by our E-Marketing
application can then be extracted by Rubric eMA to develop and execute marketing
campaigns. Our software can then analyze the results of these campaigns.
APPLICATIONS
Each application is designed specifically to address critical business
functions. These applications analyze, measure and evaluate information from
numerous customer touch points by extracting the information, reformatting it,
performing various calculations and identifying customer patterns that are
useful for each specific business function. For example, the E-Marketing
application collects and analyzes customer information extracted from a
company's order processing system, its website and external demographic data
sources. It then performs calculations on the information to identify patterns
and trends, such as historical purchasing patterns of customers, and uses this
analysis to provide information, such as identifying customers that are likely
to purchase a particular product. The marketing organization can use this
information to tailor its marketing campaigns to those customers most likely to
purchase the product.
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Our applications consist of the following:
<TABLE>
<CAPTION>
APPLICATION DESCRIPTION
<S> <C> <C>
-------------------------------------------------------------------------------------------------
Customer Service - Analyzes service costs and case queues
- Measures workforce readiness and service level management
- Prioritizes support cases and recommends resource
allocation
- Analyzes online customer service activity as compared to
call center workloads (not included in current version;
anticipated in next release)
-------------------------------
Sales - Measures profitability and bookings, billings and backlog
- Analyzes sales leads, pipeline, forecasting accuracy and
competitive wins/losses
- Evaluates the productivity of sales representatives and
distribution channels
-------------------------------
E-Marketing - Recommends cross-selling and up-selling opportunities
- Analyzes return on investment of campaigns and promotions
- Profiles customers and generates lists for campaign
management
-------------------------------
E-Commerce - Analyzes customer purchasing behavior and online shopping
processes, profitability of specific distribution channels
and order fulfillment
- Analyzes the performance of website content and identifies
impact of content changes
- Measures commerce website statistics and online user
activity
-------------------------------
E-Personalize - Analyzes business rules for personalization of web
content, product and service offerings
- Features personalization engine that creates content
personalization rules based on usage patterns, user
interests and demographics
- Also will provide input of rules into e-commerce systems,
such as BroadVision, to "close the loop" by enabling these
systems to personalize the customer's experience based on
analysis of prior interactions (not included in current
version; anticipated in next release)
-------------------------------
E-Procurement - Analyzes buying behavior throughout the company to help it
(anticipated to be released negotiate better volume discounts
in 2000) - Quantifies external interactions with existing suppliers
including price/performance scoring
- Analyzes supplier performance
-------------------------------
eMA - Streamlines the planning of marketing campaigns
(to be offered upon - Automates execution of multi-channel campaigns
completion of our - Measures campaign effectiveness
pending acquisition
of Rubric)
-------------------------------
</TABLE>
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Our Customer Service, Sales and E-Marketing applications were first
released in July 1998, and the most recent versions of each were released in May
1999. Our E-Commerce and our E-Personalize applications were first released in
May 1999. We anticipate releasing our E-Procurement application and enhancements
to several of our existing applications in 2000. Actual features and release
dates for new applications and versions could differ materially from those
projected as a result of a variety of factors, some or all of which may be
beyond our control. See "Risk Factors -- We may be unable to attract new
customers if we do not develop new products and enhancements."
Our applications provide analysis of a wide range of customer trends and
patterns. The analytic capabilities of each application are based on the
business logic that is used by a specific business function, such as e-commerce,
customer support, sales and marketing. In developing this logic, we survey the
major decision points faced by executives in the functional area and in many
cases retain industry consultants in the relevant fields to provide further
input on the analysis requirements of the business function. We believe that we
have gained significant internal expertise in the critical decision processes of
executives in these functional areas, and in the data and analysis needed to
support these decisions. The members of our research and development
organization who have developed this expertise identify the types of analysis
that can be effectively provided using our technology and that are needed by the
business function. We then develop and refine the models and calculations
necessary to provide this analysis. In addition, each application incorporates a
specific data model designed to support this analysis using data from multiple
alternative third party information systems. These data models are sets of
specifications and functions used by the applications to perform functions such
as eliminating the data that is not useful for the specific analysis and
transforming the data into uniform tables. We have developed a knowledge base
about the typical sources of data that can be used for the desired analysis and
draw on this knowledge base to design the data models used by our applications.
In addition to the standard analytic and data integration capabilities provided
by our applications, organizations can customize the business logic and data
models to support their specific and changing needs.
The following examples illustrate how our applications integrate and
analyze data:
Customer Service. One of the functions provided by the Customer Service
application is analysis of service costs. To analyze service costs, this
application accesses data from an organization's customer support systems,
including such case history data as the customer's name, the support
representatives that handled the case, the date and time the case was opened and
closed and, if available, entries of time spent on the case. In addition, the
application extracts data about the relevant support representatives'
compensation history from the organization's human resources system. The
Customer Service application then calculates the total time spent on each case
for each customer and the hourly cost of each representative involved in the
case. The application multiplies this cost by the total number of hours spent
supporting each customer case to determine the cost for each case. It then
aggregates the total costs for each case and sorts this aggregated data to
provide such information as the total cost to support an individual customer or
product, high or low support costs, costs by region, costs by support
representative, and trends by day, week or month. Our customers can customize
the application to provide additional functions or incorporate other data
sources. For example, the application can be customized to incorporate into the
calculation of the cost of each case information from the customer's financial
systems about the indirect and fixed costs of customer support, such as
administrative overhead and computer systems.
Sales. The process for making a sale often starts with the generation of a
lead by the marketing department. The sales department may not know the quality
of that lead, the cost to generate that lead, how that lead turns into a sale
and how many leads are needed in order to attain a given revenue goal. To
determine how many leads a company or division needs to meet its sales goals,
and how much they need to spend to generate those leads, our Sales application
performs lead analysis. Our Sales application extracts lead source and company
profile information from the organization's marketing automation system. In
addition, it extracts data such as lead qualification and closure rates,
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historical transaction size information and current sales goals from the
organization's sales force automation system. The application then uses this
data to project the number of leads expected to be required to meet the sales
goal. It can perform further calculations using lead generation cost data to
create projected budgets to support this lead generation process.
E-Commerce. Our E-Commerce application analyzes a number of types of data
about website content, user activity and online purchasing behavior. For
example, it uses information from a company's Internet infrastructure systems to
identify the registered visitors to the website who look at a specific piece of
content over a specific period. It then obtains data about product sales on a
customer to customer basis from the transaction database in the company's
e-commerce system. This data includes the type and amount of products purchased,
the date of the purchase and the amount paid. Our E-Commerce application then
correlates the two sets of data to identify and count the visitors who both
viewed the content and purchased the product, and calculates a "look-to-buy"
ratio - the percentage of people who viewed a product on the website and who
actually purchased it. The application then develops a more detailed analysis
that uses data from the company's web logs to correlate actual visitor sessions
with purchases and to provide information about whether visitors purchased the
product immediately after viewing the content or in a later visit.
E-Personalize. Our E-Personalize application aggregates a range of website
data, including website usage patterns from web logs, user interest data
gathered from on-line surveys, and demographic data from the user registration
database or the third party demographic databases used by the customer. We are
developing analytic capabilities for this application that would then estimate
the likelihood that a website visitor would purchase specific products, by
aggregating historical usage patterns for groups of users and calculating the
percentage of times a product is purchased by each customer group. The group
with the highest ratio of product purchases would be identified as the most
likely to purchase a product. For example, if a retailer is interested in
determining the group that is most likely to purchase blue shirts, the
application would be able to determine that this group consisted of males over
the age of 30. It would then be able to create a rule that males over the age of
30 who visit the website should be shown blue shirts. The application would then
be able to input this rule into application systems such as Broadvision to
enable these systems to personalize the customer's experience.
FOUNDATION
Our applications are built on Foundation, a comprehensive software platform
that provides analytic capabilities. Foundation has the following features:
Adapters for internal and external enterprise systems. Foundation features
adaptable and robust data extraction, transformation and loading capabilities
that extract and transform data from key data sources and load that data into
our applications. The extraction, transformation and loading layer includes
adapters for integration with key enterprise systems and sources. Using
adapters, Foundation integrates with:
- e-commerce systems such as those offered by Art Technology Group,
Allaire, BroadVision, InterWorld, Kana, Microsoft, Open Market and
Vignette;
- customer relationship management systems such as those offered by Aurum,
Baan, Clarify, Genesys, ONYX, Oracle, Pivotal, Saratoga Systems, Scopus,
Siebel and Vantive;
- enterprise resource planning applications that manage and integrate data
from business operations, such as those offered by Baan, JD Edwards,
Oracle, PeopleSoft and SAP;
- custom, legacy and homegrown applications and systems;
- demographic and other data from external providers such as Acxiom and Dun
& Bradstreet; and
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- leading data warehouses, or enterprise-wide systems that store, retrieve
and manage data such as those offered by IBM, Informix/Red Brick, NCR,
Oracle and Sybase.
The extraction, transformation and loading layer also provides businesses with
the flexibility to integrate other data sources and systems as their
requirements change.
Open, scalable architecture. Foundation runs on leading databases, such as
Microsoft SQL Server and Oracle. 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. Foundation features a powerful
analytic engine, with capabilities including hybrid online analytical
processing, data mining, statistical analysis and ad hoc analysis. In addition,
Foundation contains an extendable library of reusable application components,
such as profitability calculations, that facilitate the management and
customization of analytical applications.
Information delivery server. Foundation supports a completely
Internet-based, publish-and-subscribe information delivery model with security
features for individuals or groups of users. In addition, alerts and triggers
can be set to automatically deliver information only when and where needed.
Integrated graphical application management. Foundation features an
integrated graphical management environment for complete system administration
and management of both Foundation and our applications.
SERVICE OFFERINGS
Our professional services group helps businesses define, design and
implement e-business analysis solutions. Our customers benefit from the
accumulated expertise of our professional services group including its
experience in developing, deploying and implementing analytic applications,
enterprise applications and data warehouses. In addition, our professional
services group has built expertise in key functional areas including e-commerce,
customer relationship management and direct marketing. Moreover, our
professional services group has specific expertise in the systems with which our
solution is integrated and assists in the development of our adapters. We
generally charge for our services on a time and materials basis and provide them
worldwide through offices in the United States, Germany, Netherlands and United
Kingdom, through distributors in Japan and through our Canadian subsidiary. Our
professional services include:
- project planning and management;
- system implementation;
- software integration;
- user training; and
- ongoing customer support.
In a typical application license transaction, our professional services
group connects our products to the customer's systems and data sources. The
actual connection process can often be completed in approximately two to four
weeks.
The goals of our professional services group are to rapidly deliver
solution value and meet the specific business needs of our customers. We will
continue to work closely with our network of systems integration partners and
expand our training capabilities both in the United States and
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internationally. We believe that our professional services group can assist
businesses in developing innovative ways to implement our solutions, leading to
increased product adoption.
CUSTOMERS
To date, over 150 end user customers have licensed our products from us and
from our indirect sales channel, which includes our distributors and companies
that sell our products as part of an integrated solution with their own
offerings. These end user customers include both traditional "bricks and mortar"
companies and Internet-only companies. The following table represents all end
user customers as of December 31, 1999 to whom we had licensed products or sold
services totaling at least $100,000. This list does not include end users which
license our products under an agreement with another party.
<TABLE>
<S> <C> <C>
INTERNET AND MANUFACTURING ENERGY INDUSTRIES
COMMUNICATION SERVICES Anderson Windows Bonneville Power
Allied Riser Communications Baxter IV Systems Boston Edison
Ashford.com Bell & Howell Chevron
BizBuyer.com Boeing Commercial Airplanes Enbridge Consumer First
CMP Media Group Idaho Power
Done.com Canon Computer Los Alamos National Labs
Driveway.com Eastman Kodak New Century Energy
InsWeb Honda Omaha Public Power
Mercata Rockwell Automation Seattle City Power
MVX.com
NTT FINANCIAL SERVICES OTHER
Onvia.com Aon Innovative Communications DSC Logistics
Pets.com Automatic Data Processing HealthSystem Minnesota
WebTV/Microsoft Fidelity Investments National TechTeam
TECHNOLOGY Plymouth Rock Assurance Shikishima Baking Company
Hewlett-Packard Putnam Investments Telia AB
Inprise The Sharper Image
Kana Communications Tokai
Mercury Interactive United Airlines
Polaris Service
Rational Software
Vantive
Xerox
</TABLE>
Hewlett-Packard represented 10.1% of our net revenue in 1998 and 3.2% in
1999.
In addition, the following table represents Rubric customers as of December
31, 1999, to whom Rubric had licensed products or sold services totaling at
least $100,000.
<TABLE>
<S> <C>
TECHNOLOGY INTERNET
DiTech.com
BEA Systems Internet Appliance Network
Cisco Systems LoanCity.com
Citrix MSHOW.com
Hewlett-Packard Outpost.com
Merant PeopleFirst.com
N.E.T.
Rainmaker Systems
Sierra Atlantic
Sybase
</TABLE>
Hewlett-Packard represented 26% of Rubric's net revenue in 1999.
LICENSING
Currently, businesses that license our products generally license one or
more of our applications, together with Foundation and adapters to interface
with their existing data sources. Customers
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generally receive nonexclusive, perpetual licenses 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.
MARKETING AND TECHNOLOGY RELATIONSHIPS
We establish marketing and technology 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.
TYPES OF RELATIONSHIPS
We have six types of marketing and technology 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 US Web/CKS. In addition, we
have relationships with Internet-focused professional services firms and
regional system integrators. Upon the completion of our pending acquisition of
Rubric, we will also gain integrator relationships with Breakaway Solutions,
Dialogos and Tessera.
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 Art Technology Group, BroadVision, Kana and Vignette. We jointly
integrate, market and sell our complementary solutions with BroadVision. We also
have been featured at BroadVision's user group meetings, internal sales meetings
and on their website. We are engaged in joint marketing and integration of our
solutions with Kana's e-mail management solution.
FRONT AND BACK OFFICE SOFTWARE VENDORS
To enable our solutions to integrate data from as many customer touch
points as possible, and to target the installed customer base of these
applications, we have formed relationships with leading enterprise applications
vendors. We currently have marketing and technology relationships with Clarify,
Genesys, ONYX, 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. In addition, Rubric has a
reseller relationship with Hewlett-Packard as a component of Hewlett-Packard's
front office software offering.
TECHNOLOGY AND PLATFORM VENDORS
To ensure that our products are based on industry standards and to take
advantage of new and emerging technologies, we have formed relationships with
key technology and platform vendors. As part of our relationship with Microsoft,
we have joined the Microsoft Data Warehouse Alliance, whose
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members support the Microsoft Data Warehouse Framework. In addition, we support
Windows NT, Internet Information Server and Office 2000.
DEMOGRAPHIC DATA PROVIDERS
To provide more effective customer and marketing analysis, our solutions
allow businesses to integrate external demographic data with their customer
data. We have entered into joint marketing agreements with Acxiom and Dun &
Bradstreet and are integrating our products with their products to enable our
customers to access and analyze the demographic data of these companies.
APPLICATION SERVICE PROVIDER AND INTERNET HOSTER
To enable our solutions to be rapidly implemented by companies that host
their web commerce applications, we have formed a relationship with an
application service provider (ASP), USinternetworking. ASP's host and manage
software applications for companies that do not want to install and manage
software on their own systems. USinternetworking resells Broadbase applications
to provide analysis for their e-commerce clients. In addition, Rubric has a
marketing relationship with Exodus Communications.
TERMS OF AGREEMENTS
Our marketing and technology relationships are generally not documented in
writing, or are governed by agreements that can be terminated by either party
with little or no notice. These agreements generally provide for the parties to
cooperate to make joint press releases, do joint marketing and where appropriate
to integrate their products or make them compatible with each other. These
agreements may also specify that payments are to be made by us to these
companies for providing us with qualifying customer leads. The generation of
leads to date by these companies has not generally satisfied the specified
criteria and therefore payments for leads have been immaterial in amount.
SALES AND MARKETING
We license our software through both our direct sales force and indirect
sales channels. As of December 31, 1999, our sales group consisted of 50
employees, in 10 locations -- six offices in the United States and four offices
internationally, which are located in Germany, Japan, the Netherlands and the
United Kingdom. Our direct sales force consists of sales representatives as well
as sales personnel who provide pre-sales technical support and other support
personnel. We plan to expand our direct sales force significantly. Our corporate
sales organization is responsible for collecting inbound leads, performing
initial qualification and introducing each prospective customer to a direct
sales representative. We sell to companies at the departmental level, targeting
directors and executives in e-commerce, sales, marketing, customer service and
information technology.
Our indirect sales channel includes companies such as Baan, Datamedica,
Genesys, Indus, and USinternetworking, which sell our products as part of an
integrated solution with their own offerings. Indus selected 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 11.2% of our revenue in 1999. Baan
selected Foundation as the platform on which to build its Enterprise Decision
Manager decision support suite. USinternetworking, an application service
provider, resells our applications. 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.
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Our distribution relationships are generally governed by agreements that
can be terminated by either party with little or no prior notice. These
agreements generally grant nonexclusive licenses to distribute our products, are
not subject to minimum purchase requirements and provide for certain discounts
on the purchase prices of our products. We entered into our distribution
agreement with Indus, which contains similar provisions, on June 2, 1998. This
agreement is effective until June 30, 2001 and will automatically renew for
additional one year terms unless it is terminated earlier by either party with
30 days written notice prior to the date of the automatic renewal.
We focus our marketing efforts on sales lead generation, sales support,
creating market awareness of our solutions and establishing strategic
relationships. Our marketing activities include direct mail and e-mail
campaigns, press relations and industry analyst briefings, speaking engagements,
attendance at partners' user group meetings and industry trade shows, and
participation in sales and marketing programs of companies with whom we have
marketing relationships.
INTERNATIONAL OPERATIONS
International sales represented approximately 5.1% of our total net revenue
in 1998 and 23.2% of our total net revenue in 1999. Approximately 17.3% of our
total net revenue in 1999 consisted of sales to customers in Japan. We first
recognized revenue from international sales in the last quarter of 1998. We
currently conduct our international sales primarily through direct sales offices
in Germany, the Netherlands and the United Kingdom, through our Canadian
subsidiary and through distributors in Japan. Our products are sold
internationally both individually and as part of integrated solutions with the
product offerings of certain companies, such as Baan. Our relationships with our
Japanese distributors are generally governed by agreements that are similar to
those described under "Sales and Marketing" above. The end user companies that
license our products internationally span many industries. We believe that there
will continue to be significant international opportunities for our integrated
e-business solutions. As a result, we intend to expand our international
operations and to continue to invest in our sales infrastructure in order to
support a growing global sales force in international markets, particularly
Asia-Pacific and Europe.
The expansion of our existing international operations and entry into
additional international markets will require significant management attention
and financial resources. In particular, we must develop local versions of our
products for foreign markets and must recruit and train an international staff.
Currently, we have only limited experience in localizing our products and in
marketing, selling and supporting our products and services overseas.
RESEARCH AND DEVELOPMENT
Our research and development organization is comprised of separate groups
responsible for core product development, application development and product
strategy and management. The core product development group is responsible for
ongoing development of Foundation. Our application development group is
responsible for developing new 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 $2.0 million in 1997, $3.7
million in 1998 and $6.0 million in 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
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<PAGE> 50
customers. See "Risk Factors -- We may be unable to attract new customers if we
do not develop new products and enhancements".
COMPETITION
Our competitors vary in company size, and in the scope and breadth of their
products and services. We have three primary sources of competition:
- providers of consulting services-based analysis solutions, such as
E.piphany;
- vendors of point technologies that provide website analysis such as
Accrue, Andromedia, which was recently acquired by Macromedia, Net
Perceptions and Personify; and
- in-house development efforts by potential customers using traditional and
generic decision support tools.
The addition of the Rubric eMA product line will introduce new competitors,
including the following:
- vendors of online marketing automation software such as MarketFirst and
Annuncio;
- providers of outsourced email marketing services such as Digital Impact
and Responsys.com; and
- campaign management software vendors such as Exchange Applications and
Prime Response.
In addition, we face potential competition from vendors of other enterprise
applications as they expand the functionality of their product offerings. These
vendors may include Oracle, SAP, Siebel, other vendors of software designed for
decision support or management of customer relationships or of organizations'
operational information. They also may include vendors of database applications.
Principal competitive factors include:
- quality, breadth and depth of application offerings;
- product robustness and extensibility;
- openness of technology architecture;
- ease of deployment and maintenance;
- quality of services and customer support; and
- price.
Although we believe that our solutions compete favorably with respect to
these factors, our market is new and rapidly evolving. We may not be able to
maintain our competitive position against current and potential competitors. See
"Risk Factors -- We face intense competition which could make it difficult to
acquire and retain customers".
We face the same sources of competition and the same competitors both
domestically and internationally. However, we face additional challenges in
selling our products and services internationally in that we must develop local
versions of our products for foreign markets and must recruit and train an
international staff.
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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 -- We depend on our intellectual property, and litigation regarding our
intellectual property could harm our business".
We currently rely on software that we have licensed from a number of
suppliers. These licenses may not continue to be available to us on commercially
reasonable terms or at all. If these licenses cease to be available, we believe
we could license equivalent software on commercially reasonable terms. In the
future, we expect to license other third party technologies to enhance our
products, meet evolving customer needs or adapt to changing technology
standards. Failure to license, or the loss of any license of necessary
technologies could result in delays or reductions of shipments of our products
until equivalent software is identified, licensed and integrated or developed by
us.
EMPLOYEES
As of December 31, 1999, we had a total of 131 full-time employees,
including 56 in sales and six in marketing, 45 in research and development, 16
in administrative, eight in professional services and six in customer support,
and Rubric had a total of 78 employees. Our future success will depend in part
on our ability to attract, train, retain, integrate and motivate highly
qualified sales, technical and management personnel, for whom competition is
intense. From time to time we also employ independent contractors to support our
services, product development, sales and marketing departments. Our employees
are not represented by any collective bargaining unit, and we have never
experienced a work stoppage. We believe our relations with our employees are
good.
FACILITIES
Our principal office occupies approximately 66,000 square feet in Menlo
Park, California under leases that expire on July 31, 2002 and April 30, 2007.
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. In addition, Rubric's principal office occupies approximately 20,000
square feet in San Mateo, California under a lease that expires in November
2000.
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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 January 15, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Chuck Bay....................... 42 Chief Executive Officer, President and Director
Rusty Thomas.................... 39 Executive Vice President and Chief Financial Officer
Thomas Doyle.................... 49 Executive Vice President of Sales
Brian Kelly..................... 34 Executive Vice President of Products
Greg Martin..................... 35 Senior Vice President, Consulting and Customer Advocacy
Eric Willgohs................... 34 General Counsel, Vice President Legal and Secretary
Mark Kremer..................... 43 Chairman of the Board of Directors
Kevin Harvey.................... 35 Director
Paul Levy....................... 44 Director
Nancy Schoendorf................ 44 Director
</TABLE>
CHUCK BAY joined Broadbase in January 1998 and currently serves as Chief
Executive Officer, President and as a member of our board of directors. Mr. Bay
previously served as our Chief Financial Officer, General Counsel and Executive
Vice President of Operations. 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.
RUSTY THOMAS joined Broadbase in January 2000 as Executive Vice President
and Chief Financial Officer. From June 1982 to July 1995 and from April 1998 to
January 2000, Mr. Thomas held various positions in the high technology practice
of KPMG LLP, including 8 years as a partner in the Silicon Valley office and
most recently as an Industry Leader for Electronics and Software segments. From
July 1995 to April 1998, Mr. Thomas served as a Vice President in the finance
department of Rubbermaid Inc., a consumer products company. Mr. Thomas holds a
B.S. degree in business administration from Creighton University.
THOMAS DOYLE joined Broadbase in April 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. From May 1984 to September 1996,
Mr. Doyle held various 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 and currently serves as
Executive Vice President of Products. Mr. Kelly previously served as our
Executive Vice President of Applications and Engineering. From June 1998 to
December 1998, Mr. Kelly served as Director of Product Strategy, Analytic
Applications at PeopleSoft, Inc., a software company. From June 1996 to June
1998, Mr. Kelly served as Vice President of Product Strategy at Intrepid
Systems, Inc., a software company. From December 1992 to June 1996, Mr. Kelly
was President of Kelly Information Systems, a software company. Mr. Kelly holds
a B.S. degree in computer science from the University of Cincinnati.
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GREG MARTIN joined Broadbase in January 2000 as Senior Vice President,
Consulting and Customer Advocacy. From December 1988 to January 2000, Mr. Martin
held various positions in the high technology practice of KPMG LLP, including
partner and Industry Leader for Customer Relationship and eBusiness Solution
Integration. Mr. Martin holds a B.S. degree in chemistry from the State
University of New York.
ERIC WILLGOHS joined Broadbase in July 1999 and currently serves as General
Counsel, Vice President Legal and Secretary. From September 1997 to July 1999,
Mr. Willgohs held various positions with Reasoning, Inc., most recently as
General Counsel. From July 1993 to July 1997, Mr. Willgohs held various
positions with Pure Atria Software, Inc., most recently as Associate General
Counsel. From October 1993 to December 1995, Mr. Willgohs also served as
Corporate Counsel, Intellectual Property, for StarSight Telecast, Inc., an
interactive television company. Mr. Willgohs holds a B.S. degree in electrical
engineering from Vanderbilt University and a J.D. degree from Stanford
University.
MARK KREMER is the founder of Broadbase and has served as Chairman of the
Board of Directors since our inception in November 1995. Mr. Kremer previously
served as our Chief Executive Officer from our inception until January 2000, and
as our President from our inception until October 1999. 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.
KEVIN HARVEY has served as a member of our board of directors since January
1996. Mr. Harvey has been a Managing Member of the general partner of Benchmark
Capital Partners, 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 Critical Path,
Inc., an e-mail hosting services company, Red Hat Software, a developer and
provider of open source software and services, Ashford.com, an Internet
retailer, and several privately held companies. Mr. Harvey holds a B.S.E.E.
degree from Rice University.
PAUL LEVY has served as a member of our 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 our board of directors since
February 1997. Ms. Schoendorf has been a General Partner of Mohr, Davidow
Ventures, a venture capital firm, since 1994 and a Managing Partner since 1997.
Ms. Schoendorf currently serves as a director of Actuate Software Corporation
and several privately held companies. Ms. Schoendorf holds a B.S. degree in
computer science and mathematics from Iowa State University and an M.B.A. degree
from Santa Clara University.
In addition, we expect that some executive officers of Rubric will become
officers or executive officers of Broadbase after our acquisition of Rubric is
completed. In connection with this transaction, we have entered into employment
agreements with Anu Shukla, Chief Executive Officer and Chairman of the Board of
Directors of Rubric, to become our Chief Marketing Officer, and Chris Maeda,
Vice President and Chief Technical Officer of Rubric, to become our Executive
Vice President of Engineering.
Our board of directors is currently comprised of five 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 that our board of directors
is divided into three classes as nearly equal in size as possible with staggered
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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 is a Class I director;
Mr. Bay and Ms. Schoendorf are Class II directors; and Mr. Kremer and Mr. Levy
are 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. Levy and Mr. Harvey. The compensation committee reviews and makes
recommendations to our board of directors concerning salaries and incentive
compensation for our officers and employees. The compensation committee also
administers our 1999 Equity Incentive Plan and 1999 Employee Stock Purchase
Plan.
Audit committee. The current members of our audit committee are Mr. Levy
and Ms. Schoendorf. Our audit committee reviews and monitors our financial
statements and accounting practices, makes recommendations to our board of
directors regarding the selection of independent auditors and reviews the
results and scope of the audit and other services provided by our independent
auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee has at any time since our
formation been an officer or employee of Broadbase. None of our executive
officers currently serves, or in the past has served, as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors or compensation committee.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses in
attending board and committee meetings.
In September 1999, Kevin Harvey, Paul Levy and Nancy Schoendorf each
received an option to purchase 10,000 shares of our common stock under our 1999
Equity Incentive Plan at an exercise price of $14.00 per share, our initial
public offering price. In addition, each non-employee director who becomes a
member of our board of directors and who has not previously received shares or
options in Broadbase will be granted an option to purchase 10,000 shares of our
common stock under the 1999 Equity Incentive Plan. Immediately following each
annual meeting of our stockholders, each non-employee director will
automatically be granted an additional option to purchase 10,000 shares under
that plan if the director has served continuously as a member of our board of
directors since the date of the director's initial grant. Each option will have
an exercise price equal to the fair market value of our common stock on the date
of grant and will have a ten-year term. Each of these options will be
immediately exercisable and fully vested.
In May 1999, we granted to Paul Levy, one of our directors, an option to
purchase 96,750 shares of common stock at an exercise price of $0.73 per share.
Mr. Levy exercised this option in full in May 1999. We have a right to
repurchase shares issued upon exercise of this option upon termination of Mr.
Levy's membership on our board of directors. This repurchase right lapsed as to
19,350 shares in November
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1999 and lapses as to 2,577 shares each month thereafter. In the event of a
change of control of 50% or more of our outstanding stock, and if Mr. Levy is
not invited to serve on the board of the combined company, then any unvested
shares will vest immediately.
EXECUTIVE COMPENSATION
The following table shows all compensation awarded to, earned by or paid
for services rendered to Broadbase in all capacities during 1999 by our chief
executive officer and our four other most highly compensated executive officers
who earned at least $100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS(1) OPTIONS
---------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Mark Kremer.................................... 1999 $205,000 $ 45,000 200,000
Chairman of the Board of Directors(2) 1998 205,000 25,000 259,000
Chuck Bay...................................... 1999 150,000 60,000 200,000
President and Chief Executive Officer(3) 1998 143,269 40,000 256,000
Brian Kelly.................................... 1999 150,000 30,000 250,000
Executive Vice President of Products(4) 1998 12,500 -- --
Thomas Doyle................................... 1999 225,000(6) 500,000(7) 240,000
Executive Vice President of Sales(5) 1998 -- -- --
</TABLE>
- -------------------------
(1) Represents bonus earned for the fiscal year listed.
(2) Mr. Kremer served as President until October 1999 and as Chief Executive
Officer until January 2000.
(3) Mr. Bay became President in October 1999 and Chief Executive Officer and a
director in January 2000.
(4) Mr. Kelly joined Broadbase in December 1998 as Executive Vice President of
Applications and Engineering and became Executive Vice President of Products
in January 2000.
(5) Mr. Doyle was hired as Executive Vice President of Sales in April 1999 and
is compensated at an annual rate of $225,000 with a targeted commission of
$100,000.
(6) Includes commissions of $75,000.
(7) Includes a signing bonus of $500,000.
Rusty Thomas was hired as Executive Vice President and Chief Financial
Officer in January 2000 and is compensated at an annual rate of $200,000 with
bonuses of up to $50,000 per year.
OPTION GRANTS IN 1999
The following table shows information about each stock option grant during
1999 to the executive officers named in the Summary Compensation Table above.
All options included in the following table have a term of ten years,
subject to earlier termination in the event the optionee's service with us
terminates. For a description of the terms of each of the options listed below,
see "-- Employment Agreements and Stock Option Grants". All options were granted
at an exercise price equal to the fair market value of our common stock, as
determined by
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our board of directors on the date of grant. The percent of total options
granted is based on an aggregate of 3,330,350 options granted by us to our
employees, directors and consultants in 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS DEEMED FAIR PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET VALUE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE ON DATE OF EXPIRATION ------------------------------------
NAME GRANTED IN 1999 PER SHARE GRANT DATE 0% 5% 10%
---- ---------- ------------- --------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chuck Bay............ 200,000 6.0% $26.94 $26.94 10/12/09 -- $3,388,484 $8,587,084
Mark Kremer.......... 200,000 6.0 26.94 26.94 10/12/09 -- 3,388,484 8,587,084
Brian Kelly.......... 135,000 4.0 0.73 6.81 1/18/09 $ 820,800 1,398,974 2,286,007
95,000 2.8 0.73 7.93 5/27/09 684,000 1,157,778 1,884,646
20,000 0.6 0.73 7.93 5/27/09 144,000 243,743 396,768
Thomas Doyle......... 240,000 7.2 0.73 7.65 4/30/09 1,660,800 2,815,451 4,586,911
</TABLE>
The 0%, 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 based on the fair market value or deemed fair market value
of the common stock used by us for accounting purposes, as applicable, and do
not represent our estimates or projections of our future stock prices. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
See "Employment Agreements and Stock Option Grants" for information
regarding option grants made to Rusty Thomas in 2000.
AGGREGATED OPTION EXERCISES IN 1999 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
who exercised options during the fiscal year ended December 31, 1999 and
information concerning unexercised options held by these officers at the end of
1999. The value realized represents the difference between the deemed fair value
of the common stock used by us for accounting purposes and the exercise price of
the option. The value of unexercised in-the-money options is based on the
closing price on December 31, 1999 of $112.50 per share, minus the exercise
price, multiplied by the number of shares issued upon exercise of the option. 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.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Chuck Bay............ 86,000 $546,960 8,333 191,667 $ 712,992 $16,399,508
Brian Kelly.......... 135,000 858,600 100,000 15,000 11,177,000 1,676,550
</TABLE>
EMPLOYEE BENEFIT PLANS
1996 EQUITY INCENTIVE PLAN
We adopted our 1996 Equity Incentive Plan in April 1996, and we terminated
this plan in September 1999. As of December 31, 1999, there were outstanding
options to purchase a total of 2,289,206 shares of common stock under this plan.
No further options will be granted under this plan. Shares reserved under our
1996 Equity Incentive Plan that had not been issued and were not subject to
outstanding options as of the date of termination of this plan, and shares
subject to options which had become unexercisable, became available for issuance
under our 1999 Equity Incentive Plan.
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However, the termination of this plan did not affect outstanding options, which
will remain outstanding until they are exercised or until they terminate or
expire.
1999 EQUITY INCENTIVE PLAN
We adopted our 1999 Equity Incentive Plan in September 1999. As of January
1, 2000, there were 4,577,057 shares authorized for issuance under this plan,
which number includes shares added upon the termination of our 1996 Equity
Incentive Plan and an automatic increase of 902,504 shares, or 5% of our total
shares outstanding, on January 1, 2000. On each subsequent January 1, the number
of shares authorized and reserved for issuance under this plan will be increased
automatically by an amount of shares equal to 5% of our total outstanding shares
as of the immediately preceding December 31. The following shares will also
become available for issuance under our 1999 Equity Incentive Plan:
- shares subject to issuance upon exercise of an option granted under our
1999 Equity Incentive Plan that cease to be subject to that option for
any reason other than exercise of the option;
- shares issued pursuant to the exercise of an option granted under our
1999 Equity Incentive Plan that are subsequently forfeited or repurchased
by us at the original purchase price;
- shares subject to awards granted pursuant to restricted stock purchase
agreements under our 1999 Equity Incentive Plan that are subsequently
forfeited or repurchased by us at the original issue price; and
- shares subject to stock bonuses granted under our 1999 Equity Incentive
Plan that terminate without shares being issued.
Our 1999 Equity Incentive Plan will terminate in 2009, unless sooner
terminated in accordance with the terms of the plan.
Our 1999 Equity Incentive Plan authorizes the award of options, restricted
stock awards and stock bonuses. Our non-employee directors are entitled to
receive automatic annual grants of fully vested options to purchase 10,000
shares of our common stock, as described under "Management -- Director
Compensation". Additionally, our non-employee directors are eligible to receive
discretionary awards under our 1999 Equity Incentive Plan. Our 1999 Equity
Incentive Plan is administered by the compensation committee of our board of
directors, which currently consists of Mr. Harvey and Ms. Schoendorf, both of
whom are "non-employee directors" under applicable federal securities laws and
"outside directors" as defined under applicable federal tax laws. The committee
has the authority to construe and interpret this plan and any agreement made
thereunder, grant awards and make all other determinations necessary or
advisable for the administration of this plan.
Our 1999 Equity Incentive Plan provides for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. Incentive stock options may be granted only to
employees. Nonqualified stock options, and all other awards other than incentive
stock options, may be granted to employees, officers, directors, consultants,
independent contractors and advisors of Broadbase or any parent or subsidiary of
Broadbase. However, consultants, independent contractors and advisors are only
eligible to receive awards if they render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction. The
exercise price of incentive stock options must be at least equal to the fair
market value of our common stock on the date of grant. The exercise price of
incentive stock options granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of nonqualified stock options must be at
least equal to 85% of the fair market value of the our common stock on the date
of grant.
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The maximum term of options granted under our 1999 Equity Incentive Plan is
ten years. Awards other than nonqualified stock options granted under this plan
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of the
optionee only by the optionee. The plan allows exceptions to this restriction
with respect to awards that are nonqualified stock options. Options granted
under our 1999 Equity Incentive Plan generally expire three months after the
termination of the 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 adopted our 1999 Employee Stock Purchase Plan in September 1999. There
are currently 680,501 shares authorized for issuance under this plan, which
number includes an automatic increase of 180,501 shares, or 1% of our total
outstanding shares, on January 1, 2000. On each subsequent January 1, the number
of shares authorized and reserved for issuance under this plan will be increased
automatically by an amount of shares equal to 1% of our total outstanding shares
as of the immediately preceding December 31. Our 1999 Employee Stock Purchase
Plan is administered by our compensation committee.
Employees generally become eligible to participate in our 1999 Employee
Stock Purchase Plan if they are employed 10 days before the beginning of the
applicable offering period and they are customarily employed by us or a parent
or any subsidiary that we designate 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 are able to
acquire shares of our common stock through payroll deductions. Eligible
employees may select a rate of payroll deduction between 2% and 10% of their
cash compensation and are subject to certain maximum purchase limitations.
Participation in this plan ends automatically upon termination of employment for
any reason.
Offering periods under our 1999 Employee Stock Purchase Plan generally last
two years and consist of four six-month purchase periods. The first offering
period and purchase period began on September 22, 1999. Offering periods and
purchase periods thereafter begin on each January 1 and July 1. In addition, an
offering period and purchase period will begin 15 days after the completion of
our acquisition of Rubric.
The purchase price for common stock purchased under our 1999 Employee Stock
Purchase Plan is 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. Our compensation committee has the authority 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.
RUBRIC STOCK OPTIONS
In connection with our pending acquisition of Rubric, we have agreed to
assume all options to purchase Rubric common stock outstanding as of the closing
of the acquisition and to convert these into options to purchase our common
stock according to the exchange ratio in the acquisition. As of January 20,
2000, there were options to purchase approximately 3.3 million shares of Rubric
common stock.
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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 AND STOCK OPTION GRANTS
In January 2000, we executed an offer letter to Rusty Thomas, our Executive
Vice President and Chief Financial Officer. This offer letter established Mr.
Thomas' annual base salary at $200,000 and provides for bonuses of up to $50,000
per year. Under this offer letter, Mr. Thomas was granted an option to purchase
175,000 shares of common stock at an exercise price of $54.00 per share, which
price is $40.00 less than the closing price of our common stock on Mr. Thomas'
starting date. This option will vest as to 10,937 shares in April 2000, and as
to 3,646 shares each month thereafter. In the event of a change of control after
which Mr. Thomas is not offered the same position, this option will vest as to
50% of the unvested shares. The offer letter also provides for a loan of
$250,000, to be repayable in full within two weeks if Mr. Thomas terminates his
employment with us within the first three months of his employment, and
otherwise to be secured by the shares of common stock underlying the above
option. We will provide Mr. Thomas with the same health, holiday, vacation,
401(k) and other benefits that are available to all of our employees. Mr.
Thomas' employment is considered an "at-will" agreement. We or Mr. Thomas may
terminate the employment relationship at any time for any reason.
In January, 2000, we executed an offer letter to Greg Martin, our Senior
Vice President, Consulting and Customer Advocacy. This offer letter established
Mr. Martin's annual base salary at $200,000 and provides for bonuses of up to
$40,000 a year. Under this offer letter, Mr. Martin was granted an option to
purchase 125,000 shares of common stock at an exercise price of $54.00 per
share, which price is $40 less than the closing price of our common stock on Mr.
Martin's starting date. This option will vest and become exercisable as to 7,812
share in April, 2000, and as to 2,604 shares each month thereafter. The offer
letter also provides for a loan of $200,000 to be repayable in full within two
weeks if Mr. Martin terminates his employment with us within the first three
months of employment, and otherwise to be secured by the shares of common stock
underlying the above option. We will provide Mr. Martin with the same health,
holiday, vacation and other benefits that are available to all of our employees.
Mr. Martin's employment is considered an "at will" agreement. We or Mr. Martin
may terminate the employment relationship at any time.
In December 1999, we entered into an employment agreement with Anu Shukla,
to become our Chief Marketing Officer upon the completion of our acquisition of
Rubric. This agreement established Ms. Shukla's annual base salary at not less
than $195,000 and provides for bonuses of up to $15,000 per year. In addition,
the agreement provides that, immediately before the acquisition, Rubric will
grant Ms. Shukla an option to purchase 150,000 shares of Rubric common stock at
the fair market value on the date of grant. This stock option will vest as to
12.5% of the shares in August, 2000, and as to 2.1% of the shares each month
thereafter. In addition, if Ms. Shukla's employment with us is terminated for
other than cause, as defined in the agreement, she will receive three months'
base salary in a lump sum payment. The agreement also imposes non-competition
restrictions on Ms. Shukla for a period of at least twelve months following the
merger. We will provide Ms. Shukla with the same health, holiday, vacation and
other benefits that are available to all of our employees. Ms. Shukla's
employment is considered an "at-will" agreement. We or Ms. Shukla may terminate
the employment relationship at any time for any reason.
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In December 1999, we entered into an employment agreement with Chris Maeda,
to become our Executive Vice President of Engineering upon the completion of our
acquisition of Rubric. This agreement established Mr. Maeda's annual base salary
at not less than $150,000 and provides for bonuses of up to $30,000 per year. In
addition, the agreement provides that, immediately before the acquisition,
Rubric will grant Mr. Maeda an option to purchase 150,000 shares of Rubric
common stock at the fair market value on the date of grant. This stock option
will vest as to 12.5% of the shares in August, 2000, and as to 2.1% of the
shares each month thereafter. In addition, if Mr. Maeda's employment with us is
terminated for other than cause, as defined in the agreement, he will receive
three months' base salary in a lump sum payment. The agreement also imposes non-
competition restrictions on Mr. Maeda for a period of at least twelve months
following the merger. We will provide Mr. Maeda with the same health, holiday,
vacation and other benefits that are available to all of our employees. Mr.
Maeda's employment is considered an "at-will" agreement. We or Mr. Maeda may
terminate the employment relationship at any time for any reason.
In July 1999, we executed an offer letter to Eric Willgohs, our General
Counsel, Vice President Legal and Secretary. This offer letter established Mr.
Willgohs' annual base salary at $120,000 and provides for bonuses of up to
$30,000 a year. Under this offer letter, Mr. Willgohs was granted an option to
purchase 60,000 shares of common stock at an exercise price of $4.56 per share.
This option was immediately exercisable in full, and Mr. Willgohs exercised this
option in part. We have a right to repurchase the shares issued upon exercise of
this option upon termination of Mr. Willgohs' employment. The repurchase right
lapses and the remaining option vests as to 7,500 shares in January, 2000, and
will lapse or vest, as applicable, as to 1,250 shares each month thereafter. In
the event of a change of control of Broadbase and Mr. Willgohs' involuntary
termination, the repurchase right will lapse and the option will vest as to 50%
of the unvested shares. We will provide Mr. Willgohs with the same health,
holiday, vacation and other benefits that are available to all of our employees.
Mr. Willgohs' employment is considered an "at will" agreement. We or Mr.
Willgohs may terminate the employment relationship at any time.
In April 1999, we executed an offer letter to Thomas Doyle, our Executive
Vice President of Sales. This offer letter established Mr. Doyle's annual base
salary at $225,000 and a commission of $100,000, which can increase or decrease
if sales are above or below an established sales target. In addition, the offer
letter provides for a sign-on bonus of $250,000 to be paid on his first day of
employment and an additional bonus of $250,000 payable on July 1, 1999. Each
bonus is subject to repayment if he voluntarily terminates his employment less
than 18 months after the payment of that bonus. 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. This option is immediately exercisable in
full. This option vested as to 30,000 shares in October 1999, and vests as to
5,000 shares each month thereafter. In the event of a change of control of
Broadbase and Mr. Doyle's involuntary termination, this repurchase right will
lapse as to 50% of the shares still subject to the repurchase right. We will
provide Mr. Doyle with the same health, holiday, vacation and other benefits
that are available to all of our employees. Mr. Doyle's employment is considered
an "at-will" agreement. We or Mr. Doyle may terminate the employment
relationship at any time for any reason.
In November 1998, we executed an offer letter to Brian Kelly, Executive
Vice President of Products. This offer letter established Mr. Kelly's annual
base salary at $150,000 and 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, and Mr. Kelly exercised this option, in full. We have a
right to repurchase the shares upon termination of Mr. Kelly's employment at the
original purchase price of $0.73 per share. This repurchase right lapsed as to
16,875 shares in May 1999, and lapses as to 2,812 shares each month thereafter.
In addition, the agreement provided for the grant of an option to purchase an
additional 20,000 shares to Mr. Kelly under certain circumstances. On May 27,
1999, Mr. Kelly was granted this option to purchase 20,000 shares of common
stock and an additional option to purchase 95,000 shares of common stock, each
at an exercise price of $0.73 per share. The option to purchase
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95,000 shares is immediately exercisable in full. These options vested as to
26,250 shares on June 1, 1999 and vest as to 4,374 shares each month thereafter.
In the event of a change of control and Mr. Kelly's involuntary termination, the
option to purchase 20,000 shares will vest as to 50% of the unvested shares. We
will provide Mr. Kelly with the same health, holiday, vacation and other
benefits that are available to all of our employees. Mr. Kelly's employment is
considered an "at-will" agreement. We or Mr. Kelly may terminate the employment
relationship at any time for any reason.
In January 1998, we executed an offer letter to Chuck Bay, our President
and Chief Executive Officer. This offer letter established Mr. Bay's annual base
salary at $150,000 and provides 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, and Mr. Bay exercised this option, in full. We have a right to
repurchase the shares upon termination of Mr. Bay's employment at the original
purchase price of $0.25 per share. This repurchase right lapsed as to 21,625
shares in July 1998, and lapses as to 3,604 shares each month thereafter. In the
event of a change of control, this repurchase right will lapse as to 50% of the
shares still subject to the repurchase right. We will provide Mr. Bay with the
same health, holiday, vacation, 401(k) and other benefits that are available to
all of our employees. Mr. Bay's employment is considered an "at-will" agreement.
We or Mr. Bay may terminate the employment relationship at any time for any
reason.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our certificate of incorporation, as amended, 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 us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Delaware law regarding unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by Delaware law, our bylaws provide that:
- we must indemnify our directors and executive officers to the fullest
extent permitted by Delaware law, provided that each indemnified officer
and director acted in good faith and in a manner that the officer or
director reasonably believed to be in or not opposed to Broadbase's best
interests;
- we may indemnify our other employees and agents; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to very limited exceptions.
In addition to the indemnification required in our certificate of
incorporation and bylaws, we have entered into indemnification agreements with
each of our directors and executive officers. We also have obtained 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
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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.
We, the selling stockholders and the underwriters have entered into an
underwriting agreement pursuant to which we and the selling stockholders have
agreed to indemnify the underwriters, and the underwriters have agreed to
indemnify us, our directors and executive officers, and the selling
stockholders, against certain liabilities, including liabilities arising under
the Securities Act. Likewise, pursuant to our Fourth Amended and Restated
Investors' Rights Agreement, selling stockholders exercising rights pursuant to
that agreement have agreed to indemnify us, our directors and our officers who
sign the registration statement against certain liabilities, including
liabilities arising under the Securities Act.
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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RELATED PARTY TRANSACTIONS
Other than the transactions described in "Management" and the transactions
described below, since January 1, 1997, there has not been nor is there
currently proposed any transaction or series of similar transactions to which we
were or will be a party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than 5% of our
common stock or any member of his or her immediate family had or will
have a direct or indirect material interest.
TRANSACTIONS WITH PROMOTER
On November 30, 1995, in connection with the formation and initial
financing of Broadbase, Mark Kremer purchased 1,282,500 shares of our common
stock for an aggregate purchase price of $2,565. Mr. Kremer is Chairman of the
Board of Directors, served as our President until October 1999 and as our Chief
Executive Officer until January 2000, and may be considered to be a promoter of
Broadbase.
PREFERRED STOCK FINANCINGS IN WHICH 5% STOCKHOLDERS PARTICIPATED
In December 1996 and March 1997, we sold a total of 1,923,223 shares of
Series B preferred stock at a purchase price of $2.683 per share. In February
and April 1998, we sold a total of 2,166,055 shares of Series C preferred stock
at a purchase price of $5.54 per share. In June 1999, we sold a total of
2,188,812 shares of Series E preferred stock at a purchase price of $9.1325 per
share. In connection with the Series E preferred stock financing in June 1999,
we entered into an agreement with the investors in that financing that gave
certain of the investors rights to purchase, at the initial public offering
price, up to 238,306 shares of our common stock, subject to compliance with
applicable laws. In connection with this agreement, some of these investors
purchased 45,063 shares of common stock at the initial public offering price in
a separate private placement.
Purchasers of our preferred stock include, among others, the following
holders of more than 5% of our outstanding stock:
<TABLE>
<CAPTION>
SERIES B SERIES C SERIES E
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
STOCKHOLDER PURCHASED PURCHASED PURCHASED
----------- --------------- --------------- ---------------
<S> <C> <C> <C>
Entities affiliated with Benchmark Capital........ 559,070 526,173 109,500
Entities affiliated with Mohr, Davidow Ventures... 1,304,510 286,101 --
Entities affiliated with Accel Partners........... -- 902,527 27,375
Entities affiliated with Charter Growth Capital... -- -- 218,999
</TABLE>
Our director Kevin Harvey is a Managing Member of the general partner of
Benchmark Capital Partners, and our director Nancy Schoendorf is a managing
partner of Mohr, Davidow Ventures.
DEBENTURE FINANCINGS IN WHICH 5% STOCKHOLDERS PARTICIPATED
In December 1998 and April 1999, we sold debentures in the aggregate
principal amount of $8,000,000 to Charter Growth Capital and certain of its
affiliated funds. These debentures were converted into 1,103,448 shares of our
common stock upon the closing of our initial public offering in September 1999.
None of our executive officers, directors or other holders of more than 5% of
our outstanding common stock purchased any of the debentures.
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INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Mark Kremer. In April 1998, we lent $400,000 to Mark Kremer, currently the
Chairman of the Board of Directors of Broadbase, secured by a pledge of all
shares of Mr. Kremer's Broadbase common stock. The loan accrues interest at an
annual rate of 5.51%. In November 1999, we agreed to release all but 200,000 of
the originally pledged shares securing this loan. Pursuant to this amendment,
the loan will become due ten days after the closing date of this offering. As of
December 31, 1999, the total amount outstanding, including accrued interest, was
$436,854.
Chuck Bay. In February 1998 and March 1999, Chuck Bay, currently our Chief
Executive Officer, President and a member of our board of directors, executed
promissory notes in the principal amounts of $43,250 and $62,780 in connection
with the exercise of stock options. These notes are secured by a pledge of Mr.
Bay's Broadbase common stock, bear interest at annual rates of 8.5% and 7.5%,
respectively, and are payable on or before March 19, 2000. As of December 31,
1999, the total amount outstanding, including accrued interest, was $116,536.
Brian Kelly. In March 1999, Brian Kelly, our Executive Vice President of
Products, 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 an annual rate of 7.5%
and is payable on or before March 19, 2000. As of December 31, 1999, the total
amount outstanding, including accrued interest, was $104,336.
Eric Willgohs. In July 1999, Eric Willgohs, our General Counsel, Vice
President Legal and Secretary, executed a promissory note in the principal
amount of $68,400 in connection with the exercise of a stock option. This note
is secured by a pledge of Mr. Willgohs' Broadbase common stock, bears interest
at an annual rate of 7.5% and is payable on or before March 27, 2000. As of
December 31, 1999, the total amount outstanding, including accrued interest, was
$70,566.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table presents information as to the beneficial ownership of
our common stock as of December 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;
- all current executive officers and directors as a group; and
- each selling stockholder.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED BEFORE BENEFICIALLY OWNED AFTER
THIS OFFERING SHARES TO BE THIS OFFERING
-------------------------- SOLD IN ------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE THIS OFFERING NUMBER PERCENTAGE
------------------------ ----------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Kevin Harvey(1).......................... 3,454,742 19.1% 0 3,454,742 17.7%
c/o Benchmark Capital
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Nancy Schoendorf(2)...................... 1,600,611 8.9 0 1,600,611 8.2
c/o Mohr, Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Entities affiliated with Charter Growth
Capital(3)............................. 1,350,051 7.5
525 University Avenue, Suite 1500
Palo Alto, CA 94301
Entities affiliated with Accel
Partners(4)............................ 929,902 5.2
428 University Avenue
Palo Alto, CA 94301
Mark Kremer(5)........................... 1,230,833 6.8 71.125 1,159,708 5.9
Chuck Bay(6)............................. 267,333 1.5 0 267,333 1.4
Brian Kelly(7)........................... 187,500 1.0 0 187,500 *
Paul Levy(8)............................. 106,750 * 0 106,750 *
Thomas Doyle(9).......................... 40,000 * 0 40,000 *
All ten current directors and executive
officers as a group(10)................ 6,947,769 38.5% 71.125 6,816,644 34.9%
Other selling stockholders(11)
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Represents 3,063,891 shares of common stock held of record by Benchmark
Capital Partners, L.P. and 380,851 shares held by Benchmark Founders' Fund,
L.P. Mr. Harvey, a director of Broadbase, is a Managing Member of Benchmark
Capital Management Co., LLC, the general partner of Benchmark Capital
Partners, L.P. and Benchmark Founders' Fund, L.P. Mr. Harvey disclaims
beneficial ownership of shares held by Benchmark except to the extent of
his pecuniary interest arising from his interest in Benchmark Capital. Also
includes an option which will be exercisable as to 10,000 shares within 60
days of December 31, 1999.
(2) Represents 1,524,126 shares of common stock held of record by Mohr, Davidow
Ventures IV, L.P., and 66,485 shares held by 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
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of her pecuniary interest arising from her interest in Mohr, Davidow Ventures.
Also includes an option which will be exercisable as to 10,000 shares within 60
days of December 31, 1999.
(3) Includes 810,345 shares of common stock held of record by Charter Growth
Capital Co-Investment Fund, 275,862 shares held by Charter Growth Capital,
L.P. and 17,241 shares held by CGC Investors, L.L.C.
(4) Includes 729,974 shares of common stock held of record by Accel V L.P.,
96,710 shares held by Accel Internet/Strategic Technology Fund L.P., 44,635
shares held by Accel Investors '97 L.P., 38,125 shares held by Accel
Keiretsu V L.P., and 20,458 shares held by Ellmore C. Patterson Partners.
(5) Includes 70,000 shares held by the Mark Kremer 1999 Annuity Trust, of which
Mr. Kremer is trustee, 70,000 shares held by the Anat Kremer 1999 Annuity
Trust, of which Mr. Kremer and his wife are trustees, and an option which
will be exercisable as to 8,333 shares within 60 days of December 31, 1999.
Does not include 60,000 shares held by a trust for the benefit of Mr.
Kremer's children, of which neither he nor his wife are trustees. Mr.
Kremer is the Chairman of the Board of Directors of Broadbase.
(6) Includes 90,104 shares subject to a repurchase right that lapses at a rate
of 3,604 shares per month until January 2002, 64,500 shares subject to a
repurchase right that lapses as to 1,791 shares per month until December
2002 and an option which will be exercisable as to 8,333 shares within 60
days of December 31, 1999. Mr. Bay is our Chief Executive Officer,
President and a director.
(7) Includes 101,250 shares that are subject to a repurchase right that lapses
as to 3,825 shares per month until November 2002, and options which will be
exercisable as to 100,000 shares within 60 days of December 31, 1999. Mr.
Kelly is our Executive Vice President of Products.
(8) Includes 74,820 shares subject to a repurchase right that lapsed as to
12,093 shares in November 1999 and lapses as to 2,015 shares per month
until April 2003, and an option which will be exercisable as to 10,000
shares within 60 days of December 31, 1999. Mr. Levy is a director of
Broadbase.
(9) Includes an option which will be exercisable as to 40,000 shares within 60
days of December 31, 1999. Mr. Doyle is our Executive Vice President of
Sales.
(10) Includes options which will be exercisable as to an aggregate of 184,166
shares within 60 days of December 31, 1999, and an aggregate of 330,674
shares subject to repurchase rights.
(11) Includes certain Rubric stockholders who will receive shares of our common
stock in exchange for shares of Rubric common stock in connection with our
acquisition of Rubric.
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 18,050,087 shares outstanding
as of December 31, 1999. Shares of common stock subject to options that are
currently exercisable or exercisable within 60 days of December 31, 1999, are
deemed to be outstanding and to be beneficially owned by the person holding the
options 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 listed above is Broadbase Software, Inc., 172 Constitution
Drive, Menlo Park, CA 94025.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 90,000,000 shares of common stock,
$0.001 par value per share, and 5,000,000 shares of preferred stock, $0.001 par
value per share. As of December 31, 1999 there were outstanding 18,050,087
shares of common stock held of record by approximately 179 stockholders and
options to purchase 3,195,489 shares of common stock.
COMMON STOCK
Dividend rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as our board of directors may from time to time
determine.
Voting rights. Each common stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
No preemptive or similar rights. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
Right to receive liquidation distributions. Upon a liquidation, dissolution
or winding-up of Broadbase, the holders of common stock are entitled to share
ratably with holders of any participating preferred stock in all assets
remaining after payment of all liabilities and the liquidation preferences of
any outstanding preferred stock. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to our certificate of incorporation, our board of directors is
authorized, subject to the limits imposed by Delaware law, to issue preferred
stock in one or more series, to establish from time to time the number of shares
to be included in each series and to fix the rights, preferences and privileges
of the shares of each wholly unissued series and any of its qualifications,
limitations or restrictions. Our board of directors can also increase or
decrease the number of shares of any series, but not below the number of shares
of any series then outstanding, without any further vote or action by the
stockholders.
Our board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of the common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of Broadbase and may
adversely affect the market price of the common stock and the voting and other
rights of the holders of common stock. We have no current plan to issue any
shares of preferred stock.
REGISTRATION RIGHTS
After this offering, the holders of approximately shares of common
stock will 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. Beginning March 20, 2000, the holders of at
least 30% of the shares having registration rights have the right to demand that
we file a registration statement so that they can publicly sell their shares, so
long as the value of the securities to be sold in that registration exceeds
$7,500,000. In addition, if we are eligible to file a registration statement on
Form S-3, the
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holders of at least 20% of the shares having registration rights have the right
to demand that we file a registration statement on Form S-3, so long as the
amount of securities to be sold in that registration exceeds $500,000.
Piggyback registration rights. If we register any securities for public
sale, these stockholders will have the right to include their shares in the
registration statement. The underwriters of any underwritten offering will have
the right to limit the number of shares to be included in that registration
statement.
Expenses of registration. We generally will pay all of the expenses
relating to any demand or piggyback registration.
Expiration of registration rights. The registration rights described above
will expire on September 27, 2004, or earlier with respect to a particular
stockholder if (1) that holder owns less than 1% of our outstanding securities,
(2) that holder can resell all of its securities in a three-month period under
Rule 144 of the Securities Act and (3) we are subject to the reporting
requirements of the Securities Exchange Act of 1934.
ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law, our certificate of incorporation and
bylaws described below may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
DELAWARE LAW
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents certain
Delaware corporations from engaging, under limited circumstances, in a "business
combination", which includes a merger or sale of more than 10% of the
corporation's assets, with any "interested stockholder", or a stockholder who
owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of such stockholder, for three years following the
date that stockholder becomes an interested stockholder unless:
- the transaction is approved by the board prior to the date the interested
stockholder attained that status;
- upon the closing of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to such date the business combination is approved by the
board and authorized at an annual or special meeting of stockholders by
at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
This provision could prohibit or delay mergers or other takeover or
change-in-control attempts and, accordingly, may discourage attempts to acquire
us.
CHARTER AND BYLAW PROVISIONS
Our certificate of incorporation and bylaws provide for the division of our
board of directors into three classes as nearly equal in size as reasonably
possible with staggered three-year terms. Our stockholders are unable to fill
any vacancy on our board of directors. Any action required or permitted to be
taken by our stockholders at an annual meeting or a special meeting of the
stockholders may only be taken if it is properly brought before that meeting and
may not be taken by written consent. Our stockholders are limited in their
ability to remove any director or the entire board of directors without cause.
Our bylaws provide that special meetings of the stockholders may be called at
any time by the board of directors, and must be called upon the request of the
chairman of the board of directors, the chief executive officer, the president,
stockholders that are entitled to cast not less than
66
<PAGE> 69
a majority of the total number of votes entitled to be cast by all stockholders
at that special meeting, or by a majority of the members of the board of
directors. These provisions of our certificate of incorporation and bylaws are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and to discourage transactions that may
involve an actual or threatened change of control of Broadbase. These provisions
are designed to reduce the vulnerability of Broadbase to an unsolicited
acquisition proposal and, accordingly, could discourage potential acquisition
proposals and could delay or prevent a change in control of Broadbase. These
provisions are also intended to discourage tactics that may be used in proxy
fights but could have the effect of discouraging others from making tender
offers for our shares and, consequently, might also inhibit fluctuations in the
market price of our shares that could result from actual or rumored takeover
attempts. These changes may also have the effect of preventing changes in our
management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation. The address of our transfer agent and registrar is 1745
Gardena Avenue, Glendale, California 91204-2991, and its telephone number at
this location is (818) 502-1404.
LISTING
Our common stock is quoted on the Nasdaq National Market under the trading
symbol "BBSW".
67
<PAGE> 70
SHARES ELIGIBLE FOR FUTURE SALE
Prior to our initial public offering in September 1999, our common stock
was not traded on a public market. Future sales of substantial amounts of common
stock, including shares issued upon exercise of outstanding options, 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, 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 19,550,087
shares of common stock, based on shares outstanding at December 31, 1999 and
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options. Of this amount, the 3,000,000 shares being sold in this
offering will be, and the 4,000,000 shares that were sold in our initial public
offering are, 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. The remaining 12,550,087 shares of
common stock held by existing stockholders are subject to various resale
restrictions. Securities restricted under the Securities Act may be sold in the
public market only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 under the Securities
Act.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the restricted shares will be available
for sale in the public market as follows:
- shares will be eligible for sale beginning March 20, 2000
(the expiration date of the lock-up agreements related to our initial
public offering);
- shares will become eligible for sale on various dates
after March 20, 2000 and before the date 90 days after the date of this
prospectus;
- shares will become eligible for sale upon expiration of
the lock-up agreements related to this offering, which are described
below, beginning 90 days after the date of this prospectus; and
- shares will become eligible for sale on subsequent dates
after 90 days after the date of this prospectus, subject in most cases to
volume limitations.
In addition, the approximately 2.9 million shares to be issued in
connection with our acquisition of Rubric will be freely tradeable under Section
3(a)(10) of the Securities Act if and when we receive the necessary regulatory
approval. Of these shares, shares will be subject to lock-up
agreements until March 20, 2000, subject to certain exceptions, and
shares will be subject to lock-up agreements until 90 days after the date of
this prospectus.
LOCK-UP AGREEMENTS
As part of this offering, all of the selling stockholders and our executive
officers and directors have agreed not to transfer or dispose of, directly or
indirectly, any of our common stock or securities convertible into or
exchangeable for shares of common stock for a period of 90 days after the date
of this prospectus, subject to limited exceptions in the lock-up agreements. In
addition, certain of our significant stockholders will execute agreements with
the underwriters that they will not, without the prior written consent of
Goldman, Sachs & Co., transfer or dispose of, directly or indirectly, any of our
common stock for a period of 45 days after the date of this prospectus with
respect to 50% of the shares held by these significant stockholders and 90 days
after the date of this prospectus with respect to the remaining 50% of the
shares held by these stockholders. In connection with our initial
68
<PAGE> 71
public offering, all of our executive officers, directors and substantially all
of our securityholders agreed not to transfer or dispose of, directly or
indirectly, any of our common stock obtained by these persons prior to our
initial public offering, or securities convertible into or exchangeable for
shares of common stock, until March 20, 2000. Goldman, Sachs & Co. may release
the shares subject to the lock-up agreements related to this offering, and
Deutsche Bank Securities Inc., in some instances together with us, may release
the shares subject to the initial public offering lock-up agreements in whole or
in part at any time with or without notice.
RULE 144
In general, under Rule 144, 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 195,500 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.
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 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 such agreements or obtaining the prior written consent of Deutsche
Bank Securities Inc. or Goldman, Sachs & Co., as applicable.
REGISTRATION RIGHTS
Beginning March 20, 2000, the holders of shares of our common stock,
or their transferees, will be entitled to rights to register their shares under
the Securities Act. See "Description of Capital Stock -- Registration Rights".
After registration, these shares could be sold without restriction under the
Securities Act.
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<PAGE> 72
STOCK OPTIONS
On September 27, 1999, we filed a registration statement under the
Securities Act covering approximately 6.5 million shares, constituting 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 as of that date. The registration statement was
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
initial public offering lock-up agreements expire.
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, 1998 and 1999, and for each of
the three years in the period ended December 31, 1999, as set forth in their
report. We have 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.
The financial statements of Rubric, Inc. as of December 31, 1998 and 1999
and for the period from inception, September 24, 1997, through December 31, 1997
and each of the two years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report, which contains an
explanatory paragraph relating to Rubric's ability to continue as a going
concern as described in Note 1 to the financial statements, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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
offered by this prospectus. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule filed as part of the registration statement. For further information
with respect to us and our common stock, we refer you to the registration
statement and the exhibits and schedule filed as a part of the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or any other document are not necessarily complete. If a contract
or document has been filed as an exhibit to the registration statement, we refer
you to the copy of the contract or document that has been filed. Each statement
in this prospectus relating to a contract or document filed as an exhibit is
qualified in all respects by the filed exhibit. The registration statement,
including exhibits and schedule, may be inspected without charge at the
principal office of the Securities and Exchange Commission in Washington, D.C.,
and copies of all or any part of it may be obtained from that office after
payment of fees prescribed by the Securities and Exchange Commission. The
Securities and Exchange Commission maintains a website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Securities and Exchange Commission at
http://www.sec.gov.
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<PAGE> 73
BROADBASE SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets
As of December 31, 1998 and 1999.......................... F-3
Consolidated Statements of Operations
Years Ended December 31, 1997, 1998 and 1999.............. F-4
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1998 and 1999.............. F-5
Consolidated Statements of Stockholders' Equity (Net Capital
Deficiency)
Years Ended December 31, 1997, 1998 and 1999.............. F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Pro Forma Combined Condensed Financial
Statements................................................ F-21
</TABLE>
F-1
<PAGE> 74
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Broadbase Software, Inc.
We have audited the accompanying consolidated balance sheets of Broadbase
Software, Inc. as of December 31, 1998 and 1999, and the related consolidated
statements of operations, cash flows, and stockholders' equity (net capital
deficiency) for each of the three years in the period ended December 31, 1999.
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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Broadbase
Software, Inc. at December 31, 1998 and 1999, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
San Jose, California
January 11, 2000
F-2
<PAGE> 75
BROADBASE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 13,990 $ 76,642
Accounts receivable, net of allowances of $50,000 at
December 31, 1998 and 1999.............................. 1,072 2,712
Prepaid expenses and other current assets................. 326 1,239
-------- --------
Total current assets............................... 15,388 80,593
Property and equipment, net................................. 1,610 2,868
Restricted cash............................................. -- 633
Other assets................................................ 175 676
-------- --------
Total assets....................................... $ 17,173 $ 84,770
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 395 $ 559
Accrued compensation...................................... 922 2,919
Accrued expenses.......................................... 1,142 2,341
Current portion of capital lease obligations.............. 30 --
Current portion of bank line of credit and notes
payable................................................. 768 749
Deferred revenue.......................................... 3,330 4,663
-------- --------
Total current liabilities.......................... 6,587 11,231
Bank line of credit and notes payable....................... 1,110 333
Convertible debentures...................................... 8,250 --
-------- --------
Total liabilities.................................. 15,947 11,564
Commitments and contingencies
Stockholders' equity:
Preferred stock: par value $0.001 per share; 5,000,000
shares authorized and none designated................... -- --
Convertible preferred stock: par value $0.001 per share;
15,154,046 shares authorized and issuable in series in
1998:
Series A: 2,398,000 shares designated, 2,384,999 shares
issued and outstanding at December 31, 1998 and none at
December 31, 1999...................................... 2 --
Series B: 2,000,000 shares designated, 1,923,223 shares
issued and outstanding at December 31, 1998 and none at
December 31, 1999...................................... 2 --
Series C: 2,166,065 shares designated, 2,166,055 shares
issued and outstanding at December 31, 1998 and none at
December 31, 1999...................................... 2 --
Common stock: par value $0.001 per share; 90,000,000
shares authorized; 2,707,300 and 18,050,087 shares
issued and outstanding at December 31, 1998 and 1999,
respectively............................................ 2 17
Additional paid-in capital................................ 22,171 124,297
Deferred stock compensation............................... (2,338) (8,710)
Notes receivable from stockholders........................ (476) (693)
Accumulated other comprehensive loss...................... (37) (33)
Accumulated deficit....................................... (18,102) (41,672)
-------- --------
Total stockholders' equity......................... 1,226 73,206
-------- --------
Total liabilities and stockholders' equity......... $ 17,173 $ 84,770
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 76
BROADBASE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------------------
1997 1998 1999
------- -------- ------------
<S> <C> <C> <C>
Net revenue:
License................................................. $ -- $ 2,996 $ 7,689
Maintenance and professional services................. -- 443 2,753
------- -------- --------
Total net revenue............................. -- 3,439 10,442
Cost of revenue:
License............................................... -- 713 1,437
Maintenance and professional services................. -- 254 2,610
------- -------- --------
Total cost of revenue......................... -- 967 4,047
------- -------- --------
Gross margin............................................ -- 2,472 6,395
Operating expenses:
Sales and marketing................................... 2,851 7,888 15,092
Research and development.............................. 1,980 3,738 6,024
General and administrative............................ 744 1,165 2,011
Amortization of deferred stock compensation........... -- 1,133 6,403
Merger expenses....................................... -- -- 1,000
------- -------- --------
Total operating expenses...................... 5,575 13,924 30,530
------- -------- --------
Loss from operations.................................... (5,575) (11,452) (24,135)
Interest income......................................... 154 335 1,454
Interest expense........................................ (66) (226) (889)
------- -------- --------
Net loss................................................ $(5,487) $(11,343) $(23,570)
======= ======== ========
Basic and diluted net loss per share.................... $ (6.19) $ (8.85) $ (3.74)
======= ======== ========
Weighted-average shares used in computing basic and
diluted net loss per share............................ 887 1,281 6,296
======= ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 77
BROADBASE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss.................................................... $(5,487) $(11,343) $(23,570)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 149 507 961
Write-off of note receivable from stockholder......... -- -- 7
Amortization of deferred stock compensation........... -- 1,133 6,403
Value of common stock issued to non-employees......... -- -- 404
Changes in balance sheet items:
Accounts receivable................................... -- (1,072) (1,640)
Prepaid expenses and other current assets............. (212) (243) (913)
Accounts payable...................................... 456 (91) 164
Accrued expenses...................................... 327 1,649 3,196
Deferred revenue...................................... -- 3,330 1,333
------- -------- --------
Net cash used in operating activities............... (4,767) (6,130) (13,655)
------- -------- --------
Investing activities:
Changes in other assets................................... -- -- 108
Change in restricted cash................................. -- -- (633)
Purchases of property and equipment....................... (661) (1,415) (2,178)
------- -------- --------
Net cash used in investing activities............... (661) (1,415) (2,703)
------- -------- --------
Financing activities:
Net proceeds from issuance of convertible preferred
stock................................................... 133 11,906 19,979
Proceeds from issuance of common stock upon exercise of
options................................................. 10 41 131
Net proceeds from issuance of common stock in initial
public offering......................................... -- -- 57,835
Net proceeds from issuance of common stock in private
placement............................................... -- -- 619
Proceeds from notes payable............................... 1,000 -- --
Payments to repurchase unvested common stock.............. -- -- (11)
Payments on stockholders' notes receivable................ 3 1 4
Issuance of notes receivable to stockholder............... -- (400) --
Payments on notes payable................................. (77) (347) (463)
Principal payments on capital lease obligations........... -- (32) (30)
Principal payments on equipment line of credit............ -- -- (333)
Borrowings on equipment line of credit.................... -- 1,000 --
Proceeds from issuance of convertible debt................ -- 8,250 1,275
------- -------- --------
Net cash provided by financing activities........... 1,069 20,419 79,006
Effect of foreign exchange rate changes on cash and cash
equivalents............................................. -- (37) 4
------- -------- --------
Net increase (decrease) in cash and cash equivalents...... (4,359) 12,837 62,652
Cash and cash equivalents:
Beginning of period....................................... 5,512 1,153 13,990
------- -------- --------
End of period............................................. $ 1,153 $ 13,990 $ 76,642
======= ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 82 $ 227 $ 839
Supplemental schedule of noncash investing activity:
Purchase of equipment under capital leases................ $ 64 $ -- $ --
</TABLE>
See accompanying notes.
F-5
<PAGE> 78
BROADBASE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED RECEIVABLE
------------------- ------------------ PAID-IN STOCK FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS
---------- ------ --------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996....... 4,248,579 $ 4 2,691,725 $ 2 $ 6,579 $ -- $ (47)
Issuance of Series B convertible
preferred stock at $2.68 per share
in March 1997 for cash, net of $27
issuance costs..................... 59,643 -- -- -- 133 -- --
Issuance of common stock upon
exercise of options............... -- -- 7,350 -- 10 -- --
Repurchase of common stock......... -- -- (206,250) -- (10) -- 10
Payments of notes receivable from
stockholders...................... -- -- -- -- -- -- 3
Comprehensive income (loss)........ -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- -- --
---------- --- --------- --- -------- -------- -----
Balance at December 31, 1997....... 4,308,222 4 2,492,825 2 6,712 -- (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 2 -- -- 11,904 -- --
Deferred stock compensation related
to certain options granted to
employees......................... -- -- -- -- 3,471 (3,471) --
Amortization of deferred stock
compensation...................... -- -- -- -- -- 1,133 --
Issuance of common stock upon
exercise of options............... -- -- 293,889 -- 87 -- (46)
Repurchase of common stock......... -- -- (79,414) -- (3) -- 3
Payments of notes receivable from
stockholders...................... -- -- -- -- -- -- 1
Note receivable from stockholder... -- -- -- -- -- -- (400)
Comprehensive income (loss)........ -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- -- --
---------- --- --------- --- -------- -------- -----
Balance at December 31, 1998....... 6,474,277 6 2,707,300 2 22,171 (2,338) (476)
Debentures converted into Series D
preferred stock in connection with
the Company's IPO................. 1,313,793 1 -- -- 9,524 -- --
Issuance of Series E preferred
stock, at $9.13 per share in June
1999 for cash, net of $10 of
issuance costs.................... 2,188,812 2 -- -- 19,977 -- --
Conversion of Series A, Series B,
Series C, Series D and Series E
preferred stock to common stock in
connection with the Company's
IPO............................... (9,976,882) (9) 9,976,882 9 -- -- --
Issuance of common stock in
connection with the Company's IPO,
net of issuance costs............. -- -- 4,600,000 5 57,830 -- --
Issuance of common stock in private
placement, net of issuance
costs............................. -- -- 45,063 -- 619 -- --
Issuance of common stock in
connection with license
agreement......................... -- -- 40,000 -- 400 -- --
Deferred stock compensation........ -- -- -- -- 12,775 (12,775) --
Amortization of deferred stock
compensation...................... -- -- -- -- -- 6,403 --
Issuance of common stock upon
exercise of options............... -- -- 791,370 1 1,013 -- (229)
Issuance of common stock upon
exercise of warrants.............. -- -- 36,764 -- 86 -- --
Repurchase of unvested common
stock............................. -- -- (147,292) -- (94) -- --
Notes receivable from
stockholder....................... -- -- -- -- (4) -- 12
Comprehensive income (loss)........ -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- --
Foreign currency translation
adjustment...................... -- -- -- -- -- -- --
Comprehensive loss................. -- -- -- -- -- -- --
---------- --- --------- --- -------- -------- -----
Balance at December 31, 1999....... -- $-- 18,050,087 $17 $124,297 $ (8,710) $(693)
---------- --- --------- --- -------- -------- -----
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
COMPREHENSIVE OTHER EQUITY
INCOME COMPREHENSIVE ACCUMULATED (NET CAPITAL
(LOSS) LOSS DEFICIT DEFICIENCY)
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
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
stockholders...................... -- -- -- 3
Comprehensive income (loss)........ -- -- -- --
Net loss.......................... $ (5,487) -- $ (5,487) (5,487)
--------
Comprehensive loss................. $ (5,487) -- -- --
======== ---- -------- --------
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
stockholders...................... -- -- -- 1
Note receivable from stockholder... -- -- -- (400)
Comprehensive income (loss)........ -- -- -- --
Net loss.......................... (11,343) -- (11,343) (11,343)
Foreign currency translation
adjustment...................... (37) (37) -- (37)
--------
Comprehensive loss................. $(11,380) -- -- --
======== ---- -------- --------
Balance at December 31, 1998....... (37) (18,102) 1,226
Debentures converted into Series D
preferred stock in connection with
the Company's IPO................. -- -- -- 9,525
Issuance of Series E preferred
stock, at $9.13 per share in June
1999 for cash, net of $10 of
issuance costs.................... -- -- -- 19,979
Conversion of Series A, Series B,
Series C, Series D and Series E
preferred stock to common stock in
connection with the Company's
IPO............................... -- -- -- --
Issuance of common stock in
connection with the Company's IPO,
net of issuance costs............. -- -- -- 57,835
Issuance of common stock in private
placement, net of issuance
costs............................. -- -- -- 619
Issuance of common stock in
connection with license
agreement......................... -- -- -- 400
Deferred stock compensation........ -- -- -- --
Amortization of deferred stock
compensation...................... -- -- -- 6,403
Issuance of common stock upon
exercise of options............... -- -- -- 785
Issuance of common stock upon
exercise of warrants.............. -- -- -- 86
Repurchase of unvested common
stock............................. -- -- -- (94)
Notes receivable from
stockholder....................... -- -- -- 8
Comprehensive income (loss)........ -- -- -- --
Net loss.......................... (23,570) -- (23,570) (23,570)
Foreign currency translation
adjustment...................... 4 4 -- 4
--------
Comprehensive loss................. $(23,566) -- -- --
======== ---- -------- --------
Balance at December 31, 1999....... $(33) $(41,672) $ 73,206
---- -------- --------
</TABLE>
See accompanying notes.
F-6
<PAGE> 79
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Broadbase Software, Inc. (the "Company") was incorporated on November 28,
1995 and develops and markets software that integrates and analyzes customer
information from Internet and traditional business channels, enabling businesses
to improve their customer acquisition, retention, and profitability.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), as amended by Statement of Position 98-4, "Deferral
of the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). The Company
derives revenue from the sale of software licenses, post-contract support
("maintenance"), and other professional services. Maintenance includes telephone
technical support, bug fixes and rights to upgrades and enhancements on a
when-and-if available basis. Professional services include training and basic
post-implementation consulting to meet specific customer needs.
Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, no significant company
obligations with regard to installation or implementation of the software
remain, the fee is fixed or determinable and collectibility is probable. Revenue
on arrangements with customers that are not the ultimate end users (primarily
resellers) is recognized upon receipt of a reseller report of the sale and the
Company's shipment of the licensed software. Advance payments are recorded as
deferred revenue until the products are shipped, services are delivered or
obligations are met. The Company's products do not require significant
customization.
Revenue related to maintenance is recognized on a straight-line basis over
the period maintenance is provided and revenue allocable to professional
services is recognized as the services are performed.
In December 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions" ("SOP 98-9"). SOP
98-9 requires use of the "residual method" for recognition of revenue when
vendor-specific objective evidence exists for undelivered elements but
F-7
<PAGE> 80
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
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 adoption of SOP 98-9 is not expected
to have a material impact on the Company's 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 that subject the Company to concentrations of credit
risk primarily consist of cash, cash equivalents and accounts receivable. The
Company maintains its cash and cash equivalents principally in domestic
financial institutions of high credit standing. The Company's accounts
receivables are derived primarily from sales of software products and services.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral.
A limited number of customers has accounted for a substantial portion of
the Company's revenues. The Company had no revenue for the year ended December
31, 1997. One customer accounted for 18% and 11%, of total revenue for the year
ended December 31, 1998 and 1999, respectively. Another customer accounted for
10% of total revenue for the year ended December 31, 1998. Sales of the
Company's products will vary as a result of fluctuations in market demand for
such products and technology. Further, the markets in which the Company competes
are characterized by rapid technological change and intense competition.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of money market funds. The Company considers all
highly liquid investments with an original maturity date of three months or less
to be cash equivalents. The fair value, based on quoted market prices, of the
cash equivalents is approximately equal to their carrying value at December 31,
1998 and 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
F-8
<PAGE> 81
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
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 1999, were approximately $0,
$57,000 and $187,000, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned foreign subsidiaries
are translated from their functional currencies at exchange rates in effect at
the balance sheet date, and revenues and expenses are translated at average
exchange rates prevailing during the year. Resulting translation adjustments are
reflected as a separate component of stockholders' 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. 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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net loss................................................ $(5,487) $(11,343) $(23,570)
======= ======== ========
Basic and diluted shares:
Weighted-average shares of common stock outstanding..... 2,689 2,615 7,079
Less weighted-average shares subject to repurchase...... (1,802) (1,334) (783)
------- -------- --------
Weighted-average shares of common stock outstanding used
in computing basic and diluted net loss per share..... 887 1,281 6,296
------- -------- --------
Basic and diluted net loss per share.................... $ (6.19) $ (8.85) $ (3.74)
======= ======== ========
</TABLE>
If the Company had reported net income, diluted net income per share would
have included 661,914, 1,278,889 and 3,195,489 common equivalent shares related
to outstanding options and warrants to purchase common stock not included above
at December 31, 1997, 1998 and 1999, respectively. The common equivalent shares
from options and warrants would be determined on a weighted-average basis using
the treasury stock method.
F-9
<PAGE> 82
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
SEGMENT INFORMATION
The Company operates solely in one segment, the development and marketing
of customer-centric analytic software products. The Company did not have revenue
in the year ended December 31, 1997. For the years ended December 31, 1998 and
1999, revenue from sales to customers located outside of the United States was
approximately $175,000, and $2,419,000 respectively. This revenue was solely
from customers in Japan in 1998 and also included revenue of $611,000 from
customers in Europe and Canada in 1999.
PROPERTY AND EQUIPMENT
The Company records property and equipment at cost and calculates
depreciation using the straight-line method over the estimated useful lives of
the assets, generally three to five years. Equipment held under capital leases
is amortized on a straight-line basis over the shorter of the lease term or the
lives of the respective assets, generally three to five years.
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -------
(IN THOUSANDS)
<S> <C> <C>
Computer hardware and software.......................... $1,407 $ 3,232
Office furniture and fixtures........................... 881 1,234
------ -------
2,288 4,466
Less accumulated depreciation and amortization.......... (678) (1,598)
------ -------
$1,610 $ 2,868
====== =======
</TABLE>
As of December 31, 1999, property and equipment include amounts held under
capital leases of $63,941 and related accumulated amortization of $50,120.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires
companies to capitalize certain qualifying computer software costs that are
incurred during the application development stage and amortize them over the
software's estimated useful life. The Company adopted SOP 98-1 effective January
1, 1999. The adoption of SOP 98-1 did not have a material affect on the
Company's consolidated financial position, results of operations, or cash flows.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 is effective beginning on January 1, 1999,
and requires that start-up costs, capitalized prior to January 1, 1999, be
written off and any future start-up costs be expensed as incurred. The adoption
of SOP 98-5 did not have a material impact on the Company's financial position,
results of operations, or cash flows.
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. The Company will be required to
F-10
<PAGE> 83
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
adopt FAS 133 for its year ending December 31, 2001. However, because the
Company does not currently 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,
---------------
1998 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Notes payable.............................................. $ 878 $ 415
Bank line of credit........................................ 1,000 667
------ ------
1,878 1,082
Less current portion....................................... (768) (749)
------ ------
Noncurrent portion......................................... $1,110 $ 333
====== ======
</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. The full principal amount of notes payable outstanding,
$415,000, is due in 2000. The carrying value of these note obligations
approximates their fair value.
In connection with the issuance of the notes, the Company issued warrants
to purchase 12,537 and 24,227 shares of Series A and Series B preferred stock at
prices of $1.67 and $2.68 per share, respectively. At the date of grant, the
value ascribed to these warrants was immaterial for financial statement
purposes. In November 1999, the warrants were exercised in full.
In July 1998, the Company entered into a loan and security agreement with a
financial institution. The agreement provides for an accounts receivable line of
credit not to exceed $2,000,000 and an equipment line of credit not to exceed
$1,000,000. Borrowings under the accounts receivable line of credit bear
interest at the institution's prime lending rate (8.5% at December 31, 1999),
and any borrowings under the equipment line of credit bear interest at the
institution's prime lending rate plus 0.5% (9.0% at December 31, 1999). All
borrowings under this agreement are secured by certain assets of the Company. As
of December 31, 1999, the $2,000,000 line of credit expired, and $1,000,000, the
full amount available, had been borrowed under the equipment line of credit of
which $333,000 had been repaid during 1999. The equipment line of credit
borrowings are due in 36 equal monthly installments of principal, plus accrued
interest, beginning in January 1999 and ending in December 2001. The carrying
value of borrowings under the equipment line of credit approximates their fair
value. The agreement also includes terms requiring satisfaction of certain
financial ratios, and a minimum tangible net worth requirement, and restricts
the Company from paying cash dividends. The Company was in compliance with these
financial covenants at December 31, 1999.
3. COMMITMENTS
LEASES
The Company leases its principal office under a noncancelable operating
lease agreement that expires in July 2002.
F-11
<PAGE> 84
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
On December 23, 1999 the Company entered into a seven year noncancelable
operating lease agreement commencing May 1, 2000 for a new corporate
headquarters. In accordance with the terms of this agreement, the Company has
put $580,000 into a restricted cash account as a security deposit.
The gross rental payments under all operating leases were approximately
$114,000, $230,000 and $1,014,000 for the years ended December 31, 1997, 1998,
and 1999, respectively. Rental expense, net of reimbursements from sublessees,
was approximately $114,000, $73,000 and $679,000 in 1997, 1998 and 1999,
respectively.
As of December 31, 1999, minimum lease payments under all noncancelable
lease agreements were as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
(IN THOUSANDS)
<S> <C>
Year ending December 31,
2000...................................................... $ 1,458
2001...................................................... 1,942
2002...................................................... 1,666
2003...................................................... 1,286
2004 and thereafter....................................... 4,664
-------
Total minimum lease payments................................ $11,016
=======
</TABLE>
Included in the above minimum operating lease payments are future
reimbursements from sublessees under noncancellable subleases, which amount to
$96,000 in 2000, and $0 for all other periods.
4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock consisted 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 was convertible at any
time into common stock at the exchange rate in effect at the time of conversion,
currently one-for-one, and was subject to appropriate adjustment for common
stock splits, stock dividends, and similar transactions. Conversion was
automatic upon the closing of an initial public offering of common stock in
which the aggregate gross proceeds to the Company were at least $10,000,000 and
the offering price is at least $10.00 per share.
F-12
<PAGE> 85
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Each holder of Series A, B, C and D preferred stock was entitled to the
number of votes equal to the number of shares of common stock into which such
preferred stock was convertible.
Each holder of preferred stock was 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 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 were 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.
SERIES E FINANCING
In June 1999, the Company issued 2,188,812 shares of its Series E
convertible preferred stock at $9.13 per share in exchange for net proceeds of
$20.0 million. The conversion rights, preferences and privileges of the Series E
shares were generally equivalent to those of the preceding A, B, C and D
preferred stock. Conversion of shares of Series E preferred stock were automatic
upon the closing of an initial public offering of common stock in which
aggregate gross proceeds to the Company were at least $10,000,000, and the
offering price was at least $10.00 per share.
Each holder of Series E preferred stock was entitled to receive, when and
as declared by the Board of Directors, noncumulative dividends, at the annual
rate of $0.73 per share.
INITIAL PUBLIC OFFERING
On September 21, 1999, the Company consummated its initial public offering
of common stock, in which it sold 4,000,000 shares of its common stock at a
price of $14.00 per share, raising $56.0 million in gross proceeds. Offering
proceeds to Broadbase, net of approximately $3.9 million in aggregate
underwriters discounts and commissions and $2.1 million in related offering
expenses, were approximately $50.0 million. Upon closing of the initial public
offering, all convertible debentures were converted into shares of Series D
convertible preferred stock and each outstanding share of the Company's Series
A, Series B, Series C, Series D, and Series E convertible preferred stock was
converted into one share of common stock, resulting in the issuance of 9,976,882
shares of common stock. In October, 1999, an additional 600,000 shares of common
stock were sold by the Company at a price of $14.00 per share pursuant to the
exercise of the underwriters' overallotment option, generating additional net
proceeds to the Company of approximately $7.8 million.
PRIVATE PLACEMENT
In connection with its Series E Preferred private financing in June 1999,
the Company granted rights to purchase up to 238,306 shares in its initial
public offering to many of these Series E investors, subject to compliance with
applicable laws, including federal securities laws. Some of these investors
accepted this offer and purchased 45,063 shares of the Company's common stock
resulting in net proceeds to the Company of approximately $619,000. The Company
believes that it has fulfilled its obligations under the agreement, but it is
possible that the investors who did not accept this offer could claim that the
Company breached the agreement by failing to sell them the shares in the initial
public offering. If they were successful in their claims, the Company could be
obligated to pay
F-13
<PAGE> 86
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
damages, which could equal the amount of any increase in the market value of the
Company's common stock.
SHARES SUBJECT TO REPURCHASE
In November 1995, 1,282,500 shares of common stock were issued to the
Company's founder at $0.002 per share in exchange for cash. These shares are
subject to certain transfer restrictions. These shares are also subject to
repurchase at the issuance price upon the occurrence of certain events,
including termination of employment. The Company's right of repurchase expires
over four years. At December 31, 1998 and 1999, 264,516 and 0 shares,
respectively, remained subject to repurchase.
Shares subject to repurchase pursuant to the exercise of stock options by
the Company totaled 890,393, 810,486 and 449,884 at December 31, 1997, 1998, and
1999, respectively.
STOCK OPTION PLANS
During 1996, the Company adopted the 1996 Equity Incentive Plan (the
"Plan"). Under the Plan, up to 4,530,000 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. This plan terminated in September 1999.
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"). A total of
3,500,000 shares of common stock were initially reserved for issuance under the
1999 Incentive Plan. Commencing on January 1, 2000, annual increases equal to 5%
of the outstanding shares on the preceding December 31 have been approved. The
number of shares authorized for issuance under the 1999 Incentive Plan was
increased to include shares reserved under the 1996 Equity Incentive Plan that
had not been issued and were not subject to outstanding options as of the date
of termination of the 1996 plan, and shares subject to options which had become
unexercisable. The types of awards that may be made under the 1999 Incentive
Plan are options to purchase shares of common stock, restricted stock and stock
bonuses. The exercise price for incentive stock options may not be less than
100% of the fair market value of the Company's common stock on the date of grant
(85% for nonstatutory options). In the event of a change in control of the
Company, an option or award under the 1999 Incentive Plan may be assumed or
substituted by the successor corporation. The Company's compensation committee
may also accelerate the vesting of awards upon a change of control transaction.
F-14
<PAGE> 87
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
A summary of activity under stock option plans is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
SHARES AVAILABLE WEIGHTED-AVERAGE
FOR GRANT NUMBER OF SHARES EXERCISE PRICE
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996................. 1,572,775 48,000 $ 0.03
Granted.................................... (694,000) 694,000 0.25
Exercised.................................. -- (7,350) 0.22
Canceled................................... 109,500 (109,500) 0.20
Repurchased................................ 206,250 -- 0.03
---------- ---------- ------
Balance at December 31, 1997................. 1,194,525 625,150 0.24
Authorized................................. 1,000,000 -- --
Granted.................................... (1,254,110) 1,254,110 0.47
Exercised.................................. -- (293,889) 0.33
Canceled................................... 343,246 (343,246) 0.43
Repurchased................................ 79,414 -- 0.03
---------- ---------- ------
Balance at December 31, 1998................. 1,363,075 1,242,125 0.40
Authorized................................. 4,000,000 -- --
Granted.................................... (3,397,265) 3,397,265 9.74
Exercised.................................. -- (791,370) 1.66
Canceled................................... 652,531 (652,531) 0.79
Repurchased................................ 146,354 -- 0.08
---------- ---------- ------
Balance at December 31, 1999................. 2,764,695 3,195,489 $10.12
========== ========== ======
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1999 (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------- ---------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICE AS OF 12/31/1999 LIFE PRICE AS OF 12/31/1999 PRICE
- ----------------------- ---------------- ----------- -------- ---------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.03 - $ 0.25 222 7.48 $ 0.24 78 $ 0.24
$ 0.55 - $ 0.75 1,530 9.10 0.69 592 0.69
$ 4.56 - $14.00 567 9.62 5.06 251 5.69
$26.94 - $26.94 751 9.78 26.94 29 26.94
$64.88 - $64.88 125 9.88 64.88 2 64.88
----- ---- ------ --- ------
$ 0.03 - $64.88 3,195 9.27 $10.12 952 $ 2.88
===== ==== ====== === ======
</TABLE>
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"). A total
of 500,000 shares of common stock were 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.
F-15
<PAGE> 88
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The 1999 Purchase Plan permits eligible employees to acquire shares of the
Company's common stock through periodic payroll deductions of up to 10% of their
cash compensation, subject to certain maximum purchase limitations. Each
offering period will have a maximum duration of 24 months and will consist of
four six-month purchase periods. The price at which the common stock may be
purchased is 85% of the lesser of the fair market value of the Company's common
stock on the first day of the applicable offering period or the last day of each
respective purchase period. This initial offering period began on September 22,
1999. At December 31, 1999, 500,000 shares have been reserved for and remain
available for future issuance under the Plan.
STOCK BASED COMPENSATION
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. This information is required to be determined as if
the Company had accounted for its employee stock options (including shares
issued under the 1999 Purchase Plan, collectively called "options") granted
subsequent to June 30, 1995 under the fair value method of that statement. The
fair value of options granted during 1997 and 1998 reported below, has been
estimated at the date of grant using the minimum value method option pricing
model. The fair value of options granted in 1999, reported below has been
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions:
<TABLE>
<CAPTION>
EMPLOYEE STOCK
EMPLOYEE PURCHASE
STOCK OPTIONS PLAN SHARES
-------------------- --------------
1997 1998 1999 1999
---- ---- ---- --------------
<S> <C> <C> <C> <C>
Expected life (in years).............................. 4 4 4 1.75
Risk-free interest rate............................... 6.0% 6.0% 6.0% 6.0%
Volatility............................................ N/A N/A 0.60 0.60
Dividend yield........................................ 0% 0% 0% 0%
</TABLE>
The weighted average fair value of options granted during the year ended
December 31, 1997 with an exercise price equal to fair value of the company's
stock on the date of grant was $0.06.
The following table summarizes information about weighted average fair
values and weighted average exercise prices of options granted in the years
ended December 31, 1998 and 1999.
<TABLE>
<CAPTION>
1998 1999
----------------------- -----------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE WEIGHTED AVERAGE
AVERAGE EXERCISE AVERAGE EXERCISE
FAIR VALUE PRICE FAIR VALUE PRICE
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Exercise price equals fair value............ $0.10 $0.26 $16.34 $31.72
Deemed fair value exceeds exercise price.... $2.86 $0.57 $ 6.98 $ 1.64
</TABLE>
F-16
<PAGE> 89
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
--------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Pro forma net loss........................................ $(5,496) $(11,702) $(54,405)
======= ======== ========
Pro forma basic and diluted net loss per share............ $ (6.20) $ (9.14) $ (8.64)
======= ======== ========
</TABLE>
Pro forma net loss represents the difference between compensation expense
recognized under APB 25 and the related expense using the fair value method of
SFAS No. 123 taking into account any additional tax effects of applying SFAS No.
123. The effects on pro forma disclosures of applying SFAS No. 123 for all years
presented are not likely to be representative of the effects on pro forma
disclosures of future years.
In connection with the grant of certain options to employees during the
years ended December 31, 1998 and 1999, the Company recorded deferred stock
compensation of approximately $3,471,000 and $12,775,000, 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 stockholders' equity and are being amortized on a graded vesting method. The
compensation expense of $1,133,000 and $6,403,000 during 1998 and 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 1999, the Company has reserved common shares for
issuance as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Stock options:
Outstanding............................................. 1,242,125 3,195,489
Available for grant..................................... 1,363,075 2,764,695
Employee Stock Purchase Plan............................ -- 500,000
---------- ----------
2,605,200 6,460,184
========== ==========
</TABLE>
5. 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-17
<PAGE> 90
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. INCOME TAXES
The Company's income tax provision (benefit) differs from the income tax
provision (benefit) determined by applying the U.S. federal statutory rate to
the net loss as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax provision (benefit) at U.S. statutory rate.............. $(1,866) $(3,857) $(8,143)
Amortization of Deferred Compensation....................... -- -- 2,177
Valuation allowance for deferred tax assets................. 1,866 3,857 5,966
------- ------- -------
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,
-------------------
1998 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 5,800 $ 10,700
Tax credit carryforwards.................................... 400 700
Deferred revenue............................................ 214 900
Capitalized research and development........................ -- 300
Other accruals and reserves not deductible for tax
purposes.................................................. 86 600
------- --------
Total gross deferred tax assets............................. 6,500 13,200
Less valuation allowance.................................... (6,500) (13,200)
------- --------
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, 1998 and
1999 has been established to reflect these uncertainties. The valuation
allowance increased by $3,600,000 and $6,700,000 during the years ended December
31, 1998 and 1999, respectively.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $29,100,000 and $13,600,000, respectively.
The Company also had federal and state research and development tax credit
carryforwards of approximately $500,000 and $300,000, 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 losses and
tax credit carryforwards before utilization.
F-18
<PAGE> 91
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. RELATED PARTY TRANSACTIONS
In April 1998, the Company provided a $400,000 loan to an officer, who is
also a stockholder, in exchange for a nonrecourse promissory note which is
secured by security interest in common stock. The loan is due on the earlier of,
April 2001, or ten days after the officer sells any common stock, and bears
interest annually at 5.51%.
8. LEGAL PROCEEDINGS
On July 21, 1999, Timeline, Inc. filed a complaint against the Company in
the United States District Court for the Western Division of Washington,
alleging infringement by the Company of U.S. Patent No. 5,802,511 held by
Timeline. The complaint alleged that the Company directly and indirectly
infringed Timeline's patent claims by making, using, selling and offering to
sell software products, both alone and in combination with third party software
products, and further alleged that the Company induced infringement of the
Timeline patent claims. Timeline requested permanent injunctions prohibiting the
Company from directly or indirectly infringing the Timeline patent, and sought
damages, exemplary damages, costs and attorneys' fees. Timeline further
disclosed to the Company patent claims of a related pending patent application
that Timeline expected to be issued and to be added to its claims. Based on the
Company's preliminary investigation of this matter, it did not believe its
products infringed any valid claims of the Timeline patent or of the pending
patent application, and that it had other meritorious defenses to all claims
made by Timeline. However, rather than pursue a course of protracted litigation,
the Company, on August 30, 1999, settled this matter by paying Timeline $250,000
and agreeing to issue Timeline 40,000 shares of its common stock for a license
to all of Timeline's patents and pending patent applications and a release of
any claims of past infringement by its products of any of Timeline's patents and
pending patent applications. The cost of the license is being amortized by the
Company over its estimated useful life of five years. All of Timeline's claims
against the Company have been dismissed with prejudice.
9. PENDING ACQUISITION OF RUBRIC, INC.
On December 9, 1999 the Company entered into a definitive agreement to
acquire all the outstanding capital stock of Rubric, Inc. ("Rubric") in exchange
for approximately 2.9 million shares of its common stock and the issuance of
options and warrants to purchase an additional approximately 700,000 shares of
Broadbase common stock, in a transaction to be accounted for as a purchase
business combination. Consummation of the transaction, which is subject to
approval of the Rubric stockholders and regulatory approvals, is expected in
February 2000.
In connection with signing of the definitive agreement, the Company has as
of December 31, 1999, loaned Rubric $1,000,000 under a note which is payable on
June 9, 2000, or immediately if the merger between Broadbase and Rubric is not
consummated. The note bears interest at a fixed rate per annum based on the
"Prime Rate" reported in the Wall Street Journal in effect on December 9, 1999.
The purpose of the loan is to fund Rubric's working capital requirements until
closing of the merger which is expected no later than February 2000. This amount
has been expensed in full on the accompanying statement of operations as a
direct expense of the merger.
F-19
<PAGE> 92
BROADBASE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
10. SUBSEQUENT EVENT (UNAUDITED)
DEFERRED COMPENSATION ON STOCK OPTION GRANTS
On January 4, 2000, in connection with the hiring of two new officers, the
Company granted an aggregate of 300,000 options to purchase shares of Broadbase
common stock at an exercise price of $54.00 per share. As a result of these
option grants, the Company will record approximately $12,000,000 of deferred
stock compensation, computed as the difference between the options' exercise
price and the fair market value of the Company's stock on the date of grant.
This amount will be recorded as a reduction of stockholder's equity and will be
amortized over the options' vesting term, four years, on a graded vesting
method.
F-20
<PAGE> 93
BROADBASE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
for Broadbase Software, Inc. ("Broadbase") consist of the Unaudited Pro Forma
Combined Condensed Statement of Operations for the year ended December 31, 1999
and the Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31,
1999. These pro forma financial statements give effect to Broadbase's pending
acquisition of Rubric, Inc. ("Rubric") in a business combination to be accounted
for as a purchase, which is expected to be consummated in February 2000. In
exchange for the acquisition of all of Rubric's outstanding capital stock,
Broadbase will issue Rubric stockholders approximately 2.9 million shares of its
common stock and reserve approximately 700,000 additional shares for issuance
upon the exercise of stock options and warrants of Rubric which will be
converted into options and warrants to purchase shares of Broadbase stock.
The Unaudited Pro Forma Combined Condensed Statement of Operations combines
Broadbase's historical results of operations for the year ended December 31,
1999 with Rubric's historical results for the year ended December 31, 1999. The
Unaudited Pro Forma Combined Condensed Balance Sheet combines Broadbase's
historical balance sheet and Rubric's historical balance sheet at December 31,
1999. The pro forma financial statements are not necessarily indicative of what
the actual operating results or financial position would have been for the
combined company had the transaction taken place on January 1, 1999, and do not
purport to indicate the results of future operations.
BASIS OF PRESENTATION
The unaudited pro forma combined condensed financial statements reflect the
Rubric acquisition accounted for using the purchase method of accounting and
have been prepared on the basis of assumptions described in the notes thereto
including assumptions related to the allocation of the amount of consideration
paid to the assets and liabilities of Rubric based upon preliminary estimates of
their fair value. The actual allocation of the consideration to be paid may
differ from those assumptions reflected in the pro forma financial statements
after valuations and other procedures to be performed after the closing of the
Rubric acquisition are completed.
In connection with the acquisition of Rubric, Broadbase expects to record a
charge to operations related to in-process research and development, currently
estimated to be $10.1 million. The Unaudited Pro Forma Combined Condensed
Balance Sheet includes the effect of this charge but the Unaudited Pro Forma
Combined Condensed Statement of Operations does not reflect this charge because
of its nonrecurring nature. The charge related to in-process research and
development will be reflected in Broadbase's consolidated financial statements
when the Rubric acquisition is consummated, which is expected to occur in
February 2000. In addition, Broadbase expects to incur costs of integration and
other merger-related costs estimated at $3.5 million, of which $1 million were
included in the results of operation of Broadbase for the year ended December
31, 1999. The pro forma financial statements do not include the estimated
remaining costs of integration of up to $2.5 million, as these costs will affect
future operations and do not qualify as liabilities in connection with a
purchase business combination under EITF 95-3, "Recognition of Liabilities in
Connection with A Purchase Business Combination".
The pro forma financial statements should be read in conjunction with the
related notes included in this document and the audited consolidated financial
statements and notes of Broadbase and the audited financial statements and notes
of Rubric included elsewhere in this prospectus.
F-21
<PAGE> 94
BROADBASE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
BROADBASE RUBRIC PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 76,642 $ 210 $ 76,852
Accounts receivable net............ 2,712 1,523 4,235
Prepaid expenses and other current
assets........................... 1,239 627 $ (289)(5) 1,577
-------- -------- -------- ---------
Total current assets............. 80,593 2,360 (289) 82,664
Property, plant and equipment......... 2,868 1,437 -- 4,305
Restricted cash....................... 633 -- -- 633
Intangibles and goodwill.............. -- -- 356,389(10) 356,389
Other assets.......................... 676 112 -- 788
-------- -------- -------- ---------
Total assets..................... $ 84,770 $ 3,909 $356,100 $ 444,779
======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 559 $ 619 $ -- $ 1,178
Accrued compensation............... 2,919 -- 2,919
Accrued expenses................... 2,341 1,383 4,500(1) 8,224
Current portion of capital lease
obligation....................... -- 67 -- 67
Current portion of bank line of
credit and notes payable......... 749 1,338 (1,000)(6) 1,087
Deferred revenue................... 4,663 997 (997)(9) 4,663
-------- -------- -------- ---------
Total current liabilities........ 11,231 4,404 2,503 18,138
Bank line of credit and notes
payable............................ 333 85 -- 418
Capital lease obligation, net of
current portion.................... -- 130 -- 130
-------- -------- -------- ---------
Total liabilities................ 11,564 4,619 2,503 18,686
Stockholders' equity:
Preferred stock....................... -- 13,765 (13,765)(3) --
Common stock.......................... 17 5 (2)(2) 20
Additional paid-in capital............ 124,297 30,450 332,492(2) 487,239
Deferred stock compensation........... (8,710) (15,669) 15,669(11) (8,710)
Notes receivable from stockholders.... (693) -- -- (693)
Accumulated other comprehensive
loss............................... (33) -- -- (33)
Accumulated deficit................... (41,672) (29,261) 19,203(7,12) (51,730)
-------- -------- -------- ---------
Total stockholders' equity....... 73,206 (710) 353,597 426,093
-------- -------- -------- ---------
Total liabilities and
stockholders'
equity........................ $ 84,770 $ 3,909 $356,100 $ 444,779
======== ======== ======== =========
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
F-22
<PAGE> 95
BROADBASE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BROADBASE RUBRIC PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue:
License............................... $ 7,689 $ 1,868 $ 9,557
Maintenance and professional
services........................... 2,753 1,562 4,315
-------- -------- -------- ---------
Total net revenue.................. 10,442 3,430 13,872
Cost of revenue:
License............................... 1,437 278 1,715
Maintenance and professional
services........................... 2,610 2,089 $ (566)(4) 4,133
Amortization of core and developed
technology......................... -- -- 1,587(8) 1,587
-------- -------- -------- ---------
Total cost of revenue.............. 4,047 2,367 1,021 7,435
-------- -------- -------- ---------
Gross margin.......................... 6,395 1,063 (1,021) 6,437
Operating expenses:
Sales and marketing................... 15,092 7,677 (2,628)(4) 20,141
Research and development.............. 6,024 5,940 (2,096)(4) 9,868
General and administrative............ 2,011 9,256 (6,979)(4) 4,288
Amortization of intangibles and
goodwill........................... -- -- 70,419(8) 70,419
Amortization of deferred stock
compensation....................... 6,403 -- 6,403
Merger expenses....................... 1,000 -- 1,000
-------- -------- -------- ---------
Total operating expenses................ 30,530 22,873 58,716 112,119
-------- -------- -------- ---------
Loss from operations.................... (24,135) (21,810) (59,737) (105,682)
Interest income......................... 1,454 132 1,586
Interest expense........................ (889) (348) (1,237)
-------- -------- -------- ---------
Net loss................................ $(23,570) $(22,026) $(59,737) $(105,333)
======== ======== ======== =========
Basic and diluted net loss per share.... $ (3.74) $ (5.75) $ (11.45)
======== ======== =========
Weighted average shares used in
computing basic and diluted net loss
per share............................. 6,296 3,832 (932) 9,196
======== ======== ======== =========
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
F-23
<PAGE> 96
BROADBASE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
1. BASIS OF PRO FORMA PRESENTATION
The pro forma financial statements give effect to Broadbase's pending
acquisition of Rubric, in a business combination to be accounted for as a
purchase, which is expected to be consummated in February 2000. Upon the
effective date of the acquisition, all the outstanding common and preferred
stock of Rubric will be converted into shares of Broadbase common stock, and all
outstanding stock options and warrants to purchase shares of Rubric common stock
will be converted into options and warrants to purchase shares of Broadbase
common stock. The aggregate Broadbase shares and options/warrants to be issued
to Rubric stockholders, option holders, and warrant holders will equal 3.6
million.
The pro forma financial statements have been prepared on the basis of
assumptions described in the following notes and include assumptions relating to
the allocation of the consideration paid for the assets and liabilities of
Rubric based on preliminary estimates of their fair value. The actual allocation
of such consideration may differ from that reflected in the pro forma financial
statements after valuations and other procedures to be performed after the
closing of the Rubric acquisition have been completed. Broadbase does not expect
that the final allocation of the purchase price will differ materially from the
preliminary allocation. In the opinion of Broadbase's management, all
adjustments necessary to present fairly such pro forma financial statements have
been made based on the proposed terms and structure of the Rubric acquisition.
The Unaudited Pro Forma Combined Condensed Statement of Operations for the year
ended December 31, 1999 gives effect to this transaction as if it had taken
place on January 1, 1999. The Unaudited Pro Forma Combined Condensed Balance
Sheet as of December 31, 1999 gives effect to the transaction as if it had taken
place on December 31, 1999.
The pro forma financial statements are not necessarily indicative of what
the actual financial results would have been had the transaction taken place on
January 1, 1999 and do not purport to indicate the results of future operations.
F-24
<PAGE> 97
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
Below is a table of the estimated acquisition consideration, purchase price
allocation and annual amortization of the intangible assets and goodwill
acquired (in thousands):
<TABLE>
<CAPTION>
ANNUAL
AMORTIZATION AMORTIZATION
LIFE OF INTANGIBLES
------------ --------------
<S> <C> <C> <C>
Estimated acquisition consideration:
Estimated value of securities to be issued:
Common stock.................................... $293,269
Stock options and warrants...................... 69,677
Acquisition costs.................................. 4,500
--------
Total estimated acquisition consideration..... $367,446
========
Purchase price allocation:
Tangible net assets acquired....................... $ 998
Intangible assets acquired:
Developed technology............................ 282 1 year $ 282
In-process research and development............. 10,058
Core technology................................. 6,523 5 years 1,305
Assembled workforce............................. 1,738 3 years 579
Tradename....................................... 773 5 years 155
OEM distribution contract....................... 2,027 3 years 676
Goodwill........................................ 345,047 5 years 69,009
--------
Total......................................... $367,446
========
</TABLE>
Broadbase anticipates issuing 2.9 million shares of its common stock,
valued at $100.83 per share, the average market price per share of Broadbase
common stock in a range of seven trading days before and after the announcement
date (December 9, 1999) of the acquisition. In addition, Broadbase anticipates
issuing approximately 700,000 options and warrants to purchase shares of its
common stock in exchange for all options and warrants to purchase shares of
Rubric common stock. The value of the options and warrants to be issued by
Broadbase was determined by estimating their fair value as of December 9, 1999
using the Black-Scholes option pricing model with the following weighted average
assumptions:
- risk free interest rate of 5.0%
- dividend yield of 0.0%
- expected life of 0.5 years for vested options and warrants
- expected life of 3.4 years for unvested options and warrants
- volatility factor for the expected market price of Broadbase common stock
of 0.60.
Tangible assets of Rubric acquired principally include cash and cash
equivalents, accounts receivable, fixed assets and other assets. Liabilities of
Rubric assumed principally include accounts payable, accrued liabilities,
capital lease obligations, and long term debt.
To determine the value of the developed technology, the expected future
cash flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the developed
technology, existing and future markets, and assessments of the stage of the
technology's life cycle. The analysis resulted in a valuation for developed
technology that had
F-25
<PAGE> 98
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
reached technological feasibility and therefore was capitalizable. The developed
technology will be amortized on a straight line basis over one year.
The value allocated to projects identified as in-process research and
development of the Rubric eMarketing Automation ("eMA") product release version
3.0 and 4.0 will be charged to expense during the first quarter of 2000 but has
not been reflected in the Broadbase Unaudited Pro Forma Combined Condensed
Statement of Operations as it is non-recurring in nature.
The write-off will be necessary because the acquired in-process research
and development has not yet reached technological feasibility and has no future
alternative uses. These products under development may not achieve commercial
viability. The nature of the efforts required to develop the purchased
in-process research and development into commercially viable products
principally relate to the completion of all planning, designing, prototyping,
verification and testing activities that are necessary to establish that the
product can be produced to meet its design specifications, including functions,
features and technical performance requirements.
The value of the purchased in-process research and development was
determined by estimating the projected net cash flows related to the products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products. These cash flows
were then discounted back to their net present value. The projected net cash
flows from the projects were based on management's estimates of revenues and
operating profits related to the projects.
To determine the revenue attributable to the in-process technology,
consideration was also given to the contribution of the existing technology
which will be utilized in the development of the in-process technology, referred
to as "core technology." The value allocated to the core technology was
determined by assigning a "leverage factor" of 25% to the estimated projected
net cash flows related to the products under development after analysis of both
the effort and work completed as well as the expected value of the in-process
technology. The projected net cash flows from the products assigned to core
technology using the leverage factor were then discounted back to their net
present value. The core technology is being amortized over its estimated useful
life of five years.
The value allocated to the assembled workforce is attributable to the
Rubric workforce in place after the acquisition which eliminates the need to
hire new replacement employees. The value was determined by estimating the cost
involved in assembling a new workforce including costs of salaries, benefits,
training and recruiting. The value of the assembled workforce will be amortized
on a straight-line basis over three years.
The value of the Rubric tradename was determined by considering, among
other factors, the assumption that in lieu of ownership of a the tradename, a
third party would be willing to pay a royalty in order to exploit the related
benefits of such tradename. Estimated royalties to be received over the next
five years were then discounted to their present value using an appropriate rate
of return.
The value of the OEM distribution contract was determined by computing the
present value of the estimated the net cash flows to be generated over the
remaining three year life of the agreement.
Goodwill is determined based on the residual difference between the amount
of consideration to be paid and the values assigned to identified tangible and
intangible assets. The goodwill will be amortized on a straight line basis over
five years.
F-26
<PAGE> 99
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
2. PRO FORMA NET LOSS PER SHARE
Pro forma basic and diluted net loss per share are based on the weighted
average number of shares of Broadbase common stock outstanding during the period
and the number of shares of Broadbase common stock to be issued in connection
with the Rubric acquisition. The following options have not been included in the
computation of pro forma diluted net loss per share because their effect would
be antidilutive.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
POTENTIAL COMMON SECURITIES 1999
--------------------------- --------------
(IN THOUSANDS)
<S> <C>
Broadbase options outstanding............................... 3,195
Options and warrants to be issued in connection with the
Rubric acquisition.......................................... 700
-----
3,895
=====
</TABLE>
3. PRO FORMA ADJUSTMENTS
1. To reflect the accrual of direct acquisition costs arising from the
Rubric acquisition, including legal, banking, and accounting fees and employee
relocation costs ($4.5 million).
2. To eliminate Rubric's outstanding common stock ($5.4 million) and
reflect the issuance of approximately 2.9 million shares of Broadbase' common
stock and approximately 700,000 options and warrants to purchase Broadbase
common stock in connection with the acquisition ($362.9 million).
3. To eliminate Rubric's outstanding convertible preferred stock ($13.8
million).
4. To eliminate Rubric's amortization of deferred stock compensation
expense ($12,269,000 in total, including $566,000 in cost of revenue, $2,628,000
in research and development, $2,096,000 in sales and marketing, and $6,979,000
in general and administrative expenses).
5. To eliminate deferred financing charges ($289,000) recorded on Rubric's
financial statements in connection with the issuance of warrants to purchase
Rubric common stock.
6. To eliminate intercompany note payable ($1,000,000) to Broadbase
recorded on Rubric's financial statements.
7. To eliminate Rubric's accumulated deficit ($29.34 million).
8. To record the amortization of acquired intangible assets and goodwill
($72.0 million).
9. To eliminate deferred revenue recorded on Rubric's financial statements
($997,000).
10. To record acquired intangible assets and goodwill.
11. To eliminate deferred stock compensation recorded on Rubric's financial
statements.
12. To record the in-process research and development charge ($10.1
million).
F-27
<PAGE> 100
RUBRIC, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-29
Balance Sheets.............................................. F-30
Statements of Operations.................................... F-31
Statements of Stockholders' Equity (Deficit)................ F-32
Statements of Cash Flows.................................... F-33
Notes to Financial Statements............................... F-34
</TABLE>
F-28
<PAGE> 101
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Rubric, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Rubric, Inc. at
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended and for the period from inception, September 24, 1997,
through December 31, 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses from operations
since inception and has a net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Notes 1 and 11. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 12, 2000
F-29
<PAGE> 102
RUBRIC, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 7,597,417 $ 210,114
Accounts receivable....................................... 299,428 1,522,824
Deferred financing cost, net.............................. -- 289,038
Prepaid expenses and other current assets................. 344,735 338,494
------------ -----------
Total current assets.............................. 8,241,580 2,360,470
------------ -----------
Property and equipment, net................................. 597,520 1,437,249
Other assets................................................ 41,270 111,825
------------ -----------
Total assets...................................... $ 8,880,370 $ 3,909,544
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 246,643 $ 619,418
Accrued liabilities....................................... 181,560 1,382,917
Deferred revenue.......................................... 132,333 996,955
Current portion of long-term debt......................... 305,446 1,338,187
Current portion of capital lease obligations.............. -- 67,099
------------ -----------
Total current liabilities......................... 865,982 4,404,576
Long-term debt, net of current portion...................... 308,782 84,547
Capital lease obligations, net of current portion........... -- 129,852
------------ -----------
Total liabilities................................. 1,174,764 4,618,975
------------ -----------
Commitments (Note 6)
Stockholders' equity (deficit):
Convertible Preferred Stock: $0.001 par value; 9,300,000
shares authorized; 8,996,930 shares issued and
outstanding at December 31, 1999 and 1998 (liquidation
value $13,825,000 at December 31, 1999)................ 13,765,398 13,765,398
Common Stock: $0.001 par value; 25,000,000 shares
authorized; 5,409,657 and 4,897,595 shares issued and
outstanding at December 31, 1999 and 1998.............. 4,888 5,400
Additional paid-in capital................................ 2,194,142 30,449,863
Deferred stock-based compensation......................... (1,023,262) (15,668,948)
Accumulated deficit....................................... (7,235,560) (29,261,144)
------------ -----------
Total stockholders' equity (deficit).............. 7,705,606 (709,431)
------------ -----------
Total liabilities and stockholders' equity
(deficit)....................................... $ 8,880,370 $ 3,909,544
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 103
RUBRIC, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24,
1997, THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
NET REVENUES:
License............................................ $ -- $ 267,700 $ 1,868,431
Maintenance and professional services............ -- 75,767 1,561,576
----------- ----------- ------------
Total net revenues....................... -- 343,467 3,430,007
----------- ----------- ------------
COST OF NET REVENUES:
License.......................................... -- 25,238 278,036
Maintenance and professional services............ -- 292,823 2,088,588
----------- ----------- ------------
Total cost of net revenues............... -- 318,061 2,366,624
----------- ----------- ------------
Gross profit....................................... -- 25,406 1,063,383
OPERATING EXPENSES:
Research and development......................... 992,412 2,266,544 5,939,978
Sales and marketing.............................. 112,420 2,820,292 7,677,126
General and administrative....................... 159,299 1,191,057 9,255,914
----------- ----------- ------------
Total operating expenses................. 1,264,131 6,277,893 22,873,018
----------- ----------- ------------
Loss from operations............................... (1,264,131) (6,252,487) (21,809,635)
Interest income.................................... 50,372 257,071 132,045
Interest expense................................... -- (20,650) (347,994)
Other expense, net................................. (5,735) -- --
----------- ----------- ------------
Net loss........................................... $(1,219,494) $(6,016,066) $(22,025,584)
=========== =========== ============
Net loss per share -- basic and diluted............ $ (0.83) $ (2.21) $ (5.75)
=========== =========== ============
Shares used in per share calculation -- basic and
diluted.......................................... 1,470,408 2,719,818 3,832,396
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 104
RUBRIC, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
THE PERIOD FROM INCEPTION, SEPTEMBER 24, 1997, THROUGH DECEMBER 31, 1997,
AND THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
----------------------- ------------------ PAID-IN STOCK-BASED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
--------- ----------- --------- ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception....... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Series A
Convertible Preferred
Stock, net................. 5,025,000 5,097,349 -- -- -- -- --
Issuance of Common Stock... -- -- 4,784,470 4,774 472,663 -- --
Net loss................... -- -- -- -- -- -- (1,219,494)
--------- ----------- --------- ------ ----------- ------------ ------------
Balance at December 31,
1997..................... 5,025,000 5,097,349 4,784,470 4,774 472,663 -- (1,219,494)
Issuance of Series A
Convertible Preferred
Stock, net............... 200,000 198,565 -- -- -- -- --
Issuance of Series B
Convertible Preferred
Stock, net............... 3,771,930 8,469,484 -- -- -- -- --
Exercise of common stock
options.................. -- -- 113,125 114 11,200 -- --
Deferred stock-based
compensation............. -- -- -- -- 1,663,310 (1,663,310) --
Amortization of deferred
stock-based
compensation............. -- -- -- -- -- 640,048 --
Value of options granted to
non employees............ -- -- -- -- 46,969 -- --
Net loss................... -- -- -- -- -- -- (6,016,066)
--------- ----------- --------- ------ ----------- ------------ ------------
Balance at December 31,
1998..................... 8,996,930 13,765,398 4,897,595 4,888 2,194,142 (1,023,262) (7,235,560)
Exercise of common stock
options.................. -- -- 512,062 512 66,431 -- --
Deferred stock-based
compensation............. -- -- -- -- 26,914,620 (26,914,620) --
Amortization of deferred
stock-based
compensation............. -- -- -- -- -- 12,268,934 --
Value of options granted to
non employees............ -- -- -- -- 696,595 -- --
Warrant issued in
connection with lease
agreement................ -- -- -- -- 578,075 -- --
Net loss................... -- -- -- -- -- -- (22,025,584)
--------- ----------- --------- ------ ----------- ------------ ------------
Balance at December 31,
1999..................... 8,996,930 $13,765,398 5,409,657 $5,400 $30,449,863 $(15,668,948) $(29,261,144)
========= =========== ========= ====== =========== ============ ============
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balance at inception....... $ --
Issuance of Series A
Convertible Preferred
Stock, net................. 5,097,349
Issuance of Common Stock... 477,437
Net loss................... (1,219,494)
------------
Balance at December 31,
1997..................... 4,355,292
Issuance of Series A
Convertible Preferred
Stock, net............... 198,565
Issuance of Series B
Convertible Preferred
Stock, net............... 8,469,484
Exercise of common stock
options.................. 11,314
Deferred stock-based
compensation............. --
Amortization of deferred
stock-based
compensation............. 640,048
Value of options granted to
non employees............ 46,969
Net loss................... (6,016,066)
------------
Balance at December 31,
1998..................... 7,705,606
Exercise of common stock
options.................. 66,943
Deferred stock-based
compensation............. --
Amortization of deferred
stock-based
compensation............. 12,268,934
Value of options granted to
non employees............ 696,595
Warrant issued in
connection with lease
agreement................ 578,075
Net loss................... (22,025,584)
------------
Balance at December 31,
1999..................... $ (709,431)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 105
RUBRIC, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24,
1997, THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(1,219,494) $(6,016,066) $(22,025,584)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on disposal of property and equipment.... 5,735 -- --
Depreciation and amortization................. 12,631 135,934 352,014
Amortization of deferred stock-based
compensation expense........................ -- 640,048 12,268,934
Value of options granted to non employees..... -- 46,969 696,595
Amortization of warrant issued in connection
with lease agreement........................ -- -- 289,037
Changes in current assets and liabilities:
Accounts receivable......................... -- (299,428) (1,223,396)
Prepaid expenses and other current assets... (13,285) (331,450) 6,241
Accounts payable............................ -- 246,643 372,775
Accrued liabilities......................... 84,795 96,765 1,201,357
Deferred revenue............................ -- 132,333 864,622
Changes in other long-term assets........... (35,391) (5,879) (70,555)
----------- ----------- ------------
Net cash used in operating activities.... (1,165,009) (5,354,131) (7,267,960)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............... (234,507) (517,313) (977,176)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series A Convertible
Preferred Stock, net of issuance costs........ 5,097,349 198,565 --
Proceeds from issuance of Series B Convertible
Preferred Stock, net of issuance costs........ -- 8,469,484 --
Proceeds from issuance of Common Stock........... 477,437 11,314 66,943
Principal payments on capital lease obligation... -- -- (17,616)
Proceeds from debt............................... -- 614,228 1,113,950
Principal payments on debt....................... -- -- (305,444)
----------- ----------- ------------
Net cash provided by financing
activities............................. 5,574,786 9,293,591 857,833
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents...................................... 4,175,270 3,422,147 (7,387,303)
Cash and cash equivalents at beginning of period... -- 4,175,270 7,597,417
----------- ----------- ------------
Cash and cash equivalents at end of period......... $ 4,175,270 $ 7,597,417 $ 210,114
=========== =========== ============
NON CASH ACTIVITIES:
Equipment acquired under capital lease........... $ -- $ -- $ 214,567
=========== =========== ============
Warrants issued in connection with lease
agreement..................................... $ -- $ -- $ 578,075
=========== =========== ============
Deferred stock-based compensation................ $ -- $ 1,663,310 $ 26,914,620
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 106
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Rubric, Inc. (the "Company" or "Rubric"), is a provider of Web based
eMarketing Automation ("eMA") software applications for Fortune 500 and
e-commerce companies. Rubric eMA enables the implementation of a closed loop
system to increase revenue, reduce marketing costs, increase marketing
efficiency, and measure marketing effectiveness. The Company was incorporated in
Delaware on September 24, 1997.
BASIS OF PRESENTATION
As of December 31, 1999, the Company has an accumulated deficit of
$29,261,144 and negative working capital. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management expects
to merge the Company (see Note 11) or to obtain additional working capital
financing and to achieve profitable operations from the sale of its products.
These financial statements have been prepared assuming that the Company will
continue as a going concern and do not include any adjustments that might result
from the outcome of this uncertainty.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Effective January 1, 1998, the Company adopted the provisions the AcSEC
Statement of Position 97-2 ("SOP 97-2"), Software Revenue Recognition, as
amended by AcSEC Statement of Position 98-4, Deferral of the Effective Date of a
Provision of SOP 97-2, and AcSEC Statement of Position 98-9, Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions. SOP
97-2 proscribes the accounting for sales of the Company's software licenses,
annual software maintenance and technical support, and certain professional
services. Under SOP 97-2, license revenue is recognized upon delivery of the
software provided that (i) a license agreement has been executed with the
customer, (ii) the Company has no significant obligations remaining to the
customer, (iii) the fees for products are fixed and determinable, and (iv)
collection is considered probable. Maintenance revenues are recognized ratably
over the maintenance period, which is generally one year. Fees for professional
services are recognized as services are performed.
For sales contracts where the Company includes multiple elements (e.g.,
licenses, professional services including customer training and annual
maintenance), revenue from product licenses are recognized when delivery has
occurred, collection of receivable is probable, the fee is fixed and
determinable and vendor specific objective evidence exits to allocate the total
fee to all delivered and undelivered elements of the arrangement.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less at the date of purchase to be cash
equivalents. At December 31, 1999 and 1998, virtually all of the Company's cash
was held in an interest bearing demand deposit money market
F-34
<PAGE> 107
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
account. The Company deposits cash and cash equivalents with high credit quality
financial institutions.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. The Company's accounts receivable are derived from the sale of its
software products and related services to customers in the United States. The
Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers.
The following table summarizes the revenues from customers in excess of 10%
of the total revenues:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1998 1999
---- ----
<S> <C> <C>
Company A................................................... 48% --
Company B................................................... 45% --
Company C................................................... -- 26%
</TABLE>
At December 31, 1998, company B accounted for 86% of total accounts
receivable. At December 31, 1999, company C, D and E accounted for 28%, 23% and
12% of total accounts receivable, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including
cash, cash equivalents, trade accounts receivable, accounts payable and accrued
liabilities approximate fair value due to their short maturities. Based on
borrowing rates currently available to the Company for loans with similar terms,
the carrying value of its long-term debt approximates fair value.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Software development costs are included in research and development and are
expensed as incurred. After technological feasibility is established, material
software development costs are capitalized. The capitalized cost is then
amortized on a straight-line basis over the estimated product life, or on the
ratio of current revenues to total projected product revenues, whichever is
greater. To date, the period between achieving technological feasibility, which
the Company has defined as coding and testing in accordance with detailed
program designs, and the general availability of such software, has been short
and software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life of the related assets of
three to five years. Leasehold improvements and leased assets are amortized on a
straight line basis over the lesser of their estimated useful life or the lease
term. Gains and losses from the disposal of property and equipment are taken
into income in the year of disposition. Repairs and maintenance costs are
expensed as incurred.
F-35
<PAGE> 108
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
LONG-LIVED ASSETS
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS 121"). SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets.
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between the financial statements and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
ADVERTISING
The Company expenses advertising costs as they are incurred. Advertising
expense for the period from inception, September 24, 1997, through December 31,
1997 and the years ended December 31, 1998 and 1999 was $0, $1,106,301, and
$1,029,349, respectively.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss available to
common shareholders by the weighted average number of vested common shares
outstanding for the period. Diluted net loss per share is computed giving effect
to all dilutive potential common stock, including options, non vested common
stock and preferred shares. Options, non vested common stock and preferred
shares were not included in the computation of diluted net loss per share in the
periods reported because the effect would be antidilutive.
Antidilutive securities which are excluded in the diluted net loss per
share calculation for the periods:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24,
1997, THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1997 1998 1999
------------- ---------- ----------
<S> <C> <C> <C>
Non vested common stock........................... 3,314,063 1,726,074 897,559
Common stock options.............................. 617,094 1,664,501 2,924,881
Convertible Preferred Shares...................... 5,025,000 8,996,930 8,996,930
Common stock warrants............................. -- -- 43,860
--------- ---------- ----------
8,956,157 12,387,505 12,863,230
========= ========== ==========
</TABLE>
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123").
F-36
<PAGE> 109
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. The Company has no comprehensive income
components other than its net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standard
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133, as amended, is effective for
all fiscal quarters beginning after June 15, 2000. As Rubric does not currently
engage in any such activity, the Company does not expect SFAS No. 133 to have
any effect on its financial condition or results of operations.
NOTE 2 -- SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24,
1997, THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1997 1998 1999
------------- --------- ---------
<S> <C> <C> <C>
Cash paid for income taxes............................ $ -- $ 800 $ 1,600
======= ======= =======
Cash paid for interest................................ $ -- $20,650 $58,957
======= ======= =======
</TABLE>
NOTE 3 -- BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
--------- ----------
<S> <C> <C>
PROPERTY AND EQUIPMENT, NET:
Computer equipment and software........................... $ 569,550 $1,583,232
Furniture and fixtures.................................. 136,535 314,598
Leasehold improvements.................................. 40,000 40,000
--------- ----------
746,085 1,937,830
Less: Accumulated depreciation and amortization......... (148,565) (500,581)
--------- ----------
$ 597,520 $1,437,249
========= ==========
</TABLE>
Property and equipment includes $214,567 of computer equipment and
internal-use software under capital leases at December 31, 1999. Accumulated
amortization of assets under capital leases totaled $36,102 at December 31,
1999. Depreciation and amortization expense for the period from
F-37
<PAGE> 110
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
inception, September 24, 1997, through December 31, 1997 and for the years ended
December 31, 1998 and 1999 was $12,631, $135,934 and $352,014, respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
-------- ----------
<S> <C> <C>
ACCRUED LIABILITIES:
Accrued operating expenses................................. $116,373 $ 561,085
Payroll and related expenses............................. 48,427 648,391
Sales tax payable........................................ 11,550 50,149
Accrued royalties........................................ 5,210 123,292
-------- ----------
$181,560 $1,382,917
======== ==========
</TABLE>
NOTE 4 -- INCOME TAXES:
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards....................... $ 2,434,437 $ 6,240,141
Accruals and other................................... 112,559 121,959
Credits.............................................. 264,072 502,769
----------- -----------
2,811,068 6,864,869
Less: Valuation allowance.............................. (2,811,068) (6,864,869)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
Management believes that, based on a number of factors, it is more likely
than not that the deferred tax assets will not be utilized, such that a full
valuation allowance has been recorded.
Rubric's expected U.S. Federal statutory income tax rate differs from the
effective tax rate as follows:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24, YEAR ENDED
1997, THROUGH DECEMBER 31,
DECEMBER 31, ----------------
1997 1998 1999
------------- ------ ------
<S> <C> <C> <C>
"Expected" income benefit....................... (34.0)% (35.0)% (35.0)%
Net operating loss not benefited................ 34.0% 31.2% 15.2%
Non-deductible items............................ 0.0% 3.8% 19.8%
----- ------ ------
0.0% 0.0% 0.0%
===== ====== ======
</TABLE>
At December 31, 1999, the Company had approximately $15,770,000 of federal
and $15,272,000 of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts beginning in 2005. At
December 31, 1999, Rubric also had available research and development credit
carryforwards and other credit carry forwards of approximately $333,000 and
$170,000 to offset future federal and state taxable income, respectively. Under
the Tax Reform Act of 1986, the amounts of and benefits from net operating loss
carryforwards may be impaired or limited in certain circumstances. Events which
cause limitations in the amount of net operating losses that the
F-38
<PAGE> 111
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50%, as defined, over a three year
period.
NOTE 5 -- BORROWINGS:
Borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
--------- -----------
<S> <C> <C>
Term loan, 7.75%......................................... $ 614,228 $ 422,734
Broadbase loan, 8.50%.................................... -- 1,000,000
Capital lease obligation, 7.50%.......................... -- 196,951
--------- -----------
614,228 1,619,685
Less: Current portion.................................... (305,446) (1,405,286)
--------- -----------
$ 308,782 $ 214,399
========= ===========
</TABLE>
TERM LOAN
At December 31, 1998 and 1999, the Company had $614,228 and $422,733,
respectively, outstanding and due under a term loan with Silicon Valley Bank.
The term loan was used primarily to finance the Company's purchases of equipment
and furniture during 1997 and early 1998, and all of the Company's assets serve
as collateral for the loan. The loan requires monthly interest and principal
payments and carries an interest rate of 7.75% per annum. Remaining monthly
principal payments due in 2000 and 2001 total $338,187 and $84,547,
respectively. The Company is not required to maintain any financial covenants
pursuant to this loan. In the event of default under the loan, the lender has
the right to accelerate and declare all amounts immediately due and payable and
to increase the interest rate by two percent per annum. Under this loan
agreement, the Company requires the lender's consent to (i) enter into any
transaction outside the ordinary course of business, (ii) sell or transfer any
collateral except in the ordinary course of business, (iii) pay or declare
dividends on the Company's stock, or (iv) redeem, retire, purchase or otherwise
acquire, directly or indirectly, in any one fiscal year greater than 5% of the
Company's outstanding stock.
BROADBASE LOAN
In connection with the pending acquisition of Rubric by Broadbase Software,
Inc. ("Broadbase") (see Note 11, "Merger"), the Company had as of December 31,
1999 a $1,000,000 note outstanding and due to Broadbase. The purpose of this
note was to satisfy Rubric's working capital requirements until closing of the
merger which is expected no later than February 15, 2000. The outstanding
principal balance of this note bears interest (computed on the basis of a
365-day year, actual days elapsed) at a fixed rate per annum determined by
Broadbase as the "Prime Rate" reported in the Wall Street Journal in effect on
the first day of the note, which was December 9, 1999. The outstanding balance
is due on June 9, 2000. However, in the event the merger between Rubric and
Broadbase is not consummated, then the note is immediately due.
CAPITAL LEASE OBLIGATION
At December 31, 1999, the Company had $196,951 outstanding and due under an
equipment lease financing line with Comdisco, Inc. The equipment lease line
provides for borrowings of up to $2,000,000; equipment purchased under the line
serves as collateral. The financing line expires in July 2000 and carries
interest at a rate of 7.5% per annum. The Company is not required to maintain
any financial covenants pursuant to this loan. In the event of default under the
lease line, the lessor has
F-39
<PAGE> 112
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the right to accelerate and declare all rents immediately due and payable.
Minimum payments due under the lease line are included in Note 6, "Commitments."
NOTE 6 -- COMMITMENTS:
PURCHASE COMMITMENTS
At December 31, 1999, the Company had approximately $285,000 in
noncancelable purchase commitments with suppliers.
LEASES
The Company leases office space and equipment under noncancelable operating
and capital leases with various expiration dates through November 2000. Rent
expense for the period from inception, September 24, 1997, through December 31,
1997 and the years ended December 31, 1998 and 1999, was $37,404, $381,075, and
$608,369, respectively. The terms of the facility lease provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent expense
incurred but not paid.
The minimum lease payments under noncancelable operating and capital
leases, required under these leases as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
YEARS ENDED DECEMBER 31,
2000........................................................ $ 79,587 $818,625
2001...................................................... 79,587 --
2002...................................................... 59,354 --
-------- --------
Total minimum lease payments...................... 218,528 $818,625
========
Less: Amount representing interest.......................... (21,577)
--------
Present value of capital lease obligations.................. 196,951
Less: Current portion....................................... (67,099)
--------
Long-term portion of capital lease obligations.............. $129,852
--------
</TABLE>
NOTE 7 -- CONVERTIBLE PREFERRED STOCK:
Convertible Preferred Stock at December 31, 1999 consists of the following:
<TABLE>
<CAPTION>
PROCEEDS
SHARES NET OF
------------------------ LIQUIDATION ISSUANCE
SERIES AUTHORIZED OUTSTANDING AMOUNT COSTS
------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
A.................................. 5,300,000 5,225,000 $ 5,225,000 $ 5,295,914
B.................................. 4,000,000 3,771,930 8,600,000 8,469,484
--------- --------- ----------- -----------
9,300,000 8,996,930 $13,825,000 $13,765,398
========= ========= =========== ===========
</TABLE>
The holders of Preferred Stock have various rights and preferences as
follows:
VOTING
Each share of Series A and B Convertible Preferred Stock has voting rights
equal to an equivalent number of shares of Common Stock into which each share is
convertible on the record date of the vote and may vote together as one class
with the Common Stock.
F-40
<PAGE> 113
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Series A Preferred Stockholders, voting as a separate class, have the right
to elect two members of the Company's Board of Directors; Series B Preferred
Stockholders, voting as a separate class, have the right to elect one member of
the Company's Board of Directors; and Common Stockholders (excluding persons who
hold Common Stock pursuant the conversion of Preferred Stock), voting as a
separate class, have the right to elect two members of the Board of Director,
one of whom must be the Company's President and/or Chief Executive Officer and
the other of whom must be an independent/outside member. The final director is
nominated by the other five directors and elected by a vote amongst all
stockholders.
DIVIDENDS
Holders of Series A and B Convertible Preferred Stock are entitled to
receive noncumulative dividends at the per annum rate of $0.08 and $0.18 per
share, respectively, when and if declared by the Board of Directors prior and in
preference to payment of any dividend (other than dividends payable solely in
Common Stock of the Company) with respect to Common Stock. No dividends on
Convertible Preferred Stock or Common Stock have been declared by the Board from
inception through December 31, 1999.
LIQUIDATION
In the event of any liquidation, dissolution, sale, merger, or winding up
of the Company, either voluntary or involuntary, the holders of Series A and B
Convertible Preferred Stock are entitled to receive an amount of $1.00 and $2.28
per share, respectively, plus any declared but unpaid dividends prior to and in
preference to any distribution to the holders of Common Stock. Should the
Company's legally available assets be insufficient to satisfy the liquidation
preferences, the funds will be distributed ratably among the holders of Series A
and B Convertible Preferred Stock. Any assets and funds remaining after
satisfaction of the liquidation preferences will be distributed ratably among
the holders of Common Stock.
CONVERSION
Each share of Series A and B Convertible Preferred Stock is convertible, at
the option of the holder, according to a conversion ratio, subject to adjustment
for dilution. Each share of Series A and B Convertible Preferred Stock
automatically converts into the number of shares of Common Stock into which such
shares are convertible at the then effective conversion ratio upon: (1) the
closing of a public offering of Common Stock at a per share price of at least
$5.39 per share with gross proceeds of at least $15,000,000 or (2) the consent
of the holders of at least 75% of Convertible Preferred Stock.
The conversion ratio as of December 31, 1999 was 1:1.
The Company has reserved 5,300,000 and 4,000,000 shares of Common Stock for
the conversion of Series A and B Convertible Preferred Stock, respectively.
NOTE 8 -- COMMON STOCK:
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 25,000,000 shares of $0.001 par value Common Stock. A portion of the
shares sold are subject to a right of repurchase by the Company subject to
vesting, which is generally over a four year period from the earlier of grant
date or employee hire date, as applicable, until vesting is complete. At
December 31, 1999, there were 897,559 shares subject to repurchase.
F-41
<PAGE> 114
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WARRANTS FOR COMMON STOCK
In connection with an equipment lease line, the Company issued warrants to
purchase 43,860 shares of Common Stock for $2.28 per share in July 1999. Such
warrants are outstanding at December 31, 1999 and expire on July 9, 2006. Using
the Black-Scholes pricing model, the Company determined that the fair value of
the warrants were $578,075 at the date of grant. The deferred financing cost of
$578,075 is being amortized over the term of the lease line.
NOTE 9 -- STOCK OPTION PLANS:
In 1997, the Company adopted the 1997 Stock Option Plan (the "Plan"). The
Plan provides for the granting of stock options to employees and consultants of
the Company. Options granted under the Plan may be either incentive stock
options or nonqualified stock options. Incentive stock options ("ISO") may be
granted only to Company employees. Nonqualified stock options ("NSO") may be
granted to Company employees and consultants. The Company has reserved 3,636,250
shares of Common Stock for issuance under the Plan. In addition to options
granted under the Plan, the Company granted an option during 1999 to a key
employee to purchase 360,000 shares of Common stock outside of the Plan; this
grant was approved by the Company's shareholders and board of directors (This
option is not included in the option tables presented below).
Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date of
grant as determined by the Board of Directors, provided, however, that (i) the
exercise price of an ISO and NSO shall not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and (ii)
the exercise price of an ISO and NSO granted to a 10% or greater shareholder
shall not be less than 110% of the estimated fair value of the shares on the
date of grant, respectively. Options are exercisable only upon vesting. To date,
options granted generally vest over four years.
During 1998 and 1999, the Company recorded $1,663,310 and $26,914,620,
respectively, of deferred stock compensation for the excess of the deemed fair
market value over the exercise price at the date of grant related to certain
options granted to employees and directors in those years. Such compensation
expense is being recognized over the period in which the underlying options
vest.
During 1998 and 1999 the Company recorded compensation expense of $46,969
and $696,595, respectively, for fair value of options to non-employees
calculated using the Black-Scholes pricing model.
<TABLE>
<CAPTION>
1997 1998 1999
------------------ -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January
1,............................. -- $ -- 617,094 $0.10 1,664,501 $0.14
Options granted.................. 617,094 $0.10 1,288,407 $0.15 2,145,708 $0.30
Options exercised................ -- $ -- (113,125) $0.10 (512,062) $0.13
Options canceled................. -- $ -- (127,875) $0.10 (733,266) $0.17
------- --------- ---------
Options outstanding at
December 31,................... 617,094 $0.10 1,664,501 $0.14 2,564,881 $0.27
------- --------- ---------
Options exercisable at
December 31,................... -- $ -- 84,914 $0.10 259,938 $0.17
======= ========= =========
</TABLE>
F-42
<PAGE> 115
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT
DECEMBER 31, 1999
------------------------
WEIGHTED OPTIONS EXERCISABLE AT
AVERAGE DECEMBER 31, 1999
REMAINING -----------------------
EXERCISE NUMBER CONTRACTUAL NUMBER EXERCISE
PRICE OF SHARES LIFE OUTSTANDING PRICE
- ------------------------------------ --------- ----------- ----------- --------
<S> <C> <C> <C> <C>
$0.10............................... 408,963 8.7 years 170,450 $0.10
$0.30............................... 2,155,918 9.5 years 89,488 $0.30
--------- -------
2,564,881 259,938
========= =======
</TABLE>
FAIR VALUE DISCLOSURES
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION,
SEPTEMBER 24,
1997, THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
Net loss:
As reported............................ $(1,219,494) $(6,016,066) $(22,025,584)
=========== =========== ============
Pro forma............................ $(1,219,580) $(6,041,249) $(22,044,822)
=========== =========== ============
Net loss per share:
As reported.......................... $ (0.83) $ (2.21) $ (5.75)
=========== =========== ============
Pro forma............................ $ (0.83) $ (2.22) $ (5.75)
=========== =========== ============
</TABLE>
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes pricing method with the following assumptions for
all periods presented: a weighted average expected option term of 10 years; a
risk free interest rate of 6%; and no expected dividends. The weighted average
fair value of options granted during the period from inception, September 24,
1997, through December 31, 1997, and the years ended December 31, 1998 and 1999
was $0.83, $1.10 and $11.47, respectively.
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected volatility of the stock price.
Because the Company's stock based awards have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimates, in the opinion
of management, this model does not necessarily provide a reliable single measure
of the fair value of its stock-based awards.
NOTE 10 -- EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) defined contribution plan covering all
employees. As of December 31, 1999, the Company has made no contributions to the
plan since its inception.
F-43
<PAGE> 116
RUBRIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- MERGER:
On December 9, 1999, the Company entered into a definitive agreement to be
acquired by Broadbase Software, Inc. Under the terms of the definitive
agreement, Broadbase will issue approximately 2.9 million shares of its common
stock to the stockholders of Rubric, and will assume options and warrants to
purchase Rubric Capital Stock and convert them into options and warrants to
purchase approximately 700,000 shares of Broadbase common stock, collectively
representing approximately 14.5% of the newly combined company formed by the
merger on a fully diluted basis. The transaction will be accounted for by
Broadbase as a purchase. The acquisition is subject to customary closing
conditions, including the approval of Rubric's stockholders and regulatory
approvals, and is expected to close in February 2000.
F-44
<PAGE> 117
UNDERWRITING
Broadbase, the selling stockholders and the underwriters for the offering
named below have entered into an underwriting agreement with respect to the
shares being offered. Subject to certain conditions, each underwriter has
severally agreed to purchase the number of shares indicated in the following
table. Goldman, Sachs & Co., Deutsche Bank Securities Inc., Dain Rauscher
Incorporated and Thomas Weisel Partners LLC are the representatives of the
underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.................................
Deutsche Bank Securities Inc........................
Dain Rauscher Incorporated..........................
Thomas Weisel Partners LLC..........................
-------
Total.....................................
=======
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 450,000
shares from Broadbase to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Broadbase and selling
stockholders. Such amounts are shown assuming both no exercise and full exercise
of the underwriter's option to purchase 450,000 additional shares.
<TABLE>
<CAPTION>
Paid by Broadbase
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
<TABLE>
<CAPTION>
Paid by the Selling Stockholders
--------------------------------
No Exercise Full Exercise
-------------- --------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial price
to public. If all the shares are not sold at the initial price to public, the
representatives may change the offering price and the other selling terms.
Broadbase, its executive officers and directors and the selling
stockholders have agreed not to offer, sell, transfer or otherwise dispose of or
hedge any of their common stock or securities convertible into or exchangeable
for shares of common stock during the period from the date of this prospectus
continuing through the date 90 days after the date of this prospectus, except
with the prior written consent of the representatives. This agreement does not
apply to any existing employee benefit plan. In addition, certain of our
significant stockholders will execute agreements with the underwriters that they
will not, without the prior written consent of Goldman, Sachs & Co., transfer or
dispose of, directly or indirectly, any of their common stock for a period of 45
days after the date of this prospectus with respect to 50% of the shares held by
these significant stockholders and 90 days after the date of this prospectus
with respect to the remaining 50% of the shares held by these stockholders. In
connection with our initial public offering, substantially all of our
securityholders not
U-1
<PAGE> 118
participating in this offering are restricted from transferring or disposing,
directly or indirectly, of any portion of the common stock obtained by these
persons prior to our initial public offering or common stock issuable upon
exercise of options held by these persons, until March 20, 2000, without the
prior written consent of Deutsche Bank Securities Inc. See "Shares Eligible for
Future Sale" for a discussion of transfer restrictions.
In December 1998, DRW Investors LLC, an affiliate of Dain Rauscher
Incorporated, purchased debentures in the principal amount of $250,000, which
automatically converted into 34,482 shares of our Series D preferred stock upon
completion of our initial public offering 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. In this private placement, BT
Investment Partners, Inc., an affiliate of Deutsche Bank Securities Inc.,
purchased 109,263 shares of Series E preferred stock for an aggregate purchase
price of $997,844. BT Investment Partners, Inc. purchased the Series E preferred
stock on the same terms as the other investors in the private placement. In
addition, three individuals associated with Thomas Weisel Partners LLC purchased
an aggregate of 6,570 shares of our Series E preferred stock in the private
placement. Each of the shares of Series E preferred stock was automatically
converted into one share of our common stock upon the consummation of our
initial public 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 110 filed
public offerings of equity securities, of which 79 have been completed, and has
acted as a syndicate member in an additional 54 public 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 connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
As permitted by Rule 103 under the Exchange Act, certain Underwriters and
selling group members, if any, that are market makers ("passive market makers")
in the common stock may make bids for or purchases of common stock in the Nasdaq
National Market until a stabilizing bid has been made. Rule 103 generally
provides that:
- a passive market maker's net daily purchases of the common stock may not
exceed 30% of its average daily trading volume in such securities for the
two full consecutive calendar months, or any 60 consecutive days ending
within the 10 days, immediately preceding the filing date of the
registration statement of which this prospectus forms a part,
U-2
<PAGE> 119
- a passive market maker may not effect transactions or display bids for
common stock at a price that exceeds the highest independent bid for the
common stock by persons who are not passive market makers, and
- bids made by passive market makers must be identified as such.
Broadbase and the selling stockholders estimate that their shares of the
total expenses of the offering, excluding underwriting discounts and
commissions, will be approximately $ and $ , respectively.
Broadbase and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
U-3
<PAGE> 120
[Description of Graphics on Inside Front Cover]
At the center of this graphic is a circle labeled "Web Sites" which
contains the image of a computer screen. Arranged concentrically around this
circle is a series of six additional circles. The first circle, directly above
the "Web Sites" graphic, is labeled "E-Mail" and contains the image of an
envelope and a computer that is shaped in the form of a mailbox. Clockwise from
the "E-Mail" graphic, the second circle is labeled "Online Service" and contains
the image of a mouse sitting on a mouse pad. The third circle is labeled "Direct
Sales" and contains the image of a man in a suit holding a briefcase. The fourth
circle is labeled "Direct Mail" and contains the image of three envelopes. The
fifth circle is labeled "Call Centers" and contains the image of an individual
wearing headphones and facing a computer screen. The sixth circle is labeled
"Store Fronts" and contains the image of a store front. Above this graphic, the
text reads "You can touch your customers in many ways..." Below this graphic the
text reads "...Are you making the most of it?" At the bottom right corner of the
graphic is the Broadbase logo.
<PAGE> 121
DESCRIPTION OF GRAPHICS
[Description of Graphics on Gatefold]
This graphic is entitled, "E-business Analytic Solutions." In the center of the
page, a circle is labeled "Broadbase EPM." Below the circle is a column entitled
"Personalize," followed by five bullet points. The first point reads, "All
customer interactions with closed loop optimization." The second point reads,
"Recommend cross sells and up sells." The third point reads, "Adjust web content
& offerings." The fourth point reads, "Differentiate offerings." The fifth point
reads, "Target profitable customers." To the right of the circle, a
double-headed arrow moves straight to the right of the circle to a graphic of a
cloud labeled, from top-to-bottom, "Internet," "Intranets" and "Extranets."
Forming a semi-circle outside the image of the cloud is a series of circular
graphics entitled "Business Users" and labeled as follows: "Sales,"
"E-commerce," "Marketing" and "Customer Service." Below the cloud and the
circular graphics is the Broadbase logo. Above the cloud and the circular
graphics is a column entitled "Analyze," followed by three bullet points. The
first point reads, "With logic and best practices." The second point reads, "For
users in specific business areas." The third point reads, "Guided
decision-making & customer analysis." From the graphic of the cloud, an arrow
moves clockwise through the "Personalize" column to the left of the "Broadbase
EPM" circle to a series of circular graphics labeled "Customer touch points." In
the center of this series of graphics is a circle labeled "Web Sites" which
contains the image of a computer screen. Arranged concentrically around this
circle is a series of six additional circles. The first circle, directly above
the "Web Sites" graphic, is labeled "E-Mail" and contains the image of an
envelope and a computer that is shaped in the form of a mailbox. Clockwise from
the "E-Mail" graphic, the second circle is labeled "Online Service" and contains
the image of a mouse sitting on a mouse pad. The third circle is labeled "Direct
Sales" and contains the image of a man in a suit holding a briefcase. The fourth
circle is labeled "Direct Mail" and contains the image of three envelopes. The
fifth circle is labeled "Call Centers" and contains the image of an individual
wearing headphones and facing a computer screen. The sixth circle is labeled
"Store Fronts" and contains the image of a store front. Above the "Customer
touch points" graphic is a column entitled "Integrate," followed by three bullet
points. The first point reads, "Comprehensive customer data." The second point
reads "Historic and real time data." The third point reads, "From multiple
customer touch points." A double-headed arrow moves straight from the "Customer
touch points" graphic to the "Broadbase EPM" circle. A second arrow moves
clockwise through the "Integrate" column from the "Customer touch points"
graphic to the space above the "Broadbase EPM" circle. A third arrow moves
clockwise from the head of the second arrow through the "Analyze" column to the
graphic of the cloud. On the left edge of the gatefold, a rectangle runs from
the top to the bottom of the page with the heading "Broadbase EPM Customers" and
a column of text reading, from top-to-bottom, "Automatic Data Processing,"
"BankBoston," "Baxter IV Systems," "Bell & Howell," "Boeing Commercial Airplanes
Group," "Boston Edison," "Canon Computer," "Catalog Marketing Services,"
"Chevron," "CommerzBank," "Computer Hardware Maintenance Co.," "DG Systems,"
"DSC Logistics," "Eastman Kodak Company," "Fidelity Investments," "Ginza Cozy
Corner," "Golden Books," "Harvard Pilgrim Healthcare," "Hewlett-Packard,"
"Honda," "Idaho Power," "Inprise," and "InsWeb." To the right of the bottom of
this rectangle is an asterisk followed by the words "These customers represent
all end user customers to whom we had licensed products and sold services
totalling at least $50,000 as of July 31, 1999." On the right edge of the
gatefold, a rectangle runs from the top to the bottom of the page with the
heading "Broadbase EPM Customers" and a column of text reading, from
top-to-bottom, "Kana Communications," "Los Alamos National Labs," "Mercata,"
"NECX Direct," "New Century Energy," "NTT," "Oakley," "Omaha Public Power,"
"Plymouth Rock Assurance," "PMA Group," "Pointcast," "PreVision Marketing,"
"Putnam Investments," "Rockwell Automation," "Shikishima Baking Company," "The
Sharper Image," "Thomson Technology Services," "Tokai," "Travers Tool," "United
Airlines," "United Natural Foods," "Vantive," and "WebTV/Microsoft."
[Description of Graphics on Page 38]
Graphic depicts a three dimensional rectangle divided vertically from side to
side into four segments. The segments are labelled, from left to right,
"E-Commerce Systems," "Customer Relationship Management Systems," "Enterprise
Resource Planning Systems" and "Demographic Data." To the left of this
vertically-segmented rectangle are the words "Sources of Data." Extending across
the top of this rectangle is another three-dimensional rectangle, which is
divided horizontally from top to bottom into three segments. These segments are
labelled, from top to bottom, "Information Delivery Server," "Application Server
& Analytic Engine" and "Data Source Adapters." To the left of this
horizontally-segmented rectangle are the words "EPM/Foundation." On top of this
horizontally-segmented rectangle is a row of six cylinders arranged in a row.
These cylinders are labelled, from left to right, "Customer Service," "Sales,"
"E-Marketing," "E-Commerce," "E-Personalize" and "E-Procurement (anticipated).
To the left of the cylinder labelled "Customer Service" are the words "Broadbase
EPM Applications."
<PAGE> 122
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 5
Special Note Regarding
Forward-Looking Statements and
Industry Data...................... 17
Use of Proceeds...................... 18
Dividend Policy...................... 18
Price Range of Common Stock.......... 18
Capitalization....................... 19
Dilution............................. 20
Selected Consolidated Financial
Data............................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 24
Business............................. 32
Management........................... 50
Related Party Transactions........... 61
Principal and Selling Stockholders... 63
Description of Capital Stock......... 65
Shares Eligible for Future Sale...... 68
Legal Matters........................ 71
Experts.............................. 71
Where You Can Find Additional
Information........................ 71
Index to the Financial Statements.... F-1
Underwriting......................... U-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
3,000,000 Shares
BROADBASE SOFTWARE, INC.
Common Stock
-------------------------
[BROADBASE LOGO]
-------------------------
GOLDMAN, SACHS & CO.
DEUTSCHE BANC ALEX. BROWN
DAIN RAUSCHER WESSELS
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 123
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 and the NASD filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 77,902
NASD filing fee............................................. 30,500
Nasdaq National Market filing fee........................... 17,500
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 200,000
Road show expenses.......................................... 50,000
Printing and engraving expenses............................. 250,000
Blue sky fees and expenses.................................. 5,000
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous............................................... 39,098
----------
Total............................................. $ 850,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and executive officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred arising under the Securities Act.
As permitted by the Delaware General Corporation Law, the registrant's
certificate of incorporation, as amended, 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 limited exceptions; and
- the rights conferred in the bylaws are not exclusive.
The registrant entered 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.
II-1
<PAGE> 124
We, the selling stockholders and the underwriters have entered into an
underwriting agreement pursuant to which we and the selling stockholders have
agreed to indemnify the underwriters, and the underwriters have agreed to
indemnify us, our directors and executive officers, and the selling
stockholders, against certain liabilities, including liabilities arising under
the Securities Act. Likewise, pursuant to our Fourth Amended and Restated
Investors' Rights Agreement, selling stockholders exercising rights pursuant to
this agreement have agreed to indemnify us, our directors and our officers who
sign the registration statement against certain liabilities including
liabilities arising under the Securities Act.
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.
The indemnification provisions in the registrant's certificate of
incorporation, bylaws, the indemnity agreements, the underwriting agreement and
the investors' rights agreement may be sufficiently broad to permit
indemnification of the registrant's directors and executive officers for
liabilities arising under the Securities Act.
The registrant has also obtained directors' and officers' liability
insurance that will include coverage for securities matters.
See also the undertakings set out in response to Item 17.
Reference is made to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT NUMBER
---------------- ------
<S> <C>
Underwriting Agreement...................................... 1.01
The registrant's Certificate of Incorporation............... 3.01
The registrant's Bylaws..................................... 3.02
Fourth Amended and Restated Investors' Rights Agreement..... 4.02
Form of Indemnity Agreement................................. 10.01
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities sold by
the registrant in the past three years:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PURCHASE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES PRICE CONSIDERATION
------------------- ------------ ------------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
2 employees............ 01/24/97 common stock 6,500 $ 1,625 Services
11 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........... 05/23/97 common stock 2,500 625 Services
2 consultants.......... 09/16/97 common stock 850 213 Services
1 lender............... 09/11/97 Warrant to purchase N/A -- (1) (1)
24,227 shares of
Series B Preferred Stock
10 investors........... 02/17/98 Series C preferred stock 1,975,172 10,942,453 Cash
Chuck Bay.............. 02/19/98 common stock 173,000 43,250 Promissory Note
1 employee............. 03/31/98 common stock 583 321 Cash
25 investors........... 04/15/98 Series C preferred stock 190,883 1,057,492 Cash
2 employees............ 04/21/98 common stock 5,000 5,000 Cash
1 employee............. 04/30/98 common stock 12,500 6,875 Cash
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
</TABLE>
II-2
<PAGE> 125
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PURCHASE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES PRICE CONSIDERATION
------------------- ------------ ------------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
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
2 consultants.......... 11/24/98 common stock 5,000 2,750 Services
1 employee............. 12/08/98 common stock 3,323 831 Cash
4 investors............ 12/09/98 Debentures Convertible (2) 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............. 01/06/99 common stock 31,919 17,555 Cash
1 employee............. 01/21/99 common stock 21,603 11,882 Cash
1 consultant........... 02/22/99 common stock 5,000 3,650 Services
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............. 04/01/99 common stock 4,584 2,596 Cash
2 consultants.......... 04/01/99 common stock 10,000 7,300 Services
2 investors............ 04/13/99 Debentures Convertible (3) 1,275,000 Cash
into Series D preferred
stock
1 employee............. 04/17/99 common stock 13,125 3,281 Cash
1 employee............. 04/21/99 common stock 2,167 542 Cash
1 employee............. 04/23/99 common stock 5,664 1,276 Cash
1 consultant........... 04/30/99 common stock 207 151 Cash
1 employee............. 05/27/99 common stock 96,750 70,628 Cash
1 employee............. 06/01/99 common stock 3,696 2,698 Cash
1 employee............. 06/01/99 common stock 12,500 6,875 Cash
1 employee............. 06/04/99 common stock 4,855 550 Cash
1 employee............. 06/05/99 common stock 6,808 3,706 Cash
2 employees............ 06/08/99 common stock 6,952 2,078 Cash
3 employees............ 06/10/99 common stock 30,844 7,786 Cash
3 employees............ 06/22/99 common stock 16,386 9,666 Cash
12 employees........... 06/23/99 common stock 82,488 26,995 Cash
2 employees............ 06/24/99 common stock 11,416 3,306 Cash
2 employees............ 06/25/99 common stock 7,844 2,582 Cash
5 employees............ 06/28/99 common stock 30,026 8,509 Cash
38 investors........... 06/30/99 Series E preferred stock 2,188,812 19,989,325 Cash
1 employee............. 06/30/99 common stock 35,156 8,789 Cash
13 employees........... 07/05/99 common stock 69,663 94,260 Cash
to
09/17/99
17 consultants......... 07/15/99 common stock 48,900 222,984 Services
to
08/26/99
</TABLE>
II-3
<PAGE> 126
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PURCHASE FORM OF
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES PRICE CONSIDERATION
------------------- ------------ ------------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Timeline............... 08/31/99 common stock 40,000 (4) (4)
6 investors............ 09/28/99 common stock 45,063 630,882 Cash
</TABLE>
Each share of Series A, Series B, Series C, Series D and Series E preferred
stock was converted automatically into one share of common stock upon the
closing of our initial public offering on September 27, 1999.
All sales of common stock set forth in the table were made in reliance on
Rule 701 under the Securities Act or on Section 4(2) of the Securities Act
and/or Regulation D under the Securities Act. The sales of preferred stock and
debentures convertible into preferred stock were made in reliance on Section
4(2) of the Securities Act and/or Regulation D under the Securities Act. These
sales of preferred stock or convertible debentures were made without general
solicitation or advertising. Each purchaser of preferred stock or convertible
debentures represented that he, she, or it 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 was issued in connection with debt financing the registrant
obtained from the warrant holder. Upon the completion of the registrant's
initial public offering, the warrant was converted into a warrant to
purchase common stock. After the initial public offering, the warrant was
exercised for common stock at an exercise price of $2.683 per share.
(2) The debentures were converted into 1,137,931 shares of common stock.
(3) The debentures were converted into 175,862 shares of common stock.
(4) Stock was issued in connection with the execution of a license agreement and
settlement of pending litigation.
II-4
<PAGE> 127
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herein or incorporated herein by
references:
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<S> <C>
1.01 Form of Underwriting Agreement.**
2.01 Agreement and Plan of Reorganization between the registrant,
a wholly-owned subsidiary of the registrant and Rubric,
Inc., dated December 9, 1999.
3.01 The registrant's Certificate of Incorporation.*
3.02 The registrant's Bylaws.*
3.03 The registrant's Certificate of Designation, filed with the
Secretary of State of Delaware on September 10, 1999.*
3.04 Certificate of Amendment of Certificate of Incorporation.*
3.05 The registrant's Certificate of Retirement, filed with the
Secretary of State of Delaware on November 3, 1999.
4.01 Form of Specimen Certificate for the registrant's common
stock.*
4.02 Fourth Amended and Restated Investors' Rights Agreement,
dated June 30, 1999.*
4.03 Series E Rights Agreement, dated June 30, 1999.*
5.01 Opinion of Fenwick & West LLP regarding legality of the
securities being registered.**
10.01 Form of Indemnity Agreement between the registrant and each
of its directors and executive officers.*
10.02 1996 Equity Incentive Plan and related forms of agreement.*
10.03 1999 Equity Incentive Plan and related forms of agreement.*
10.04 1999 Employee Stock Purchase Plan and related forms of
agreement.*
10.05 Sublease between SaRonix and the registrant dated June 1,
1998.*
10.06 Offer letter for Brian Kelly dated November 10, 1998.*
10.07 Offer letter for Thomas Doyle dated April 12, 1999.*
10.08 Offer letter for Chuck Bay dated January 18, 1998.*
10.09 Separation Agreement between the registrant and Bruce
Armstrong dated April 14, 1999.*
10.10 Broadbase Partner Agreement between the registrant and Indus
International, Inc. dated June 2, 1998, as amended.*
10.11 Amendment of Note and Stock Pledge Agreement between the
registrant and Mark Kremer dated December 2, 1999.
10.12 Employment Agreement between the registrant and Anu Shukla
dated December 9, 1999.
10.13 Employment Agreement between the registrant and Chris Maeda
dated December 9, 1999.
10.14 Offer Letter for Rusty Thomas dated January 4, 2000.
10.15 Rubric, Inc. 1997 Stock Option Plan.**
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.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of Attorney (see page II-7).
27.01 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated into this registration statement by reference to the exhibit of
the same number to the registrant's registration statement on form S-1, File
No. 333-82251, originally filed with the Commission on July 2, 1999, as
subsequently amended.
** To be filed by amendment.
(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, 1998
and 1999 should be read in
II-5
<PAGE> 128
conjunction with the consolidated financial statements of Broadbase Software,
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-6
<PAGE> 129
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 21st day of January, 2000.
BROADBASE SOFTWARE, INC.
By: /s/ CHUCK BAY
------------------------------------
Chuck Bay
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Chuck Bay and Rusty Thomas, 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
dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ CHUCK BAY Chief Executive Officer, President January 21, 2000
- --------------------------------------------- and a Director
Chuck Bay
PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER:
/s/ RUSTY THOMAS Executive Vice President and January 21, 2000
- --------------------------------------------- Chief Financial Officer
Rusty Thomas
DIRECTORS:
/s/ MARK KREMER Chairman of the Board of Directors January 21, 2000
- ---------------------------------------------
Mark Kremer
</TABLE>
II-7
<PAGE> 130
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ KEVIN HARVEY Director January 21, 2000
- ---------------------------------------------
Kevin Harvey
/s/ PAUL LEVY Director January 21, 2000
- ---------------------------------------------
Paul Levy
/s/ NANCY SCHOENDORF Director January 21, 2000
- ---------------------------------------------
Nancy Schoendorf
</TABLE>
II-8
<PAGE> 131
BROADBASE SOFTWARE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<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:
Year Ended December 31, 1997................ $ -- $ -- $-- $ --
Year Ended December 31, 1998................ $ -- $50,000 $-- $50,000
Year Ended December 31, 1999................ $50,000 $ -- $-- $$50,000
</TABLE>
S-1
<PAGE> 132
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<S> <C>
2.01 Agreement and Plan of Reorganization between the registrant,
a wholly-owned subsidiary of the registrant and Rubric,
Inc., dated December 9, 1999.
3.05 The registrant's Certificate of Retirement, filed with the
Secretary of State of Delaware on November 3, 1999.
10.11 Amendment of Note and Stock Pledge Agreement between the
registrant and Mark Kremer dated December 2, 1999.
10.12 Employment Agreement between the registrant and Anu Shukla
dated December 9, 1999.
10.13 Employment Agreement between the registrant and Chris Maeda
dated December 9, 1999.
10.14 Offer letter for Rusty Thomas dated January 4, 2000.
23.02 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
24.01 Power of Attorney (see page II-7).
27.01 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 2.01
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
BROADBASE SOFTWARE, INC.
RUBRIC, INC.
AND
BRONCO ACQUISITION CORP.
DECEMBER 9, 1999
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into as of December 9, 1999, by and among Broadbase Software, Inc., a Delaware
corporation ("Broadbase"), Rubric, Inc., a Delaware corporation ("Rubric"), and
Bronco Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Broadbase ("Newco").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into Rubric in a reverse
triangular merger (the "Merger"), with Rubric to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of this Agreement, a
Certificate of Merger containing the information required by Section 251 of the
Delaware General Corporation Law (the "Certificate of Merger") and the
applicable provisions of the laws of the state of Delaware. Upon the
effectiveness of the Merger, (i) all the outstanding Common Stock and Preferred
Stock of Rubric will be converted into the right to receive Common Stock of
Broadbase and (ii) all warrants and options to purchase Common Stock or
Preferred Stock of Rubric will be assumed and converted into warrants and
options to purchase Common Stock of Broadbase, in the manner and on the basis
determined herein and as provided in the Certificate of Merger.
B. Concurrently with the execution of this Agreement, and as a condition
and inducement to Broadbase's willingness to enter into this Agreement, Rubric
and each of the Stockholders of Rubric listed on Exhibit A (collectively, the
"Principal Stockholders") shall execute and deliver a Voting Agreement in
substantially the form attached hereto as Exhibit B (the "Voting Agreement")
agreeing to vote in favor of this Agreement and the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Broadbase's willingness to enter into this Agreement, certain
employees of Rubric shall execute and deliver to Broadbase employment and
noncompetition agreements with Broadbase and Rubric (the "Employment
Agreements"), to be effective upon the Effective Time (as defined in this
Agreement).
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. The Certificate of Merger will be filed with the
Secretary of State of the State of Delaware as soon as practicable after the
Closing (as defined in Section 6.1 below). The effective time of the Merger (the
"Effective Time") shall be the time of filing of the Certificate of Merger
unless otherwise specified in the Certificate of Merger. Subject to the terms
and conditions of this Agreement and the Certificate of Merger, Newco will be
merged with and into Rubric (such remaining entity, as appropriate, the
"Surviving Corporation") in a statutory merger pursuant to the Certificate of
Merger and in accordance with applicable provisions of Delaware law as follows:
<PAGE> 3
1.1.1 Conversion of Rubric Shares. Each share of Rubric
Common Stock, $0.001 par value per share (the "Rubric Common Stock") that is
issued and outstanding immediately prior to the Effective Time, other than
shares, if any, for which dissenters rights have been or may be perfected in
compliance with applicable law, will, by virtue of the Merger and at the
Effective Time, and without further action on the part of any holder thereof, be
converted into right to receive the Applicable Number (determined in accordance
with Section 1.1.4 hereof) of fully paid and nonassessable shares of Broadbase
Common Stock, $0.001 par value per share ("Broadbase Common Stock"). Each share
of Rubric Preferred Stock, $0.001 par value per share (the "Rubric Preferred
Stock"), that is issued and outstanding immediately prior to the Effective Time,
other than shares, if any, for which dissenters rights have been or may be
perfected in compliance with applicable law, will, by virtue of the Merger and
at the Effective Time, and without further action on the part of any holder
thereof, be converted into a number of shares of Broadbase Common Stock equal to
the Applicable Number multiplied by the number of shares of Rubric Common Stock
into which a share of the applicable series of Rubric Preferred Stock could be
converted immediately prior to the Effective Time.
1.1.2 Conversion of Rubric Options. Effective at the
Effective Time, Broadbase will assume all outstanding options to purchase Rubric
Common Stock (the "Rubric Options"), and each of the Rubric Options shall by its
terms be converted into an option (a "Broadbase Option"), to purchase that
number of shares of Broadbase Common Stock which equals the number of shares of
Rubric Common Stock that could be purchased pursuant to the Rubric Option
immediately prior to the Effective Time multiplied by the Applicable Number
(determined in accordance with Section 1.1.4 hereof), such number of shares
being rounded down to the nearest whole share. The exercise price per share of
Broadbase Common Stock purchasable under each Broadbase Option shall be equal to
the exercise price per share of Rubric Common Stock under the corresponding
Rubric Options divided by the Applicable Number, such exercise price being
rounded up to the nearest whole cent. All of the other terms and conditions of
each Broadbase Option will be the same in all material respects as the
corresponding Rubric Option. It is the intention of the parties that the Rubric
Options assumed by Broadbase qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Rubric
Options qualified as incentive stock options immediately prior to the Effective
Time. No cash will be paid in lieu of fractional shares which are rounded down
pursuant to this section.
1.1.3 Conversion of Rubric Warrants. Effective at the
Effective Time, Broadbase will assume the outstanding warrants to purchase
Rubric Preferred Stock and Common Stock (the "Rubric Warrants"), and each of the
Rubric Warrants shall by its terms be converted into a warrant (a "Broadbase
Warrant") to purchase that number of shares of Broadbase Common Stock which
equals (a) in the case of an Rubric Warrant to purchase Rubric Preferred Stock,
the number of shares of Rubric Common Stock into which the Rubric Preferred
Stock that could be purchased pursuant to the Rubric Warrant immediately prior
to the Effective Time could be converted or (b) in the case of an Rubric Warrant
to purchase Rubric Common Stock, that number of shares of Rubric Common Stock
which could be purchased pursuant to the Rubric Warrant immediately prior to the
Effective Time, in each case multiplied by the Applicable Number (determined in
accordance with Section 1.1.4 hereof), such number of shares being rounded down
to the nearest whole share. The exercise price per share of Broadbase Common
Stock purchasable under each Broadbase Warrant shall be equal to the exercise
price per share of Rubric Common Stock (on an as-if converted to Rubric Common
Stock basis in the case of an Rubric Warrant to purchase Rubric Preferred Stock)
under the corresponding Rubric Warrants divided by the Applicable Number, such
exercise price
-2-
<PAGE> 4
being rounded up to the nearest whole cent. All of the other terms and
conditions of each Broadbase Warrant will be the same in all material respects
as the corresponding Rubric Warrant. No cash will be paid in lieu of fractional
shares which are rounded down pursuant to this section.
1.1.4 Applicable Number. Unless there is an adjustment to
the shares to be issued in the Merger pursuant to Section 1.1.5 below, the
"Applicable Number" shall equal (a) 3,600,000 divided by (b) the sum of the
total number of shares of Rubric Common Stock issued and outstanding at the
Effective Time, plus the total number of shares of Rubric Common Stock issuable
upon conversion of all shares of Rubric Preferred Stock issued and outstanding
at the Effective Time, plus the total number of shares of Rubric Common Stock
issuable upon exercise of all Rubric Options outstanding at the Effective Time,
plus the total number of shares of Rubric Common Stock (on an as-if converted to
Rubric Common Stock basis) issuable upon exercise of all Rubric Warrants
outstanding at the Effective Time.
1.1.5 Adjustments for Capital Changes. If prior to the
Merger, Broadbase recapitalizes either through a split-up of the outstanding
shares of Broadbase Common Stock into a greater number, or through a combination
of such outstanding shares into a lesser number, or reorganizes, reclassifies or
otherwise changes such outstanding shares into the same or a different number of
shares of other classes (other than through a split-up or combination of shares
provided for in the previous clause), or declares a dividend on its outstanding
shares payable in shares or securities convertible into shares or sets a record
date with respect to any of the foregoing that is before the Effective Time, the
calculation of the Applicable Number and the Escrow Shares (as defined herein)
will be adjusted appropriately.
1.1.6 Conversion of Newco Shares. Each share of Newco
Common Stock ("Newco Common Stock"), that is issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without further
action on the part of the sole stockholder of Newco, be converted into and
become one (1) share of Rubric Common Stock that is issued and outstanding
immediately after the Effective Time, and the shares of Rubric Common Stock into
which the shares of Newco Common Stock are so converted shall be the only shares
of Rubric Common Stock that are issued and outstanding immediately after the
Effective Time.
1.2 Escrow. Broadbase will deduct from the number of shares of
Broadbase Common Stock deliverable to the holders of Rubric Common Stock and
Rubric Preferred Stock, and as soon as practicable after the Effective Time, and
in accordance with the provisions of Section 10 hereof, Broadbase will deposit
into escrow, a certificate representing ten percent (10%) of the shares of
Broadbase issuable in the Merger to such holders with respect to the shares of
Broadbase, on a pro rata basis, rounded down to the nearest whole share (the
"Escrow Shares"). The Escrow Shares shall be held by State Street Bank & Trust
Company (or such other institution as shall be agreed upon by Broadbase and the
Shareholder Representative (as defined in Section 10.7)) as escrow agent (the
"Escrow Agent"), in accordance with and subject to the provisions of an Escrow
Agreement substantially in the form of Exhibit C (the "Escrow Agreement"). The
Escrow Shares shall serve as collateral for the indemnification obligations
under Section 10 of the persons who were holders of Rubric Common Stock and
Rubric Preferred Stock immediately prior to the Effective Time. To the extent
not used for such purposes, such shares shall be released, all as provided in
Section 10 hereof.
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1.3 Fractional Shares. No fractional shares of Broadbase Common
Stock will be issued in connection with the Merger, but in lieu thereof, the
holder of any shares of Rubric Common Stock and Preferred Stock who would
otherwise be entitled to receive a fraction of a share of Broadbase Common Stock
will receive from Broadbase, promptly after the Effective Time, an amount of
cash equal to the average closing price as quoted on the Nasdaq National Market
and as reported in the Wall Street Journal of one share of Broadbase Common
Stock for the ten trading days prior to and including the trading day ending one
day prior to the date of the Effective Time (the "Average Price") multiplied by
the fraction of a share of Broadbase Common Stock to which such holder would
otherwise be entitled.
1.4 Effects of the Merger. At the Effective Time: (a) the
separate existence of Newco will cease and Newco will be merged with and into
Rubric and Rubric will be the Surviving Corporation pursuant to the terms of the
Certificate of Merger; (b) the Certificate of Incorporation and Bylaws of Rubric
will continue unchanged to be the Certificate of Incorporation and Bylaws of the
Surviving Corporation; (c) each share of Rubric Common Stock and Rubric
Preferred Stock outstanding (collectively "Outstanding Rubric Stock")
immediately prior to the Effective Time will be converted as provided in this
Section 1, subject to the escrow provisions of Section 10 hereof; (d) each
Rubric Option and Rubric Warrant outstanding immediately prior to the Effective
Time will be converted as provided in this Section 1; (e) each share of Newco
Common Stock outstanding immediately prior to the Effective Time will be
converted into one (1) outstanding share of Rubric Common Stock; (f) the Board
of Directors and executive officers of Broadbase will remain unchanged and the
sole director of Newco immediately prior to the Effective Time will become the
sole director of the surviving corporation and the officers of Newco will become
the officers of the Surviving Corporation; and (g) the Merger will, at and after
the Effective Time, have all of the effects provided by applicable law.
Immediately following the Effective Time, the Surviving Corporation shall cause
to be filed with the Secretary of State of Delaware a Certificate of
Incorporation substantially in the form of Exhibit 1.4.
1.5 Further Assurances. Rubric agrees that if, at any time after
the Effective Time, Broadbase considers or is advised that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest, perfect
or confirm in Broadbase title to any property or rights of Rubric as provided
herein, Broadbase and any of its officers are hereby authorized by Rubric to
execute and deliver all such proper deeds, assignments and assurances and do all
other things necessary or desirable to vest, perfect or confirm title to such
property or rights in Broadbase and otherwise to carry out the purposes of this
Agreement, in the name of Rubric or otherwise.
1.6 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The shares of Broadbase
Common Stock issued in the Merger will be issued solely in exchange for the
issued and outstanding shares of Rubric Common Stock and Preferred Stock
pursuant to this Agreement, the Broadbase Options issued in the Merger will be
issued solely in exchange for the outstanding Rubric Options and the Broadbase
Warrants issued in the Merger will be issued solely in exchange for the
outstanding Rubric Warrants, and no other transaction other than the Merger
represents, provides for or is intended to be an adjustment to the consideration
paid for the Rubric Common Stock, Rubric Options or Rubric Warrants. Except for
cash paid in lieu of fractional shares, no consideration that could constitute
"other property" within the meaning of Section 356 of the Code will be paid by
Broadbase for shares of Rubric Common Stock, Rubric Options or Rubric
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Warrants in the Merger. In addition, Broadbase represents that it presently
intends, and that at the Effective Time it will intend, to continue Rubric's
historic business or use a significant portion of Rubric's business assets in a
business.
1.7 Hart-Scott-Rodino Filings. Each of Broadbase and Rubric will
promptly prepare and file the applicable notices (if any) required to be filed
by it under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), and comply promptly with any requests to it from the Federal Trade
Commission or United States Department of Justice for additional information.
1.8 "Purchase" Accounting Treatment. The parties intend that the
Merger be treated as a "purchase" for accounting purposes.
1.9 Limitations on Resale. The shares of Broadbase Common Stock
issued in the Merger (or issuable upon exercise of warrants or options that are
assumed by Broadbase) may not be directly or indirectly offered, sold, disposed
of, transferred or pledged until the earlier of (i) March 19, 2000, (ii) in the
case of any holder of shares of Broadbase Common Stock issued in the Merger (or
issuable upon such exercise), such time as substantially all other persons that
hold a similar number of shares of Broadbase Common Stock and who are bound by
similar lock-ups are released from such lock-ups, or (iii) in the case of former
holders of Rubric Preferred Stock, such time as any holder of Broadbase Common
Stock issued on conversion of BroadBase preferred stock is released from any
lock-up executed by them in connection with BroadBase's initial public offering.
If, following the Effective Time but prior to March 19, 2000, Broadbase shall
consummate a public offering of its Common Stock in which shares are being sold
by existing stockholders of Broadbase, Broadbase shall use all reasonable
efforts to offer to each holder of shares of Broadbase Common Stock issued in
the Merger the right to include in such public offering a percentage of such
shares held by such holder as is equal (or, at the election of Broadbase) to the
percentage of shares of Broadbase Common Stock beneficially owned by the
Shareholder (as defined in the Fourth Amended and Restated Investors' Rights
Agreement dated as of June 30, 1999 by and among Broadbase and certain holders
of Broadbase Common Stock or warrants to purchase Broadbase Common Stock (the
"Investor Rights Agreement")) that are included in such public offering, on the
same terms as are applicable to the Shareholder (including but not limited to
payment of expenses and indemnification). If Broadbase offers to include in such
public offering any shares of Broadbase Common Stock issued in the Merger, on
such terms, then the holder of such shares of Broadbase Common Stock will be
subject to the same restrictions on transfer and disposition of shares of
Broadbase Common Stock following such public offering as are applicable to the
Shareholder pursuant to the underwriting agreement relating to such public
offering; provided that each holder of a number of shares of Broadbase Common
Stock issued on conversion of Broadbase preferred stock representing at least
three percent of the outstanding shares of Broadbase Common Stock shall have
agreed to a restriction on sales of Broadbase Common Stock for the same period.
If the shares of Broadbase Common Stock beneficially owned by such holder that
Broadbase shall offer to include in such public offering and which such holder
shall be entitled to
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include therein (subject to appropriate prospectus disclosure and execution of
the underwriting agreement and customary selling stockholder documents)
represent 20% or more of the aggregate number of shares of Broadbase Common
Stock issued to such holder in the Merger, then all of the shares of Broadbase
Common Stock beneficially owned by such holder will be subject to such
restrictions, and if the shares of Broadbase Common Stock beneficially owned by
such holder that Broadbase shall offer to include in such public offering and
which such holder shall be entitled to include therein (subject to appropriate
prospectus disclosure and execution of the underwriting agreement and customary
selling stockholder documents) represent less than 20% of the aggregate number
of shares of Broadbase Common Stock issued to such holder in the Merger, then
the number of shares of Broadbase Common Stock held by such holder that will be
subject to such restrictions will equal all of the shares of Broadbase Common
Stock beneficially owned by such holder minus a number of shares of Broadbase
Common Stock that is equal to the product of (i) 20% of the aggregate number of
shares of Broadbase Common Stock issued to such holder in the Merger, minus (ii)
the number of shares of Broadbase Common Stock beneficially owned by such holder
that Broadbase shall offer to include in such public offering and which such
holder shall be entitled to include therein (subject to appropriate prospectus
disclosure and execution of the underwriting agreement and customary selling
stockholder documents). The obligation of Broadbase to use all reasonable
efforts to offer the right to participate in such offering shall include the
obligation to seek to obtain any required amendment to, or consent under, the
Investors' Rights Agreement (but not the obligation to surrender any right or
pay or grant any consideration in exchange therefore), and if Broadbase shall
not be able to obtain any such consent or amendment, then Broadbase shall not be
required to offer the right to participate in such offering and any restrictions
on transfer or disposition under this paragraph after March 19, 2000 of shares
of Broadbase Common Stock issued in the Merger shall not apply.
Each holder of shares of Outstanding Rubric Stock shall be required, as
a condition to the delivery of shares of Broadbase Common Stock to such holder
following the Effective Time, to execute a "lock-up agreement" in the form
attached hereto as Exhibit D (the "Lock-up Agreements") under which each such
holder shall agree to be bound by the restrictions described in the preceding
paragraph.
In addition to the foregoing, the shares of Broadbase Common Stock issued to
holders of Outstanding Rubric Stock that are employees of Rubric at the
Effective Time will be subject to restrictions on transfer pursuant to
Broadbase's insider trading policy, on the same terms as apply to other
employees of Broadbase.
2. REPRESENTATIONS AND WARRANTIES OF RUBRIC
Rubric hereby represents and warrants that, except as set forth
in the Rubric disclosure letter (the "Rubric Disclosure Letter") delivered by
Rubric to Broadbase herewith, including inter alia items in the Rubric
Disclosure Letter referred to as "Items" below:
2.1 Organization and Good Standing. Rubric is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and is
qualified as a foreign corporation in each jurisdiction (as listed on Item 2.1)
in which a failure to be so qualified could reasonably be expected to have a
Rubric Material Adverse Effect (as defined below). For purposes of this
Agreement, the term "Material Adverse Effect" when used in connection with an
entity means any change, event, violation, inaccuracy, circumstance or effect
that is, or could reasonably be expected to be, materially adverse to (A) the
business, assets (including intangible assets), capitalization, financial
condition or results of operations of such entity, or (B) the ability of such
person to perform its obligations under this Agreement or to consummate the
transactions provided for hereunder. "Broadbase Material Adverse Effect" means a
Material Adverse Effect with respect to Broadbase, and "Rubric Material Adverse
Effect" means Material Adverse Effect with respect to Rubric.
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2.2 Power, Authorization and Validity.
2.2.1 Rubric has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement and all agreements to which Rubric is or will be a party that are
required to be executed pursuant to or in connection with this Agreement (the
"Rubric Ancillary Agreements"). This Agreement and the Rubric Ancillary
Agreements have been duly and validly approved by the unanimous vote of the
Rubric Board of Directors.
2.2.2 No filing, authorization or approval, governmental
or otherwise, is necessary to enable Rubric to enter into and to perform its
obligations under this Agreement and the Rubric Ancillary Agreements, except for
(a) the filing of the Certificate of Merger with the Secretary of State of
Delaware, the filing of such officers' certificates and other documents as are
required to effectuate the Merger under Delaware law and the filing of
appropriate documents with the relevant authorities of the states other than
Delaware in which Rubric is qualified to do business, if any, (b) such filings
as may be required to comply with federal and state securities laws including
the Permit Application (as defined in Section 4.6), (c) the approval of the
Stockholders of Rubric (the "Rubric Stockholders") of the transactions
contemplated hereby, and (d) such filings as may be required by the HSR Act.
2.2.3 This Agreement and the Rubric Ancillary Agreements
are, or when executed and delivered by Rubric and the other parties thereto will
be, valid and binding obligations of Rubric enforceable against Rubric in
accordance with their respective terms, except as to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally, (b) rules of law governing specific performance, injunctive relief
and other equitable remedies and (c) the enforceability of provisions requiring
indemnification; provided, however, that the Certificate of Merger and the
Rubric Ancillary Agreements will not be effective until the earlier of the
Effective Time or the date provided for therein.
2.3 Capitalization.
(a) Authorized/Outstanding Capital Stock. As of the date
hereof, the authorized capital stock of Rubric consists of 75,000,000 shares of
Rubric Common Stock, $0.001 par value per share, and 10,000,000 shares of
Preferred Stock, $0.001 par value per share, of which 5,300,000 shares are
designated as Series A Preferred Stock and 4,000,000 shares are designated as
Series B Preferred Stock. As of the date hereof, there are issued and
outstanding:5,312,169 shares of Rubric Common Stock, 5,225,000 shares of Series
A Preferred Stock, each of which is convertible into one share of Rubric Common
Stock, and 3,771,930 shares of Series B Preferred Stock, each of which is
convertible into one share of Rubric Common Stock. All issued and outstanding
shares of Rubric Common Stock and Preferred Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any right
of rescission and have been offered, issued, sold and delivered by Rubric in
compliance with all registration or qualification requirements (or applicable
exemptions therefrom) of applicable federal and state securities laws. Listed on
Item 2.3 are the names, number and type of shares held by each of the Rubric
Stockholders as of the date hereof, to be updated as of the Closing Date.
(b) Options/Rights. Except as listed on Item 2.3(b), there
are no stock appreciation rights, options, warrants, calls, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any of Rubric's authorized but unissued capital
stock; there are no options, warrants, calls, commitments,
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conversion privileges or preemptive or other rights or agreements to which
Rubric is a party involving the purchase or other acquisition of any shares of
Rubric Common Stock or Rubric Preferred Stock other than rights of Rubric to
repurchase shares of Rubric Common Stock upon termination of employment pursuant
to the terms of written agreements with Rubric; there is no liability for
dividends accrued but unpaid; and there are no voting agreements, registration
rights, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable federal and state securities laws)
applicable to any of Rubric's outstanding securities.
2.4 Subsidiaries and Guaranties. Rubric has no subsidiaries.
Rubric does not have any equity interest, direct or indirect, in any
corporation, partnership, joint venture or other business entity. Rubric is not
a guarantor of any obligation of a third party, whether or not such third party
is related to or affiliated with Rubric.
2.5 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement or any Rubric Ancillary Agreement, nor the
consummation of the transactions provided for herein or therein, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, (a) any provision of the
Certificate of Incorporation or Bylaws of Rubric, as currently in effect, (b)
any material instrument or contract to which Rubric is a party or by which
Rubric is bound, or (c) any federal, state, local or foreign judgment, writ,
decree, order, statute, rule or regulation applicable to Rubric or its assets or
properties. The consummation of the Merger and succession by Broadbase to all
rights, licenses, franchises, leases and agreements of Rubric under any Rubric
Contracts (as defined in Section 2.11) will not require the consent of any third
party (except as set forth in Item 2.5) and will not have a material adverse
effect upon any rights, licenses, franchises, leases or agreements of Rubric
pursuant to the terms thereof.
2.6 Litigation. There is no action, proceeding or investigation
pending, nor, to Rubric's knowledge, are any of the foregoing threatened against
Rubric before any court or administrative agency that, if determined adversely
to Rubric, may reasonably be expected to have a Rubric Material Adverse Effect.
To the knowledge of Rubric, there is no basis for any person, firm, corporation
or entity to assert a claim against Rubric, or Broadbase as successor in
interest to Rubric, based upon: (a) ownership or rights to ownership of any
shares of Rubric Common Stock or Preferred Stock or other securities, (b) any
rights as a Rubric securities holder, including, without limitation, any option,
warrant or other right to acquire any Rubric securities, any preemptive rights
or any rights to notice or to vote, or (c) any rights under any agreement
between Rubric and any Rubric securities holder or former Rubric securities
holder in such holder's capacity as such. There is no action, suit, proceeding,
claim, arbitration or investigation pending as to which Rubric has received
notice of assertion against Rubric, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
2.7 Rubric Financial Statements. Rubric has delivered to
Broadbase in Item 2.7 Rubric's balance sheet as of December 31, 1998 and its
balance sheet as of September 30, 1999 (the "Balance Sheet Date"), Rubric's
income statements and statements of cash flows for the period from inception
through December 31, 1997 and the year ended December 31, 1998 and its income
statement and statement cash flows for the period from January 1, 1999 through
September 30, 1999 (collectively, the "Rubric Financial Statements"). The Rubric
Financial Statements (a) are in accordance with the books and records of Rubric,
(b) fairly and accurately represent the financial condition of Rubric at the
respective dates specified therein and the results of operations for the
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respective periods specified therein and (c) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except that they do not not include footnotes and related disclosures required
by GAAP) and, in the opinion of management, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position, results of operations and cash flows of Rubric for the
interim period. Rubric has no material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected, reserved against or disclosed in the
Rubric Financial Statements or on Item 2.7, except for those that may have been
incurred after the Balance Sheet Date in the ordinary course of Rubric's
business, consistent with past practice and that are in an aggregate amount not
to exceed $100,000.
2.8 Taxes. Rubric has filed all federal, state, local and foreign
tax and material information returns required to be filed prior to the date
hereof, has paid all taxes required to be paid in respect of all periods prior
to the date hereof for which returns have been filed, has made all necessary
estimated tax payments, and has no liability for taxes in excess of the amount
so paid, except to the extent adequate reserves have been established in the
Rubric Financial Statements. True, correct and complete copies of all such tax
and information returns have been provided or made available by Rubric to
Broadbase. Rubric is not delinquent in the payment of any tax or in the filing
of any tax returns, and no deficiencies for any tax have been threatened,
claimed, proposed or assessed which have not been settled or paid. No tax return
of Rubric has ever been audited by the Internal Revenue Service or any state
taxing agency or authority. For the purposes of this Section 2.8, the terms
"tax" and "taxes" include all federal, state, local and foreign income, gains,
franchise, excise, property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, governmental charges,
fees, levies or assessments (whether payable directly or by withholding), and,
with respect to such taxes, any estimated tax, interest and penalties or
additions to tax and interest on such penalties and additions to tax. Rubric
does not have any current or deferred federal income tax liabilities and will
not as a result of the merger become liable for any income tax not adequately
reserved against on the Rubric Financial Statements. Rubric has not filed a
consent pursuant to Section 341(f) of the Code.
2.9 Title to Properties. Rubric has good and marketable title to
all of its assets as shown on the balance sheet as of the Balance Sheet Date
included in the Rubric Financial Statements, free and clear of all liens,
charges or encumbrances (other than for taxes not yet due and payable). Except
as set forth in Item 2.9, there are no UCC financing statements of record with
the State of California naming Rubric as debtor nor does Rubric own property in
any other state. All leases of real or personal property to which Rubric is a
party are fully effective and afford Rubric peaceful and undisturbed possession
of the subject matter of the lease. To its knowledge, Rubric is not in violation
of any zoning, building, safety or environmental ordinance, regulation or
requirement or other law or regulation applicable to the operation of owned or
leased properties, and Rubric has not received any notice of such violation with
which it has not complied or had waived.
2.10 Absence of Certain Changes. Since the Balance Sheet Date,
Rubric has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and except as set forth in Item 2.10 or permitted by the terms of this
Agreement, since the Balance Sheet Date there has not been with respect to
Rubric:
(a) any Rubric Material Adverse Effect;
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(b) any contingent liability incurred by Rubric as
guarantor or surety with respect to the obligations of others which exceed in
the aggregate $150,000;
(c) any mortgage, encumbrance or lien placed on any of the
properties of Rubric;
(d) any obligation or liability incurred by Rubric other
than in the ordinary course of business, which obligations or liabilities do not
exceed in the aggregate $100,000 through the date of this Agreement;
(e) any purchase, license, sale or other disposition, or
any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the properties, assets or goodwill of Rubric other than
in the ordinary course of business and consistent with past practice;
(f) any damage, destruction or loss, whether or not
covered by insurance that would have or is reasonably likely to have a Rubric
Material Adverse Effect;
(g) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of Rubric, any split, stock dividend, combination or recapitalization of
the capital stock of Rubric or any direct or indirect redemption, purchase or
other acquisition by Rubric of the capital stock of Rubric, other than
repurchases of unvested shares subject to a repurchase right in favor of Rubric
in connection with the termination of a relationship with any employee,
consultant, officer or director;
(h) any labor dispute or claim of unfair labor practices,
any change in the compensation payable or to become payable to any of Rubric's
officers, employees or agents earning compensation at an anticipated annual rate
in excess of $100,000, or any bonus payment or arrangement made to or with any
of such officers, employees or agents; or any change in the compensation payable
or to become payable to any of Rubric's other officers, employees or agents
(other than normal annual raises for non-officers in accordance with past
practice) or any bonus payment or arrangement made to or with any of such
officers, employees or agents other than normal bonuses or compensation
increases granted prior to the date of this Agreement as disclosed on Item
2.10(h) hereof;
(i) any change with respect to the management,
supervisory, development or other key personnel of Rubric (the management,
supervisory, development and other key personnel of Rubric are listed on Item
2.10(i) hereof);
(j) any payment or discharge of a lien or liability
thereof, which lien or liability was not either (i) shown on the balance sheet
as of the Balance Sheet Date included in the Rubric Financial Statements or (ii)
incurred in the ordinary course of business after the Balance Sheet Date;
(k) any obligation or liability incurred by Rubric to any
of its officers, directors or Stockholders, or any loans or advances made to any
of its officers, directors, Stockholders or affiliates, except normal
compensation and expense allowances payable to officers or directors;
(l) any loss of one or more material Rubric customers or
such number of Rubric customers which together represent a material amount of
business;
(m) any amendment or change in the Certificate of
Incorporation or Bylaws of Rubric;
(n) any issuance or sale of any debt or equity securities
(including but not limited to stock) of Rubric or of any options or other rights
to acquire from Rubric, directly or
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indirectly, any debt or equity securities (including but not limited to stock)
of Rubric other than the issuance of Rubric Common Stock and Rubric Preferred
Stock pursuant to the exercise of options and warrants, or the conversion of
Rubric Preferred Stock outstanding as of the date of this Agreement, the
granting of options to the extent permitted under Section 4.3(a) hereof and the
issuance of additional Rubric Options for an aggregate of 300,000 shares of
Rubric Common Stock per calendar month (and the issuance of Rubric Common Stock
upon the exercise thereof) to new hires in the ordinary course of business
consistent with past practices and Rubric's normal guidelines in effect prior to
the date of this Agreement for option grants to new hires in such positions;
(o) any execution, amendment, relinquishment, termination
or non-renewal by Rubric of, any material contract, lease, transaction or
legally binding commitment other than in the ordinary course of Rubric's
business or, to Rubric's knowledge, any written or oral indication or assertion
by the other party thereto of its desire to so amend, relinquish, terminate or
not renew any such contract, lease transaction or legally binding commitment.
2.11 Agreements and Commitments. Except as set forth in Item 2.11
and delivered or made available by Rubric to Broadbase herewith, or as listed in
Item 2.12, Item 2.15.3 or Item 2.15.6 as required by Section 2.12, Section
2.15.3 or Section 2.15.6, as the case may be, Rubric is not a party or subject
to any oral or written executory agreement, obligation or commitment that is
material to Rubric, its financial condition or business or which is described
below and is not terminable within 60 days without cost or penalty to Rubric,
including but not limited to the following:
(a) Any contract, commitment, letter agreement, quotation
or purchase order providing for payments by or to Rubric in an amount with
respect to any single transaction of (i) $100,000 or more in the ordinary course
of business or (ii) $50,000 or more not in the ordinary course of business;
(b) Any license agreement under which Rubric is licensor
(except for any nonexclusive software license granted by Rubric to end-user
customers where the form of the license, excluding standard immaterial
deviations, has been provided or made available to Broadbase's counsel); or
under which Rubric is licensee (except for standard "shrink wrap" licenses for
off-the-shelf software products);
(c) Any agreement by Rubric to encumber, transfer or sell
any material rights in or with respect to any Rubric Intellectual Property (as
defined in Section 2.12 hereof) except in the ordinary course of business
consistent with past practice;
(d) Any agreement, contract or commitment currently in
force for hosting, data center, transaction processing or other services related
to the Rubric website and provision of hosted versions of Rubric products and
services;
(e) Any agreement for the sale or lease of real or
personal property involving more than $100,000 per year;
(f) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of Rubric's products;
(g) Any franchise agreement or financing statement;
(h) Any stock redemption or purchase agreement;
(i) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the payment
of royalties to any other person;
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(j) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness or any
advance to any employee of Rubric incurred or made in the ordinary course of
business, and except as disclosed in the Rubric Financial Statements;
(k) Any contract containing covenants purporting to limit
Rubric's freedom to compete in any line of business in any geographic area or to
sell products or services to a specific entity; or
(l) Any agreement, contract or commitment currently in
force to provide source code to any third party for any product or technology;
(m) Any contract or commitment for the employment of any
officer, employee or consultant of Rubric or any other type of contract or
understanding with any officer, employee or consultant of Rubric that is not
immediately terminable by Rubric without cost or liability.
All agreements, obligations and commitments listed in Item
2.11, Item 2.12, Item 2.15.3 or Item 2.15.6 as required by Section 2.11, Section
2.12, Section 2.15.3 or Section 2.15.6, as the case may be (the "Rubric
Contracts"), are valid and in full force and effect, and except as expressly
noted, a true and complete copy of each has been delivered or made available to
Broadbase. Except as noted on Item 2.11, neither Rubric nor, to the knowledge of
Rubric, any other party is in material breach of or default under any material
term of any such agreement, obligation or commitment. Rubric has no liability
for renegotiation of government contracts or subcontracts which are material to
Rubric, its financial condition, business or prospects.
2.12 Intellectual Property. Rubric owns all right, title and
interest in, or has the right to use, all patent applications, patents,
trademark applications, trademarks, service marks, trade names, URLs, copyright
applications, copyrights, trade secrets, know-how, databases, database
architecture, data collections, technology and other intellectual property and
proprietary rights used in or reasonably necessary to the conduct of its
business as presently conducted and the business of the development, production,
marketing, licensing and sale of commercial products (whether or not such
products are still in the development stage) or services using such intellectual
property and proprietary rights ("Rubric Intellectual Property"). Rubric has
taken commercially reasonable measures to protect all Rubric Intellectual
Property, and, except as set forth on Item 2.12, to the knowledge of Rubric,
Rubric is not aware of any infringement of any Rubric Intellectual Property by
any third party. Set forth on Item 2.12 delivered to Broadbase herewith is a
true and complete list of all copyright, mask work and trademark registrations
and applications and all patents and patent applications for Rubric Intellectual
Property owned by Rubric. Rubric is not aware of any loss, cancellation,
termination or expiration of any such registration or patent except as set forth
on Item 2.12. To the knowledge of Rubric, the business of Rubric as conducted as
of the date hereof does not, and the business of the development, production,
marketing, licensing and sale of commercial products and services using such
intellectual property and proprietary rights after the Effective Time will not
cause Rubric to, infringe or violate any of the patents, trademarks, service
marks, trade names, mask works, copyrights, trade secrets, proprietary rights or
other intellectual property of any other person, and Rubric has not received any
written or oral claim or notice of infringement or potential infringement of the
intellectual property of any other person which could be reasonably expected to
have a Rubric Material Adverse Effect . To its knowledge, Rubric has no
restrictions on its worldwide right to reproduce, manufacture, sell, license and
distribute all of its products and services (such products and services being
set forth in Item 2.12) and the right to use all of its customer and supplier
lists, and it is not using any confidential information or trade secrets of any
former employer of any past or present employees. To the knowledge of Rubric,
Rubric is not using any
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confidential information or trade secrets of any past or present employees.
Except as set forth in Item 2.12, Rubric has not granted any reseller,
distributor, sales representative, original equipment manufacturer, value added
reseller or other third party any right to reproduce, manufacture, sell, license
or distribute any of its products or services in any market segment or
geographic location.
2.13 Compliance with Laws. Rubric has complied, or prior to the
Closing Date (as defined in Section 6.1 hereof) will have complied, and is or
will be at the Closing Date (as defined in Section 6.1 hereof) in compliance, in
all respects material to Rubric, with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to Rubric or to the assets, properties and business of
Rubric, including, without limitation: (a) all applicable federal and state
securities laws and regulations, (b) all applicable federal, state and local
laws, ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing, ownership
or management of Rubric's owned, leased or licensed real or personal property,
products or technical data, (ii) employment or employment practices, terms and
conditions of employment, or wages and hours or (iii) safety, health, fire
prevention, environmental protection (including toxic waste disposal and related
matters described in Section 2.19 hereof), building standards, zoning or other
similar matters, (c) the Export Administration Act and regulations promulgated
thereunder or other laws, regulations, rules, orders, writs, injunctions,
judgments or decrees applicable to the export or re-export of controlled
commodities or technical data, (d) the Immigration Reform and Control Act and
(e) all governmental and nongovernmental regulations related to the operation
and use of the Internet. Rubric has received all material permits and approvals
from, and has made all material filings with, third parties, including
government agencies and authorities, that are necessary to the conduct of its
business as presently conducted.
2.14 Certain Transactions and Agreements. No person who is an
officer or director of Rubric, or a member of any officer's or director's
immediate family, has any employment or consulting agreement with any firm or
corporation that competes with Rubric or Broadbase (except with respect to any
interest in less than 1% of the outstanding voting shares of any corporation
whose stock is publicly traded). No person who is an officer or director of
Rubric, or any member of any officer's or director's immediate family, is
directly or indirectly interested in any contract or informal arrangement with
Rubric, including, but not limited to, any loan arrangements, except for
compensation for services as an officer (listed in Item 2.15.3), director or
employee of Rubric and except for the normal rights of a Stockholder,
warrantholder or optionholder. None of such officers or directors or family
members has any interest in any (a) Rubric Intellectual Property or (b) property
(other than Rubric Intellectual Property) used in the business of Rubric whether
such property is real or personal, tangible or intangible.
2.15 Employees.
2.15.1 Except as set forth in Item 2.15.1, (i) Rubric has
no employment contract or consulting agreement currently in effect that is not
terminable at will without penalty (subject to such implied employment doctrines
such as the covenant of good faith and fair dealing) or payment of compensation
by Rubric (other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions) and (ii)
all employees and consultants of Rubric have executed Rubric's standard form of
assignments of copyright and other intellectual property rights to Rubric.
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2.15.2 Rubric (a) has never been and is not now subject to
a union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (d) has no current labor dispute. Rubric has good
labor relations, and Rubric has no knowledge of any facts indicating that the
consummation of the transactions provided for herein will have a material
adverse effect on its labor relations, and has no knowledge that any of its key
development or other employees (each of whom is listed on Item 2.15.2) intends
to leave its employ.
2.15.3 Item 2.15.3 delivered by Rubric to Broadbase
herewith contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by Rubric or any trade or business which is treated as a single
employer with Rubric within the meaning of the Code Section 414(b), (c), (m) or
(o) (each an "ERISA Affiliate") (the "Employee Plans"), including without
limitation all "employee benefit plans" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Rubric
shall deliver no more than ten days after the date of this Agreement to
Broadbase a true and complete copy of, to the extent applicable, (a) all
Employee Plans, (b) the most recent annual reports (Form 5500s), (c) each trust
agreement related to such Employee Plans, (d) most recent summary plan
description for each Employee Plan for which a description is required, (e) the
most recent Internal Revenue Service determination letter issued with respect to
any Employee Plan, and (f) any contract regarding the funding arrangement for
any Employee Plan. Except as set forth in Item 2.15.3, each of the Employee
Plans, and its operation and administration, is in compliance in all material
respects with each of the respective Employee Plans' terms and all applicable,
federal, state, local and other governmental laws and ordinances, orders, rules
and regulations, including the requirements of ERISA and the Code. Except as set
forth in Item 2.15.3, all such Employee Plans that are "employee pension benefit
plans" (as defined in Section 3(2) of ERISA) which are intended to qualify under
Section 401(a) of the Code have received favorable determination opinion,
notification or advisory letters with respect to such plans that such plans
comply with the Tax Reform Act of 1986 or have remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified states of each such Employee Plan. In addition, Rubric has
never been a participant in any "prohibited transaction," within the meaning of
Section 406 of ERISA with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which Rubric sponsors as employer or in which
Rubric participates as an employer, which was not otherwise exempt pursuant to
Section 408 of ERISA (including, but not limited to, any individual exemption
granted under Section 408(a) of ERISA), or which could result in an excise tax
under Section 4975 of the Code. Except as set forth in Item 2.15.3, no Employee
Plans will be subject to any material surrender fees or service fees upon
termination other than the normal and reasonable administrative fees associated
with the termination of benefit plans. Except as set forth in Item 2.15.3, no
Employee Plans will be subject to any surrender fees or service fees upon
termination other than the normal and reasonable administrative fees associated
with the termination of benefit plans. All Employee Plans, to the extent
applicable, are in compliance, with (a) the continuation coverage requirements
of Section 4980B of the Code and Sections 601 through 608 of ERISA, (b) the
Americans with Disabilities Act of 1990, as amended, and (c) the Family Medical
Leave Act of 1993, as amended, and the regulations thereunder.
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2.15.4 To Rubric's knowledge, no employee of Rubric is in
material violation of any term of any employment contract, patent disclosure
agreement or noncompetition agreement or any other contract or agreement, or any
restrictive covenant, relating to the right of any such employee to be employed
by Rubric or to use trade secrets or proprietary information of others, and the
employment of any employee of Rubric does not subject Rubric to any material
liability to any third party.
2.15.5 Except as set forth in Item 2.15.5, Rubric is not a
party to any (a) agreement with any employee of Rubric (i) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Rubric in the nature of any of the
transactions contemplated by this Agreement, the Agreement of Merger or the
Certificate of Merger, (ii) providing any term of employment or compensation
guarantee or (iii) providing severance benefits or other benefits after the
termination of employment of such employee regardless of the reason for such
termination of employment, or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement, the Certificate of
Merger or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement and the
Certificate of Merger. Except as set forth on Item 2.15.5, Rubric is not
obligated to make any parachute payment, as defined in Section 280G(b)(2) of the
Code, nor will any parachute payment be deemed to have occurred as a result of
the transactions contemplated by this Agreement or the Certificate of Merger.
2.15.6 A list of all employees, officers and consultants
of Rubric and their current compensation and benefits as of the date of this
Agreement is set forth on Item 2.15.6.
2.15.7 All contributions required by Rubric under the
terms of any of the Employee Plans have been made or accrued on Rubric's
financial statements, and no further contributions will be due or will have
accrued thereunder as of the Closing Date.
2.16 No Brokers. Except as set forth in Item 2.16, Rubric is not
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement or the Certificate of Merger or in connection with any transaction
provided for herein or therein.
2.17 Disclosure. This Agreement and its exhibits and schedules,
taken together, do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
2.18 Insurance. Rubric maintains, and at all times during the
prior three years, maintained, fire and casualty, workers compensation, general
liability, business interruption and product liability insurance (as listed on
Item 2.18) which it believes to be reasonably prudent for similarly sized and
similarly situated businesses. Item 2.18 sets forth all claims made under
insurance policies since December 31, 1997 and the premiums that apply with
respect to such insurance policies as of the date of this Agreement. Except as
set forth on Item 2.18, Rubric has not changed insurance carriers since December
31, 1997.
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2.19 Environmental Matters.
2.19.1 During the period that Rubric has leased the
premises currently occupied by it and those premises occupied by it since the
date of its incorporation, to Rubric's best knowledge, there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on any such premises. Rubric has no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to Rubric having taken possession of any
of such premises. For purposes of this Agreement, the terms "disposal,"
"release," and "threatened release" have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the purposes of this
Section 2.22, "Hazardous Materials" mean any hazardous or toxic substance,
material or waste which is or becomes prior to the Closing Date (as defined in
Section 6.1 hereof) regulated under, or defined as a "hazardous substance,"
"pollutant," "contaminant," "toxic chemical," "hazardous material," "toxic
substance" or "hazardous chemical" under (i) CERCLA; (ii) the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (iii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (iv)
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; (v) the
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq.; (vi)
regulations promulgated under any of the above statutes; or (vii) any other
applicable federal, state or local statute, ordinance, rule or regulation that
has a scope or purpose similar to those identified above.
2.19.2 To Rubric's knowledge, during the time that Rubric
has leased the premises, none of the premises currently leased by Rubric or any
premises previously occupied by Rubric is in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions in such premises.
2.19.3 To Rubric's knowledge, during the time that Rubric
has leased the premises currently occupied by it or any premises previously
occupied by Rubric, neither Rubric nor any third party, has used, generated,
manufactured or stored in such premises or transported to or from such premises
any Hazardous Materials.
2.19.4 To Rubric's knowledge, during the time that Rubric
has leased the premises currently occupied by it or any premises previously
occupied by Rubric, there has been no litigation, proceeding or administrative
action brought, to Rubric's knowledge threatened in writing against Rubric, or
any settlement reached by Rubric with, any party or parties alleging the
presence, disposal, release or threatened release of any Hazardous Materials on,
from or under any of such premises.
2.19.5 To Rubric's knowledge, during the period that
Rubric has leased the premises currently occupied by it or any premises
previously occupied by Rubric, no Hazardous Materials have been transported from
such premises to any site or facility now listed or proposed for listing on the
National Priorities List, at 40 C.F.R. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.20 Year 2000 Compliance. Rubric has conducted a reasonable
review of all of its software products, the technology, systems and
infrastructure used to host and deliver its products and services and all
material operating codes, programs, utilities and other software, as well as all
hardware and systems, utilized by it (collectively, "Systems") to determine
whether such
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software products and Systems are designed to record, store, process and present
millennial dates in the same manner, and with the same functionality, as
provided on or before December 31, 1999, and are designed to not lose
functionality or degrade in performance as a consequence of such software
operating at a millennial date (such design and performance being referred to as
"Y-2000 Compliant"). To the extent such review identified software products or
Systems that are not Y-2000 Compliant, (a) Rubric has taken, or is planning to
take, appropriate corrective action with respect to such software products and
Systems, and to Rubric's knowledge as of the date hereof, the costs of such
corrective action will not exceed, in the aggregate, $50,000, and (b) such
software products and Systems and the related appropriate corrective action is
described in Item 2.20. All of Rubric's systems and products are Y-2000
Compliant except where the failure to be Y-2000 Compliant will not have a Rubric
Material Adverse Effect or materially impair the performance of any of Rubric's
products or services. Except as set forth in Item 2.20, to the knowledge of
Rubric, all suppliers of products or services to Rubric are Y-2000 Compliant.
2.21 Warranties. Except as set forth in Item 2.21, Rubric has not
provided to its customers (i) any express warranties, including any warranties
related to Y-2000 Compliant issues, regarding the software products and services
it provides to such customers or (ii) rights to obtain refunds with respect to
any such products or services.
2.22 Information Supplied. None of the information supplied or to
be supplied by Rubric for inclusion in any of the Notice Materials, the
Information Statement or the S-4 (all as defined in Section 4.6 below), at the
date such information is supplied and at the time of the meeting, or date of the
written consent, of the Rubric Stockholders to approve the Merger, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
2.23 Corporate Documents. Rubric has made available to Broadbase
for examination all documents and information listed in Items 2.1 through 2.25
or other exhibits called for by this Agreement which have been requested by
Broadbase's legal counsel, including, without limitation, the following: (a)
copies of Rubric's Certificate of Incorporation and Bylaws as currently in
effect; (b) Rubric's minute book containing all records of all proceedings,
consents, actions and meetings of Rubric's directors and Stockholders; (c)
Rubric's stock ledger, journal and other records reflecting all stock issuances
and transfers; and (d) all permits, orders and consents issued by any regulatory
agency with respect to Rubric, or any securities of Rubric, and all applications
for such permits, orders and consents.
2.24 Books and Records. The books, records and accounts of Rubric
(a) are in all material respects true and complete, (b) have been maintained in
accordance with reasonable business practices and (c) accurately and fairly
reflect in all material respects the transactions and dispositions of the assets
of Rubric.
2.25 Claims to Rubric Common Stock and Preferred Stock. To
Rubric's knowledge, no Rubric Stockholder has claimed any interest in any
additional shares of capital stock of Rubric, or any options, warrants or other
securities of Rubric, except for the number of shares of Rubric Common Stock
which such person is shown to be the owner of on Item 2.3(a), and (b) no third
party who is not listed on Item 2.3(a) has made, or has, any claim of
entitlement to receive any
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shares of the capital stock of Rubric, any warrants or other rights to acquire
any capital stock of Rubric or any other securities of Rubric.
3. REPRESENTATIONS AND WARRANTIES OF BRONCO
Each of Broadbase and Newco, where applicable, hereby represents
and warrants, that, except as set forth on the Broadbase disclosure letter
delivered to Rubric herewith:
3.1 Organization and Good Standing. Each of Broadbase and Newco
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted.
3.2 Power, Authorization and Validity.
3.2.1 Each of Broadbase and Newco has the corporate right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement, and all agreements to which Broadbase or Newco is or will
be a party that are required to be executed pursuant to this Agreement (the
"Broadbase Ancillary Agreements") (either or both of the Rubric Ancillary
Agreements and the Broadbase Ancillary Agreements, as the context requires the
"Ancillary Agreements"). The execution, delivery and performance of this
Agreement and the Broadbase Ancillary Agreements have been duly and validly
approved and authorized by Broadbase's Board of Directors and Newco's Board of
Directors, as applicable.
3.2.2 No filing, authorization or approval, governmental
or otherwise, is necessary to enable Broadbase to enter into, and to perform its
obligations under, this Agreement and the Broadbase Ancillary Agreements, except
for (a) the filing of the Certificate of Merger with the Delaware Secretary of
State and the filing of appropriate documents with the relevant authorities of
other states in which Broadbase is qualified to do business, if any, (b) such
filings as may be required to comply with federal and state securities laws, and
(c) such filings as may be required by the HSR Act.
3.2.3 This Agreement and the Broadbase Ancillary
Agreements are, or when executed by Broadbase and Newco (as applicable) and the
other parties thereto will be, valid and binding obligations of Broadbase and
Newco, enforceable against Broadbase and Newco in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies and (c) the enforceability of provisions requiring indemnification;
provided, however, that the Certificate of Merger and the Broadbase Ancillary
Agreements will not be effective until the earlier of the Effective Time or the
date provided for therein.
3.3 No Violation. Neither the execution nor delivery of this
Agreement or any Broadbase Ancillary Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of (a) any provision of the Certificate of Incorporation
or Bylaws of Broadbase or Newco, as currently in effect, (b) any federal, state,
local or foreign judgment, writ, decree, order, statute or regulation applicable
to Broadbase or its assets or properties, or (c) any material instrument or
contract to which Broadbase is a party or by which is bound.
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3.4 Disclosure. Broadbase has furnished Rubric with its
Registration Statement on Form S-1 filed July 2, 1999, as amended and declared
effective by the SEC (as defined herein) (the "S-1"), and all other reports or
documents required to be filed by Broadbase pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 ("Exchange Act") since the declaration of
effectiveness of the S-1 (the "Broadbase Disclosure Package"). The Broadbase
Disclosure Package, this Agreement, the exhibits and schedules hereto, and any
certificates or documents to be delivered to Rubric pursuant to this Agreement,
when taken together, do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading.
3.5 Valid Issuance. The Broadbase Common Stock to be issued in
the Merger will, when issued in accordance with the provisions of this Agreement
and the Certificate of Merger, be validly issued, fully paid and nonassessable.
3.6 Capitalization. As of the dates set forth in the Broadbase
Disclosure Package, the authorized capital stock of Broadbase and the numbers of
shares of issued and outstanding Broadbase Common Stock were as set forth in the
Broadbase Disclosure Package.
3.7 Broadbase Financial Statements. As of the dates set forth in
the Broadbase Disclosure Package, the financial statements of Broadbase included
therein (a) were in accordance with the books and records of Broadbase, (b)
fairly and accurately represented the financial condition of Broadbase at the
respective dates specified therein and the results of operations for the
respective periods specified therein and (c) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
3.8 Information Supplied. None of the information supplied or to
be supplied by Broadbase for inclusion in the Notice Materials and the
Information Statement, at the date such information is supplied and at the time
of the meeting of the Rubric Stockholders to be held to approve the Merger,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
3.9 Litigation. There is no action, proceeding or, to Broadbase's
knowledge, investigation pending, nor, to Broadbase's knowledge, are any of the
foregoing threatened against Broadbase or Newco before any court or
administrative agency that, if determined adversely to Broadbase or Newco, may
reasonably be expected to have a Broadbase Material Adverse Effect. There is no
action, suit, proceeding, claim, arbitration or investigation pending as to
which Broadbase or Newco has received notice of assertion against Broadbase or
Newco, which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement.
4. RUBRIC PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Rubric covenants to and agrees with Broadbase as follows:
4.1 Advice of Changes. Rubric will promptly advise Broadbase in
writing, (a) of any event occurring subsequent to the date of this Agreement
that would render any representation
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or warranty of Rubric contained in this Agreement, if made on or as of the date
of such event or the Closing Date (as defined in Section 6.1 hereof), untrue or
inaccurate in any material respect, and (b) of any Rubric Material Adverse
Effect.
4.2 Maintenance of Business. The parties hereto understand and
acknowledge that it is their intent to work closely together during the period
from the date hereof until the Closing Date. Rubric will use all reasonable
efforts to carry on and preserve its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If Rubric becomes aware of a material
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of Broadbase in writing
and, if requested by Broadbase, will exert all reasonable efforts to restore the
relationship.
4.3 Conduct of Business. Except as provided otherwise herein or
as approved or recommended by Broadbase, Rubric will not, without the prior
written consent of the Chief Executive Officer or Chief Financial Officer of
Broadbase, not to be unreasonably withheld:
(a) incur any indebtedness individually or in the
aggregate in excess of $100,000 (except as described in Section 5.8 hereof);
(b) enter into any transaction or make any commitment
involving an expense of Rubric or capital expenditure by Rubric in excess of
$100,000 (except as described in Section 5.8 hereof);
(c) encumber or permit to be encumbered any of its assets
except in the ordinary course of its business consistent with past practice and
to an extent which is not material;
(d) dispose of any of its assets except in the ordinary
course of business consistent with past practice;
(e) enter into any material lease or contract for the
purchase or sale of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice or enter
into any agreement of the types described in Section 2.11;
(f) fail to maintain its equipment and other assets in
good working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) except as set forth on Item 4.3(g), pay any bonus,
royalty, increased salary (except for increases in the ordinary course of
business consistent with past practice) or special remuneration to any officer,
employee or consultant (except pursuant to existing arrangements heretofore
disclosed in writing to Broadbase) or enter into any new employment or
consulting agreement with any such person, or enter into any new agreement or
plan of the type described in Section 2.15.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend
or other distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock;
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(j) amend or terminate any contract, agreement or license
to which it is a party except those amended or terminated in the ordinary course
of business, consistent with past practice;
(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course of
business consistent with past practice, not material in amount, which travel and
expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any obligation except
for the endorsement of checks and other negotiable instruments in the ordinary
course of business, consistent with past practice;
(m) waive or release any material right or claim except in
the ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, stock appreciation
rights or other commitments to issue shares of capital stock other than the
issuance of Rubric Common Stock and Rubric Preferred Stock pursuant to the
exercise of options and warrants, or the conversion of Rubric Preferred Stock,
outstanding as of the date of this Agreement and the issuance of up to 300,000
additional Rubric Options per calendar month (and the issuance of Rubric Common
Stock upon the exercise thereof) to new hires in the ordinary course of business
consistent with past practices and Rubric's normal guidelines in effect prior to
the date of this Agreement for option grants to such positions (not to exceed
options to purchase an aggregate of 50,000 shares of Rubric Common Stock to be
granted to any one person), or accelerate the vesting of any outstanding option
or other security;
(o) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other of
its securities;
(p) except for the Merger, merge, consolidate or
reorganize with, or acquire any entity;
(q) amend its Certificate of Incorporation or Bylaws;
(r) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless copies of such
returns have been delivered to Broadbase for its review prior to filing;
(s) license any of Rubric's technology or any of Rubric's
Intellectual Property, except for non-exclusive licenses in the ordinary course
of business consistent with past practice;
(t) change any insurance coverage or issue any
certificates of insurance except in the ordinary course of business;
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(u) terminate the employment of any key employee listed in
Item 2.10(i); or
(v) agree to do any of the things described in the
preceding clauses 4.3(a) through 4.3(u).
4.4 Certain Agreements. Rubric will use all reasonable efforts to
cause all present employees and consultants of Rubric who have not previously
executed Rubric's forms of assignments of copyright and other intellectual
property rights to Rubric to execute such forms, copies of which are attached
hereto as Exhibit 4.4.
4.5 Necessary Consents. Rubric will use all reasonable efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate for Rubric, in addition to those set forth in Section 4.6, to
facilitate and allow the consummation of the transactions provided for herein
and to facilitate and allow Broadbase to carry on Rubric's business after the
Closing Date (as defined in Section 6.1 hereof).
4.6 Securities Compliance.
4.6.1 Preparation of Permit Application, Hearing Request,
Hearing Notice and Information Statement. As promptly as practicable after the
date hereof, Broadbase and Rubric shall prepare and file with the California
Commissioner of Corporations the documents required by the California Corporate
Securities Law of 1968, as amended (the "CCSL") including, but not limited to,
any required "Permit Application," "Hearing Request," and "Hearing Notice,"
pursuant to Sections 25121 and 25142 of the CCSL (collectively, the "Notice
Materials"), in connection with the Merger in order to obtain a permit to issue
securities (the "Permit") and perfect the exemption from registration provided
in Section 3(a)(10) of the Securities Act. Each of Broadbase and Rubric shall
use all reasonable efforts to have the Permit Application, Hearing Request and
Hearing Notice declared effective under the CCSL as promptly as practicable
after such filing. In addition, Rubric and Broadbase will prepare and Rubric
will distribute an information statement (the "Information Statement") along
with the Notice Materials, as may be required by California Law, at the earliest
practicable date to submit this Agreement, the Merger and related matters for
the consideration and approval of the Rubric Stockholders, which approval will
be recommended by Rubric's Board of Directors and management. Such Information
Statement will contain information, and will be solicited, in compliance with
applicable law. Each of Broadbase and Rubric will promptly provide all
information relating to their respective business and operations necessary for
inclusion in the Notice Materials to satisfy all requirements of applicable
state and federal securities laws. Each of Broadbase and Rubric shall be solely
responsible for any statement, information or omission in the Notice Materials
relating to it or its affiliates based upon written information furnished by it.
4.6.2 S-4 Registration Statement. If Broadbase determines
that the Permit is not available or that obtaining the Permit is not practical,
Rubric will assist Broadbase and cooperate fully with Broadbase in connection
with preparation and filing of a Registration Statement on Form S-4 to register
the offer and sale of securities by Broadbase in connection with the Merger and
the solicitation of proxies or written consents for the approval of this
Agreement and the Merger by the Rubric Stockholders (the "S-4") which Broadbase
will prepare and file with the SEC as provided in Section 5.4. Each of Broadbase
and Rubric shall use reasonable efforts to cause the S-4 to become effective as
promptly as practicable. The S-4, including the proxy statement/prospectus used
in connection therewith and all related materials will contain information,
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and all related materials will contain information, and such proxies will be
solicited, in accordance with applicable law. Each of Broadbase and Rubric will
promptly provide all information relating to Broadbase or Rubric, as applicable,
for inclusion in the S-4 and such proxy statement/prospectus to satisfy the
requirements of all applicable state and federal securities laws. Each of
Broadbase and Rubric shall be solely responsible for any statement, information
or omission in the S-4 and such proxy statement/prospectus relating to it or its
affiliates based upon written information furnished by it.
4.7 Approval of Rubric Stockholders.
(a) Rubric Stockholder Approval. Rubric will hold a
special meeting or solicit written consent of its Stockholders at the earliest
practicable date following issuance of the Permit or the effectiveness of the
S-4 to submit this Agreement, the Merger and related matters for the
consideration and approval of the Rubric Stockholders. Approval of this
Agreement, the Merger and related matters will be recommended by Rubric's Board
of Directors and management, and Rubric's Board of Directors and management will
use all reasonable efforts to obtain such approval from all the Rubric
Stockholders. Any meeting will be called, held and conducted, and any proxies or
Stockholder written consents will be solicited, in compliance with applicable
law. Rubric's obligation to hold a special meeting or solicit written content of
its Stockholders shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Rubric of any
Acquisition Proposal (as defined in Section 4.8) (including a Superior Offer (as
defined in Section 4.7(c)), or by any withdrawal, amendment or modification of
the recommendation of the Board of Directors of Rubric to the Rubric
Stockholders to approve this Agreement and the Merger.
(b) Subject to Section 4.7(c): (i) the Board of Directors
of Rubric shall recommend that the Rubric Stockholders approve this Agreement
and the Merger; (ii) the Information Statement, if any, and the written consent
of Stockholders shall include a statement to the effect that the Board of
Directors of the Rubric has recommended that the Rubric Stockholders approve
this Agreement and the Merger; and (iii) neither the Board of Directors of
Rubric nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to Broadbase, the
recommendation of the Board of Directors of Rubric that the Rubric Stockholders
vote in favor of and approve this Agreement and the Merger.
(c) Nothing in this Agreement shall prevent the Board of
Directors of Rubric from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer (as defined
herein) is made to Rubric and is not withdrawn, (ii) Rubric shall have provided
written notice to Broadbase (a "Notice of Superior Offer") advising Broadbase
that Rubric has received a Superior Offer, specifying all of the material terms
and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Broadbase shall not have, within five business
days of Broadbase's receipt of the Notice of Superior Offer, made an offer that
the Rubric Board by a majority vote determines in its good faith judgment (after
consultation with its financial adviser) to be at least as favorable to the
Rubric Stockholders as such Superior Offer (it being agreed that the Board of
Directors of Rubric shall convene a meeting to consider any such offer by
Broadbase promptly following the receipt thereof), (iv) the Board of Directors
of Rubric concludes in good faith, after consultation with its outside counsel,
that, in light of such Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation is required in order for the Board of
Directors of Rubric to comply with its fiduciary obligations to the Rubric
Stockholders under applicable law and (v) Rubric shall not have
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violated any of the restrictions set forth in Section 4.8 or this Section 4.7.
The Board of Directors of Rubric shall provide Broadbase with at least three
business days prior notice (or such lesser prior notice as provided to the
members of Rubric's Board of Directors but in no event less than twenty-four
(24) hours) of any meeting of Rubric's Board of Directors at which Rubric's
Board of Directors is reasonably expected to consider any Acquisition Proposal
(as defined in Section 4.8) to determine whether such Acquisition Proposal is a
Superior Offer. Nothing contained in this Section 4.7 shall limit Rubric's
obligation to seek the approval of the Rubric Stockholders with respect to this
Agreement and the Merger. For purposes of this Agreement "Superior Offer" shall
mean an unsolicited, bona fide written offer made by a third party to consummate
any of the following transactions: (i) a merger or consolidation involving
Rubric pursuant to which the Stockholders of Rubric immediately preceding such
transaction hold less than 50% of the equity interests in the surviving or
resulting entity of such transaction or (ii) the acquisition by any person or
group (including by way of a tender offer or an exchange offer or a two step
transaction involving a tender offer followed with reasonable promptness by a
cash-out merger involving Rubric), directly or indirectly, of ownership of 100%
of the then outstanding shares of capital stock of Rubric, on terms that the
Board of Directors of Rubric determines, in its reasonable judgment (after
consultation with its financial adviser) to be more favorable to the Rubric
Stockholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not likely in the
reasonable judgment of the Board of Directors of Rubric to be obtained by such
third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit
Rubric or its Board of Directors from taking and disclosing to its Stockholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act of 1934.
4.8 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Section 9, Rubric
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as hereinafter defined);
(ii) furnish to any person any non-public information with respect to any
Acquisition Proposal; (iii) participate or engage in any discussions or
negotiations with any person with respect to any Acquisition Proposal, except
that Rubric may inform third parties, in response to unsolicited inquiries, of
the existence of these provisions; (iv) except as permitted by Section 4.7(c),
approve, endorse or recommend any Acquisition Proposal; or (v) enter into any
letter of intent or similar document or any contract, agreement, agreement in
principle or commitment contemplating or otherwise relating to any Acquisition
Transaction (as hereinafter defined); provided, however, that prior to the
approval of this Agreement and the Merger by the Rubric Stockholders at a
meeting of the Rubric Stockholders or by written consent, this Section 4.8(a)
shall not prohibit Rubric from furnishing nonpublic information regarding Rubric
and its subsidiaries to, or entering into discussions with, any person or group
who has submitted (and not withdrawn) to Rubric an unsolicited, written, bona
fide Acquisition Proposal that the Board of Directors of Rubric reasonably
concludes (after consultation with its financial adviser) may constitute, or may
be reasonably expected to lead to, a Superior Offer if (1) neither Rubric nor
any representative of Rubric or its subsidiaries shall have violated any of the
restrictions set forth in this Section 4.8, (2) the Board of Directors of Rubric
concludes in good faith, after consultation with its
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outside legal counsel, that such action is required in order for the Board of
Directors of Rubric to comply with its fiduciary obligations to Rubric's
stockholders under applicable law, (3) prior to furnishing any such nonpublic
information to, or entering into any such discussions with, such person or
group, Rubric gives Broadbase written notice of the identity of such person or
group and all of the material terms and conditions of such Acquisition Proposal
and of Rubric's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and Rubric receives from such person or
group an executed confidentiality agreement containing terms at least as
restrictive with regard to Rubric's confidential information as the
non-disclosure agreement between Rubric and Broadbase executed prior to this
Agreement, (4) Rubric gives Broadbase at least three business days advance
notice of its intent to furnish such nonpublic information or enter into such
discussions, and (5) contemporaneously with furnishing any such nonpublic
information to such person or group, Rubric furnishes such nonpublic information
to Broadbase (to the extent such nonpublic information has not been previously
furnished by Rubric to Broadbase). Rubric and its subsidiaries will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding two sentences by any officer, director or employee of
Rubric or any of its subsidiaries or any investment banker, attorney or other
advisor or representative of Rubric or any of its subsidiaries shall be deemed
to be a breach of this Section 4.8 by Rubric unless such communication was
unauthorized by Rubric and Rubric terminates any such discussions promptly
following discovery of such unauthorized communication. Notwithstanding any
provision of this Agreement to the contrary, Rubric will be allowed to pursue
financing alternatives that do not constitute a change of control of Rubric in
the event Broadbase does not comply with its obligations under Section 5.8
For purposes of this Agreement, "Acquisition Proposal"
shall mean any offer or proposal (other than an offer or proposal by Broadbase)
relating to any Acquisition Transaction. For the purposes of this Agreement,
"Acquisition Transaction" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from Rubric by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 5% interest in the total outstanding
voting securities of Rubric or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of Rubric, or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Rubric; (B) any sale,
lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than 5% of the assets of Rubric; or (C) any liquidation or
dissolution of Rubric.
(b) In addition to the obligations of Rubric set forth in
paragraph (a) of this Section 4.8, Rubric as promptly as practicable shall
advise Broadbase orally and in writing of any request for non-public information
or any other inquiry which Rubric reasonably believes could lead to an
Acquisition Proposal or of any Acquisition Proposal, the material terms and
conditions of such request, inquiry or Acquisition Proposal, and the identity of
the person or group making any such request, inquiry or Acquisition Proposal.
Rubric will keep Broadbase informed as promptly as practicable in all material
respects of amendments to any such request, inquiry or Acquisition Proposal.
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4.9 Regulatory Approvals. Rubric will execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Broadbase may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Rubric will use
all reasonable efforts to obtain or assist Broadbase in obtaining all such
authorizations, approvals and consents.
4.10 Access to Information. Until the Closing Date (as defined in
Section 6.1 hereof) and subject to the terms and conditions hereof relating to
the confidentiality and use of confidential and proprietary information, Rubric
will provide Broadbase and its agents with reasonable access, during regular
business hours, to the files, books, records and offices of Rubric, including,
without limitation, any and all information relating to Rubric taxes,
commitments, contracts, leases, licenses, real, personal and intangible
property, and financial condition, and specifically including, without
limitation, access to Rubric source code reasonably necessary for Broadbase to
complete its diligence review of Rubric products and technology. Rubric will
cause its accountants to cooperate with Broadbase and its agents in making
available all financial information reasonably requested, including without
limitation the right to examine all working papers pertaining to all financial
statements prepared or audited by such accountants.
4.11 Satisfaction of Conditions Precedent. Rubric will use all
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8, and Rubric will use all
commercially reasonable efforts to cause the transactions provided for in this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
provided for herein.
4.12 Blue Sky Laws. Rubric shall use reasonable efforts to assist
Broadbase to the extent necessary to comply with the securities and Blue Sky
laws of all jurisdictions applicable in connection with the Merger.
4.13 Notification of Employee Problems. Rubric will promptly
notify Broadbase if any of Rubric's officers becomes aware that any of the key
employees listed in Item 2.15.2 intends to leave its employ.
4.14 Rubric Affiliates. To help ensure that the issuance of
Broadbase Common Stock in the Merger complies with the Securities Act,
concurrently with the execution of this Agreement Rubric will deliver a letter
identifying all persons who are, in Rubric's reasonable judgment, "affiliates"
of Rubric at the time this Agreement is executed (the "Rubric Affiliates").
Rubric will provide Broadbase with all information and documents needed to
evaluate this list for compliance with securities laws. Broadbase will cause the
shares of Broadbase Common Stock issued to Rubric Affiliates in connection with
the Merger to bear legends with respect to any applicable limitations on
transfer under Rule 145 promulgated under the Securities Act.
4.15 Rubric Dissenting Shares. As promptly as practicable after
the date the Information Statement is distributed to Rubric Stockholders and
prior to the Closing Date, Rubric shall furnish Broadbase with the name and
address of each Rubric Stockholder who has up to such time dissented and the
number of shares owned by such Rubric Stockholders (the "Dissenting Shares").
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4.16 Litigation. Rubric will notify Broadbase in writing promptly
after learning of any material action, suit, proceeding or investigation by or
before any court, board or governmental agency, initiated by or against Rubric
or threatened against it.
4.17 Certain Employee Benefits. As soon as practicable after the
execution of this Agreement, Rubric and Broadbase shall confer and work together
in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements for Rubric and its Subsidiaries' employees following
the Merger. Rubric and its Subsidiaries shall take such actions as are necessary
to terminate such Employee Plans as are requested by Broadbase to be terminated,
provided that those Rubric and Subsidiary employees who are eligible to
participate in each such Employee Plan shall be provided the opportunity to
participate in a substantially comparable employee benefit plan maintained by
Broadbase and provided further that Broadbase requests such termination no later
than ten days prior to the Closing Date. Rubric agrees that it and its
Subsidiaries shall terminate any and all group severance, separation, retention
and salary continuation plans, programs or arrangements (other than the change
of control agreements described in Item 2.15.5(a)(i) entered into by certain
individuals to effect transactions contemplated by this Agreement) prior to the
Closing.
4.18 Employment Agreements. Anu Shukla, Chris Maeda, Hal Steger
and Tom Alliotti shall each execute and deliver to Broadbase Employment
Agreement substantially in the form of Exhibits 4.18 A, B, C and D attached
hereto.
4.19 Audited Financial Statements. Rubric shall use all
reasonable efforts to generate and deliver to Broadbase as soon as practicable
(and in no event later than January 30, 2000) an audited balance sheet, income
statement and statement of cash flows, and related footnotes, together with the
report of Rubric's independent accountants, prepared in accordance with
generally accepted accounting principles, for each fiscal year since Rubric's
inception (including but not limited to fiscal year 1999).
5. BRONCO COVENANTS
During the period from the date of this Agreement until the
Effective Time, Broadbase covenants to and agrees with Rubric as follows:
5.1 Access to Information. Until the Closing Date (as defined in
Section 6.1 hereof) and subject to the terms and conditions hereof relating to
confidentiality and use of confidential and proprietary information, Broadbase
will provide Rubric and its agents with reasonable access to its management and
officers and material information regarding Broadbase, including, without
limitation, material information relating to Broadbase's business, intellectual
property and financial condition. Broadbase will cause its accountants to
cooperate with Rubric's accountants in making available all financial
information reasonably requested to evaluate Broadbase's financial package.
5.2 Satisfaction of Conditions Precedent. Broadbase will use all
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 7, and Broadbase will use
all commercially reasonable efforts to cause the transactions provided for in
this Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and
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give all notices to, third parties that may be necessary or reasonably required
on its part in order to effect the transactions provided for herein.
5.3 Regulatory Approvals. Broadbase will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Rubric may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Broadbase will
use all commercially reasonable efforts to obtain all such authorizations,
approvals and consents.
5.4 Preparation of Permit Application, Hearing Request and
Hearing Notice. As promptly as practicable after the date hereof, Broadbase,
with Rubric's assistance, shall prepare and file with the California
Commissioner of Corporations the Notice Materials, including the Permit
Application, Hearing Request and Hearing Notice, in connection with the Merger.
Broadbase, with Rubric's assistance, shall use all reasonable efforts to have
the Permit Application, Hearing Request and Hearing Notice declared effective
under the CCSL as promptly as practicable after such filing; provided however,
that if notwithstanding such exercise of all reasonable efforts, the parties
fail to have the Permit Application, Hearing Request and Hearing Notice declared
effective under the CCSL, the parties agree that Broadbase, with Rubric's
assistance, shall promptly prepare and file the S-4 with the Securities and
Exchange Commission.
5.5 Indemnification of Directors and Officers; Directors &
Officers Insurance.
(a) From and after the Effective Time, Broadbase will
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of Rubric pursuant to any indemnification agreements between Rubric
and its directors and officers as of or prior to the date hereof (or
indemnification agreements in Rubric's customary form for directors joining
Rubric's Board of Directors prior to the Effective Time) and any indemnification
provisions under Rubric's Certificate of Incorporation or bylaws as in effect
immediately prior to the Effective Time.
(b) For a period of three years after the Effective Time,
Broadbase will maintain or cause the Surviving Corporation to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who, as of immediately prior to the Effective Time, were scheduled
to be covered by Rubric's directors' and officers' liability insurance policy
(the "Insured Parties").
(c) The provisions of this Section 5.5 are intended to be
for the benefit of, and will be enforceable by, each Insured Party entitled to
indemnification hereunder and the heirs and representatives of such Insured
Party. Broadbase will not permit the Surviving Corporation to merge or
consolidate with any other entity unless the Surviving Corporation will ensure
that the surviving or resulting entity assumes the obligations imposed by this
Section 5.5.
5.6 Advice of Changes. Broadbase will promptly advise Rubric in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Broadbase contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect, and (b) of any Broadbase Material
Adverse Effect.
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5.7 Necessary Consents. Broadbase will use all commercially
reasonable efforts to obtain such written consents and take such other actions
as may be necessary or appropriate for Broadbase, in addition to those set forth
in Section 4.6, to facilitate and allow the consummation of the transactions
provided for herein and to allow Broadbase to carry on Rubric's business after
the Effective Time.
5.8 Interim Financing. Provided this Agreement has not been
terminated by Rubric as provided in Section 9, Broadbase agrees to lend up to an
aggregate of $3,000,000 to Rubric (up to $1,000,000 in any one calendar month)
for the purpose of financing operating expenses incurred in the ordinary course
of business, pursuant to the terms set forth in the form of note attached hereto
as Exhibit E, and subject to execution and delivery of such note by Rubric. Each
advance of all or any portion of such loan shall be subject to the conditions
that (a) the representations and warranties of Rubric set forth in this
Agreement shall be true and correct as of the time of such advance, (b) Rubric
shall not have breached any material covenant contained in this Agreement, and
(c) Rubric shall have given Broadbase at least five (5) days' written notice
requesting such advance and affirming that the conditions described in clauses
(a) and (b) have been satisfied.
5.9 Employee Benefit Plans.
(a) Broadbase agrees that individuals who are employed by
Rubric or any Subsidiary immediately prior to the Effective Time shall remain
employees of Rubric or become employees of Broadbase following the Effective
Time (each such employee, an "Affected Employee"); provided, however, that this
Section 5.9(a) shall not be construed to limit the ability of the applicable
employer to terminate the employment of any Affected Employee at any time for
any reason.
(b) To the extent that Affected Employees become eligible
to participate in any employee benefit plans or arrangements maintained by
Broadbase, Broadbase will, give Affected Employees full credit for purposes of
eligibility (including service and waiting period requirements), vesting,
benefit accrual and determination of the level of benefits under any employee
benefit plans or arrangements maintained by Broadbase, for such Affected
Employees' service with Rubric or any Subsidiary to the same extent recognized
by either Rubric or a Subsidiary for the comparable employee benefit program
immediately prior to the Effective Time.
(c) To the extent consistent with the terms of Broadbase's
employee benefit plans and programs as applied to eligible Broadbase employees,
Broadbase will, or will cause Rubric to waive all limitations as to preexisting
conditions, exclusions and waiting periods and service requirements with respect
to participation and coverage requirements applicable to the Affected Employees
under any welfare benefit plans that such employees may be eligible to
participate in after the Effective Time. In the event that Broadbase causes the
termination of an Employee Plan which is a group health plan prior to the end of
the 1999 calendar year, Broadbase shall take such actions as are commercially
reasonable to provide each such affected participant with credit for any
co-payments and deductibles paid prior to the Effective Time for purposes of
satisfying any applicable deductible, out-of-pocket, or similar requirements for
the 1999 calendar year under the comparable group health plan maintained by
Broadbase in which each such affected participant is eligible to participate
after the Effective Time. Notwithstanding any of the foregoing
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to the contrary, none of the provisions contained herein shall operate to
duplicate any benefit provided to any employee of Rubric or the funding of any
such benefit.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this Agreement as
provided in Section 9 below, the closing of the transactions provided for herein
(the "Closing") will take place at the offices of Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306 at 10:00 a.m., Pacific Time no later
than the third business day after all conditions to closing have been satisfied
or waived (the "Closing Date"). Prior to or concurrently with the Closing, the
Certificate of Merger and such officers' certificates or other documents as may
be required to effectuate the Merger will be filed in the office of the Delaware
Secretary of State.
6.2 Exchange of Certificates.
6.2.1 As of the Effective Time, all shares of Rubric
Common Stock and Rubric Preferred Stock that are outstanding immediately prior
thereto will, by virtue of the Merger and without further action, cease to
exist, and all such shares (other than dissenters' shares) will be converted
into the right to receive from Broadbase the number of shares of Broadbase
Common Stock determined as set forth in Section 1.1, subject to Sections 1.2 and
1.3 hereof.
6.2.2 At and after the Effective Time, each certificate
representing outstanding shares of Rubric Common Stock and Rubric Preferred
Stock will represent the number of shares of Broadbase Common Stock into which
such shares of Rubric Common Stock and Rubric Preferred Stock have been
converted, and such shares of Broadbase Common Stock will be deemed registered
in the name of the holder of such certificate. As soon as practicable after the
Effective Time, each holder of shares of Rubric Common Stock and Rubric
Preferred Stock (a) will surrender (i) the certificates for such shares (the
"Rubric Certificates") to Broadbase for cancellation or (ii) an affidavit of
lost certificate (or nonissued) and a bond in form reasonably satisfactory to
Broadbase (a "Bond"), (b) will execute and deliver representations as to such
Rubric Stockholders' valid and marketable title to such holder's shares of
Rubric Common Stock and Rubric Preferred Stock (the "Rubric Stockholder
Representations"), and (c) will execute and deliver to Broadbase a letter of
transmittal in which such holder agrees, among other things, to be bound by the
provisions of Section 1.9 and Article 10 of this Agreement, consenting to the
appointment of the Stockholder's Representative, and consenting to the
termination of Rubric's Second Amended and Restated Rights Agreement and
terminating and waiving any further rights that such holder may have under the
Rubric Second Amended and Restated Rights Agreement (the "Letter of
Transmittal"). Promptly following the Effective Time and receipt of Rubric
Certificates and/or the Bonds, the Rubric Stockholder Representations and the
Letter of Transmittal, Broadbase will cause its transfer agent to issue to such
surrendering holder certificate(s) for the number of shares of Broadbase Common
Stock to which such holder is entitled pursuant to Section 1.1, subject to
Section 1.2 hereof (i.e. excluding such holder's pro rata portion of the Escrow
Shares), and Broadbase will distribute any cash payable under Sections 1.2 and
1.3 hereof (i.e. excluding such holder's pro rata portion of the Escrow Shares,
and Broadbase will distribute any cash payable under Sections 1.2 and 1.3
hereof).
6.2.3 All shares of Broadbase Common Stock (and, if
applicable, cash in lieu of fractional shares) delivered upon the surrender of
Rubric Certificates in accordance with the terms hereof will be delivered to the
registered holder or placed in escrow with the Escrow Agent. After the Effective
Time, there will be no further registration of transfers of the shares of Rubric
Common Stock and Rubric Preferred Stock on the stock transfer books of Rubric.
If, after the
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Effective Time, Rubric Certificates are presented for transfer or for any other
reason, they will be canceled and exchanged and certificates therefor will be
delivered as provided in this Section 6.2. Notwithstanding anything herein to
the contrary, except to the extent waived by Broadbase, any Rubric Certificate
that is not properly submitted to Broadbase for exchange and cancellation within
three years after the Effective Time shall no longer evidence ownership of or
any right to receive shares of Broadbase Common Stock and all rights of the
holder of such Rubric Certificate, with respect to the shares previously
evidenced by such Rubric Certificate, shall cease.
6.2.4 Until Rubric Certificates representing Rubric Common
Stock and Rubric Preferred Stock outstanding prior to the Merger are surrendered
pursuant to Section 6.2.2 above, such certificates will be deemed, for all
purposes, to evidence ownership of (a) the number of shares of Broadbase Common
Stock into which the shares of Rubric Common Stock and Rubric Preferred Stock
will have been converted and (b) if applicable, cash in lieu of fractional
shares.
6.3 Assumption of Warrants and Options. Within a reasonable time
period, and in any event within thirty (30) days, after the Effective Time,
Broadbase will notify in writing each holder of an Rubric Option or Rubric
Warrant of: (i) the assumption of such Rubric Options or Rubric Warrants, as
applicable, by Broadbase, (ii) the conversion of such Rubric Options into
Broadbase Options or the conversion of such Rubric Warrants into Broadbase
Warrants, as applicable, (iii) the number of shares of Broadbase Common Stock
that are subject to such Broadbase Options and Broadbase Warrants and (iv) the
exercise price of such Broadbase Options as determined pursuant to Section 1.1.2
hereof and the exercise price of such Broadbase Warrants as determined pursuant
to Section 1.1.3 hereof. Within a reasonable time period, and in any event
within thirty (30) days following the Effective Time, Broadbase shall file a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to shares of Broadbase Common Stock subject to
Broadbase Options and shall use all commercially reasonable efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
6.4 Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement, any shares of Rubric Common Stock or Rubric
Preferred Stock that, as of the Effective Time, are or may become "dissenting
shares" within the meaning of Section 262 of the Delaware General Corporations
Law shall not be converted into or represent the right to receive Broadbase
Common Stock in accordance with Section 1.1.1 (or cash in lieu of fractional
shares in accordance with Section 1.2), and the holder or holders of such shares
shall be entitled only to such rights as may be granted to such holder or
holders in Section 262 of the Delaware General Corporation Law; provided,
however, that if the status of any such shares as "dissenting shares," shall not
be perfected, or if any such shares lose their status as "dissenting shares,"
then, as of the latter of the Effective Time or the time of the failure to
perfect such status or the loss of such status, such shares shall automatically
be converted into and shall represent only the right to receive (upon surrender
of the certificate or certificates representing such shares) Broadbase Common
Stock in accordance with Section 1.1.1 (and cash in lieu of fractional shares in
accordance with Section 1.2).
6.5 Employee Plans. As of the Effective Time, Broadbase and
Rubric shall take such actions as are necessary to effect the mutually
acceptable employee benefit and compensation arrangements as determined pursuant
to Section 4.17.
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7. CONDITIONS TO OBLIGATIONS OF RUBRIC
Rubric's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Rubric, but only in a writing signed on
behalf of Rubric by its Chief Executive Officer or Chief Financial Officer):
7.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Broadbase set forth in Section 3 of this
Agreement shall be true and correct as of the date hereof and at and as of the
Closing Date as if made at and as of such time, except that to the extent such
representations and warranties address matters only as of a particular date,
such representations and warranties shall, to such extent, be true and correct
as of the date hereof and at and as of such particular date as if made at and as
of such particular date; provided that if any of such representations and
warranties shall not be true and correct as aforesaid, then this condition shall
nevertheless be deemed satisfied if the cumulative effect of all inaccuracies of
such representations and breaches of such warranties shall not be or have a
Broadbase Material Adverse Effect, and Rubric shall have received a certificate
to such effect executed on behalf of Broadbase by its Chief Executive Officer or
Chief Financial Officer.
7.2 Covenants. Broadbase shall have performed and complied in all
material respects with all of its covenants contained in Section 5 on or before
the Closing Date, and Rubric shall have received a certificate to such effect
executed on behalf of Broadbase by its Chief Executive Officer or Chief
Financial Officer.
7.3. Absence of Material Adverse Effect. There shall not have
been any change, event, violation, inaccuracy, circumstance or effect that is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of Broadbase.
7.4 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the Merger by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
7.6 Opinion of Broadbase's Counsel. Rubric shall have received
from Fenwick & West LLP, counsel to Broadbase, an opinion in the form attached
hereto as Exhibit F.
7.7 Permit. The California Commissioner of Corporations shall
have issued a permit declaring the Permit Application, Hearing Request and
Hearing Notice with respect to the Merger effective, or the issuance of the
Broadbase Common Stock in connection with the Merger shall have been registered
pursuant to an S-4 Registration Statement declared effective by the Securities
and Exchange Commission (the "SEC").
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7.8 Requisite Approvals. The principal terms of this Agreement
and the Certificate of Merger shall have been approved and adopted by the
written consent or vote of the Rubric Stockholders, as required by applicable
law and Rubric's Certificate of Incorporation and Bylaws.
7.9 Employment Agreements. Broadbase shall have executed and
delivered the Employment Agreements.
7.10 Hart-Scott-Rodino Compliance. All applicable waiting periods
under the HSR Act shall have expired or early termination shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice.
7.11 Tax Opinions. Broadbase and Rubric shall each have received
written opinions from their respective tax advisors (Ernst & Young LLP and
Wilson Sonsini Goodrich & Rosati, respectively), in form and substance
reasonably satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn. The parties to this Agreement agree to
make such reasonable representations as requested by such counsel for the
purpose of rendering such opinions.
8. CONDITIONS TO OBLIGATIONS OF BRONCO
The obligations of Broadbase hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Broadbase, but only in a
writing signed on behalf of Broadbase by its Chief Executive Officer or Chief
Financial Officer):
8.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Rubric set forth in Section 2 of this
Agreement shall be true and correct as of the date hereof and at and as of the
Closing Date as if made at and as of such time, except that, to the extent such
representations and warranties address matters only as of a particular date,
such representations and warranties shall, to such extent, be true and correct
at and as of such particular date as if made at and as of such particular date;
provided that if any of such representations and warranties shall not be true
and correct as aforesaid, then this condition shall nevertheless be deemed
satisfied if the cumulative effect of all inaccuracies of such representations
and breaches of such warranties shall not be or have a Rubric Material Adverse
Effect, and Broadbase shall have received a certificate to such effect executed
on behalf of Rubric by its Chief Executive Officer or Chief Financial Officer.
8.2 Covenants. Rubric shall have performed and complied in all
material respects with all of its covenants contained in Section 4 on or before
the Closing and Broadbase shall have received a certificate to such effect
signed on behalf of Rubric by its Chief Executive Officer or Chief Financial
Officer.
8.3 Absence of Material Adverse Effect. There shall have not been
any change, event, violation, inaccuracy, circumstance or effect that is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of Rubric.
8.4 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
provided for in this Agreement.
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8.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
8.6 Opinion of Rubric's Counsel. Broadbase shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to Rubric, an opinion in the form
attached hereto as Exhibit G.
8.7 Requisite Approvals. The principal terms of this Agreement
and the Certificate of Merger shall have been approved and adopted by the
written consent or vote of the Rubric Stockholders, as required by applicable
law and Rubric's Certificate of Incorporation and Bylaws and by Rubric's Board
of Directors.
8.8 Documents. Broadbase shall have received (a) all written
consents, assignments, waivers, authorizations or other certificates set forth
on Exhibit H, and (b) any other written consents, assignments, waivers,
authorizations or other certificates where, in the case of this clause (b), the
failure to have received the same shall have a Rubric Material Adverse Effect.
8.9 Employment Agreements. The individuals identified in Section
4.18 hereof shall have executed and delivered to Broadbase the Employment
Agreements.
8.10 Termination of Rights. Any registration rights, rights of
first refusal, rights to any liquidation preference, or redemption rights of any
Rubric Stockholder shall have been terminated or waived as of the Closing.
8.11 Resignations. The directors of Rubric in office immediately
prior to the Effective Time of the Merger shall have resigned as directors of
Rubric effective as of the Effective Time of the Merger.
8.12 Permit. The California Commissioner of Corporations shall
have issued a permit declaring the Permit Application, Hearing Request and
Hearing Notice with respect to the Merger effective, or the issuance of the
Broadbase Common Stock in connection with the Merger shall have been registered
pursuant to an S-4 Registration Statement declared effective by the SEC.
8.13 Hart-Scott-Rodino Compliance. All applicable waiting periods
under the HSR Act shall have expired or early termination shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice.
8.14 Dissenting Shares. The number of shares of Rubric Common
Stock or Rubric Preferred Stock eligible to become dissenting shares shall not
constitute more than nine percent 9% of the total number of shares of Rubric
Common Stock (on an as-if converted to Rubric Common Stock basis) outstanding
immediately prior to the Effective Time.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the Stockholders of Rubric:
(a) by the mutual written consent of Broadbase and Rubric;
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(b) unless otherwise specifically provided herein or
agreed in writing by Broadbase and Rubric, upon notice by either party, this
Agreement will be terminated if all the conditions to Closing have not been
satisfied or waived on or before April 15, 2000, or, if on or before such date
Broadbase files the S-4 due to the unavailability of the Securities Act Section
3(a)(10) exemption, on or before June 15, 2000 (the "Final Date") other than as
a result of a breach of this Agreement by the terminating party;
(c) by Broadbase (at any time prior to the approval of
this Agreement and the Merger by the required vote of the stockholders of
Rubric) if a Triggering Event (as defined below) shall have occurred;
(d) by Rubric, if there has been a breach by Broadbase of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Broadbase, or if any representation of Broadbase will have become
untrue, in either case to an extent that would cause the conditions set forth in
Section 7.1 or 7.2 not to be satisfied and which Broadbase fails to cure within
a reasonable time, not to exceed thirty (30) days, after written notice thereof
(except that no cure period will be provided for a breach by Broadbase which by
its nature cannot be cured);
(e) by Broadbase, if there has been a breach by Rubric of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Rubric, or if any representation of Rubric will have become
untrue, in either case to an extent that would cause the conditions set forth in
Section 8.1 or 8.2 not to be satisfied and which Rubric fails to cure within a
reasonable time not to exceed thirty (30) days after written notice thereof
(except that no cure period will be provided for a breach by Rubric which by its
nature cannot be cured);
(f) by either party, if a permanent injunction or other
order by any Federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable. Any termination of this Agreement
under this Section 9.1 will be effective by the delivery of written notice of
the terminating party to the other party hereto; or
(g) by either Rubric or Broadbase if the required approval
of the Rubric Stockholders contemplated by this Agreement shall not have been
obtained by either (i) the failure to obtain the required vote at a meeting of
the Rubric Stockholders duly convened therefore or at any adjournment thereof or
(ii) the failure to obtain the required approval by written consent of the
Rubric Stockholders, in either case within 20 days after the issuance of Permit
by the California Commissioner of Corporations pursuant to a fairness hearing or
the effectiveness of the S-4 with respect to the issuance of securities in the
Merger; provided, however, that the right to terminate this Agreement under this
Section 9.1(g) shall not be available to a party where the failure to obtain the
Rubric Stockholder approval shall have been caused by the action or failure to
act of such party (or an officer, stockholder or director of such party) and
such action or failure to act constitutes a material breach of this Agreement or
any of the Voting Agreements.
For the purposes of this Agreement, a "Triggering Event"
shall be deemed to have occurred if: (i) the Board of Directors of Rubric or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Broadbase its recommendation in favor of the
approval of this Agreement or the Merger; (ii) Rubric shall have failed to
include in the Information Statement the recommendation of the Board of
Directors of
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Rubric in favor of the approval of this Agreement and the Merger; (iii) the
Board of Directors of Rubric fails to reaffirm its recommendation in favor of
the adoption and approval of this Agreement and the Merger within 10 business
days after Broadbase requests in writing that such recommendation be reaffirmed
at any time following the public announcement of an Acquisition Proposal; (iv)
the Board of Directors of Rubric or any committee thereof shall have approved or
publicly recommended any Acquisition Proposal; (v) Rubric shall have entered
into any letter of intent of similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; or (vi) a tender or exchange
offer relating to securities of Rubric shall have been commenced by a person or
entity unaffiliated with Broadbase, and Rubric shall not have sent to its
Stockholders pursuant to Rule 14e-2 promulgated under the Securities Act, within
10 business days after such tender or exchange offer is first published sent or
given, a statement disclosing that Rubric recommends rejection of such tender or
exchange offer.
9.2 Fees and Expenses.
(a) General. Except as set forth in this Section 9.2, each party
will bear its respective expenses and fees of its own accountants, attorneys,
investment bankers and other professionals incurred with respect to this
Agreement and the transactions contemplated hereby. If the Merger is
consummated, Broadbase will pay at or immediately following the Closing the
reasonable investment banking, accounting and attorneys' fees and expenses and
other fees and expenses incurred by Rubric in connection with the Merger
("Rubric's Expenses"). Rubric will not incur in connection with the Merger more
than $500,000 in such fees and expenses (excluding investment banking fees and
expenses, which shall be paid by the Surviving Corporation in accordance with
any existing fee arrangement disclosed to Broadbase prior to the date of this
Agreement) unless any such fees or expenses incurred by Rubric in excess of the
applicable amount set forth for above are paid by the Rubric Stockholders on or
before the Closing.
(b) Rubric Payments.
(i) In the event that this Agreement is terminated by
Broadbase pursuant to Section 9.1(c), Rubric shall promptly, but in no
event later than two days after the date of such termination, pay
Broadbase in immediately available funds a fee equal to $15,000,000 (the
"Termination Fee") plus an amount equal to Broadbase's reasonable
accounting and attorneys' fees and expenses and other fees and expenses
incurred by Broadbase with respect to this Agreement and the
transactions contemplated hereby ("Broadbase's Expenses");
(ii) In the event that this Agreement is terminated by
Broadbase pursuant to Section 9.1(e) or pursuant to Section 9.1(b) (at a
time when Broadbase is also entitled to terminate this Agreement under
Section 9.1(e)), or by either Broadbase or Rubric pursuant to Section
9.1(g), and within 12 months following the termination of this Agreement
a Competing Transaction (as defined below) is consummated or Rubric
enters into an agreement providing for a Competing Transaction, then
Rubric shall, within two days after the consummation of a Competing
Transaction, pay Broadbase in immediately available funds an amount
equal to the Termination Fee plus Broadbase's Expenses.
(iii) Rubric acknowledges that the agreements contained in
this Section 9.2(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements,
Broadbase would not enter into this Agreement; accordingly,
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if Rubric fails to pay in a timely manner the amounts due pursuant to
this Section 9.2(b), and, in order to obtain such payment, Broadbase
makes a claim that results in a judgment against Rubric for the amounts
set forth in this Section 9.2(b), Rubric shall pay to Broadbase its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 9.2(b) at the prime rate of Bank of
America in effect on the date such payment was required to be made.
Payment of the fees described in this Section 9.2(b) shall not be in
lieu of damages incurred in the event of breach of this Agreement.
(c) In the event that Rubric shall terminate this Agreement
pursuant to Section 9.1(d), then Broadbase shall immediately pay to Rubric
immediately available funds an amount equal to the Termination Fee plus an
amount equal to Rubric's reasonable accounting and attorneys' fees and expenses
and other fees and expenses incurred by Rubric with respect to this Agreement
and the transactions contemplated hereby ("Broadbase's Expenses"). Such payment
shall be treated as liquidated damages and shall be in lieu of any other
payments for damages incurred by Rubric or its Stockholders for any non-willful
breach of this Agreement by Broadbase.
(d) Neither Rubric nor Broadbase shall be entitled to
reimbursement for Rubric's Expenses or Broadbase's Expenses in excess of
$2,000,000 in the aggregate.
(e) For the purposes of this Section 9.2, a "Competing
Transaction" shall mean any of the following involving Broadbase or Rubric (as
the case may be) other than the Merger: (a) any merger, consolidation, share
exchange, business combination or other similar transaction in which a majority
of Rubric's voting stock is transferred to any third party; (b) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 50% or more of the
assets of such party and its subsidiaries, taken as a whole in single
transaction or series of transactions; (c) any license, joint venture or other
arrangement pursuant to which Rubric provides or permits exclusive access to all
or a majority of its intellectual property (on a value basis) to a third party;
(d) any tender offer or exchange offer for 50% or more of the outstanding voting
securities of such party or the filing of a registration statement under the
Securities Act in connection therewith; or (e) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act) having
been formed that beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the outstanding voting securities of such party.
9.3 Notice of Termination and Effect of Termination. Any
termination of this Agreement under Section 9.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 9.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 9.3, Section 9.2 and Article 11, each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
pursuant to any agreement to maintain the confidentiality of information
regarding the other party, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
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10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
10.1 Survival of Representations. All representations, warranties
and covenants of Broadbase and Rubric contained in this Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the parties to this Agreement, and will survive the Effective
Time for a period of twelve (12) months.
10.2 Agreement to Indemnify. Subject to the limitations set forth
in this Section 10, the holders of the Outstanding Rubric Stock immediately
prior to the Effective Time (each, an "Indemnifying Stockholder") will severally
indemnify and hold harmless Broadbase and its officers, directors, agents and
employees, and each person, if any, who controls or may control Broadbase within
the meaning of the Securities Act (hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all claims, demands, actions, causes of actions, losses, costs, damages,
liabilities and expenses, including without limitation, reasonable legal fees
and costs (hereinafter referred to as "Damages"):
(a) arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties and covenants
given or made by Rubric in this Agreement or any certificate, document or
instrument delivered by or on behalf of Rubric pursuant hereto; or
(b) resulting from any failure of such Indemnifying
Stockholder to have good, valid and marketable title to the issued and
outstanding Rubric Stock held by such Indemnifying Stockholder, free and clear
of all liens, claims, pledges, options, adverse claims, assessments or charges
of any nature whatsoever.
For purposes of the foregoing clause (a), the existence of
a breach of or misrepresentation in any of the representations set forth in
Section 2.12 shall be determined without regard to any qualification or
reference to the "knowledge" of Rubric or "Rubric's knowledge."
For purposes of the foregoing clause (b), the Indemnified
Person may only seek and recover Damages from the Indemnifying Stockholder who
failed to have good, valid and marketable title to the issued and outstanding
Rubric Stock held by such Indemnifying Stockholder, free and clear of all liens,
claims, pledges, options, adverse claims, assessments or charges of any nature
whatsoever.
10.3 Limitations. Except with respect to Sections 10.2(c) and
10.2(d), the indemnification provided for in Section 10 will not apply unless
and until the aggregate Damages for which one or more Indemnified Persons seek
indemnification under Section 11 exceeds $310,000 (the "Basket"), in which event
the indemnification provided for in Section 10 will include all Damages in
excess of the amount of the Basket. The aggregate Damages for which the
Indemnifying Stockholders will be liable hereunder, or any other theory of
liability, shall not exceed the aggregate value of the Escrow Shares (with each
Escrow Share to be valued in the manner set forth in the Escrow Agreement) and
the Escrow Shares shall be Broadbase's sole and exclusive remedy against the
indemnifying Stockholders. The foregoing limitations and Basket shall not be
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applicable to any claim against any Indemnifying Stockholder in the event of
fraud by such Indemnifying Stockholder or to any claim against such Indemnifying
Stockholder of the type described in Section 10.2(b) hereof.
10.4 Procedure for Asserting Claims. If Broadbase wishes to
assert a claim against the Escrow Shares for indemnification pursuant to this
Section 10 (a "Claim"), Broadbase shall deliver to Thomas Bredt, as agent of the
Indemnifying Stockholders (the "Stockholders' Representative"), a certificate
signed by an officer of Broadbase (a "Claim Certificate") providing notice of
such claim and specifying in reasonable detail the manner in which the Damages
were paid, incurred or otherwise arose, and the nature of the breach,
misrepresentation or other matter to which such Claim is related. Broadbase
shall act reasonably and in good faith in preparing any such Claim Certificate
and in specifying any alleged Claim. If the Stockholders' Representative
disputes the Claim, Stockholders' Representative shall notify Broadbase of such
disagreement within twenty (20) days of the receipt from Broadbase of the Claim
Certificate. Thereupon, Broadbase and the Stockholders' Representative will,
during the thirty (30) day period following delivery of the Claim Certificate,
negotiate in good faith to resolve their differences with respect to the Claim.
Upon the expiration of such 30-day period, Broadbase shall deduct from the
Escrow Shares the amount of the original Claim (with each deducted Escrow Share
to be valued in the manner set forth in the Escrow Agreement) or, if Broadbase
and the Stockholders' Representative have agreed on a different amount,
reflected in a written memorandum signed by both parties, such different amount.
If the Stockholders' Representative does not object in the manner set forth
above to the Claim presented in the Claim Certificate, Broadbase shall deduct
the amount of the Claim from the Escrow Shares as provided in the Escrow
Agreement. If no agreement on the resolution of the Claim within the thirty (30)
day period referenced above, the Claim shall be resolved according to the
procedure set forth in Section 11 hereof.
10.5 Matters Involving Third Parties. If any third party shall
notify Broadbase or any Indemnified Person with respect to any matter (a "Third
Party Claim") which may give rise to a claim for indemnification against the
Indemnifying Stockholders, Broadbase or the Indemnified Person shall promptly
notify the Stockholders' Representative in writing; provided, however, that no
delay on the part of Broadbase or the Indemnified Person in notifying the
Stockholders' Representative shall relieve the Indemnifying Stockholders from
any obligation hereunder except to the extent that the Indemnifying Stockholders
are materially prejudiced by any such failure. Broadbase or the Indemnified
Person may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any manner
Broadbase or such Indemnified Person reasonably deems appropriate, and the
Indemnifying Stockholders will remain responsible for any damages suffered by
the Indemnified Person resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 10. Notwithstanding the foregoing, the amount of any settlement of
a Third Party Claim shall not be determinative of the amount of Damages related
to such Claim unless the Stockholders' Representative consents in writing to the
settlement of such Claim. With respect to the defense of any Third Party Claim,
Broadbase or the Indemnified Person shall use reasonable efforts to consider
strategy and other suggestions of the Indemnifying Stockholders. Counsel for the
Indemnifying Stockholders shall be permitted to monitor Broadbase's or the
Indemnified Persons' defense of a Third Party Claim for the purpose of advising
the Indemnifying Stockholders of the status and progress of the defense. Any
such activity shall be at the sole expense of the Indemnifying Stockholders.
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10.6 No Indemnity for Corporate Agents. Each of the Indemnifying
Stockholders agrees that such Indemnifying Stockholder will not make any claim
for indemnification against Rubric by reason of the fact that such Indemnifying
Stockholder was a director, officer, employee or agent of any such entity or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee or agent of another entity (whether such claims is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expense or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement or otherwise) with respect to any action, suit,
proceeding, complaint, claim or demand brought by Broadbase against the
Indemnifying Stockholder (whether such action, suit, proceeding, complaint,
claim or demand is pursuant to this Article 10, or in respect of a claim of
fraud).
10.7 Stockholders' Representative.
(a) Authority. For purposes of Section 10, Thomas Bredt
shall act as the Stockholders' Representative on behalf of holders of
Outstanding Rubric Stock or their successors or assigns ("Former Rubric
Stockholders"), subject to the provisions hereof. The Stockholders'
Representative shall keep the Former Rubric Stockholders reasonably informed of
his decisions of a material nature. The Stockholders' Representative is
authorized to take any action deemed by him appropriate or reasonably necessary
to carry out the provisions of Section 10, and is authorized to act on behalf of
the Former Rubric Stockholders for all purposes related to Section 10, with such
powers as are expressly delegated to Stockholders' Representative by the terms
of this Agreement and the Ancillary Agreements (as defined herein), together
with such other powers as are reasonably incidental thereto. In addition the
Stockholders' Representative is authorized to accept service of process upon the
Former Rubric Stockholders. Stockholders' Representative shall not have any
duties or responsibilities except those expressly set forth in the Agreement or
in any other Ancillary Agreements, be a trustee for any Former Rubric
Stockholder or have any fiduciary duty to any Former Rubric Stockholder. All
decisions and actions of the Stockholders' Representative shall be binding and
conclusive upon the Former Rubric Stockholders and may be relied upon by
Broadbase and Rubric.
(b) Standard of Conduct. Neither the Stockholders'
Representative nor any of its partners, members, directors, officers, employees
or agents shall be liable to any of the Former Rubric Stockholders for any error
of judgment, act done or omitted by him, or mistake of fact or law in connection
with his services pursuant to Section 10, unless caused by his or its own gross
negligence or willful misconduct. In taking any action or refraining from taking
any action whatsoever the Stockholders' Representative shall be protected in
relying upon any notice, paper or other document reasonably believed by him to
be genuine, or upon any evidence reasonably deemed by him to be sufficient. The
Stockholders' Representative shall not be required to take any action which is
contrary to this Agreement or any other Ancillary Agreement or applicable law.
The Stockholders' Representative may consult with counsel in connection with his
duties and shall be fully protected in any act taken, suffered or permitted by
him in good faith in accordance with the advice of counsel. In connection with
his services under Section 10, the Stockholders' Representative shall not be
responsible for determining or verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement.
(c) Indemnification. Each Former Rubric Stockholder shall
indemnify Stockholders' Representative, ratably in accordance with their pro
rata share of the Escrow Shares, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
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expenses or disbursements of any kind or nature whatsoever which may at any time
be imposed on, incurred by or asserted against Stockholders' Representative in
any way relating to or arising out of this Agreement or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or the enforcement of any of the terms hereof or
thereof or of any such other documents; provided, however, that no Former Rubric
Stockholder shall be liable for any of the foregoing to the extent they arise
from Stockholders' Representative's gross negligence or willful misconduct.
Stockholders' Representative shall be fully justified in refusing to take or to
continue to take any action hereunder unless it shall first be indemnified to
its reasonable satisfaction by the Former Rubric Stockholders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
(d) Resignation or Removal of the Stockholders'
Representative. Subject to the appointment and acceptance of a successor
Stockholders' Representative as provided below, Stockholders' Representative may
resign at anytime thirty (30) days subsequent to giving notice thereof to the
Former Rubric Stockholders and Stockholders' Representative may be removed at
any time with or without cause by action of the Former Rubric Stockholders who
represented a majority of the rights to the Escrow Shares. Upon any such
resignation or removal, the Former Stockholders' Representative shall be
reasonably acceptable to Broadbase. If no successor Stockholders' Representative
shall have been appointed by the Former Rubric Stockholders and accepted such
appointment within twenty (20) days after the retiring Stockholders'
Representative's giving of notice of resignation or the Former Rubric
Stockholders' removal of the Stockholders' Representative, then the retiring or
removed Stockholders' Representative may, on behalf of the Former Rubric
Stockholders, appoint a successor which shall be reasonably acceptable to
Broadbase. Upon the acceptance of any appointment as Stockholders'
Representative hereunder, such successor Stockholders' Representative shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Stockholders' Representative, and the
retiring or removed Stockholders' Representative shall be discharged from its
duties and obligations hereunder. After any retiring Stockholders'
Representative's resignation or removal hereunder as the Stockholders'
Representative, the provisions of this Section 10 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as the Stockholders' Representative.
(e) Stockholders' Representative in its Individual
Capacity. Stockholders' Representative, to the extent it was a Former Rubric
Stockholder, shall have the same rights and powers under this Agreement as any
other Former Rubric Stockholder and may exercise the same as though it were not
Stockholders' Representative, and the term "Former Rubric Stockholder" shall
include Stockholders' Representative in its capacity as such.
10.8 Survival of Claims. Notwithstanding anything to the
contrary, if, prior to the expiration of a particular representation, warranty
or covenant, an Indemnified Person makes a claim for indemnification under
either this Agreement or the Escrow Agreement with respect to a
misrepresentation or breach of such representation, warranty or covenant, then
the Indemnified Person's rights to indemnification under this Section 10 for
such claim shall survive any expiration or such representation, warranty or
covenant.
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11. MISCELLANEOUS
11.1 Governing Law; Dispute Resolution. The internal laws of the
State of California (irrespective of its choice of law principles) will govern
the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Any dispute hereunder ("Dispute") shall be settled by arbitration in San
Francisco, California, and, except as herein specifically stated, in accordance
with the commercial arbitration rules of the American Arbitration Association
("AAA Rules") then in effect. However, in all events, these arbitration
provisions shall govern over any conflicting rules which may now or hereafter be
contained in the AAA Rules. Any judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction over the subject
matter thereof. The arbitrator shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
to resolve a Dispute.
11.1.1 Compensation of Arbitrator. Any such arbitration
will be conducted before a single arbitrator who will be compensated for his or
her services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
11.1.2 Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law; provided,
however, that such lawyers cannot work for a firm then performing services for
either party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event that
the foregoing procedure is not followed, each party will choose one person from
the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as the arbitrator.
11.1.3 Payment of Costs. Broadbase and Rubric or the
Rubric Stockholders after the Closing will bear the expense of deposits and
advances required by the arbitrator in equal proportions, but either party may
advance such amounts, subject to recovery as an addition or offset to any award.
The arbitrator will award to the prevailing party, as determined by the
arbitrator, all costs, fees and expenses related to the arbitration, including
reasonable fees and expenses of attorneys, accountants and other professionals
incurred by the prevailing party.
11.1.4 Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
11.1.5 Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
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11.1.6 Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
11.1.7 Exclusive Remedy. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any Dispute arising out of this Agreement.
11.2 Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of both parties
reflected hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law on such
party, and the exercise of any one remedy will not preclude the exercise of any
other.
11.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time prior to the Effective Time and before or after approval of the Rubric
Stockholders.
11.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.8 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express
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delivery, postage prepaid, and will be deemed given upon actual delivery or, if
mailed by registered or certified mail, on the third business day following
deposit in the mails, addressed as follows:
(i) If to Broadbase:
Broadbase Software, Inc.
Attention: Chuck Bay
172 Constitution Avenue
Menlo Park, CA 94025
Phone: (650)614-8300
Fax: (650)614-8301
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Gordon K. Davidson, Esq.
Phone: (650) 494-0600
Fax: (650) 494-1417
(ii) If to Rubric:
Rubric, Inc.
2121 S. El Camino, 10th Floor
San Mateo, California 94403
Attention: Anu Shukla
Phone: (650) 513-3870
Fax: (650) 513-3877
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Steven E. Bochner, Esq.
Phone: (650) 493-9300
Fax: (650) 493-6811
(iii) If to the Stockholder Representative:
Thomas Bredt
Rubric, Inc.
2121 S. El Camino, 10th Floor
San Mateo, California 94403
Phone: (650) 513-3870
Fax: (650) 513-3877
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<PAGE> 46
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Steven E. Bochner, Esq.
Phone: (650) 493-9300
Fax: (650) 493-6811
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.8.
11.9 Construction of Agreement. The language hereof will not be
construed for or against either party. A reference to an article, Section or
Exhibit will mean an article or Section in, or an Exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.10 No Joint Venture. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other, and the parties'
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
11.11 Further Assurances. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.12 Absence of Third Party Beneficiary Rights. No provisions of
this Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner or employee of any party hereto or any other person
or entity, unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
11.13 Public Announcement. Broadbase and Rubric will issue a
press release approved by both parties announcing the Merger as soon as
practicable following the execution of this Agreement. Each of Broadbase and
Rubric may issue such press releases, and make such other disclosures regarding
the Merger, as it determines to be required or appropriate under applicable
securities laws or Nasdaq Stock Market rules after reasonable consultation,
where possible, with the other. Rubric will not make any other public
announcement or disclosure of the transactions contemplated by this Agreement.
Rubric will take all reasonable precautions to prevent any trading in the
securities of Broadbase by officers, directors, employees and agents of Rubric,
having knowledge of any material information regarding Broadbase provided
hereunder, including, without limitation, the existence of the transactions
contemplated by this Agreement (the "Broadbase Material Information") until the
information in question has been publicly disclosed.
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<PAGE> 47
11.14 Confidentiality. Except as expressly authorized by
Broadbase in writing, Rubric will not directly or indirectly divulge to any
person or entity or use any Broadbase Confidential Information, except as
required for the performance of its duties under this Agreement. Except as
expressly authorized by Rubric in writing, Broadbase will not directly or
indirectly divulge to any person or entity or use any Rubric Confidential
Information, except as required for the performance of its duties under this
Agreement. As used herein, "Broadbase Confidential Information" consists of (a)
any information designated by Broadbase as confidential whether developed by
Broadbase or disclosed to Broadbase by a third party, (b) the source code to any
Broadbase software and any trade secrets relating to any of the foregoing, and
(c) any information relating to Broadbase's product plans, product designs,
product costs, product prices, product names, finances, marketing plans,
business opportunities, personnel, research development or know-how. As used
herein, "Rubric Confidential Information" consists of (x) any information
designated by Rubric as confidential whether developed by Rubric or disclosed to
Rubric by a third party, (y) the source code to any Rubric software, and any
trade secrets related to any of the foregoing, and (z) any information relating
to Rubric product plans, product designs, product costs, product prices, product
names, finances, marketing plan, business opportunities, personnel, research,
development or know-how. "Broadbase Confidential Information" and "Rubric
Confidential Information" also include the terms and conditions of this
Agreement, except as disclosed in accordance with Section 11.13 above. The
foregoing restriction will apply to information about a party whether or not it
was obtained from such party's employees, acquired or developed by the other
party during such other party's performance under this Agreement, or otherwise
learned. The foregoing restrictions will not apply to information that (i) has
become publicly known through no wrongful act of the receiving party, (ii) has
been rightfully received from a third party authorized by the party which is the
owner, creator or compiler to make such disclosure without restriction, (iii)
has been approved or released by written authorization of the party which is the
owner, creator or compiler, or (iv) is being or has therefore been disclosed
pursuant to a valid court order after a reasonable attempt has been made to
notify the party which is the owner, creator or compiler.
11.15 Time is of the Essence. The parties hereto acknowledge and
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement.
11.16 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BROADBASE SOFTWARE, INC. RUBRIC, INC.
By: /s/ CHUCK BAY By: /s/ ANU SHUKLA
-------------------------------- --------------------------------
Chuck Bay, President Anu Shukla, Chief Executive Officer
BRONCO ACQUISITION CORP. By:
--------------------------------
By: /s/ CHUCK BAY
- -----------------------------------
Chuck Bay , President
-----------------
[SIGNATURE PAGE TO AGREEMENT AND
PLAN OF REORGANIZATION]
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EXHIBIT A
---------
Principal Stockholders
----------------------
Anu Shukla (Director)
Thomas Aliotta
Christopher M. Maeda
Hal Steger
Brentwood Associates VII, L.P.
Brentwood Associates Fund, L.P.
Cambridge Technology Capital Fund I L.P.
Menlo Entrepreneurs Fund VII, L.P.
RRE Investors Fund, L.P.
RRE Investors, L.P.
TL Ventures III Interfund L.P.
TL Ventures III Offshore L.P.
TL Ventures III L.P.
Tom Bredt (Director)
Robert Fabbio (Director)
Christopher Greendale (Director)
Joseph Roebuck (Director)
Stewart Schuster (Director)
<PAGE> 50
EXHIBIT B
---------
VOTING AGREEMENT
THIS IRREVOCABLE PROXY AND VOTING AGREEMENT, dated as of December 9,
1999 (this "Agreement"), is entered into by and between Broadbase Software,
Inc., a Delaware corporation ("Broadbase"), and [name of stockholder]
("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Broadbase, Rubric, Inc., a Delaware
corporation (the "Rubric") and Broadbase Acquisition Corporation, a Delaware
corporation ("Merger Sub") have entered into an Agreement and Plan of
Reorganization, of even date herewith) as such agreement may hereafter be
amended from time to time, the "Merger Agreement"; initially capitalized and
other terms used but not defined herein have the meanings ascribed to them in
the Merger Agreement), pursuant to which Broadbase will merge with and into
Merger Sub (the "Merger");
WHEREAS, Stockholder Beneficially Owns (as defined herein) such number
of shares of (i) Rubric's Common Stock, par value $0.001 ("Rubric Common
Stock"), (ii) Rubric's Series A Preferred Stock, par value $0.001 ("Rubric
Series A Preferred"), and (iii) Rubric's Series B Preferred Stock, par value
$0.001 ("Rubric Series B Preferred"), as are indicated on the final page of this
Agreement (such shares of Rubric Common Stock, Rubric Series A Preferred Stock
and/or Rubric Series B Preferred Stock Beneficially Owned by Stockholder and set
forth on the signature page hereto being collectively hereinafter referred to as
the "Shares");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Broadbase has requested that Stockholder agree, and Stockholder has
agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Voting Agreement. Stockholder hereby agrees with Broadbase that,
(except as may be otherwise agreed to in writing by Broadbase) at any meeting of
Rubric's stockholders, however called, or in connection with any written consent
of Rubric's stockholders, as to which any of the matters described below in this
Section 1 is put to the vote or written consent of Rubric's stockholders,
Stockholder shall vote the Shares Beneficially Owned by Stockholder, whether now
owned or hereafter acquired prior to such vote: (i) in favor of approval of the
Merger Agreement, the Merger and any actions required in furtherance of the
transactions contemplated thereby; (ii) against any action or agreement that
would result in a breach in any material respect of (A) any representation or
warranty of Rubric under the Merger Agreement that would have a Material Adverse
Effect on Rubric or (B) any other agreement, covenant or obligation of Rubric
under the Merger Agreement; (iii) against: (A) any Third Party Acquisition (as
defined below), (B) any change in a majority of the individuals who, as of the
date hereof, constitute the Board of Directors of Rubric, unless such change
results from an election to replace any such individual who ceases to be a
member of the Board of Directors of Rubric due to such individual's death,
disability or resignation from Rubric's Board of Directors for reasons unrelated
to any matter that Stockholder agrees to vote against hereunder, (C) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving
<PAGE> 51
Rubric and any Third Party (as defined below), (D) a sale, lease, transfer or
disposition of any assets of Rubric's business outside the ordinary course of
business, or any assets which are material to its business whether or not in
the ordinary course of business, (E) any reorganization, recapitalization,
dissolution or liquidation of Rubric, (F) any change in the present
capitalization of Rubric or any amendment of Rubric's Certificate of
Incorporation or bylaws not contemplated by the Merger Agreement or not
consented to in writing by Broadbase, (G) any other material change in Rubric's
corporate structure other than the approval of stock options disclosed in
Rubric's representations and warranties in the Merger Agreement or in any
Disclosure Schedule thereto) or any other change materially affecting Rubric's
business, (H) any other action or proposal which is made in opposition to or in
competition with consummation of the Merger, or which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect the Merger or any of the other transactions
contemplated by the Merger Agreement, or any of the transactions contemplated
by this Agreement; and (iv) if such Stockholder is a holder of shares of Rubric
Series A Preferred Stock or Rubric Series B Preferred Stock, in favor of the
conversion of the Rubric Preferred A Stock or Rubric Preferred B Stock,
respectively, into shares of Rubric Common Stock. If Rubric Preferred A Stock
and/or Rubric Preferred B Stock is not converted automatically by their terms
prior to the Effective Time, then by no later than immediately prior to the
Effective Time, Stockholder shall convert all shares of Rubric Series A
Preferred Stock or Rubric Series B Preferred Stock owned by such Stockholder
into shares of Rubric's Common Stock. Stockholder shall not enter into any
agreement or understanding with any person the effect of which would be
inconsistent or violative of the provisions and agreements contained herein.
Stockholder agrees that any shares of capital stock of Rubric that
Stockholder purchases or with respect to which Stockholder otherwise acquires
Beneficial Ownership or over which Stockholder exercises voting power at any
time after the execution of this Agreement and prior to the date of termination
of this Agreement pursuant to Section 6 below shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares
on the date hereof; provided, however, nothing in this Agreement shall be
construed to obligate Stockholder to exercise any options or warrants to
purchase shares of Rubric Common Stock, Rubric Series A Preferred and/or Rubric
Series B Preferred that may be held by Stockholder.
For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of Rubric by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Broadbase or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
any material portion (which shall include ten percent (10%) or more) of the
assets of Rubric, other than the sale or license of its products in the
ordinary course of business; (iii) the acquisition by a Third Party of ten
percent (10%) or more of the outstanding shares of Rubric's capital stock
(other than any such acquisition resulting from the exercise or conversion of
any stock option, stock warrant, convertible debt instrument and/or other
security of Rubric that is outstanding on the date of this Agreement); (iv) the
adoption by Rubric of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by Rubric of more than ten percent
(10%) of the outstanding Shares (other than pursuant to rights of refusal or
similar rights held by Rubric as of the date of this Agreement or pursuant to
repurchase options held by Rubric that are exercisable in connection with the
termination of a person's employment or services with or to Rubric or any of
its subsidiaries); or (vi) the acquisition (or any group of acquisitions) by
Rubric by merger, purchase of stock or assets, joint venture or otherwise, of a
direct or indirect ownership interest or investment in any business (or
businesses) whose annual
2
<PAGE> 52
revenues, net income or assets is equal to or greater than ten percent (10%) of
the most recent annual revenues, net income or assets of Rubric, respectively.
For purposes of this Agreement, "Beneficially Own," "Beneficially Owned"
or "Beneficial Ownership" with respect to any Shares shall mean Stockholder's
having record or beneficial ownership of such Shares or having, through any
agreement or arrangement, the power to direct the voting with respect to, or
otherwise enables Stockholder to legally act in a binding manner with respect
to, such Shares as contemplated hereby.
2. Irrevocable Proxy.
(a) Subject to the terms and conditions of this Agreement, and effective
upon the issuance of a permit by the California Commissioner of Corporations or
the declaration of effectiveness by the SEC of a registration statement with
respect to the securities to be issued in the Merger, the Stockholder hereby
constitutes and appoints Broadbase, which shall act by and through Chuck Bay
and Mark Kremer (each, a "Proxy Holder"), or either of them, with full power of
substitution, its true and lawful proxy and attorney-in-fact to vote at any
meeting (and any adjournment or postponement thereof) of Rubric's stockholders
called for purposes of considering whether to approve the Merger Agreement, the
Merger or any of the other transactions contemplated by the Merger Agreement, or
any Third Party Acquisition, or to execute a written consent of stockholders in
lieu of any such meeting, all Shares Beneficially Owned by Stockholder as of
the date of such meeting or written consent (i) in favor of the approval of the
Merger Agreement, the Merger and the other transactions contemplated by the
Merger Agreement, with such modifications to the Merger Agreement as the
parties thereto may make, or (ii) against any Third Party Acquisition or any
other transaction or proposal described in clause (ii) or (iii) of Section 1,
as the case may be.
(b) The proxy and power of attorney granted herein shall be irrevocable
during the term of this Agreement, shall be deemed to be coupled with an
interest sufficient in law to support an irrevocable proxy and shall revoke all
prior proxies granted by Stockholder. Stockholder shall not grant any proxy to
any person which conflicts with the proxy granted herein, and any attempt to do
so shall be void. The power of attorney granted herein is a durable power of
attorney and shall survive the insolvency, liquidation, death or incapacity of
Stockholder. The proxy and power of attorney granted herein shall be binding
upon the successors and assigns of the Stockholder. The Stockholder authorizes
the Proxy Holders to file this proxy and any substitution or revocation of
substitution with the Secretary of Rubric and with any Inspector of Elections
at any meeting of the stockholders of Rubric.
(c) If Stockholder fails for any reason to vote his, her or its Shares in
accordance with the requirements of Section 1 hereof, then the Proxy Holder
shall have the right to vote the Shares at any meeting of Rubric's stockholders
and in any action by written consent of Rubric's stockholders in accordance
with the provisions of this Section 2. The vote of the Proxy Holder shall
control in any conflict between the Proxy Holder's vote of such Shares and a
vote by Stockholder of such Shares.
3. Director Matters Excluded. Broadbase acknowledges and agrees that
no provision of this Agreement (including without limitation the provisions of
Section 4(d) hereof) shall limit or otherwise restrict Stockholder (or its
representatives) with respect to any act or omission that Stockholder (or its
representatives) may undertake or authorize in his or her
3
<PAGE> 53
capacity as a director of Rubric, including, without limitation, any vote that
Stockholder (or its representatives) may make as a director of Rubric with
respect to any matter presented to the Board of Directors of Rubric.
4. Other Covenants, Representations and Warranties. Stockholder hereby
represents and warrants to Broadbase as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner of all
the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by Stockholder. Stockholder has voting power with respect to
the matters set forth in Section 1 hereof with respect to all of the Shares,
with no limitations, qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement or any court order to which
Stockholder is a party or is subject including, without limitation, any voting
agreement or voting trust. This Agreement has been duly and validly executed
and delivered by Stockholder.
(c) Restriction on Transfer, Proxies and Non-Interference. During the
term of this Agreement, except as expressly contemplated by this Agreement or
the Merger Agreement, Stockholder shall not, directly or indirectly: (i) offer
for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to, or consent to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any or all of the
Shares or any interest therein unless the transferee shall execute a signature
page to this Irrevocable Proxy and Voting Agreement and shall agree to be bound
to the provisions hereof; (ii) grant any proxies or powers of attorney or
deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares; or (iii) take any action that would make any
representation or warranty of Stockholder contained in this Section 4 untrue or
incorrect or have the effect of preventing or disabling Stockholder from
performing any of Stockholder's obligations under this Agreement.
In addition, Stockholder acknowledges that any shares of
Broadbase Common Stock issued to Stockholder as a result of the Merger shall
bear legends restricting transfers to the extent provided in Section 1.9 of the
Merger Agreement, and to the extent required by Rule 145 under the Securities
Act of 1933. Stockholder hereby agrees to be bound by, and comply with, the
terms of Section 1.9 of the Merger Agreement.
(d) Other Potential Acquirors. Stockholder: (i) shall immediately
cease any existing discussions or negotiations, if any, with any persons (other
than Broadbase and its affiliates) conducted heretofore with respect to any
acquisition of all or any material portion of the assets of, or any equity
interest in, Rubric, or any business combination with Rubric, in his, her or
its capacity as a stockholder of Rubric; (ii) from and after the date hereof
until the earlier of (A) the termination of the Merger Agreement in accordance
with its terms and (B) the Effective Time, shall not, in such capacity as a
stockholder of Rubric, directly or indirectly, initiate, solicit or knowingly
encourage (including, without limitation, by way of furnishing non-public
information or assistance), or take any other action to facilitate knowingly,
any inquiries or the making of any Third Party Acquisition; and (iii) shall
promptly notify Broadbase of any
4
<PAGE> 54
proposals for, or inquiries with respect to, a potential Third Party
Acquisition received by Stockholder or of which Stockholder otherwise has
knowledge.
(e) Reliance by Broadbase. Stockholder understands and acknowledges
that Broadbase is entering into the Merger Agreement in reliance upon
Stockholder's execution and delivery of this Agreement.
5. Stop Transfer. Stockholder agrees with, and covenants to, Broadbase
that Stockholder shall not request that Rubric register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any
Shares, unless such transfer is made pursuant to and in compliance with this
Agreement. In the event of a dividend or distribution of capital stock of
Rubric, or any change in Rubric Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall be deemed to refer to and include the Shares as well as all
such shares of Rubric's capital stock issued or distributed pursuant to such
stock dividends and distributions and any shares of Rubric's capital stock into
which or for which any or all of the Shares may be so changed or exchanged.
6. Termination. The proxy granted pursuant to Section 2 hereof and
Stockholder's covenants and agreements contained herein with respect to the
Shares shall terminate upon the earliest to occur of: (a) the termination of the
Merger Agreement and (b) the Effective Time.
7. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the Merger
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) Assignment. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party; provided,
however, that Broadbase may, in its sole discretion, assign its rights and
obligations hereunder to any wholly owned subsidiary of Broadbase.
(c) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto. No
waiver by a party hereto of any of its rights hereunder shall be effective
unless and to the extent such waiver is set forth in a writing signed by such
party.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any nationally-recognized overnight courier
service, such as Federal Express, providing proof of delivery. Any such notice
or communication shall be deemed to have been delivered and received (i) in the
case of hand delivery, on the date of such delivery, (ii) in the case of
telecopy, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested); (iii) in the case of a nationally-recognized overnight courier
service, in circumstances under which such courier guarantees next business day
delivery, on the next
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<PAGE> 55
business day after the date when sent, and (iv) the case of mailing, on the
third business day following that on which the piece of mail containing such
communication is posted. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Stockholder: [name of stockholder]
Address:
Telephone:
Telecopier:
Attention:
with a copy to: Rubric, Inc.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road,
Palo Alto, CA 94304
Telecopier: (650) 493-6811
Attention: Steven E. Bochner
If to Broadbase: Broadbase, Inc.
with a copy to: Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, CA 94036
Telecopier: (650) 494-1417
Attention: Gordon K. Davidson
David K. Michaels
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(f) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
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<PAGE> 56
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties of variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
(h) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Broadbase and Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
Broadbase Software, Inc., a Delaware
corporation
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
[Name of Stockholder]
Shares of Rubric Common Stock
Beneficially Owned (if any):
Shares of Rubric Series A Preferred Stock
Beneficially Owned (if any):
Shares of Rubric Series B Preferred Stock
Beneficially Owned (if any):
7
<PAGE> 57
EXHIBIT C
---------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of December ___, 1999
by and among Broadbase Software, Inc.,, a Delaware corporation ("Broadbase"),
State Street Bank & Trust Company (the "Escrow Agent") and ________________ (the
"Stockholders Representative") for and on behalf of holders of Common Stock and
Preferred Stock (the "Indemnifying Stockholders") of Rubric, Inc., a Delaware
corporation ("Rubric").
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization dated
as of December __, 1999 (the "Plan of Reorganization"), Broadbase will issue to
the Indemnifying Stockholders shares of Broadbase Common Stock, $0.001 par value
("Broadbase Common Stock"), pursuant to the merger (the "Merger") of Broadbase
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Broadbase ("Sub"), with and into Rubric;
B. Pursuant to Section 10 of the Plan of Reorganization, the
Indemnifying Stockholders have agreed to indemnify Broadbase with respect to
inaccuracies in or breaches of representations, warranties or covenants made by
Rubric in the Plan of Reorganization and certain other matters; and
C. In accordance with the Plan of Reorganization, the parties desire to
establish an escrow for the purpose of providing a fund against which Broadbase
may seek indemnification from the Indemnifying Stockholders under the Plan of
Reorganization.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual obligations herein, the parties agree as follows:
1. Establishment of Escrow. On the date hereof or as soon thereafter as
practicable, Broadbase shall deliver to the Escrow Agent for deposit into escrow
(the "Escrow") certificates representing an aggregate of 360,000 shares of
Broadbase Common Stock (subject to adjustment for changes in Broadbase's capital
stock as provided in Section 1.1.5 of the Agreement and Plan of Reorganization)
otherwise distributable to the Indemnifying Stockholders in the Merger (the
"Escrow Shares"). The Escrow Shares so delivered to the Escrow Agent and any
other securities, cash or other property from time to time held by the Escrow
Agent pursuant to the terms hereof is herein referred to as the "Escrow Fund."
The Escrow Agent agrees to accept the Escrow Shares and to hold the Escrow Fund
in escrow subject to the terms and conditions of this Escrow Agreement.
2. Maintenance of the Escrow. The Escrow Agent shall establish a
separate account for each Indemnifying Stockholder showing the number of Escrow
Shares and the amount and type of other property, if any, held in the Escrow for
such Indemnifying Stockholder on the basis of a list of the Indemnifying
Stockholders' respective ownership percentage provided to the Escrow Agent by
the Stockholder Representative. The Escrow Agent shall maintain records
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<PAGE> 58
showing each Indemnifying Stockholder's Proportionate Interest (as defined
below) in the Escrow Fund and shall adjust each Indemnifying Stockholder's
account to reflect distributions from, and additions or substitutions to, the
property held for the account of such Indemnifying Stockholder in the Escrow so
that, at all times, each Indemnifying Stockholder's Proportionate Interest in
the Escrow Fund shall be maintained. For purposes of this Escrow Agreement, each
Indemnifying Stockholder's "Proportionate Interest" in the Escrow Fund as of a
specific date shall be equal to the percentage that the value of the Escrow
Shares and other property held for the account of such Indemnifying Stockholder
in the Escrow bears to the value of all property held for the account of all
Indemnifying Stockholders in the Escrow as of such date. For purposes of the
provisions of this Escrow Agreement relating to indemnification and claims, the
Escrow Shares shall be deemed to have a value equal to the closing sale price of
Broadbase Common Stock (as quoted on the Nasdaq National Market and reported in
The Wall Street Journal) for the five (5) trading days ending on the date of the
Agreement and Plan of Reorganization. The Escrow Agent is hereby granted the
power to effect any transfer of Escrow Shares required by this Agreement.
Broadbase shall cooperate with the Escrow Agent in promptly issuing, or causing
its transfer agent to promptly issue, such stock certificates as shall be
required to effect such transfers. All Escrow Shares and any other securities
from time to time held in the Escrow Fund shall be registered in the name of the
Escrow Agent or its nominee.
3. Stockholder Representative. From and after the establishment of the
Escrow as provided in Section 1 hereof, the Indemnifying Stockholders shall be
represented by the Stockholder Representative, or, upon written notice to the
Escrow Agent, by his successor appointed in accordance with Section 10 of the
Plan of Reorganization, who shall have the duties and authority set forth in
said section.
4. Dividends, Voting and Rights of Ownership. Except for tax-free
dividends paid in stock declared with respect to the Escrow Shares pursuant to
Section 305(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
which shall be treated in the manner set forth in Section 1 hereof, any cash
dividends, dividends payable in securities or other distributions of any kind
made in respect of the Escrow Shares will be distributed currently to the
Indemnifying Stockholders and, if distributed to the Escrow Agent, shall
promptly be paid over to the Indemnifying Stockholders. Each Indemnifying
Stockholder will have voting rights with respect to the Escrow Shares deposited
in the Escrow with respect to such Indemnifying Stockholder so long as such
Escrow Shares are held in the Escrow, and Broadbase shall take all reasonable
steps necessary to allow the exercise of such rights. The Escrow Agent shall
forward to the Stockholder Representative all voting materials and proxies
received by the Escrow Agent. In the event an Indemnifying Stockholder elects to
vote, it shall direct the Escrow Agent in writing to do so. In the absence of
such direction, the Escrow Agent shall have no duty or obligation to vote with
respect to any of the Escrow Shares. While the Escrow Shares remain in the
Escrow Agent's possession pursuant to this Escrow Agreement, the Indemnifying
Stockholders will retain and will be entitled to exercise all other incidents of
ownership of the Escrow Shares which are not inconsistent with the terms and
conditions of this Escrow Agreement. Subject to the rights of Broadbase under
the Plan of Reorganization and this Escrow Agreement, all beneficial interest in
the Escrow Fund shall be the property of the Indemnifying Stockholders from and
after the Closing, and Broadbase shall have no interest therein. None of the
rights of the Indemnifying
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<PAGE> 59
Stockholders hereunder shall be transferable except as otherwise provided by
law. Each of the Indemnifying Stockholders shall be obligated for all federal,
state or local taxes applicable to such Indemnifying Stockholder's interest in
the Escrow Fund.
5. Claims for Indemnification: Disposition Thereof. If an Indemnified
Person (as defined in the Plan of Reorganization) wishes to assert, prior to the
first anniversary of the Effective Time (as detailed in the Plan of
Reorganization) (the "Escrow Period"), any Claim (as defined in the Plan of
Reorganization) for indemnification pursuant to Section 10 of the Plan of
Reorganization ("Indemnification Claim"), such Indemnitee or Broadbase shall
assert such Claim, and such Claim shall be disposed of, according to the
procedures set forth in Sections 10 and 11.1 of the Plan of Reorganization.
6. Distribution of Escrow Fund Termination of Escrow. The portion of the
Escrow Fund not previously distributed in accordance with the terms of Section 5
hereof shall be held by the Escrow Agent until three (3) business days following
the termination of the Escrow Period (the "Release Date"), at which time it
shall be delivered to the Indemnifying Stockholders in accordance with their
Proportionate Interests. Notwithstanding the foregoing, there shall be retained
in the Escrow the lesser of (i) the number of Escrow Shares and other property
then held in the Escrow having an aggregate value equal to 100% of the amount of
all pending Indemnification Claims asserted pursuant to Section 5 hereof and
expenses reasonably estimated by Broadbase to be necessary for the disposition
of all such Indemnification Claims, and (ii) the entire remaining Escrow Fund.
The Escrow Fund not so distributed shall be retained by the Escrow Agent until
all such pending Indemnification Claims are resolved and the remaining Escrow
Fund deliverable to any Broadbase as a result thereof, if any, shall have been
delivered to Broadbase. Thereafter, the Escrow Agent shall, as promptly as
practicable, deliver the remaining Escrow Fund to the Indemnifying Stockholders
in accordance with their Proportionate Interests. In no event shall the Escrow
Agent accept or pay any Claim specified in a Claim Certificate delivered after
the termination of the Escrow Period, regardless of when the facts and
circumstances giving rise to such Claim occurred.
7. Term of Escrow Agreement. This Escrow Agreement shall terminate upon
the distribution by the Escrow Agent of all property held in the Escrow Fund.
8. Fees of the Escrow Agent. Broadbase and the Stockholder
Representative (on behalf of the Indemnifying Stockholders) agree, jointly and
severally to pay to the Escrow Agent a fee according to the fee schedule
attached as Schedule I hereto and all of the expenses of the Escrow Agent,
including expenses related to the indemnity provided in Section 11 hereof. To
the extent such fees and expenses are not paid by Broadbase, they may paid from
the Escrow Fund after ten (10) days written notice from the Escrow Agent to
Broadbase and the Stockholder Representative. As between themselves, Broadbase
and the Stockholder Representative (on behalf of the Indemnifying Stockholders)
agree that: (i) all fees and expenses payable to the Escrow Agent will be paid
in the first instance by Broadbase as and when they became payable, and (ii) all
fees and expenses associated with the administration of any Indemnification
Claim, to the extent reasonable and excluding fees and expenses pertaining to an
arbitration proceeding pursuant to Sections 10.4 and 11.1 of the Agreement and
Plan of Reorganization, shall be borne
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<PAGE> 60
by the Indemnifying Stockholders and shall be recoverable by Broadbase out of
the Escrow as a part of such Indemnification Claim.
9. Liability of the Escrow Agent. In performing any of its duties under
this Escrow Agreement, the Escrow Agent shall not be liable to any party for
damages, losses or expenses, except in the event of gross negligence or willful
misconduct on its part. The Escrow Agent shall not incur any such liability for
(i) any act or failure to act made or omitted in good faith, or (ii) any action
taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Escrow Agreement that the Escrow
Agent shall in good faith believe to be genuine; nor will the Escrow Agent be
liable or responsible for forgeries, fraud, impersonations, or determining the
scope of any agent's authority. In addition, the Escrow Agent may consult with
legal counsel of its choice in connection with its duties under this Escrow
Agreement and shall be fully protected in any act taken, suffered, or permitted
by it in good faith in accordance with the advice of counsel. The Escrow Agent
is not responsible for determining and verifying the authority of any person
acting or purporting to act on behalf of any party to this Escrow Agreement. The
Escrow Agent undertakes to perform such duties as are specifically set forth in
this Escrow Agreement, and the Escrow Agent shall not be liable except for the
performance of such duties as are specifically set forth in this Escrow
Agreement. No implied covenants or obligations shall be read into this Escrow
Agreement against the Escrow Agent.
10. Controversies. If any controversy arises between the parties to this
Escrow Agreement, or with any other party, concerning the subject matter of the
Escrow, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy as provided in the Plan of Reorganization.
11. Indemnification of Escrow Agent. Broadbase and the Indemnifying
Stockholders and their respective successors and assigns agree jointly and
severally to indemnify and hold the Escrow Agent harmless against any and all
losses, claims, damages, liabilities and expenses, including reasonable costs of
investigation, counsel fees, including allocated costs of in-house counsel, and
disbursements that may be imposed on the Escrow Agent, or incurred by it in
connection with the performance of its duties under this Escrow Agreement,
including but not limited to any arbitration or litigation arising from this
Escrow Agreement or involving its subject matter. The costs and expenses of
enforcing this right of indemnification shall be paid by Broadbase and the
Indemnifying Stockholders, provided, however, that the Broadbase and the
Indemnifying Stockholders shall not pay such costs and expenses to the extent
that the Escrow Agent is judicially determined to have been negligent or acted
with willfull misconduct. This right of indemnification shall survive the
termination of this Escrow Agreement, and the removal or resignation of the
Escrow Agent. Nothing contained in this Section 11 shall impair the rights of
the Indemnifying Stockholders and Broadbase, as between themselves, including
without limitation, their rights to enforce the provisions of Section 8 hereof
with respect to the allocation of the Escrow Agent's fees.
12. Resignation of Escrow Agent. The Escrow Agent may resign giving at
least thirty (30) days written notice to the other parties; provided, however
that no such resignation shall
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<PAGE> 61
become effective until the appointment of a successor Escrow Agent which shall
be accomplished as follows: Broadbase and the Stockholder Representative shall
use their best efforts to agree on a successor Escrow Agent within thirty (30)
days after receiving such notice. If the parties fail to agree on a successor
Escrow Agent within such time, the Escrow Agent may, at the expense of Broadbase
and the Stockholder Representative, petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent authorized to do business in the
State of California and, in such event, shall give written notice to the other
parties of such appointment. The successor Escrow Agent shall execute and
deliver to the Escrow Agent an instrument accepting such appointment, and the
successor Escrow Agent shall, without further acts, be vested with all the
estates, property rights, powers, and duties of the predecessor Escrow Agent as
if originally named as Escrow Agent herein. The predecessor Escrow Agent then
shall be discharged from any further duties and liability under this Escrow
Agreement.
13. Arbitration.
(a) The final decision of the arbitrator with respect to a Claim
resolved pursuant to Section 11.1 of the Agreement and Plan of Reorganization
(an "Arbitration-Processed Claim") shall be furnished to the Escrow Agent, the
Stockholder Representative and Broadbase in writing and will constitute a
conclusive determination of the issue in question, binding upon Rubric, the
Indemnifying Stockholders and Broadbase and shall not be contested or appealed
by any of them. Stockholder Representative shall give notice to the Escrow
Agent, within five (5) business days of commencement thereof, of the pendency of
an Arbitration-Processed Claim. After receipt of notice of an
Arbitration-Processed Claim, the Escrow Agent will continue to hold in the
Escrow Fund Escrow Shares and/or other property having a value sufficient to
cover such Claim, as determined pursuant to Section 2 hereof (notwithstanding
the occurrence of the Release Date), until the earlier of the receipt by the
Escrow Agent of (i) a settlement agreement executed by Broadbase and the
Stockholder Representative setting forth a resolution of such Claim, or (ii)
receipt of a copy of the final award of the arbitrator with respect to such
Claim.
(b) The number of Escrow Shares to be delivered upon resolution of
an Arbitration-Processed Claim shall be equal to (i) the aggregate dollar amount
of the Arbitration-Processed Claim as determined pursuant to this Section 13
divided by (ii) the value of the Escrow Shares, as determined pursuant to
Section 2 hereof as of the date of such determination.
14. Miscellaneous.
(a) Assignment: Binding upon Successors and Assigns. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other parties. This Escrow Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) Severability. If any provision of this Escrow Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Escrow Agreement and the
application of such provision to other persons or circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
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The parties further agree to replace such invalid or unenforceable provision of
this Escrow Agreement with a valid and enforceable provision which will achieve,
to the extent possible, the economic, business and other purposes of the invalid
or unenforceable provision.
(c) Entire Agreement. This Escrow Agreement, the Exhibits hereto,
the documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
(d) Notices. No notice or other communication shall be deemed given
unless sent in the manner, and to the persons, specified in this Section 14(d).
All notices and other communications hereunder will be in writing and win be
deemed given (i) upon receipt if delivered personally (or if mailed by
registered or certified mail), (ii) the day after dispatch if sent by overnight
courier; or (iii) upon dispatch if transmitted by facsimile (and confirmed by a
copy delivered in accordance with clause (i) or (ii)), addressed to the parties
at the following addresses:
To the Escrow Agent:
----------------------------
----------------------------
----------------------------
----------------------------
Phone:
----------------------
Fax:
------------------------
To Vantive: Broadbase Software, Inc.
172 Constitution Drive
Menlo Park, CA 94025
Attn: Chuck Bay
Phone: 650-614-8300
Fax: 650-614-8301
with a copy to: Fenwick & West LLP
Two Palo Alto Square, Suite 800
Palo Alto, California 94306
Attn: Gordon K. Davidson, Esq.
Phone: 650-494-0600
Fax: 650-494-1417
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To the Stockholder Representative:
----------------------------
----------------------------
----------------------------
----------------------------
Phone:
----------------------
Fax:
------------------------
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94306
Attn: Steven E. Bochner, Esq.
Phone: 650-493-9300
Fax: 650-493-6811
Any party may change its address for such communications by giving notice
thereof to the other parties.
(e) Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
(f) Amendment and Waivers. Any term or provision of this Escrow
Agreement may be amended, and the observance of any term of this Escrow
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof for default in payment
of any amount due hereunder or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any succeeding breach or
default.
(g) Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Escrow Agreement.
(h) Absence of Third Party Beneficiary Rights. No provisions of this
Escrow Agreement are intended, nor shall be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, Stockholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof shall be solely between the parties
to this Escrow Agreement.
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<PAGE> 64
(i) Governing Law. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Escrow Agreement, the construction
of its terms, and the interpretation and enforcement of the rights and duties of
the parties hereto.
(j) Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
BROADBASE SOFTWARE, INC.
By:
----------------------------
Title:
-------------------------
STATE STREET BANK & TRUST COMPANY
By:
----------------------------
Title:
-------------------------
STOCKHOLDER REPRESENTATIVE:
- -------------------------------
[----------------]
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<PAGE> 66
EXHIBIT D
---------
_____________, 2000
BroadBase Software, Inc.
172 Constitution Drive
Menlo Park, CA 94025
Deutsche Bank Securities Inc.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
Thomas Weisel Partners LLC
E*TRADE Securities Inc.
c/o Deutsche Bank Securities Inc.
1 South Street
Baltimore, MD 21202
Attention: Equity Syndicate
Ladies and Gentlemen:
The undersigned understands that Deutsche Banc Alex. Brown ("Alex.
Brown"), Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, Thomas
Weisel Partners LLC, and E*TRADE Securities Inc., as representatives (the
"Representatives") of the several underwriters (the "Underwriters"), have
entered into an Underwriting Agreement (the "Underwriting Agreement") with
BroadBase Software, Inc. ("BroadBase"), providing for the initial public
offering by the Underwriters, including the Representatives, of common stock
(the "Common Stock") of BroadBase (the "Initial Public Offering"). Under the
terms of an Agreement and Plan of Reorganization dated December 9, 1999 among
BroadBase, Bronco Acquisition Corp. and Rubric, Inc. (the "Merger Agreement"),
shares of common stock and/or preferred stock of Rubric, Inc. held by the
undersigned have been converted into the right to receive shares of Common Stock
of BroadBase (the "Merger Shares").
In consideration of the issuance of the Merger Shares to the undersigned
and for other good and valuable consideration, receipt and sufficiency of which
is hereby acknowledged, the undersigned agrees that, without the prior written
consent of Alex. Brown, the undersigned will not, directly or indirectly, offer,
sell, pledge, contract to sell (including any short sale), grant any option to
purchase or otherwise dispose of any of the Merger Shares or any shares of
Common Stock which may be issued upon exercise of a stock option or warrant, or
enter into any Hedging Transaction (as defined below) relating to the Common
Stock (each of the foregoing referred to as a "Disposition") for a period (the
"Lock-Up Period") from the date hereof until the earlier of (i) March 19, 2000,
(ii) such time as substantially all other persons that hold a similar number of
shares of Common Stock as the undersigned and who are bound by similar lock-ups
are released from such lock-ups, or (iii) if the undersigned is a former holder
of
<PAGE> 67
Rubric preferred stock, such time as any holder of Common Stock issued on
conversion of BroadBase preferred stock is released from any lock-up executed by
them in connection with BroadBase's initial public offering. The foregoing
restriction is expressly intended to preclude the undersigned from engaging in
any Hedging Transaction or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition during the Lock-Up Period even if
the Merger Shares would be disposed of by someone other than the undersigned.
"Hedging Transaction" means any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock.
If, following the Effective Time but prior to March 19, 2000, BroadBase
shall consummate a public offering of its Common Stock in which shares are being
sold by existing stockholders of BroadBase (other than former shareholders of
Rubric, Inc.), and if BroadBase offers to include in such public offering a
percentage of the Merger Shares held by the undersigned (or any shares of Bronco
Common Stock issuable to the undersigned upon exercise of options or warrants
that have been assumed by BroadBase in the Merger) as is equal to (or, at the
election of Broadbase, greater than) the percentage of shares of Common Stock
beneficially owned by the Shareholder (as defined in the Fourth Amended and
Restated Investors' Rights Agreement dated as of June 30, 1999 by and among
BroadBase and certain holders of Common Stock or warrants to purchase Common
Stock (the "Investor Rights Agreement")) that are included in such public
offering, on the same terms as are applicable to the Shareholder (including but
not limited to payment of expenses and indemnification), then the undersigned
will be subject to the same restrictions on Dispositions of shares of Common
Stock following such public offering are applicable to the Shareholder pursuant
to the underwriting agreement relating to such public offering and pursuant to
the Investor Rights Agreement; provided that each holder of a number of shares
of Common Stock issued on conversion of BroadBase preferred stock representing
at least three percent of the outstanding shares of Common Stock shall have
agreed to a restriction on sales of Common Stock for the same period. If the
shares of Common Stock beneficially owned by the undersigned that BroadBase
shall offer to include in such public offering and which the undersigned shall
be entitled to include therein (subject to appropriate prospectus disclosure and
execution of the underwriting agreement and customary selling stockholder
documents) represent 20% or more of the aggregate number of shares of Common
Stock issued to the undersigned in the Merger, then all of the shares of Common
Stock beneficially owned by the undersigned will be subject to such
restrictions, and if the shares of Common Stock beneficially owned by the
undersigned that BroadBase shall offer to include in such public offering and
which the undersigned shall be entitled to include therein (subject to
appropriate prospectus disclosure and execution of the underwriting agreement
and customary selling stockholder documents) represent less than 20% of the
aggregate number of shares of Common Stock issued to the undersigned in the
Merger, then the number of shares of Common Stock held by the undersigned that
will be subject to such restrictions will equal all of the shares of Common
Stock beneficially owned by the undersigned minus a number of shares of Common
Stock that is equal to the product of (i) 20% of the aggregate number of shares
of Common Stock issued to the undersigned in
<PAGE> 68
the Merger, minus (ii) the number of shares of Common Stock beneficially owned
by the undersigned that BroadBaseshall offer to include in such public offering
and which the undersigned shall be entitled to include therein (subject to
appropriate prospectus disclosure and execution of the underwriting agreement
and customary selling stockholder documents).
Notwithstanding the foregoing, the undersigned may transfer any or all
of the Shares by gift, will or intestacy; provided, however, that in any such
case it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding the Shares
subject to the provisions of this Agreement, and there shall be no further
transfer of such Merger Shares except in accordance with this Agreement.
Without limiting the restrictions herein, any Disposition by the
undersigned shall remain at all times subject to applicable securities laws,
including without limitation the resale restrictions imposed on affiliates by
Rule 144 and Rule 145 promulgated under the Securities Act of 1933.
The undersigned agrees that BroadBase may, and that the undersigned
will, (i) with respect to any Merger Shares for which the undersigned is the
record holder, cause the transfer agent for BroadBase to note stop transfer
instructions with respect to such Merger Shares on the transfer books and
records of BroadBase and (ii) with respect to any Merger Shares for which the
undersigned is the beneficial holder but not the record holder, cause the record
holder of such Merger Shares to cause the transfer agent for BroadBase to note
stop transfer instructions with respect to such Merger Shares on the transfer
books and records of BroadBase.
The undersigned hereby agrees that, to the extent that the terms of this
letter agreement conflict with or are in any way inconsistent with any
registration rights agreement to which the undersigned and BroadBase may be a
party, this letter agreement supersedes such registration rights agreement.
Capitalized terms used and not defined in this letter shall have the meanings
given them in the Merger Agreement. The undersigned hereby represents and
warrants that the undersigned has full power and authority to enter into this
letter agreement. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Very truly yours,
-----------------------------
<PAGE> 69
EXHIBIT E
---------
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR, IF
REASONABLY REQUIRED BY THE ISSUER OF THIS NOTE, AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THIS NOTE THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
CONVERTIBLE LINE OF CREDIT NOTE
$3,000,000.00 Menlo Park, California
December _____, 1999
FOR VALUE RECEIVED, the undersigned RUBRIC, INC. ("Borrower") promises
to pay to the order of BROADBASE SOFTWARE, INC. ("Lender") at its office at 172
Constitution Drive, Menlo Park, California, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of THREE MILLION DOLLARS
($3,000,000), or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
I. INTEREST:
(a) Interest. The outstanding principal balance of this Note
shall bear interest (computed on the basis of a 365-day year, actual days
elapsed) at a fixed rate per annum determined by Lender to be the "Prime Rate"
as reported in the Wall Street Journal in effect on the first day of the Note
("Regular Interest").
(b) Payment of Interest. Interest accrued on this Note shall be
payable on the Due Date (as defined below).
(c) Default Interest. From and after the maturity date of this
Note, or from and after the occurrence of an Event of Default (as defined
below), the outstanding principal balance of this Note shall, at the election of
Lender, bear interest until paid in full at an increased rate per annum
(computed on the basis of a 365-day year, actual days elapsed) equal to the
lesser of four percent (4%) above the rate of interest from time to time
applicable to this Note or the highest rate of interest permitted under
applicable usury laws (either, as applicable, "Default Interest"). The
imposition of such Default Interest shall be effective as of the date of notice
to the holder from Lender making such election and specifying such Event of
Default, provided, however, that such Default Interest shall not apply if holder
(i) within ten (10) days of such notice either (i) cures the Event of Default or
(ii) pays all outstanding principal and Regular Interest through the date of
such payment.
<PAGE> 70
II. BORRWING AND REPAYMENT:
(a) Borrowing and Repayment. Lender shall loan to Borrower the
amounts set forth above, provided that (i) the loaned funds may be used by
Borrower only for operating purposes, (ii) Borrower shall not be permitted to
borrow more than once, and not more than ONE MILLION DOLLARS ($1,000,000.00) in
principal amount, in any calendar month, (iii) there shall be a period of at
least two weeks between any two borrowings, and (iv) Borrower shall have given
Lender five (5) days' written notice requesting such advance and a written
affirmation that Borrower has not met either of the default conditions in
Sections IV(b) or (c) hereof. Borrower may from time to time during the term of
this Note partially or wholly repay its outstanding borrowings, subject to all
of the limitations, terms and conditions of this Note and of any document
executed in connection with or governing this Note; provided however, that
amounts repaid may not be reborrowed; and provided further, that the total
borrowings under this Note shall not exceed the principal amount stated above.
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. Subject to Section III and Section VI(a)
below, the outstanding balance of this Note shall be due and payable on demand
of the holder but not sooner than (i) June 9, 2000 or (ii) the first date upon
which either (A) the Lender terminates that certain Agreement and Plan of
Reorganization dated December ___, 1999 by and between Lender, a wholly owned
subsidiary of Lender and Borrower (the "Merger Agreement") pursuant to any of
Sections 9.1(b), (c) or (e) of the Merger Agreement or (B) the Merger Agreement
is terminated pursuant to either 9.1(a) or (g) thereof (the "Due Date").
(b) Advances. Borrower shall provide Lender with Borrower's wire
instructions for Lender to send the advances.
(c) Application of Payments. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof.
(d) Prepayment. Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to the Prime Rate at any
time, in any amount and without penalty.
III. CONVERSION; ADJUSTMENT:
(a) Definitions. The following definitions shall apply for all
purposes of this Note.
(i) "Conversion Price" means the value per share of Common
Stock of the Borrower ("Common Stock") as calculated by multiplying (i) the
"Applicable Number" (as defined in the Merger Agreement) by (ii) the five (5)
day average trading price of Lender's Common Stock ending the date of the Merger
Agreement. The Conversion Price is subject to adjustment as provided herein.
(ii) "Conversion Stock" means either Common Stock or Series
B Preferred Stock of the Borrower, the selection of security to be made by the
Borrower. The number and character of shares of Conversion Stock are subject to
adjustment as provided herein
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<PAGE> 71
and the term "Conversion Stock" shall include stock and other securities and
property at any time receivable or issuable upon conversion of this Note in
accordance with its terms.
(iii) "Note" means this Convertible Promissory Note.
(b) Conversion.
(i) In the event the Borrower does not pay the full
principal amount of this Note before the Due Date, all principal and interest
accrued on this Note shall be converted, in the sole discretion of the Lender,
into shares of Conversion Stock at the Conversion Price; provided, however, that
the Lender shall not be entitled to receive the stock certificate representing
the shares of Conversion Stock to be issued upon conversion of this Note until
the original of this Note is surrendered to the Borrower.
(ii) At any time on or after the Due Date, the Lender has
the right, at the Lender's option, prior to the repayment of principal and
interest by the Borrower, to convert the principal and accrued interest on this
Note, in whole or in part, into Conversion Stock at the Conversion Price.
Conversion under this Section III(b)(ii) shall occur only upon surrender of this
Note for conversion at the principal offices of the Borrower, accompanied by
written notice of election to convert.
(c) Issuance of Conversion Stock. As soon as practicable after
conversion of this Note, the Borrower at its expense will cause to be issued in
the name of and delivered to the Lender, a certificate or certificates for the
number of shares of Conversion Stock to which the Lender shall be entitled upon
such conversion (bearing such legends as may be required by applicable state and
federal securities laws in the opinion of legal counsel of the Borrower, by the
Borrower's Certificate of Incorporation or Bylaws, or by any agreement between
the Borrower and the Lender), together with any other securities and property to
which the Lender is entitled upon such conversion under the terms of this Note.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date that this Note shall have been surrendered for
conversion, accompanied by written notice of election to convert. No fractional
shares will be issued upon conversion of this Note. If upon any conversion of
this Note a fraction of a share would otherwise result, then in lieu of such
fractional share the Borrower will pay the cash value of that fractional share,
calculated on the basis of the applicable Conversion Price.
(d) Adjustment Provisions. The number and character of shares of
Conversion Stock issuable upon conversion of this Note (or any shares of stock
or other securities or property at the time receivable or issuable upon
conversion of this Note) and the Conversion Price therefor, are subject to
adjustment upon occurrence of the following events between the date this Note is
issued and the date it is converted:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Conversion Price of this Note and the number of
shares of Conversion Stock issuable upon conversion of this Note (or any shares
of stock or other securities at the time issuable upon conversion of this Note)
shall each be proportionally adjusted to reflect any stock dividend, stock
split, reverse stock split, combination of shares, reclassification,
recapitalization or other similar
3
<PAGE> 72
event affecting the number of outstanding shares of Conversion Stock (or such
other stock or securities).
(ii) Adjustment for Other Dividends and Distributions. In
case the Borrower shall make or issue, or shall fix a record date for the
determination of eligible Holders entitled to receive, a dividend or other
distribution payable with respect to the Conversion Stock that is payable in (a)
securities of the Borrower (other than issuances with respect to which
adjustment is made under Section III(c)(i), or (b) assets (other than cash
dividends paid or payable solely out of retained earnings), then, and in each
such case, the Lender, upon conversion of this Note at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the shares of Conversion Stock issuable upon such exercise prior to
such date, the securities or such other assets of the Borrower to which the
Lender would have been entitled upon such date if the Lender had converted this
Note immediately prior thereto (all subject to further adjustment as provided in
this Note).
(iii) Adjustment for Reorganization, Consolidation, Merger.
In case of any reorganization of the Borrower (or of any other corporation the
stock or other securities of which are at the time receivable on the conversion
of this Note), after the date this Note, or in case, after such date, the
Borrower (or any such corporation) shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Lender, upon the conversion of
this Note (as provided in Section III(a)) at any time after the consummation of
such reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the conversion of this Note prior to such consummation, the stock or other
securities or property to which the Lender would have been entitled upon the
consummation of such reorganization, consolidation, merger or conveyance if the
Lender had converted this Note immediately prior thereto, all subject to further
adjustment as provided in this Note, and the successor or purchasing corporation
in such reorganization, consolidation, merger or conveyance (if other than the
Borrower) shall duly execute and deliver to the Lender a supplement hereto
acknowledging such corporation's obligations under this Note; and in each such
case, the terms of the Note shall be applicable to the shares of stock or other
securities or property receivable upon the conversion of this Note after the
consummation of such reorganization, consolidation, merger or conveyance.
(iv) Conversion of Stock. In case all the authorized
Conversion Stock of the Borrower is converted, pursuant to the Borrower's
Certificate of Incorporation, into Common Stock or other securities or property,
or the Conversion Stock otherwise ceases to exist, then, in such case, the
Lender, upon conversion of this Note at any time after the date on which the
Conversion Stock is so converted or ceases to exist (the "Termination Date"),
shall receive, in lieu of the number of shares of Conversion Stock that would
have been issuable upon such exercise immediately prior to the Termination Date
(the "Former Number of Shares of Conversion Stock"), the stock and other
securities and property to which the Lender would have been entitled to receive
upon the Termination Date if the Lender had converted this Note with respect to
the Former Number of Shares of Conversion Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this Note).
4
<PAGE> 73
(v) Notice of Adjustments. The Borrower shall promptly give
written notice of each adjustment or readjustment of the Conversion Price or the
number of shares of Conversion Stock or other securities issuable upon
conversion of this Note. The notice shall describe the adjustment or
readjustment and show in reasonable detail the facts on which the adjustment or
readjustment is based.
(vi) No Change Necessary. The form of this Note need not be
changed because of any adjustment in the Conversion Price or in the number of
shares of Conversion Stock issuable upon its conversion.
(vii) Reservation of Stock. If at any time the number of
shares of Conversion Stock or other securities issuable upon conversion of this
Note shall not be sufficient to effect the conversion of this Note, the Borrower
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Conversion Stock or
other securities issuable upon conversion of this Note as shall be sufficient
for such purpose.
IV. EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note provided that IV(b) and IV(c) shall be considered an
Event of Default only if, as a result thereof, there is a substantial likelihood
that Borrower will be unable to repay the amounts outstanding under the Line of
Credit:
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under the Note.
(b) Any representation or warranty made by Borrower under shall
fail the condition of Section 8.1 of the Merger Agreement.
(c) Any (i) failure to comply with a material obligation of this
Note, or (ii) any failure to perform or comply in all material respects with all
of Borrower's covenants contained in Section 4 of the Merger Agreement, provided
that, any such failure under (i) or (ii) shall not be deemed an Event of Default
if cured within ten (10) days of the earlier of (A) Borrower's notification to
Lender of such failure or (B) five (5) business days following Borrower's
initial awareness of such failure.
(d) Borrower shall suffer or consent to or apply for the
appointment of a receiver, trustee, custodian or liquidator of itself or any of
its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower shall
file a voluntary petition in bankruptcy, or seeking reorganization, in order to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower and not dismissed
within 90 days, or Borrower shall file an answer admitting the jurisdiction of
the court and the material allegations of any
5
<PAGE> 74
involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order
for relief shall be entered against Borrower by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.
V. REPRESENTATIONS AND WARRANTIES OF THE BORROWER:
Borrower hereby represents and warrants to Lender that the statements in
the following paragraphs of this Section V are all true and complete:
(a) Organization, Good Standing and Qualification. Borrower has
been duly incorporated and organized, and is validly existing in good standing,
under the laws of the State of Delaware. Borrower has the corporate power and
authority to own and operate its properties and assets and to carry on its
business as currently conducted and as presently proposed to be conducted.
(b) Due Authorization. All corporate action on the part of
Borrower's directors and shareholders necessary for the authorization,
execution, delivery of, and the performance of all obligations of Borrower under
the Note has been taken or will be taken prior to the Closing, and the Note when
executed and delivered will constitute the valid and legally binding obligation
of Borrower, enforceable in accordance with its terms, except as may be limited
by (i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditor's
rights generally and (ii) the effect of rules of law governing the availability
of equitable remedies.
(c) Corporate Power. Borrower has the corporate power and
authority to execute and deliver the Note to be purchased by the Lender
hereunder, to issue the Note and to carry out and perform all its obligations
under this Note.
(d) Valid Issuance.
(i) The Notes when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration provided for herein, will
be duly and validly issued, fully paid and nonassessable.
(ii) The offer and sale of the Notes solely to the Lender in
accordance with this Note are exempt from the registration and prospectus
delivery requirements of the U.S. Securities Act of 1933, as amended, and the
securities registration and qualification requirements of the currently
effective provisions of the securities laws of the state of California.
VI. MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the
holder of this Note, at the holder's option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
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<PAGE> 75
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Lender or any other person) relating to
Borrower or any other person or entity.
(b) Transfer; Successors and Assigns. The terms and conditions of
this Note shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
(c) Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(d) Notices. Any notice required or permitted by this Note shall
be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or five (5) business days after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(e) Amendments and Waivers. Any term of this Note may be amended
only with the written consent of Lender and Borrower. Any amendment or waiver
effected in accordance with this Section VI shall be binding upon the Lender and
Borrower and each transferee of the Note.
(f) Entire Agreement. This Note and the Merger Agreement and the
exhibits thereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance or usage of trade inconsistent with any of the terms hereof.
(THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK)
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name as of the date first above written.
BORROWER:
By:
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
AGREED AND ACKNOWLEDGED:
LENDER:
By:
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
[SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE]
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<PAGE> 77
Exhibit F
---------
December , 1999
Rubric, Inc.
2121 S. El Camino, 10th Floor
San Mateo, California 94403
Ladies and Gentlemen:
We have acted as counsel to Broadbase Software, Inc., a Delaware
corporation ("PARENT"), and Bronco Acquisition Corp., a Delaware corporation
that is a wholly owned subsidiary of Parent ("NEWCO"), in connection with the
merger of Newco with and into Rubric, Inc., a Delaware corporation ("COMPANY"),
in a reverse triangular merger, pursuant to the Agreement and Plan of
Reorganization by and among Parent, Newco and Company dated December , 1999
and the related Certificate of Merger (the "CERTIFICATE OF MERGER") each dated
as of even date herewith. The Plan and the Certificate of Merger provide for the
statutory merger of Newco with and into Company (the "MERGER"), with Company to
be the surviving corporation of the Merger, and the conversion of the
outstanding shares of Company Common Stock and Preferred Stock in the Merger
into Parent Common Stock. This opinion is furnished to you pursuant to Section
7.6 of the Plan. Unless otherwise indicated in this letter, all capitalized
terms used herein have the meanings given to those terms in the Plan.
In order to render this opinion we have examined the following:
(a) The Certificate of Incorporation of Parent filed with the Delaware
Secretary of State on June 28, 1999, the Certificate of Amendment of Certificate
of Incorporation filed with the Delaware Secretary of State on July 30, 1999,
the Agreement and Plan of Merger between Parent and Broadbase Information
Systems, Inc., filed with the Delaware Secretary of State on September 13, 1999,
and the Certificate of Retirement of Series A, Series B, Series C, Series D and
Series E Preferred Stock, filed with the Delaware Secretary of State on November
3, 1999;
(b) The bylaws of Parent, as adopted on June 28, 1999;
(c) The Certificate of Incorporation of Newco, filed with the Delaware
Secretary of State on December 7, 1999;
[(d) The Bylaws of Newco, as amended to date, certified by Newco's
Secretary on December , 1999;
(e) The records provided to us by Parent, and currently in our possession,
of actions by written consent and minutes of meetings of its stockholders and
Board of Directors (including the minutes of the meeting of Parent's Board of
Directors held on , 1999, approving the Plan and the Merger,
certified by Parent's Secretary on , 1999);]
<PAGE> 78
Rubric, Inc.
December 7, 1999
Page 2
(f) The records provided to us by Newco, and currently in our possession,
of actions by written consent and minutes of meetings of its stockholders and
Board of Directors (including the written consent of the sole director of Newco
dated December 7, 1999 approving the Plan and the Merger and the written
consent of the sole stockholder of Newco dated December 7, 1999 approving the
Plan and the Merger, each certified by Newco's Secretary on December 7, 1999),
as well as the stock certificate of Newco for 100 shares of its Common Stock,
issued to Parent;
(g) The Plan, the exhibits and schedules thereto, [the ancillary
agreements executed and delivered by Parent (hereafter referred to as "PARENT
ANCILLARY AGREEMENTS") and/or Newco (hereafter referred to as "NEWCO ANCILLARY
AGREEMENTS") pursuant to the Plan, consisting of the Certificate of Merger, the
Employment Agreements between Parent and each of (the "EMPLOYMENT
AGREEMENTS"), and the Noncompetition Agreements between Parent and each of
(the "NONCOMPETITION AGREEMENTS") (the Employment Agreements and Noncompetition
Agreements are hereinafter collectively referred to as the "MERGER ANCILLARY
AGREEMENTS");]
[(h) A Certificate of Good Standing regarding Parent issued by the Delaware
Secretary of State and dated , 1999;
(i) A Certificate of Status as a Foreign Corporation regarding Parent
issued by the California Secretary of State and dated , 1999;
(j) A letter from the California Franchise Tax Board dated , 1999
to the effect that Parent was in good standing with the California Franchise
Tax Board as of such date;
(k) A Certificate of Good Standing regarding Newco issued by the Delaware
Secretary of State and dated , 1999;
(l) A Management Certificate dated of even date herewith addressed to us
and executed by Parent and Newco (the "MANAGEMENT CERTIFICATE"), a copy of which
has been delivered to counsel for Company;
(m) A certificate from your transfer agent dated , 1999 regarding
the number of shares outstanding, and a list prepared by you identifying all
outstanding options, warrants and other rights to acquire your capital stock as
of , 1999; and
(n) All the certificates and documents delivered by Parent, Company, Newco
and/or certain of their respective directors, officers or stockholders at the
Closing (collectively, the "Closing Certificates").]
We have not examined any document other than those described above or
made any independent factual investigation. Bring-down certificates, telegrams,
or telephonic advice of the public officials referred to above were not
obtained as of the date hereof, nor have we caused the search of any docket of
any court, tribunal, agency, or similar authority or any other record of any
governmental agency or third party.
<PAGE> 79
Rubric, Inc.
December 7, 1999
Page 3
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents
submitted to us as originals, the conformity to originals and completeness of
all documents submitted to us as copies, the lack of any undisclosed
termination, modification, waiver or amendment to any document reviewed by us,
the legal competence or capacity of all natural persons executing the same, and
the due authorization, execution, and delivery of all documents where due
authorization, execution, and delivery are prerequisites to the effectiveness
thereof (except for the due authorization of the Plan by Parent and Newco).
As to matters of fact relevant to this opinion, we have relied solely upon
(a) our examination of the documents referred to above and our actual knowledge
and have assumed the current accuracy and completeness of the information
obtained from public officials included in the documents referred to above, (b)
certain other representations made by Parent, or certain of its respective
directors and officers, and all representations and statements contained or made
in the Closing Certificates, and (c) the representations and warranties of
Parent and Newco to us, including without limitation, those set forth in the
Management Certificate. We have made no attempt to verify the accuracy of any
such information, representations or warranties or to determine the existence or
non-existence of any other factual matters. However, we are not aware of any
facts that would cause us to believe that any of the opinions expressed herein
are not accurate.
As used in this opinion, the phrases "to our knowledge," "we are not aware
of," or "our actual knowledge" refer only to the actual knowledge of the
attorneys currently in this firm who have rendered legal services to Parent in
connection with the Plan, and mean that, while such attorneys have not been
informed by Parent that the matters stated are factually incorrect, we have
made no investigation of such matters other than our examination of those
specific documents which this opinion states that we have examined. No
inference as to our knowledge of any matters bearing on the accuracy of any
such statement should be drawn from the fact of our representation of Parent.
For the purposes of this opinion, we have also assumed, without rendering
any opinion thereon, that: (a) Company has all requisite power and authority,
and has taken all necessary corporate action, to authorize Company to consummate
the Merger and to enter into, execute, deliver, and perform all of its
obligations under the Plan, all other Merger Ancillary Agreements and all other
agreements, documents and certificates to which Company is a party or signatory
that are entered into or executed by Company pursuant to the Plan or the
Certificate of Merger in compliance with applicable law; (b) Company has duly
executed and delivered each of the agreements, documents and certificates
referred to in the preceding clause (a), and each of such agreements, documents
and certificates is the valid and binding obligation of Company, enforceable
against Company in accordance with its respective terms; (c) each Company
stockholder has all requisite power, authority and capacity, and has taken any
and all necessary corporate, partnership or other action, to duly authorize such
Company stockholder to enter into, execute, deliver and perform all such Company
stockholder's obligations under, the Plan, each Merger Ancillary Agreement and
each other agreement provided for in the Plan, the Certificate of Merger to
which such Company stockholder is a party or signatory; and (d) each Company
stockholder has duly executed and delivered each of the Merger Ancillary
Agreements to which such Company stockholder is a party or
<PAGE> 80
Rubric, Inc.
December 7, 1999
Page 4
signatory, and each of such agreements is the valid and binding obligation of
such Company stockholder, enforceable against each Company stockholder in
accordance with its respective terms.
This opinion is qualified by, and is subject to, and we render no opinion
with respect to, the limitations and exceptions to the enforceability of
contracts and obligations generally, including, without limitation:
(a) the effect of the laws of bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance, and other similar laws now or
hereinafter in effect relating to or affecting the rights and remedies of
creditors;
(b) the effect of general principles of equity and similar principles,
including, without limitation, concepts of materiality, reasonableness, public
policy and unconscionability, and the possible unavailability of specific
performance, injunctive relief, or other equitable remedies, regardless of
whether considered in a proceeding in equity or at law;
(c) the effect of Section 1670.5 of the California Civil Code regarding
unconscionability and of California court decisions, indicting that certain
covenants and provisions of agreements are unenforceable where (i) the breach
of such covenants or provisions imposes restrictions or burdens upon the other
party and it cannot be demonstrated that the enforcement of such restrictions
or burdens is reasonably necessary for the protection of the party seeking to
enforce such provisions or (ii) the enforcement of such covenants or provisions
under the circumstances would violate the implied covenant of good faith and
fair dealing; and
(d) the compliance or noncompliance of Parent, Newco, Company or any
other party with applicable antifraud statutes or rules and regulations under
state and federal laws concerning the offering, issuance and sale of securities.
We render no opinion with respect to: (a) compliance or noncompliance of
the Merger or any other transaction with any state or federal antitrust laws or
regulations or laws of a similar nature; (b) compliance with applicable federal
securities law and state "blue sky" securities laws of any jurisdictions and
states; (c) the enforceability of the Employment Agreements or Non-Competition
Agreements; (d) the tax consequences of the Merger under applicable federal,
state and local income tax laws and regulations; and (e) any of the matters
addressed in the seventh paragraph of this letter (which begins on page 3 of
this letter).
In rendering the opinion expressed in paragraph 1 below regarding the
corporate good standing of Parent and Newco, we have relied solely upon the
certificates referred to above of the Delaware Secretary of State. With respect
to such opinion, we have made no examination of the laws of any jurisdiction
other than Delaware and California, nor have we determined the qualification of
Parent or Newco to do business in any jurisdiction other than the States of
Delaware and California.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of
<PAGE> 81
Rubric, Inc.
December 7, 1999
Page 5
the State of California, the General Corporation Law of the State of Delaware as
in effect on the date hereof (as the Delaware General Corporation Law is set
forth in standard statutory compilations and without reference to any case law
or secondary sources), and the existing federal laws of the United States of
America. We express no opinion as to whether the laws of any particular
jurisdiction apply, and express no opinion to the extent that the laws of any
jurisdiction other than those identified above are applicable to the subject
matter hereof.
As to our opinion in paragraph 3 regarding California and federal laws,
rules and regulations, our opinion is limited to such California and United
States statutes, laws and rules or regulations, as in our experience are of
general application to transactions of the sort contemplated by the Plan. We
disclaim any opinions as to any statute, rule, regulation, ordinance, order, or
other promulgation of any foreign country or regional or local government body.
Our opinions assume, with your permission and without expression of any opinion
thereon, that the internal laws of the State of California as applied to
contracts made between California residents present in California when such a
contract was entered into (without regard to laws regarding choice of law or
conflict of laws) exclusively apply to and govern the Plan and the Certificate
of Merger, and all other agreements executed and entered into by Parent and
Newco on or before the Closing pursuant to the Plan or the Certificate of
Merger, regardless of the respective choice of law provisions thereof. We render
no opinion as to the enforceability of any such agreements under any law other
than the above-mentioned laws of the State of California.
In rendering the opinions below, we are opining only as to the specific
legal issues expressly set forth herein, and no opinion shall be inferred or
implied as to any other matters.
We also call your attention to the fact that under various reports
published by committees of the State Bar of California, certain assumptions,
qualifications,and exceptions are implicit in opinions of lawyers. Although we
have expressly set forth some assumptions, qualifications, and exceptions,
herein, we are not limiting or omitting any others set forth in the various
reports or otherwise deemed standard by practice for lawyers in California.
Except as otherwise indicated, all opinions herein are rendered as of the
time immediately preceding the Effective Time.
Based upon the foregoing, subject to the assumptions, qualifications, and
exceptions referred to herein it is our opinion that:
1. Each of the Parent and Newco is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted.
2. Each of the Parent and Newco has the corporate power and authority
to enter into and perform its obligations under this Agreement and the
Certificate of Merger.
<PAGE> 82
Rubric, Inc.
December 7, 1999
Page 6
3. The shares of Parent Common Stock to be issued in the Merger will, when
issued in accordance with the provisions of the Agreement and the Certificate of
Merger, be duly authorized, validly issued, fully paid and nonassessable.
4. All corporate action on the part of Parent's directors and Newco's
directors and their stockholders necessary for the authorization, execution and
delivery of the Agreement and the Certificate of Merger and the performance of
Parent's and Newco's obligations under the Agreement and the Certificate of
Merger, to be authorized as of the date hereof, has been taken. The Agreement
and the Certificate of Merger have been duly and validly executed and delivered
by Parent and Newco and constitute valid and binding obligations of Parent and
Newco, enforceable against Parent and Newco in accordance with their respective
terms.
5. Neither the execution nor delivery of the Agreement and the Certificate
of Merger, not the consummation of the transactions contemplated thereby,
conflict with, or (with or without notice or lapse of time, or both) result in
a violation of, any provision of the Certificate of Incorporation or Bylaws of
Parent or Newco, as currently in effect or, to our knowledge, any provision of
applicable U.S. federal or California state law rule or regulation or any
provision of the Delaware General Corporation Law.
6. To our knowledge, no filing, authorization or approval, with any
governmental entity, is necessary to enable Parent to enter into, and to
perform its obligations under, the Agreement and the Certificate of Merger,
except for (a) the filing of the Certificate of Merger with the California
Secretary of State and the Delaware Secretary of State, respectively, and the
filing of appropriate documents with the relevant authorities of other states
in which Parent is qualified to do business, if any, (b) such filings as may
be required to comply with federal and state securities laws, and (c) the
filings required by the HSR Act.
7. To our knowledge and except as set forth in the Disclosure Schedule,
there is no action, proceeding or investigation pending or overtly threatened
against the Parent before any court of administrative agency that questions the
validity of the Reorganization Agreement or that might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition or results of operations of the Parent.
This opinion is intended solely for the benefit of Company for the purpose
of Section 7.6 of the Plan and is not to be made available to or relied upon by
any other person or entity or used by Company or its stockholders for any other
purpose without our prior written consent. We assume no obligation to update or
advise Company of any fact, circumstance, event or change in the law or the
facts that may hereafter be brought to our attention whether or not they would
affect or modify the opinions expressed herein.
Very truly yours,
FENWICK & WEST LLP
<PAGE> 83
Rubric, Inc.
December 7, 1999
Page 7
By: _____________________________
Gordon K. Davidson, a Partner
<PAGE> 84
Exhibit G
---------
________________, 2000
Broadbase Software, Inc.
172 Constitution Dr.
Menlo Park, CA 94025
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Reorganization dated
December 9, 1999 (the "Reorganization Agreement") by and among Broadbase
Software, Inc., a Delaware corporation ("Broadbase"), Bronco Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of Broadbase ("Sub") and
Rubric, Inc., a Delaware corporation (the "Company"). The Reorganization
Agreement provides for the acquisition of the Company by Broadbase pursuant to a
reverse triangular merger of Sub with and into the Company subject to the terms
and conditions set forth in the Reorganization Agreement (the "Merger"). This
opinion is furnished to you pursuant to Section 8.6 of the Reorganization
Agreement. Unless otherwise defined herein, the capitalized terms used in this
opinion have the meaning given to them in the Reorganization Agreement.
We have acted as counsel for the Company in connection with the negotiation
of the Reorganization Agreement and the effectuation of the Merger. As such
counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion. In
addition, we have examined originals or copies of such corporate records of the
Company, certificates of public officials and such other documents and questions
of law that we consider necessary or advisable for the purpose of rendering this
opinion. In such examination we have assumed the genuineness of all signatures
on original documents, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents provided to us
by the Company, and after inquiries of officers of the Company, but without any
further independent factual investigation, we find no reason to believe that
the opinions expressed herein are factually incorrect. Further, the expression
"to our knowledge" with reference to matters of fact refers to the current
actual knowledge of the attorneys of this firm who have worked on matters for
the Company related to or in connection with the Reorganization Agreement and
the transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the
<PAGE> 85
existence or absence of any fact, and no inference as to our knowledge of the
existence or absence of any fact should be drawn from our representation of the
Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver the Reorganization Agreement, and we are assuming that the
representations and warranties made by you in the Reorganization Agreement and
pursuant thereto are true and correct. We are also assuming that the
representations and warranties made by the Company in the Reorganization
Agreement and pursuant thereto are true and correct as to matters of fact.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect or availability of rules of
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding
at law or in equity);
(b) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar federal or
state laws affecting the rights of creditors;
(c) We have assumed that there are no documents, agreements,
understandings or negotiations between or among the Company, Broadbase or Sub
which would expand, modify or otherwise affect the respective rights and
obligations of the parties set forth in the Reorganization Agreement, the
Certificate of Merger between the Company and Sub dated [ ] (the "Certificate
of Merger") or the other agreements referred to therein;
(d) Each of the opinions set forth above are subject to the
qualifications that we express no opinion as to the effect upon the legality,
validity, binding effect or enforceability of any agreement of any law relating
to antitrust, collusive or unfair trade practices or designed to promote
competition or any similar law of any jurisdiction, as to compliance with
federal or state securities laws;
(e) We express no opinion as to compliance with applicable anti-fraud
provisions of federal or state securities laws;
(f) We express no opinion as to the enforceability of contractual
provisions which purport to indemnify any party against, or to exonerate or
release any party from (i) liability for said party's wrongful or negligent
acts, or (ii) liability for attorney's fees or expenses arising from or related
to such liability or actions;
(g) In connection with the opinion expressed in paragraph 3 below, we
have examined the Certificate of Incorporation and Bylaws of the Company, the
stock journal of the Company, and the Company's minute books. The Company has
represented to us, and we have assumed, that these records are true, correct
and complete and constitute all
<PAGE> 86
documents with respect to the issuance of shares of the Company's capital
stock. We have relied on the Company's representations to us as to the nature
of the consideration received for such shares and that the shares are fully
paid and nonassessable. The factual information provided in paragraph 3 as to
outstanding capital stock, stock options, warrants and other outstanding rights
is based solely on factual representations of the Company; and
(h) We are members of the Bar of the State of California and we express no
opinion as to matters relating to laws of any jurisdiction other than the
federal laws of the United States of America, the laws of the State of
California and the Delaware General Corporation Law.
Based upon and subject to the foregoing, and except as set forth in the
Disclosure Schedule to the Reorganization Agreement, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and has the
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted.
2. The Company has all requisite corporate power and authority to execute
and deliver the Reorganization Agreement and the Certificate of Merger and to
carry out and perform its obligations under the Reorganization Agreement.
3. The authorized capital stock of the Company, as of the date hereof,
consists of 25,000,000 shares of Common Stock, $0.001 par value per share, and
10,000,000 shares of Preferred Stock, $0.001 par value per share, of which
5,300,000 shares are designated as Series A Preferred Stock and 4,000,000
shares are designated as Series B Preferred Stock. As of the date hereof, there
are issued and outstanding; shares of Common Stock, 5,225,000 shares of
Series A Preferred Stock, each of which is convertible into one share of Common
Stock, and 3,771,930 shares of Series B Preferred Stock, each of which is
convertible into one share of Common Stock. All issued and outstanding shares
of Common Stock and Preferred Stock have been duly authorized and validly
issued, are fully paid and nonassessable. To our knowledge, other than as set
forth in the Reorganization Agreement and the Disclosure Letter, there are no
options, warrants, conversion privileges, preemptive rights or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of capital stock or other securities of the Company.
4. The execution and delivery of the Reorganization Agreement and the
Certificate of Merger by the Company and compliance by the Company with the
terms of the Reorganization Agreement and the Certificate of Merger do not
violate any provision of the Company's Certificate of Incorporation or Bylaws,
or to our knowledge, any provision of applicable federal or California law,
rule or regulation or any provision of the Delaware General Corporation Law.
<PAGE> 87
5. The Reorganization Agreement and the Certificate of Merger have been
duly and validly authorized, executed and delivered by the Company, and the
Reorganization Agreement and the Certificate of Merger constitute valid and
binding agreements of the Company enforceable against the Company in accordance
with their terms.
6. Except for the filing of the Certificate of Merger with the Delaware
Secretary of State, to our knowledge, all consents, approvals, authorizations,
or orders of, and filings, registrations, and qualifications with any regulatory
authority or governmental body in the United States required for the
consummation by the Company of the transactions contemplated by the
Reorganization Agreement and the Certificate of Merger, have been made or
obtained.
7. To our knowledge and except as set forth in the Disclosure Schedule,
there is no action, proceeding or investigation pending or overtly threatened
against the Company before any court or administrative agency that questions the
validity of the Reorganization Agreement of the Certificate of Merger or that
might result, either individually or in the aggregate, in any material adverse
change in the assets, financial condition or results of operations of the
Company.
This opinion is furnished to you solely for your benefit in connection with
the Reorganization Agreement and the Certificate of Merger, and may not be
relied upon by any other person or for any other purpose without our prior
written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 88
EXHIBIT H
---------
1. Master Lease Agreement, dated July 9, 1999, by and between COMDISCO,
INC. and Rubric, Inc., and the Addendum, dated July 15, 1999
<PAGE> 89
Exhibit I
---------
Rubric, Inc.
Form of Amended and Restated
Certificate of Incorporation
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RUBRIC, Inc.
ARTICLE I
The name of the corporation is Rubric, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent, DE 19901. 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
The total number of shares of stock which the corporation has authority to
issue is One Thousand (1,000) shares, all of which shall be Common Stock,
$0.001 par value per share.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
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.
<PAGE> 90
Rubric, Inc.
Form of Amended and Restated
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.
2
<PAGE> 91
EXHIBIT J
---------
RUBRIC, INC.
PROPRIETARY INFORMATION AGREEMENT
As an employee of Rubric, Inc., a Delaware corporation, its subsidiary or
its affiliate (together, the "Company"), and in consideration of the
compensation now and hereafter paid to me, I agree to the following:
I. AT-WILL EMPLOYMENT. I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT
WITH THE COMPANY IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES "AT-WILL"
EMPLOYMENT. I ALSO UNDERSTAND THAT ANY REPRESENTATION TO THE CONTRARY IS
UNAUTHORIZED AND NOT VALID UNLESS OBTAINED IN WRITING AND SIGNED BY THE
PRESIDENT OF THE COMPANY. I ACKNOWLEDGE THAT THIS EMPLOYMENT RELATIONSHIP MAY
BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE OR FOR ANY OR NO CAUSE,
AT THE OPTION EITHER OF THE COMPANY OR MYSELF, WITH OR WITHOUT NOTICE.
II. MAINTAINING CONFIDENTIAL INFORMATION
A. Company Information. I agree at all times during the term of my
employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without the express written authorization of the Board of Directors
of the Company, any trade secrets, confidential knowledge, data or other
proprietary information relating to products, processes, know-how, designs,
formulas, developmental or experimental work, computer programs, data bases,
other original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company
or any of its clients, consultants or licensees.
B. Former Employer Information. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of my former or concurrent employers or companies,
if any, and that I will not bring onto the premises of the Company any
unpublished document or any property belonging to my former or concurrent
employers or companies, if any, unless consented to in writing by said
employers or companies.
C. Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential
or proprietary information subject to a duty on the Company's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes. I agree that I owe the Company and such third parties, during the
term of my employment and thereafter, a duty to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm or corporation (except as necessary in carrying out my work
for the Company consistent with the Company's agreement with such third
<PAGE> 92
party) or to use it for the benefit of anyone other than for the Company or
such third party (consistent with the Company's agreement with such third
party) without the express written authorization of the Board of Directors of
the Company.
III. RETAINING AND ASSIGNING INVENTIONS AND ORIGINAL WORKS
A. Inventions and Original Works Retained by Me. I have attached
hereto, as Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements and trade secrets which were made by me
prior to my employment with the Company, which belong to me, which relate to
the Company's proposed business and products, and which are not assigned to the
Company; or, if no such list is attached, I represent that there are no such
inventions.
B. Inventions and Original Works Assigned to the Company. I agree
that I will promptly make full written disclosure to the Company, will hold in
trust for the sole right and benefit of the Company, and will assign to the
Company all my right, title and interest in and to any and all inventions,
original works of authorship, developments, improvements or trade secrets which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I
am in the employ of the Company. I recognize, however, that Section 2870 of the
California Labor Code (as set forth in Exhibit B attached hereto) exempts from
this provision any invention as to which I can prove the following:
1. It was developed entirely on my own time; and
2. No equipment, supplies, facilities or trade secrets of the
Company were used in its development; and
3. It either:
a. does not relate, at the time the invention was conceived or
reduced to practice, to the Company's business or to the
Company's actual or demonstrably anticipated research and
development; or
b. does not result from any work performed by me for the
Company.
I acknowledge that all original works of authorship which are made by me
(solely or jointly with others) within the scope of my employment and which are
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act (17 USCA, Section 101).
<PAGE> 93
C. Maintenance of Records. I agree to keep and maintain adequate and
current written records of all inventions and original works of authorship made
by me (solely or jointly with others) during the term of my employment with the
Company. The records will be in the form of notes, sketches, drawings, and any
other format that may be specified by the Company. The records will be
available to and remain the sole property of the Company at all times.
D. Inventions, Assigned to the United States. I agree to assign to the
United States government all my right, title and interest in and to any and all
inventions, original works of authorship, developments, improvements or trade
secrets whenever such full title is required to be in the United States by a
contract between the Company and the United States or any of its agencies.
E. Obtaining Patent Letters and Copyright Registrations. I agree that my
obligation to assist the Company to obtain United States or foreign patent
letters and copyright registrations covering inventions and original works of
authorship assigned hereunder to the Company shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate for time actually spent by me at the Company's request on such
assistance. If the Company is unable because of my mental or physical
incapacity or for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patent letters or
copyright registrations covering inventions or original works of authorship
assigned to the Company as above, then I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, to act for and in my behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to further the
prosecution and issuance of patent letters or copyright registrations thereon
with the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any patents or copyrights,
resulting from any such application for patent letters or copyright
registrations assigned hereunder to the Company.
F. Exception to Assignments. I understand that the provisions of this
Agreement requiring assignment to the Company do not apply to any invention
which qualifies fully under the provisions of Section 2870 of the California
Labor Code, a copy of which is attached hereto as Exhibit B. I will advise the
Company promptly in writing of any inventions, original works of authorship,
developments, improvements or trade secrets that I believe meet the criteria in
Subparagraphs III.B.1, 2, and 3 above; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. I
understand that the Company will keep in confidence and will not disclose to
third parties without my consent any confidential information disclosed in
writing to the Company relating to inventions that qualify fully under the
provisions of Section 2870 of the California Labor Code.
IV. Conflicting Employment. I agree that during the term of my employment with
the Company, unless otherwise approved by a majority of the disinterested Board
of Directors of the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of
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<PAGE> 94
my employment, nor will I engage in any other activities that conflict with my
obligations to the Company.
V. RETURNING COMPANY DOCUMENTS. I agree that, at the time of leaving the employ
of the Company, I will deliver to the Company (and will not keep in my
possession or deliver to anyone else) any and all devices, records, data,
notes, reports, proposals, lists, correspondence, specifications, drawings,
blueprints, sketches, materials, equipment, other documents or property, or
reproductions of any aforementioned items belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I
agree to sign and deliver the "Termination Certification" attached hereto as
Exhibit C.
VI. REPRESENTATIONS. I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement. I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict herewith.
VII. ARBITRATION AND EQUITABLE RELIEF.
A. ARBITRATION. EXCEPT AS PROVIDED IN SECTION VII.B BELOW, I AGREE THAT ANY
DISPUTE OR CONTROVERSY ARISING OUT OF, RELATING TO, OR CONCERNING ANY
INTERPRETATION, CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT, SHALL BE
SETTLED BY ARBITRATION TO BE HELD IN SANTA CLARA COUNTY, CALIFORNIA, IN
ACCORDANCE WITH THE EMPLOYMENT DISPUTE RESOLUTION RULES THEN IN EFFECT OF THE
AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR MAY GRANT INJUNCTIONS OR OTHER
RELIEF IN SUCH DISPUTE OR CONTROVERSY. THE DECISION OF THE ARBITRATOR SHALL BE
FINAL, CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION. JUDGMENT MAY BE
ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION. THE
COMPANY AND I SHALL EACH PAY ONE-HALF OF THE COSTS AND EXPENSES OF SUCH
ARBITRATION, AND EACH OF US SHALL SEPARATELY PAY OUR COUNSEL FEES AND EXPENSES.
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL
AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP (EXCEPT AS PROVIDED IN SECTION VII.B BELOW),
INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
1. ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF
CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND
FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF
EMOTIONAL DISTRESS; NEGLIGENT OR
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INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;
2. ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL, STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS
ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR
STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE
SECTION 201, et seq.;
3. ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS
RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
B. EQUITABLE REMEDIES. I AGREE THAT IT WOULD BE IMPOSSIBLE OR INADEQUATE TO
MEASURE AND CALCULATE THE COMPANY'S DAMAGES FROM ANY BREACH OF THE COVENANTS SET
FORTH IN SECTIONS II, III, AND V HEREIN. ACCORDINGLY, I AGREE THAT IF I BREACH
ANY OF SUCH SECTIONS, THE COMPANY WILL HAVE AVAILABLE, IN ADDITION TO ANY OTHER
RIGHT OR REMEDY AVAILABLE, THE RIGHT TO OBTAIN AN INJUNCTION FROM A COURT OF
COMPETENT JURISDICTION RESTRAINING SUCH BREACH OR THREATENED BREACH AND TO
SPECIFIC PERFORMANCE OF ANY SUCH PROVISION OF THIS AGREEMENT. I FURTHER AGREE
THAT NO BOND OR OTHER SECURITY SHALL BE REQUIRED IN OBTAINING SUCH EQUITABLE
RELIEF AND I HEREBY CONSENT TO THE ISSUANCE OF SUCH INJUNCTION AND TO THE
ORDERING OF SPECIFIC PERFORMANCE.
C. CONSIDERATION. I UNDERSTAND THAT EACH PARTY'S PROMISE TO RESOLVE CLAIMS
BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, RATHER THAN
THROUGH THE COURTS, IS CONSIDERATION FOR OTHER PARTY'S LIKE PROMISE. I FURTHER
UNDERSTAND THAT I AM OFFERED EMPLOYMENT IN CONSIDERATION OF MY PROMISE TO
ARBITRATE CLAIMS.
VIII. GENERAL PROVISIONS.
A. Governing Law. This Agreement will be governed by the laws of the State
of California without reference to its conflicts of laws principles.
B. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and supersedes all prior agreements and understandings, both written and oral,
between the Company and me relating to the subject matter herein. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this agreement, will be effective unless in writing signed by the party
to be charged. Any subsequent
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<PAGE> 96
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.
C. Severability. If one or more of the provisions in this Agreement are
deemed void by law, then the remaining provisions will continue in full force
and effect.
D. Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors and its assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 97
The foregoing Proprietary Information Agreement is hereby executed as
of , 1997.
-7-
<PAGE> 98
EXHIBIT A
_________
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
_______________________________________________________________________________
Title / Date / Identifying Number or Brief Description
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Name of Employee:
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<PAGE> 99
EXHIBIT B
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) 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 actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable."
<PAGE> 100
EXHIBIT C
RUBRIC, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed to
return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Rubric, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "Company").
I further certify that I have complied with all the terms of the Company's
Proprietary Information Agreement signed by me, including the reporting of any
inventions and original works of authorship (as defined therein), conceived or
made by me (solely or jointly with others) covered by that Agreement.
I further agree that, in compliance with the Proprietary Information Agreement,
I will preserve as confidential all trade secrets, confidential knowledge, data
or other proprietary information relating to products, processes, know-how,
designs, formulas, developmental or experimental work, computer programs, data
bases, other original works of authorship, customer lists, business plans,
financial information or other subject matter pertaining to any business of the
Company or any of its clients, consultants or licensees.
Date:
_______________________________________
<PAGE> 101
EXHIBIT K
---------
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 9, 1999, by and between [name
of employee] (the "Employee") and BROADBASE SOFTWARE, INC., a Delaware
corporation (the "Company"). This Agreement shall be effective at the effective
time of the merger (the "Merger") contemplated by the Merger Agreement and Plan
of Reorganization dated December 9, 1999, by and among the Company, Rubric,
Inc., a Delaware corporation ("Rubric"), and Bronco Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of the Company. This
Agreement shall be null and void, and no parties shall be deemed to have any
rights hereunder, unless and until the Merger is consummated.
1. Duties and Scope of Employment.
(a) Position. The Company agrees to employ the Employee in the
position of Vice President of Sales Integration (the "Employment"). The Employee
shall report to the Company's Vice President of Sales.
(b) Obligations to the Company. During his Employment, the Employee
shall devote his full business efforts and time to the Company. During his
Employment, without the prior written approval of the Company's Board of
Directors, the Employee shall not render services in any capacity to any other
person or entity and shall not act as a sole proprietor or partner of any other
person or entity or as a shareholder owning more than five percent of the stock
of any other corporation. The Employee shall comply with the Company's policies
and rules, as they may be in effect from time to time during his Employment.
(c) No Conflicting Obligations. The Employee represents and warrants
to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which the Employee or
any other person has any right, title or interest and that his employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person. The Employee represents and warrants to the Company
that he has returned all property and confidential information belonging to any
prior employer.
2. Salary. The Company shall pay the Employee as compensation for his
services a base salary at a gross annual rate of not less than $[_______]. Such
salary shall be payable in accordance with the Company's standard payroll
procedures. Employee will be eligible for a target sales commission of not less
than $150,000 on an annualized basis pursuant to the Company's commission plan.
3. Vacation and Employee Benefits. During his Employment, the Employee
shall be eligible for paid vacations in accordance with the Company's standard
policy for similarly-situated employees, as it may be amended from time to time.
During his
<PAGE> 102
Employment, the Employee shall be eligible to participate in the employee
benefit plans maintained by the Company for similarly-situated employees,
subject in each case to the generally applicable terms and conditions of the
plan in question and to the determinations of any person or committee
administering such plan.
4. BUSINESS EXPENSES. During his Employment, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with his duties hereunder. The Company shall
reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. EQUITY IN THE COMPANY.
(a) STOCK OPTIONS. Notwithstanding anything in any employment
agreement, offer letter or stock option agreement with Rubric ("Prior
Agreements") to the contrary, any stock option previously granted to Employee to
purchase shares of Common Stock of Rubric (the "Option") shall become
exercisable with respect to [ ]ths of the shares of Rubric that are subject to
the Option on the date of the Merger. Thereafter Employee shall vest with
respect to all of the remaining [ ]th shares of Rubric that are subject to the
Option at the end of the six month period commencing on the date of the Merger
so long as Employee is continuously providing services to the Company until that
time. Notwithstanding the foregoing, if Employee's employment is terminated by
the Company other than for Cause (defined in Section 6(d)) within six months of
the Merger, all of the remaining [ ]th shares of Rubric that are subject to the
Option shall become exercisable. Employee agrees to cancel any right that
Employee had to accelerated exercisability or vesting of the Option as a result
of any Prior Agreements. Employee also agrees that any options granted after
December 8, 1999 shall not have accelerated vesting. Any portion of the Option
that does not vest pursuant to this Section 5 shall be forfeited.
(b) REGISTRATION ON SALE OF SHARES. Subject to the exceptions
contained in this Section 5(b), Employee agrees that Employee will not, directly
or indirectly, offer, sell, pledge, contract to sell (including any short sale),
grant any option to purchase or otherwise dispose of any shares of common stock
of the Company ("Dispositions") for a period of six months following the Merger,
to the extent that the aggregate of such Dispositions would exceed 25% of the
Applicable Shares; provided, however, that this 25% restriction shall not apply
to or take into account those shares of Common Stock of the Company that
Employee is permitted to sell and sells, with Company's consent, in a public
offering of the shares of common stock of the Company. For purposes of this
Section 5(b), "Applicable Shares" means the total number of shares of common
stock or options to purchase common stock of the Company held by the Employee on
the date of the Merger less the number of such shares of common stock of the
Company that Employee is permitted to sell and sells in a public offering of the
shares of common stock of the Company after the date of the Merger.
6. TERM OF EMPLOYMENT.
(a) Employment at Will. Either party may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
cause, by giving the other party notice in writing. The Employee's Employment
with the Company shall be "at
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<PAGE> 103
will," meaning that either the Employee or the Company shall be entitled to
terminate the Employee's employment at any time and for any reason, with or
without cause. Any contrary representations that may have been made to the
Employee shall be superseded by this Agreement. This Agreement shall constitute
the full and complete agreement between the Employee and the Company on the "at
will" nature of the Employee's Employment, which may only be changed in an
express written agreement signed by the Employee and a duly authorized officer
of the Company.
(b) RIGHTS UPON TERMINATION OF EMPLOYMENT. Upon the termination of
the Employee's Employment pursuant to this Section 6, the Employee shall only be
entitled to the compensation, benefits and reimbursements described in Sections
2, 3, 4, 5 and 6 for the period preceding the effective date of the termination.
The payments under this Agreement shall fully discharge all responsibilities of
the Company to the Employee.
(c) TERMINATION OF AGREEMENT. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied. The termination
of this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Sections 7 and 8.
(d) CASH SEVERANCE. Notwithstanding the foregoing, if Employee's
agreement is terminated other than for "cause" within six months of the Merger,
Employee shall be entitled to [ ] months base salary payable in one lump
sum. The term "Cause" shall mean:
(i) Any breach of this Agreement between the Employee and
the Company, or any other written agreement between the Employee and the
Company, if such breach causes material harm to the Company;
(ii) Any willful misconduct that causes material harm to the
Company, including (without limitation) repeated failure to follow the
directions of the person to whom the Employee reports;
(iii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony under the laws of the United States or any state thereof;
(iv) Misappropriation of the assets of the Company or other
acts of fraud or embezzlement; or
(v) The abuse of alcohol or controlled substances that has a
detrimental effect upon the Employee's performance of his duties under this
Agreement.
(e) RELEASE. Subsection (d) above shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
3
<PAGE> 104
7. Non-Disclosure. This Agreement is contingent upon the Employee's
execution of the Company form of Proprietary Information and Inventions
Agreement, a copy of which is attached hereto as Exhibit A.
8. Non-Competition, Non-Solicitation and Savings Clause.
(a) The Restricted Period. This Section 8 shall apply only during
the period commencing at the effective time of the Merger and ending on the
later to occur of: (i) the date 12 months from the Merger, or (ii) the
termination of the Employee's Employment for any reason (the "Restricted
Period").
(b) Non-Competition and Non-Soliciting. In exchange for the
consideration stated herein and for the purchase of his shares of Rubric stock
by the Company in the Merger, the Employee agrees that during the Restricted
Period he shall not:
(i) Cause or attempt to cause any existing or prospective
customer, client or account of the Company to divert from, terminate, limit or
in any manner modify, or fail to enter into, any actual or potential business
relationship with the Company. The Employee and the Company agree that this
provision is reasonably enforced with reference to any geographic area in which
the Company maintains any such relationship.
(ii) Directly or indirectly solicit, employ or conspire with
others to employ any of the Company's employees. The term "employ" for purposes
of this paragraph (ii) means to enter into an arrangement for services as a
full-time or part-time employee, independent contractor, agent or otherwise. The
Employee and the Company agree that this provision is reasonably enforced as to
any geographic area in which the Company conducts its business.
The Employee further agrees that during the Restricted Period he shall
inform any new employer, or any other person or entity with whom he enters into
a business relationship, of the existence of this Section 8 before accepting
employment or entering into such business relationship. Ownership of less than
3% of the outstanding stock of any corporation will not constitute a violation
of this Section.
(c) Savings Clause. The Employee agrees that the scope and terms
of this Section 8 are reasonable and that it is the Employee's intent and desire
that this Section 8 be enforced to the fullest extent permissible under the laws
and public policies applied in the jurisdiction in which enforcement is sought.
If any particular provision of this Section 8 is adjudicated to be invalid or
unenforceable, the parties specifically authorize the tribunal making such
determination to edit the invalid or unenforceable provision to allow this
Section 8 to be valid and enforceable to the fullest extent allowed by law or
public policy.
9. Successors.
(a) Company's Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For
4
<PAGE> 105
all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which becomes bound by this
Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributors, devisors and legatees.
10. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement shall
be modified, waived or discharged unless the modification, waiver or discharge
is agreed to in writing and signed by the Employee and by an authorized officer
of the Company (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement shall supersede in its entirety the offer letter executed by the
Employee and Rubric and any option agreement between the Employee and Rubric
to the extent inconsistent herewith.
(d) WITHHOLDING TAXES. All payments made under this Agreement shall
be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW AND SEVERABILITY. This Agreement shall be
interpreted in accordance with the laws of the State of California (except
their provisions governing the choice of law). If any provision of this
Agreement becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the extent necessary to conform to
applicable law so as to be valid and enforceable or, if such provision cannot
be so amended without materially altering the intention of the parties, then
such provision shall be stricken and the remainder of this Agreement shall
continue in full force and effect. Should there ever occur any conflict between
any provision contained in this Agreement and any present or future statute,
<PAGE> 106
law, ordinance or regulation contrary to which the parties have no legal right
to contract, then the latter shall prevail but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it into compliance with applicable law. All the other terms and
provisions of this Agreement shall continue in full force and effect without
impairment or limitation.
(f) ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof, or the Employee's Employment or the
termination thereof, shall be settled in Palo Alto, California, by arbitration
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. The decision of the arbitrator shall
be final and binding on the parties, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The parties
hereby agree that the arbitrator shall be empowered to enter an equitable
decree mandating specific enforcement of the terms of this Agreement. The
Company and the Employee shall share equally all fees and expenses of the
arbitrator. The Company and the Employee hereby consent to personal
jurisdiction of the state and federal courts located in the State of California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.
(g) NO ASSIGNMENT. This Agreement and all rights and obligations of
the Employee hereunder are personal to the Employee and may not be transferred
or assigned by the Employee at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company's obligations hereunder
in connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
-------------------------------------
BROADBASE SOFTWARE, INC.
By:
-----------------------------------
Title:
-------------------------------
6
<PAGE> 1
EXHIBIT 3.05
CERTIFICATE OF RETIREMENT
OF
SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E PREFERRED STOCK
OF
BROADBASE SOFTWARE, INC.
Broadbase Software, Inc., a Delaware corporation, hereby certifies:
1. That at a duly noticed and held meeting, the Board of Directors of the
corporation duly adopted a resolution that identified shares of capital stock of
the corporation, which, to the extent hereinafter set forth, had the status of
retired shares.
2. The shares of capital stock of the corporation that are retired are
identified as being Series A, Series B, Series C, Series D and Series E
Preferred Stock, each share with a par value of $0.001 per share.
3. That the Certificate of Incorporation of the corporation prohibits the
reissuance of the shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock; and pursuant to the provisions of Section 243 of the Delaware
General Corporation Law, upon the effective date of filing of this certificate,
the Certificate of Incorporation of the Company shall be amended so as to effect
a reduction in the authorized number of shares of the Company's capital stock to
the extent of, respectively, 2,398,000 shares of Series A Preferred Stock,
2,000,000 shares of Series B Preferred Stock, 2,166,065 shares of Series C
Preferred Stock, 1,400,000 shares of Series D Preferred Stock and 2,189,981
shares of Series E Preferred Stock, being the total number of shares retired
with a par value of $0.001.
IN WITNESS WHEREOF, said corporation has caused this Certificate of
Retirement to be signed by its duly authorized officer this 3rd day of November
1999.
BROADBASE SOFTWARE, INC
By: /s/ Chuck Bay
-----------------------------------
Chuck Bay, Chief Financial Officer,
General Counsel, Executive Vice
President of Business Development
and Corporate Secretary
I declare under penalty of perjury under the laws of the State of
California, the State of Delaware and the United States of America that the
foregoing is true and correct and that this declaration was executed November
3rd, 1999 at Palo Alto, California.
By: /s/ Chuck Bay
-----------------------------------
Chuck Bay
<PAGE> 1
Exhibit 10.11
AMENDMENT OF NOTE AND STOCK PLEDGE AGREEMENT
Whereas, Broadbase Software, Inc., successor to Broadbase Information Systems,
Inc., (the "Company") and Mark Kremer (the "Debtor") entered into a Secured
Non-Recourse Promissory Note (the "Note") and an associated Stock Pledge
Agreement, each dated April 29, 1998, and
Whereas, the parties now desire to amend certain provisions of such agreements;
Therefore, the parties hereby agree to amend the Note and the Stock Pledge
Agreement, as of December 2, 1999, as follows:
Section 1 of the Note is hereby amended to read as follows:
1. OBLIGATION. For value received, Mark Kremer (the "Debtor") promises
to pay to Broadbase Software, Inc., (the "Company"), or order, no later
than the earlier of
(i) April 29, 1999, or at Debtor's election, in writing to the
Company, by April 29, 2000 or April 29, 2001, or
(ii) ten days after Debtor first sells any common stock of the Company
(the "Loan Term") the principal sum of Four Hundred Thousand Dollars
($400,000), together with interest on the principal hereof from the date
hereof at the rate of five and fifty-one one hundredths percent (5.51%),
which rate is not less than the minimum established pursuant to 1274(d) of
the Internal Revenue Code of 1986, as amended, as of the date hereof;
provided, however, that the rate at which interest shall accrue on unpaid
principal under this Note will not exceed the highest rate permitted by
applicable law.
Section 2 of the Note is hereby amended to read as follows:
2. SECURITY. Payment of this Note was originally secured by an interest
in 1,282,500 shares of the Company's common stock (the "Originally Pledged
Shares") under a Stock Pledge Agreement between the parties dated April 29,
1998; the Company hereby agrees to release 1,082,500 of the Originally
Pledged Shares, leaving 200,000 shares of the Company's Common Stock (the
"Shares") securing this Note.
The parties acknowledge that Debtor has previously given written notice to
extend the payment due date of the Note until April 29, 2000, and the Debtor
hereby elects to extend the payment due date of the Note until April 29, 2001,
unless otherwise earlier due pursuant to the terms of the Note.
The Company hereby agrees to release 1,082,500 of the Shares pledged pursuant
to the Stock Pledge Agreement; as of this date the Collateral under the Stock
Pledge Agreement shall consist of Broadbase common stock certificate BSW 0050
in the amount of 200,000 shares.
Agreed:
/s/ MARK KREMER
- -----------------------------------
Mark Kremer, Debtor
For Broadbase Software
/s/ CHUCK BAY
- -----------------------------------
Chuck Bay, President & COO
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 9, 1999, by and
between ANU SHUKLA (the "Employee") and BROADBASE SOFTWARE, INC., a Delaware
corporation (the "Company"). This Agreement shall be effective at the effective
time of the merger (the "Merger") contemplated by the Merger Agreement and Plan
of Reorganization dated December 9, 1999, by and among the Company, Rubric,
Inc., a Delaware corporation ("Rubric") and Bronco Acquisition Corp., a Delaware
Corporation and a wholly owned subsidiary of the Company. This Agreement shall
be null and void, and no parties shall be deemed to have any rights hereunder,
unless and until the Merger is consummated.
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. The Company agrees to employ the Employee in an
executive advisory position and the Employee shall report to the Company's
President. Employment of Employee will commence on the effective date of the
Merger.
(b) OBLIGATIONS TO THE COMPANY. During her Employment, the
Employee shall devote her full business efforts and time to the Company. During
her Employment, without the prior written approval of the Company's Board of
Directors, the Employee shall not render services in any capacity to any other
person or entity and shall not act as a sole proprietor or partner of any other
person or entity or as a shareholder owning more than five percent of the stock
of any other corporation. The Employee shall comply with the Company's policies
and rules, as they may be in effect from time to time during her Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee represents and
warrants to the Company that she is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with her obligations under this
Agreement. The Employee represents and warrants that she will not use or
disclose, in connection with her employment by the Company, any trade secrets or
other proprietary information or intellectual property in which the Employee or
any other person has any right, title or interest and that to the best of her
knowledge her employment by the Company as contemplated by this Agreement will
not infringe or violate the rights of any other person. The Employee represents
and warrants to the Company that she has returned all property and confidential
information belonging to any prior employer.
2. SALARY. The Company shall pay the Employee as compensation for
her services a base salary at a gross annual rate of not less than $195,000.
Such salary shall be payable in accordance with the Company's standard payroll
procedures. Employee will be eligible for a target bonus of $15,000 pursuant to
the Company's bonus plan.
<PAGE> 2
3. VACATION AND EMPLOYEE BENEFITS. During her Employment, the
Employee shall be eligible for paid vacations in accordance with the Company's
standard policy for similarly-situated executive employees, as it may be amended
from time to time. During her Employment, the Employee shall be eligible to
participate in the employee benefit plans maintained by the Company for
similarly-situated executive employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan. Promptly
after the effective date of the Merger, Broadbase shall execute an
indemnification agreement for Employee consistent with indemnification
agreements provided to other directors and officers of Broadbase.
4. BUSINESS EXPENSES. During her Employment, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with her duties hereunder. The Company shall
reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. EQUITY AWARDS.
(a) SHARES OF THE COMPANY. Notwithstanding any provision in
any plan, employment agreement, offer letter or other agreement between Employee
and Rubric ("Prior Agreements") to the contrary, all of the Employee's remaining
unreleased/unvested shares of Rubric common stock that are exchanged for shares
of Common Stock of the Company on the date of the Merger ("Restricted Shares")
shall remain unreleased/unvested until the date six (6) months following the
date of the Merger, at which time the Restricted Shares shall be fully
released/vested if Employee has been continuously employed by the Company since
the Merger, unless the Employee is terminated by the Company other than for
"cause" (as defined in Section 6(d) below), becomes permanently disabled, or
dies in which case all Restricted Shares shall be fully released/vested on the
date of (i) the Employee's termination of service, (ii) permanent disability, or
(iii) death. Employee agrees to cancel any right that Employee had to
accelerated release/vesting of the Restricted Shares as a result of any Prior
Agreements. Any portion of the Restricted Shares that are not released/vested
pursuant to this Section 5(a) shall be forfeited.
(b) STOCK OPTION. Immediately prior to the Merger, subject to
the approval of the Rubric Board of Directors, Rubric shall grant Employee a
stock option to purchase 150,000 shares of Common Stock of Rubric (the "New
Option") pursuant to the 1997 Rubric Stock Option Plan. To the extent that
options available for grant under the 1997 Rubric Stock Option Plan are
insufficient immediately prior to the Merger to grant the New Option in full
(any such shortfall in the shares under the New Option hereinafter termed the
"Shortfall Shares"), Broadbase agrees to grant Employee an option pursuant to
Broadbase's then current employee incentive stock option plan to purchase a
number of shares of Common Stock of Broadbase equal to the Shortfall Shares
multiplied by the Applicable Number as defined in section 1.1.4 of the Merger
Agreement. The New Option shall vest and become exercisable with respect to 12 _
% of the shares on the six month anniversary of the Merger and with respect to
an additional 2.0833% of the shares on the last day of each month thereafter
provided Employee continues to be employed by the Company. Notwithstanding any
provision of any Prior Agreement to the contrary, no acceleration of vesting or
exercisability shall occur as a result of
2
<PAGE> 3
or related to the Merger. The additional terms of the New Option shall be set
forth in a standard stock option agreement pursuant to the relevant stock option
plan(s).
(c) RESTRICTION ON SALE OF SHARES. Employee agrees that
Employee will not, directly or indirectly, offer, sell, pledge, contract to sell
(including any short sale), grant any option to purchase or otherwise dispose of
any shares of common stock of the Company ("Dispositions") for a period of six
months following the Merger, to the extent that the aggregate of such
Dispositions would exceed 25% of the Applicable Shares; provided, however, that
this 25% restriction shall not apply to or take into account those shares of
Common Stock of the Company that Employee is permitted to sell and sells, with
Company's consent, in a public offering of the shares of common stock of the
Company. For purposes of this Section 5(c), "Applicable Shares" means the total
number of shares of common stock or options to purchase common stock of the
Company, both vested and unvested, held by the Employee on the date of the
Merger less the number of such shares of common stock of the Company that
Employee is permitted to sell and sells in a public offering of the shares of
common stock of the Company after the date of the Merger.
6. TERM OF EMPLOYMENT.
(a) EMPLOYMENT AT WILL. Either party may terminate the
Employee's Employment at any time and for any reason (or no reason), and with or
without Cause, by giving the other party 30 days of notice in writing. The
Employee's Employment with the Company shall be "at will," meaning that either
the Employee or the Company shall be entitled to terminate the Employee's
employment at any time and for any reason, with or without Cause. Any contrary
representations that may have been made to the Employee shall be superseded by
this Agreement. This Agreement shall constitute the full and complete agreement
between the Employee and the Company on the "at will" nature of the Employee's
Employment, which may only be changed in an express written agreement signed by
the Employee and a duly authorized officer of the Company.
(b) RIGHTS UPON TERMINATION OF EMPLOYMENT. Upon the
termination of the Employee's Employment pursuant to this Section 6, the
Employee shall only be entitled to the compensation, benefits and reimbursements
described in Sections 2, 3, 4, 5 and 6 for the period preceding the effective
date of the termination. The payments under this Agreement shall fully discharge
all responsibilities of the Company to the Employee.
(c) TERMINATION OF AGREEMENT. This Agreement shall terminate
when all obligations of the parties hereunder have been satisfied. The
termination of this Agreement shall not limit or otherwise affect any of the
Employee's obligations under Sections 8 and 9.
(d) CASH SEVERANCE. Notwithstanding the foregoing, if
Employee's agreement is terminated other than for "cause" within six months of
the Merger, Employee shall be entitled to three (3) months base salary payable
in one lump sum. The term "Cause" shall mean:
(i) Any breach of this Agreement between the Employee and the
Company, or any other written agreement between the
3
<PAGE> 4
Employee and the Company, if such breach causes material harm to the
Company;
(ii) Any willful misconduct that causes material harm to
the Company, including (without limitation) repeated failure to follow the
directions of the person to whom the Employee reports following a written
warning, delivered to the Employee, of failure to follow such directions;
(iii) Conviction of, or a plea of "guilty" or "no
contest" to, a felony under the laws of the United States or any state
thereof;
(iv) Misappropriation of the assets of the Company or
other acts of fraud or embezzlement; or
(v) The abuse of alcohol or controlled substances that
has a detrimental effect upon the Employee's performance of her duties
under this Agreement.
(e) RELEASE. Subsection (d) above shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
7. NON-DISCLOSURE. This Agreement is contingent upon the Employee's
execution of the Company's form of Proprietary Information and Inventions
Agreement, a copy of which is attached hereto as EXHIBIT A.
8. NON-COMPETITION, NON-SOLICITATION AND SAVINGS CLAUSE.
(a) THE RESTRICTED PERIOD. This Section 8 shall apply only
during the period commencing at the effective time of the Merger and ending on
the later to occur of: (i) the date 12 months from the Merger, or (ii) the
termination of the Employee's Employment for any reason (the "Restricted
Period").
(b) NON-COMPETITION AND NON-SOLICITATION. In exchange for the
consideration stated herein and for the purchase of her shares of Rubric stock
by the Company, the Employee agrees that during the Restricted Period he shall
not:
(i) Directly or indirectly, individually or in
conjunction with others, engage in activities that competes with the
Company's Business or work for any entity engaged in a business that
competes with the Company's Business. The Employee in particular agrees
not to solicit, serve, contract with or otherwise engage any existing or
prospective customer, client or account of the Company that Employee
directly or indirectly had contact with while employed by the Company.
4
<PAGE> 5
(ii) Cause or attempt to cause any existing or
prospective customer, client or account of the Company that Employee
directly or indirectly had contact with while employed by the Company to
divert from, terminate, limit or in any manner modify, or fail to enter
into, any actual or potential business relationship with the Company. The
Employee and the Company agree that this provision is reasonably enforced
with reference to any geographic area in which the Company maintains any
such relationship.
(iii) Directly or indirectly solicit, employ or conspire
with others to employ any of the Company's employees. The term "employ"
for purposes of this paragraph (iii) means to enter into an arrangement
for services as a full-time or part-time employee, independent contractor,
agent or otherwise. The Employee and the Company agree that this provision
is reasonably enforced as to any geographic area in which the Company
conducts its Business.
The Employee further agrees that during the Restricted Period he
shall inform any new employer, or any other person or entity with whom he enters
into a business relationship, of the existence of this Section 8 before
accepting employment or entering into such business relationship. Ownership of
less than 5% of the outstanding stock of any corporation will not constitute a
violation of this Section.
(c) DEFINITION OF BUSINESS. For purposes of this Agreement, the term
"Business" shall mean the development, marketing and/or sales of e-marketing,
analytic applications and CRM analysis software, including any of the following
features:
(i) automated execution of targeted and personalized Internet or
traditional marketing campaigns
(ii) planning, execution, and real-time closed loop measurement of
Internet or traditional marketing campaigns
(iii) segmentation and targeting capabilities to launch personalized
cross-sell and up-sell campaigns across Internet and traditional
channels
(iv) relationship marketing programs that automate personalized
communication with prospects
(v) Web behavior analysis for: customer profiling and segmentation;
up-sell and cross-sell offer recommendations, medium selection,
merchandising and content, effectiveness and site personalization.
(d) SAVINGS CLAUSE. The Employee agrees that the scope and
terms of this Section 8 are reasonable and that it is the Employee's intent and
desire that this Section 8 be enforced to the fullest extent permissible under
the laws and public policies applied in the jurisdiction in which enforcement is
sought. If any particular provision of this Section 8 is adjudicated to be
invalid or unenforceable, the parties specifically authorize the tribunal making
such determination to edit the invalid or unenforceable provision to allow this
Section 8 to be valid and enforceable to the fullest extent allowed by law or
public policy.
9. SUCCESSORS.
5
<PAGE> 6
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement shall supersede in its entirety the offer letter executed by the
Employee and Rubric and any Restricted Stock Purchase Agreement between the
Employee and Rubric to the extent inconsistent herewith.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW AND SEVERABILITY. This Agreement shall be
interpreted in accordance with the laws of the State of California (except their
provisions governing the choice of law). If any provision of this Agreement
becomes or is deemed invalid, illegal or unenforceable in any jurisdiction by
reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so
as to be valid and enforceable or, if such provision cannot be so amended
without materially altering the intention of the parties, then such provision
shall be stricken and
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<PAGE> 7
the remainder of this Agreement shall continue in full force and effect. Should
there ever occur any conflict between any provision contained in this Agreement
and any present or future statute, law, ordinance or regulation contrary to
which the parties have no legal right to contract, then the latter shall prevail
but the provision of this Agreement affected thereby shall be curtailed and
limited only to the extent necessary to bring it into compliance with applicable
law. All the other terms and provisions of this Agreement shall continue in full
force and effect without impairment or limitation.
(f) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, or the Employee's Employment
or the termination thereof, with the exception of any controversy or claim
arising out of or relating to Section 8, shall be settled in Palo Alto,
California, by arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association. The
decision of the arbitrator shall be final and binding on the parties, and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The parties hereby agree that the arbitrator shall
be empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement. The Company and the Employee shall share equally all
fees and expenses of the arbitrator. Any controversy or claim arising out of or
relating to Section 8 shall be settled in the appropriate federal or state court
in the State of California. The Company and the Employee hereby consent to
personal jurisdiction of the state and federal courts located in the State of
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
(g) NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.
(h) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
/s/ ANU SHUKLA
-----------------------------------------
ANU SHUKLA
BROADBASE SOFTWARE, INC.
By /s/ CHUCK BAY
----------------------------------
Title: President
----------------------------------
7
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of December 9, 1999, by and
between CHRIS MAEDA (the "Employee") and BROADBASE SOFTWARE, INC., a Delaware
corporation (the "Company"). This Agreement shall be effective at the effective
time of the merger (the "Merger") contemplated by the Merger Agreement and Plan
of Reorganization dated December 9, 1999, by and among the Company, Rubric,
Inc., a Delaware corporation ("Rubric"), and Bronco Acquisition Corp., a
Delaware Corporation and a wholly owned subsidiary of the Company. This
Agreement shall be null and void, and no parties shall be deemed to have any
rights hereunder, unless and until the Merger is consummated.
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. The Company agrees to employ the Employee in the
position of Vice President of Applications Development (the "Employment"). The
Employee shall report to the Company's Chief Executive Officer or President as
the Company may determine. Employment of Employee shall commence on the
effective date of the Merger.
(b) OBLIGATIONS TO THE COMPANY. During his Employment, the
Employee shall devote his full business efforts and time to the Company. During
his Employment, without the prior written approval of the Company's Board of
Directors, the Employee shall not render services in any capacity to any other
person or entity and shall not act as a sole proprietor or partner of any other
person or entity or as a shareholder owning more than five percent of the stock
of any other corporation. The Employee shall comply with the Company's policies
and rules, as they may be in effect from time to time during his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which the Employee or
any other person has any right, title or interest and that to the best of his
knowledge his employment by the Company as contemplated by this Agreement will
not infringe or violate the rights of any other person. The Employee represents
and warrants to the Company that he has returned all property and confidential
information belonging to any prior employer.
2. SALARY. The Company shall pay the Employee as compensation for
his services a base salary at a gross annual rate of not less than $150,000.
Such salary shall be payable in accordance with the Company's standard payroll
procedures. Employee will be eligible for a target bonus of $30,000 pursuant to
the Company's bonus plan.
<PAGE> 2
3. VACATION AND EMPLOYEE BENEFITS. During his Employment, the
Employee shall be eligible for paid vacations in accordance with the Company's
standard policy for similarly-situated executive employees, as it may be amended
from time to time. During his Employment, the Employee shall be eligible to
participate in the employee benefit plans maintained by the Company for
similarly-situated executive employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan. Promptly
after the effective date of the Merger, Broadbase shall execute an
indemnification agreement for Employee consistent with indemnification
agreements provided to other directors and officers of Broadbase.
4. BUSINESS EXPENSES. During his Employment, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with his duties hereunder. The Company shall
reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. EQUITY IN THE COMPANY.
(a) SHARES OF THE COMPANY. Notwithstanding any provision in
any plan, employment agreement, offer letter or other agreement between Employee
and Rubric ("Prior Agreements") to the contrary, all of the Employee's remaining
unreleased/unvested shares of Rubric common stock that are exchanged for shares
of Common Stock of the Company on the date of the Merger ("Restricted Shares")
shall remain unreleased/unvested until the date six (6) months following the
date of the Merger, at which time the Restricted Shares shall be fully
released/vested if Employee has been continuously employed by the Company since
the Merger, unless the Employee is terminated by the Company other than for
"cause" (as defined in Section 6(d) below), becomes permanently disabled, or
dies, in which case all Restricted Shares shall be fully released/vested on the
date of (i) the Employee's termination of service, (ii) permanent disability, or
(iii) death. Employee agrees to cancel any right that Employee had to
accelerated release/vesting of the Restricted Shares as a result of any Prior
Agreements. Any portion of the Restricted Shares that are not released/vested
pursuant to this Section 5(a) shall be forfeited.
(b) STOCK OPTION. Immediately prior to the Merger, subject to
the approval of the Rubric Board of Directors, Rubric shall grant Employee a
stock option to purchase 150,000 shares of Common Stock of Rubric (the "New
Option") pursuant to the 1997 Rubric Stock Option Plan. To the extent that
options available for grant under the 1997 Rubric Stock Option Plan are
insufficient immediately prior to the Merger to grant the New Option in full
(any such shortfall in the shares under the New Option hereinafter termed the
"Shortfall Shares"), Broadbase agrees to grant Employee an option pursuant to
Broadbase's then current employee incentive stock option plan to purchase a
number of shares of Common Stock of Broadbase equal to the Shortfall Shares
multiplied by the Applicable Number as defined in section 1.1.4 of the Merger
Agreement. The New Option shall vest and become exercisable with respect to 12_%
of the shares on the six month anniversary of the Merger and with respect to an
additional 2.0833% of the shares on the last day of each month thereafter
provided Employee continues to be employed by the Company. Notwithstanding any
provision of any Prior Agreement to the contrary, no acceleration of vesting or
exercisability shall occur as a result of
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<PAGE> 3
or related to the Merger. The additional terms of the New Option shall be set
forth in a standard stock option agreement pursuant to the relevant stock option
plan(s).
(c) RESTRICTION ON SALE OF SHARES. Employee agrees that
Employee will not, directly or indirectly, offer, sell, pledge, contract to sell
(including any short sale), grant any option to purchase or otherwise dispose of
any shares of common stock of the Company ("Dispositions") for a period of six
months following the Merger, to the extent that the aggregate of such
Dispositions would exceed 25% of the Applicable Shares; provided, however, that
this 25% restriction shall not apply to or take into account those shares of
Common Stock of the Company that Employee is permitted to sell and sells, with
Company's consent, in a public offering of the shares of common stock of the
Company. For purposes of this Section 5(c), "Applicable Shares" means the total
number of shares of common stock or options to purchase common stock of the
Company, both vested and unvested, held by the Employee on the date of the
Merger less the number of such shares of common stock of the Company that
Employee is permitted to sell and sells in a public offering of the shares of
common stock of the Company after the date of the Merger.
6. TERM OF EMPLOYMENT.
(a) EMPLOYMENT AT WILL. Either party may terminate the
Employee's Employment at any time and for any reason (or no reason), and with or
without cause, by giving the other party 30 days of notice in writing. The
Employee's Employment with the Company shall be "at will," meaning that either
the Employee or the Company shall be entitled to terminate the Employee's
employment at any time and for any reason, with or without cause. Any contrary
representations that may have been made to the Employee shall be superseded by
this Agreement. This Agreement shall constitute the full and complete agreement
between the Employee and the Company on the "at will" nature of the Employee's
Employment, which may only be changed in an express written agreement signed by
the Employee and a duly authorized officer of the Company.
(b) RIGHTS UPON TERMINATION OF EMPLOYMENT. Upon the
termination of the Employee's Employment pursuant to this Section 6, the
Employee shall only be entitled to the compensation, benefits and reimbursements
described in Sections 2, 3, 4, 5 and 6 for the period preceding the effective
date of the termination. The payments under this Agreement shall fully discharge
all responsibilities of the Company to the Employee.
(c) TERMINATION OF AGREEMENT. This Agreement shall terminate
when all obligations of the parties hereunder have been satisfied. The
termination of this Agreement shall not limit or otherwise affect any of the
Employee's obligations under Sections 7 and 8.
(d) CASH SEVERANCE. Notwithstanding the foregoing, if
Employee's agreement is terminated other than for "cause" within six months of
the Merger, Employee shall be entitled to three (3) months base salary payable
in one lump sum. The term "Cause" shall mean:
(i) Any breach of this Agreement between the Employee
and the Company, or any other written agreement between
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<PAGE> 4
the Employee and the Company, if such breach causes material harm to the
Company;
(ii) Any willful misconduct that causes material harm to
the Company, including (without limitation) repeated failure to follow the
directions of the person to whom the Employee reports following a written
warning, delivered to Employee, of failure to follow such directions;
(iii) Conviction of, or a plea of "guilty" or "no
contest" to, a felony under the laws of the United States or any state
thereof;
(iv) Misappropriation of the assets of the Company or
other acts of fraud or embezzlement; or
(v) The abuse of alcohol or controlled substances that
has a detrimental effect upon the Employee's performance of his duties
under this Agreement.
(e) RELEASE. Subsection (d) above shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
7. NON-DISCLOSURE. This Agreement is contingent upon the Employee's
execution of the Company's form of Proprietary Information and Inventions
Agreement, a copy of which is attached hereto as EXHIBIT A.
8. NON-COMPETITION, NON-SOLICITATION AND SAVINGS CLAUSE.
(a) THE RESTRICTED PERIOD. This Section 8 shall apply during
the period commencing at the effective time of the Merger and ending on the
later to occur of: (i) the date 12 months from the Merger, or (ii) the
termination of the Employee's Employment for any reason (the "Restricted
Period").
(b) NON-COMPETITION AND NON-SOLICITATION. In exchange for the
consideration stated herein, the Employee agrees that during the Restricted
Period he shall not:
(i) Directly or indirectly, individually or in
conjunction with others, engage in activities that competes with the
Company's Business or work for any entity engaged in a business that
competes with the Company's Business. The Employee in particular agrees
not to solicit, serve, contract with or otherwise engage any existing or
prospective customer, client or account of the Company that Employee
directly or indirectly had contact with while employed by the Company.
(ii) Cause or attempt to cause any existing or
prospective customer, client or account of the Company that Employee
directly or
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<PAGE> 5
indirectly had contact with while employed by the Company to divert from,
terminate, limit or in any manner modify, or fail to enter into, any
actual or potential business relationship with the Company. The Employee
and the Company agree that this provision is reasonably enforced with
reference to any geographic area in which the Company maintains any such
relationship.
(iii) Directly or indirectly solicit, employ or conspire
with others to employ any of the Company's employees. The term "employ"
for purposes of this paragraph (iii) means to enter into an arrangement
for services as a full-time or part-time employee, independent contractor,
agent or otherwise. The Employee and the Company agree that this provision
is reasonably enforced as to any geographic area in which the Company
conducts its Business.
The Employee further agrees that during the Restricted Period he
shall inform any new employer, or any other person or entity with whom he enters
into a business relationship, of the existence of this Section 8 before
accepting employment or entering into such business relationship. Ownership of
less than 5% of the outstanding stock of any corporation will not constitute a
violation of this Section.
(c) DEFINITION OF BUSINESS. For purposes of this Agreement,
the term "Business" shall mean the development, marketing and/or sales of
e-marketing, analytic applications and CRM analysis software, including any of
the following features:
(i) automated execution of targeted and personalized Internet or
traditional marketing campaigns
(ii) planning, execution, and real-time closed loop measurement of
Internet or traditional marketing campaigns
(iii) segmentation and targeting capabilities to launch personalized
cross-sell and up-sell campaigns across Internet and traditional
channels
(iv) relationship marketing programs that automate personalized
communication with prospects
(v) Web behavior analysis for: customer profiling and segmentation;
up-sell and cross-sell offer recommendations, medium selection,
merchandising and content, effectiveness and site personalization.
(d) SAVINGS CLAUSE. The Employee agrees that the scope and
terms of this Section 8 are reasonable and that it is the Employee's intent and
desire that this Section 8 be enforced to the fullest extent permissible under
the laws and public policies applied in the jurisdiction in which enforcement is
sought. If any particular provision of this Section 8 is adjudicated to be
invalid or unenforceable, the parties specifically authorize the tribunal making
such determination to edit the invalid or unenforceable provision to allow this
Section 8 to be valid and enforceable to the fullest extent allowed by law or
public policy.
9. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation,
5
<PAGE> 6
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and/or assets which becomes
bound by this Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement shall supersede in its entirety the offer letter executed by the
Employee and Rubric and any Restricted Stock Purchase Agreement between the
Employee and Rubric to the extent inconsistent herewith.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW AND SEVERABILITY. This Agreement shall be
interpreted in accordance with the laws of the State of California (except their
provisions governing the choice of law). If any provision of this Agreement
becomes or is deemed invalid, illegal or unenforceable in any jurisdiction by
reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so
as to be valid and enforceable or, if such provision cannot be so amended
without materially altering the intention of the parties, then such provision
shall be stricken and the remainder of this Agreement shall continue in full
force and effect. Should there ever occur any conflict between any provision
contained in this Agreement and any present or future statute,
6
<PAGE> 7
law, ordinance or regulation contrary to which the parties have no legal right
to contract, then the latter shall prevail but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it into compliance with applicable law. All the other terms and provisions
of this Agreement shall continue in full force and effect without impairment or
limitation.
(f) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, or the Employee's Employment
or the termination thereof, with the exception of any controversy or claim
arising out of or relating to Section 8, shall be settled in Palo Alto,
California, by arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association. The
decision of the arbitrator shall be final and binding on the parties, and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The parties hereby agree that the arbitrator shall
be empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement. The Company and the Employee shall share equally all
fees and expenses of the arbitrator. Any controversy or claim arising out of or
relating to Section 8 shall be settled in the appropriate federal or state court
in the State of California. The Company and the Employee hereby consent to
personal jurisdiction of the state and federal courts located in the State of
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
(g) NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.
(h) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
/s/ CHRIS MAEDA
----------------------------------------
CHRIS MAEDA
BROADBASE SOFTWARE, INC.
By /s/ CHUCK BAY
---------------------------------
Title: President
---------------------------------
7
<PAGE> 1
Exhibit 10.14
January 4, 2000
Rusty Thomas
Dear Rusty,
I am pleased to offer you the position of CFO for Broadbase Software, Inc.
subject to board approval. This letter outlines the proposed terms of employment
with Broadbase. Your start date will be effective immediately.
Your annual salary will be $200,000 paid bi-monthly, to be reviewed on an annual
basis. There is an incentive bonus associated with this position allowing you
to make an additional $50,000. Your bonus will be based on achievement of your
objectives and is paid on a semi-annual basis.
I will recommend that you will be granted an option to purchase 175,000 share of
stock, with the purchase price of each of the shares covered by the option to be
$40 under the closing price of the Company's common stock on your start date.
This grant is subject to approval by the Board of Directors after your
employment begins. The option would vest over four years subject to a three
month cliff and would be governed by the additional terms set forth in the
Company's stock option agreement. In the event of a change in control of at
least 50% of the voting stock of Broadbase, in conjunction with your not being
offered to continue in your same position, then 50% of your unvested shares
shall immediately vest.
The Company will extend you a loan in the amount of $250,000 which will be a non
recourse loan secured only by your stock options and any stock issued therefrom
provided you do not terminate your employment with the Company within the first
three months of your employment (in which case the loan would need to be repaid
in full within two weeks).
The Company will provide to you the health, holiday, vacation and other benefits
available to all its employees. Enclosed, for your review, is information
related to some of the benefits.
To indicate your acceptance of this offer of employment, please sign below and
return me by fax at (650) 614-8302. Employment at Broadbase is subject to your
signing the attached nondisclosure and inventions agreement, as well. Please
also understand that your employment is not governed by any written or oral
contract and is considered an "at-will" agreement. This means that you are free,
as is the Company, to terminate the employment relationship at any time for any
reason, so long as there is not violation of applicable state or federal law.
Rusty, all of us welcome you in joining Broadbase and we look forward to having
you on our team. Meanwhile, if you have any question, please do not hesitate to
call me at (650) 614-8304.
Sincerely,
Chuck Bay
President
Accepted
Signature: /s/ RUSTY THOMAS
-------------------------------
Name: Rusty Thomas
Start Date:
-------------------------------
<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
January 11, 2000, 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.
San Jose, California
January 18,2000
<PAGE> 1
Exhibit 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in Broadbase Software Inc.'s Registration Statement
on Form S-1 of our report dated January 12, 2000 relating to the financial
statements of Rubric, Inc., which appear in such Registration Statement. We also
consent to the reference of us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
San Jose, California
January 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1998 AND 1999 AND CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 13,990 76,642
<SECURITIES> 0 0
<RECEIVABLES> 1,122 2,762
<ALLOWANCES> 50 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 15,388 80,593
<PP&E> 2,288 4,466
<DEPRECIATION> 678 1,598
<TOTAL-ASSETS> 17,173 84,770
<CURRENT-LIABILITIES> 6,587 11,231
<BONDS> 9,360 333
0 0
6 0
<COMMON> 2 17
<OTHER-SE> 1,218 73,189
<TOTAL-LIABILITY-AND-EQUITY> 17,173 84,770
<SALES> 2,996 7,689
<TOTAL-REVENUES> 3,439 10,442
<CGS> 713 1,437
<TOTAL-COSTS> 967 4,047
<OTHER-EXPENSES> 3,738 6,024
<LOSS-PROVISION> 50 0
<INTEREST-EXPENSE> 226 870
<INCOME-PRETAX> (11,343) (23,551)
<INCOME-TAX> 0 19
<INCOME-CONTINUING> (11,343) (23,570)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,343) (23,570)
<EPS-BASIC> (8.85) (3.74)
<EPS-DILUTED> (8.85) (3.74)
</TABLE>
