<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 333-3844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BROADVISION, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 94-3184303
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
------------------------
333 DISTEL CIRCLE
LOS ALTOS, CA 94022
(415) 943-3600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
PEHONG CHEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROADVISION, INC.
333 DISTEL CIRCLE
LOS ALTOS, CA 94022
(415) 943-3600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
KENNETH L. GUERNSEY THOMAS A. BEVILACQUA
CYDNEY S. POSNER THOMAS J. LIMA
PATRICK D. WALRAVENS Brobeck, Phleger & Harrison LLP
Cooley Godward Castro Huddleson & One Market
Tatum Spear Street Tower
One Maritime Plaza, 20th Floor San Francisco, CA 94105
San Francisco, CA 94111 (415) 442-0900
(415) 693-2000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement number for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BROADVISION, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page and Outside Back Cover Page
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Outside Front Cover Page and Inside Front Cover Page;
Underwriting
9. Description of Securities to be Registered........... Prospectus Summary; Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend Policy;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal
Stockholders; Description of Capital Stock; Shares
Eligible for Future Sale; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 28, 1996
[LOGO]
4,000,000 SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by
BroadVision, Inc. ("BroadVision" or the "Company"). Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between $8.00
and $10.00 per share. See "Underwriting" for information relating to the method
of determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "BVSN."
Upon completion of this offering, the current directors, officers, and principal
stockholders of the Company and their affiliates will exercise voting control
over approximately 67% of the outstanding Common Stock.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................... $ $ $
- ---------------------------------------------------------------------------------
Total (2)..................... $ $ $
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $950,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 600,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
------------------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), San Francisco, California, on or about , 1996.
ROBERTSON, STEPHENS & COMPANY
HAMBRECHT & QUIST
WESSELS, ARNOLD & HENDERSON
The date of this Prospectus is , 1996
<PAGE>
BroadVision-TM-
ONE-TO-ONE-TM-
A Software Application System Enabling Businesses
to Manage the Full Marketing and Selling
Life Cycle on the World Wide Web.
<TABLE>
<S> <C>
1 Community 2 Profiling
Attracts and retains Web site visitors Collects, tracks, and manages informa-
with dynamic, targeted information tion about Web site visitors. Manages
tailored to the needs and interests privacy. Observes and records inter-
of individuals and online com- actions to improve service and
munities. Provides areas in encourage repeat business.
which Web site visitors Remembers transactions
can interact with one and preferences. Enables
another. Encourages business managers to
feedback and input. segment and target
Builds ongoing to the needs of
relationships. individual visitors.
[picture of the globe covered by individuals sitting a computer terminals all linked by
communication lines, surrounded by four colored and numbered spheres]
4 Transactions 3 Targeting
Manages Matches visitor
transaction pro- profiles to Web site
cessing essential content--product
for both business- information, editori-
to-consumer and als, pricing, advertising,
business-to-business coupons, incentives, and pro-
electronic commerce: motions. Generates custom
secure online ordering Web pages and interactions
and payment, order fulfill- in real time based on business
ment and billing, customer rules defined by marketing, adver-
service, EDI, reporting, and inte- tising, and merchandising managers.
gration with existing business systems.
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
APPLICATION
DEVELOPERS
Build powerful one-to-one
marketing and selling Web
applications rapidly with
object-oriented tools and
open APIs, reusable application
templates, and dynamic objects. Create
custom libraries of specialized objects.
Integrate existing business systems,
applications, and databases. Write Java
applets and extensions for one-to-one
interactions. Scale applications up to
millions of visitors using CORBA
architecture.
BUSINESS
MANAGERS
Design Web sites as places of business. Build customer relationships. Monitor
and control Web sites in real time through the BroadVision One-to-One Dynamic
Command Center. Personalize content and define business rules -- pricing,
promotions, targeting variables -- in real time, without programmers. Conduct
one-to-one promotions. Create point-cast advertising.
[graphic depiction of the globe covered by individuals sitting at computer
terminals, all linked by communication lines, surrounded by four colored spheres
labeled "Community," "Profiling," "Targeting," and "Transactions." Linked by
colored cables to the globe and the orbiting spheres is, in the upper left
corner, a picture of two individuals sitting at terminals entitled "Applications
Developer," in the lower left corner, a picture of three individuals sitting at
terminals entitled "Business Manager," and, to the right, a picture of three
individuals sitting at terminals entitled "Web Site Visitors."]
<PAGE>
Web Site Visitors
Register preferences, interests, and other relevant information
in profiles. Receive information tailored to profiles.
Read personalized online newspapers, magazines, and product
brochures. Shop with a virtual sales assistant. Fill out targeted
surveys and offer input and feedback on purchased products.
Participate in community chat groups and forums and watch Java
animations. Listen to one-to-one Web radio. Control privacy of personal data.
Veronika
- -- Berlin film maker.
- -- Vacations in Mediterranean.
- -- Frequently dines out.
- -- First time visit to site.
John
- -- NY-based purchasing manager.
- -- Qualifies for price discounts.
- -- Took delivery of medical instruments two months ago.
Mayumi
- -- Tokyo college student.
- -- Likes clothes from Paris.
- -- Visited Web site four times this week.
- -- Purchases with VISA.
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSONS IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 4
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Selected Financial Data................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 25
Management................................................................ 45
Certain Transactions...................................................... 52
Principal Stockholders.................................................... 54
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 58
Underwriting.............................................................. 60
Legal Matters............................................................. 62
Experts................................................................... 62
Change In Accountants..................................................... 62
Additional Information.................................................... 62
Index to Financial Statements............................................. F-1
</TABLE>
------------------
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by its independent auditors and quarterly reports
containing unaudited financial statements for each of the first three quarters
of each fiscal year.
BroadVision-TM- and BroadVision One-To-One-TM- are trademarks of the
Company. Trade names and trademarks of other companies appearing in this
Prospectus are the property of their respective holders.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS," AND THE FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CONSIDER
CAREFULLY THE INFORMATION DISCUSSED UNDER THE HEADING "RISK FACTORS."
THE COMPANY
BroadVision provides an integrated software application system, BroadVision
One-To-One-TM-, that enables businesses to create applications for interactive
marketing and selling services on the World Wide Web. These applications are
designed to allow non-technical business managers to tailor Web site content to
the needs and interests of individual Web site visitors, personalizing each
visit on a real-time basis. The BroadVision One-To-One application system and
related vertical application solutions and services are targeted at businesses
developing Web sites for marketing and selling to consumers and business
customers, and as internal resources for employees. The Company's customers use
BroadVision One-To-One to develop Web sites that engage visitors and encourage
return visits through personalized interactions, capture marketing information
from volunteered data and observed behavior, and generate revenues from
electronic commerce activities and point-cast advertising. BroadVision
One-To-One provides these software capabilities in an architecture that supports
the full one-to-one marketing and selling life cycle. The Company believes that
these capabilities are needed by business managers and Web site application
developers to take full advantage of the potential of the Internet as a
marketplace for conducting electronic commerce and for building long-term
relationships with customers.
To increase customer satisfaction, develop customer loyalty, and contain the
high costs associated with new customer acquisition, many marketing executives
in both business-to-consumer and business-to-business industries have turned
their attention from mass marketing to "one-to-one" marketing and selling -- a
systematic, interactive approach to developing long-term relationships with
individual customers. With the emergence of the Internet's World Wide Web as a
globally accessible, interactive, and individually addressable communications
and computing platform, businesses have the opportunity to implement one-to-one
marketing and selling on a mass basis. The Company believes that, to capitalize
on this opportunity, businesses require software application solutions that
exceed the capabilities of currently available Web software products, many of
which were designed for publishing static content, or "brochureware." To address
this need, the Company introduced the BroadVision One-To-One application system,
which allows businesses to develop and manage dynamic, interactive Web sites
that provide community, profiling, targeting, and transaction capabilities to
support the full one-to-one marketing and selling life cycle.
The Company's objective is to establish one-to-one marketing and selling as
a standard feature of Web sites worldwide. A key element of the Company's
strategy to achieve this objective is to provide complete application solutions
that leverage other software technologies and allow businesses to capitalize
more fully on the Internet as a business venue. In addition, the Company intends
to develop cooperative alliances with leading Internet technology vendors,
systems integrators, and Web site developers, and to leverage the BroadVision
One-To-One application system to derive additional Web application products and
services focused on vertical markets. The Company's sales strategy is to sell
initially to aggregators of online services that can introduce the Company's
products to their individual content providers, who may develop their own Web
site applications in the future.
BroadVision customers that have acquired licenses and professional services
to develop and deploy interactive marketing and selling services for use on the
Internet and other interactive venues are Hongkong Telecom, Itochu Internet
Corporation, Matsushita Electric Industrial Co., Ltd., NetRadio Network, NTT
Data Communications Systems Corporation, Olivetti Telemedia Videostrada, Prodigy
Services Co., Sema Group, Ltd., Thomson-Sun Interactive, and Virgin.net Limited.
Key alliances include Marketing 1:1 and Sun Microsystems, Inc. Types of
applications being developed by licensees using BroadVision One-To-One include
cybermalls, online services, and corporate Web sites.
The Company was incorporated in Delaware in May 1993. The Company's
principal executive offices are located at 333 Distel Circle, Los Altos, CA
94022, and its telephone number is (415) 943-3600. The Company's World Wide Web
site is located at http://www.broadvision.com. Information contained on the
Company's Web site shall not be deemed to be a part of this Prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company......... 4,000,000 shares
Common Stock Outstanding after the 20,599,484 shares(1)
Offering...................................
Use of Proceeds............................. For working capital and other general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol...... BVSN
</TABLE>
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
PERIOD FROM
MAY 13, 1993 YEARS ENDED DECEMBER THREE MONTHS ENDED
(INCEPTION) TO 31, MARCH 31,
DECEMBER 31, -------------------- --------------------
1993 1994 1995 1995 1996
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................................... $ -- $ -- $ 540 $ -- $ 1,398
Operating loss................................................ (143) (1,771) (4,478) (871) (1,705)
Net loss...................................................... (136) (1,670) (4,318) (846) (1,698)
Pro forma net loss per share(2)............................... $ (0.23) $ (0.04) $ (0.09)
Shares used in computing pro forma
net loss per share(2)........................................ 18,543 18,888 18,576
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------
AS
ACTUAL PRO FORMA(3) ADJUSTED(4)
--------- ------------ -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................... $ 2,663 $ 7,718 $ 40,248
Working capital.............................................................. 2,073 7,128 39,658
Total assets................................................................. 6,106 11,161 43,691
Long-term obligations........................................................ 569 569 569
Deficit accumulated during the development stage............................. (7,822) (7,822) (7,822)
Total stockholders' equity................................................... 2,832 7,887 40,417
</TABLE>
- ------------
(1) Excludes, as of April 16, 1996, shares reserved for issuance upon exercise
of (i) outstanding stock options to acquire 2,020,558 shares of Common
Stock, (ii) an outstanding warrant to acquire 33,750 shares of Series C
Preferred Stock, which warrant will convert into a warrant to purchase
Common Stock upon the completion of this offering, and (iii) an outstanding
option to acquire 500,000 shares of Series D Preferred Stock, which option
will convert into an option to purchase shares of Common Stock upon the
completion of this offering. See "Management -- Employee Benefit Plans" and
"Description of Capital Stock."
(2) See Note 2 of Notes to Financial Statements for information concerning the
calculation of pro forma net loss per share.
(3) Reflects the sale of 634,375 shares of Series E Preferred Stock at a price
of $8.00 per share in April 1996 (the "Series E Financing") and the
conversion of all outstanding Preferred Stock into 9,237,975 shares of
Common Stock, which will occur automatically upon the completion of this
offering.
(4) As adjusted to reflect the sale of 4,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $9.00 per share and
receipt of the estimated net proceeds therefrom. See "Use of Proceeds."
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS OR AS OTHERWISE INDICATED,
ALL INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO THE CONVERSION OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON STOCK, WHICH WILL OCCUR
AUTOMATICALLY UPON THE COMPLETION OF THIS OFFERING, AND (II) ASSUMES NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "DESCRIPTION OF CAPITAL STOCK"
AND "UNDERWRITING."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.
LIMITED OPERATING HISTORY
The Company was founded in May 1993 and commenced shipment of its initial
product, the BroadVision One-To-One application system, in December 1995. To
date, only 10 companies have licensed the BroadVision One-To-One application
system and no application has been commercially deployed using BroadVision
One-To-One. Accordingly, the Company has only a limited operating history, and
its prospects must be evaluated in light of the risks and uncertainties
frequently encountered by a company in an early stage of development. The new
and evolving markets in which the Company operates make these risks and
uncertainties particularly pronounced. To address these risks, the Company must,
among other things, successfully implement its marketing strategy, respond to
competitive developments, attract, retain, and motivate qualified personnel,
continue to develop and upgrade its products and technologies more rapidly than
its competitors, and commercialize its products and services incorporating these
enhanced technologies. There can be no assurance that the Company will succeed
in addressing any or all of these risks or that the Company will achieve or
sustain substantial revenues or profitability.
OPERATING LOSSES AND ACCUMULATED DEFICIT
Since its inception, the Company has incurred substantial costs to research,
develop, and enhance its technology and products, to recruit and train a
marketing and sales group, and to establish an administrative organization. As a
result, the Company has incurred net losses in each fiscal quarter since
inception and, as of March 31, 1996, had an accumulated deficit of $7.8 million.
To the extent such losses continue, the Company's accumulated deficit would
increase, and stockholders' equity would decrease. The Company anticipates that
its operating expenses will increase substantially in the foreseeable future as
it continues the development of its technology, increases its sales and
marketing activities, and creates and expands its distribution channels.
Accordingly, the Company expects to incur additional losses for at least the
next 18 months. In addition, the Company's limited operating history makes the
prediction of future results of operations difficult and, accordingly, there can
be no assurance that the Company will achieve or sustain revenue growth or
profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
EARLY STAGE OF MARKET DEVELOPMENT; DEPENDENCE ON THE INTERNET
The Company's products and services facilitate online communication and
commerce over public and private networks. The market for the Company's products
and services is at a very early stage of development and is rapidly evolving. As
is typical for new and rapidly evolving industries, demand and market acceptance
for recently introduced products and services are subject to a high level of
uncertainty, especially where, as is true of the Company, acquisition of the
product requires a large capital commitment or other significant commitment of
resources. With respect to the Company, this uncertainty is compounded by the
risks that consumers and enterprises will not adopt online commerce and
communication and that an appropriate infrastructure necessary to support
increased commerce and communication on the Internet will fail to develop, in
each case, to a sufficient extent and within an adequate time frame to permit
the Company to succeed.
Adoption of online commerce and communication, particularly by those
individuals and enterprises that have historically relied upon traditional means
of commerce and communication, will require a broad acceptance of new and
substantially different methods of conducting business and exchanging
information. Moreover, the Company's products and services involve a new
approach to the conduct of online commerce and, as a result, intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of the Company's products and services in order to
generate demand for the Company's systems. For example, enterprises that have
already invested substantial resources in other methods of conducting business
may be reluctant or slow to adopt a new approach that may replace, limit, or
compete with their existing systems.
6
<PAGE>
Similarly, individuals with established patterns of purchasing goods and
services may be reluctant to alter those patterns or may otherwise be resistant
to providing the personal data which is necessary to support the Company's
consumer profiling capability. Moreover, the security and privacy concerns of
existing and potential users of the Company's products and services may inhibit
the growth of online commerce generally and the market's acceptance of the
Company's products and services in particular. Accordingly, there can be no
assurance that a viable market for the Company's products will emerge or be
sustainable.
Sales of most of the Company's products and services will depend upon the
adoption of the Internet as a widely used medium for commerce and communication.
The Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as a reliable
network backbone, or timely development of complementary products, such as high
speed modems. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity or due to increased governmental regulation. Moreover, critical issues
concerning the commercial use of the Internet (including security, reliability,
cost, ease of use, accessibility, and quality of service) remain unresolved and
may negatively affect the growth of Internet use or the attractiveness of
commerce and communication on the Internet. Because global commerce and online
exchange of information on the Internet and other similar open wide area
networks are new and evolving, there can be no assurance that the Internet will
prove to be a viable commercial marketplace. If critical issues concerning the
commercial use of the Internet are not favorably resolved, if the necessary
infrastructure and complementary products are not developed, or if the Internet
does not become a viable commercial marketplace, the Company's business,
financial condition, and operating results will be materially adversely
affected. See "Business -- Background."
POTENTIAL IMPACT OF PRIVACY CONCERNS
One of the principal features of the BroadVision One-To-One application
system is the ability to develop and maintain profiles for use by business
managers in determining the nature of the content to be provided to that
customer. Typically, profiles are captured when consumers, business customers,
and employees visit a site on the World Wide Web (the "Web") and volunteer
information in response to survey questions concerning their backgrounds,
interests, and preferences. Profiles are augmented over time through the
collection of usage data. Although BroadVision One-To-One is designed to enable
the development of applications that permit Web site visitors to prevent the
distribution of any of their personal data beyond that specific Web site,
privacy concerns may nevertheless cause visitors to be resistant to providing
the personal data necessary to support this profiling capability. Moreover, even
the perception by the Company's customers or potential customers of substantial
security and privacy concerns on the part of consumers, whether or not valid,
may inhibit market acceptance of the Company's products. In addition, such
concerns may be heightened by legislative or regulatory requirements that
require notification to Web site users that the data captured as a result of
visitation of certain Web sites may be used by marketing entities to
unilaterally address product promotion and advertising to that user. While the
Company is not aware of any such legislation or regulatory requirements
currently in effect in the United States, certain other countries and political
entities, such as the European Community, have adopted such legislation or
regulatory requirements, and no assurance can be given that similar legislation
or regulatory requirements will not be adopted in the United States. If the
privacy concerns of consumers are not adequately addressed, the Company's
business, financial condition, and operating results could be materially
adversely affected. See "Business -- The BroadVision One-To-One User
Experience."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
As a result of the Company's limited operating history, the Company does not
have meaningful historical financial data for quarterly periods on which to base
planned operating expenses. The Company's expense levels are based in part on
its product development requirements as well as its expectations as to future
revenues. The Company anticipates that its operating expenses will increase
substantially for the foreseeable future as the Company continues to develop and
market its initial products, increases its sales and marketing activities,
creates and expands the distribution channels for its products, and broadens its
customer support capabilities.
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The inability of the Company to release its products in a timely manner or any
material shortfall in demand for the Company's products in relation to the
Company's expectations would have a material adverse effect on the Company's
business, financial condition, and operating results.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors including, among
others, the timing of introductions or enhancements of products and services by
the Company or its competitors, the length of the Company's sales cycle, market
acceptance of new products, the pace of development of the market for online
commerce, the mix of the Company's products sold, the size and timing of
significant orders and the timing of customer production or deployment, demand
for the Company's products, changes in pricing policies by the Company or its
competitors, changes in the Company's sales incentive plans, budgeting cycles of
its customers, customer order deferrals in anticipation of new products or
enhancements by the Company or its competitors, cancellation of orders prior to
customer deployment or during the warranty period, nonrenewal of service
agreements, product life cycles, software defects and other product quality
problems, changes in strategy, changes in key personnel, the extent of
international expansion, seasonal trends, the mix of distribution channels
through which the Company's products are sold, the mix of international and
domestic sales, changes in the level of operating expenses to support projected
growth, and general economic conditions. The Company anticipates that a
significant portion of its revenues will be derived from a limited number of
orders, and the timing of receipt and fulfillment of any such orders is expected
to cause material fluctuations in the Company's operating results, particularly
on a quarterly basis. As with many software companies, the Company anticipates
that it will make the major portion of each quarter's deliveries near the end of
each quarter and, as a result, short delays in delivery of products at the end
of a quarter could adversely affect operating results for that quarter. In
addition, the Company intends, in the near term, to increase significantly its
personnel, including its domestic and international direct sales force. The
timing of such expansion and the rate at which new sales people become
productive could also cause material fluctuations in the Company's quarterly
operating results.
Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as any indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
COMPETITION
The market for online interactive marketing and selling applications is new,
rapidly evolving, and intensely competitive. The Company expects competition to
persist and intensify in the future. The Company's current and potential
competitors include other vendors of application software directed at
interactive commerce, Web content developers engaged to develop custom software
or to integrate other application software into custom solutions, and companies
developing their own end-to-end solutions in-house.
The Company has experienced and expects to continue to experience increased
competition. The Company currently encounters direct competition from CONNECT,
Inc. ("Connect"), Netscape Communications Corporation ("Netscape"), and Open
Market Incorporated ("OMI"), among others. In addition, Microsoft Corporation
("Microsoft") has also announced its intention to offer Internet-based
electronic commerce software. Many of these competitors have longer operating
histories, and significantly greater financial, technical, marketing, and other
resources than the Company 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 greater name recognition and more
extensive customer bases that could be leveraged, thereby gaining market share
to the Company's detriment. Such competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies and
offer more attractive terms to purchasers than the Company. Moreover, certain of
the Company's current and potential competitors, such as Netscape and Microsoft,
are likely to bundle their products in a manner that may discourage users from
purchasing products offered by the Company. The Company has also experienced
competition from third-party developers, such as Web content developers, as well
as from in-house development efforts by potential customers or partners, both
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of which represent significant competition for the Company's products. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to enhance
their products. Accordingly, it is possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share. There
can be no assurance that the Company will be able to compete effectively with
current or future competitors or that the competitive pressures faced by the
Company will not have a material adverse effect on the Company's business,
financial condition, and operating results. See "Business -- Competition."
PRODUCT CONCENTRATION
To date, substantially all of the Company's revenues have been attributable
to sales of licenses of the BroadVision One-To-One application system and
related services. The Company currently expects the BroadVision One-To-One
application system and related services to account for most of its future
revenues. Accordingly, if any of the Company's customers is not able to
successfully develop and deploy an online marketplace using the BroadVision
One-To-One application system, the Company's reputation could be damaged, which
could have a material adverse effect on the Company's business, financial
condition, and operating results. In addition, factors adversely affecting the
pricing of or demand for the BroadVision One-To-One application system, such as
competition or technological change, could have a material adverse effect on the
Company's business, financial condition, and operating results. The Company's
future financial performance will depend, in significant part, on the successful
development, introduction, and customer acceptance of new and enhanced versions
of the BroadVision One-To-One application system and of new products the Company
develops. There can be no assurance that the Company will be successful in
upgrading and continuing to market the BroadVision One-To-One application system
or that the Company will successfully develop new products or that any new
products will achieve market acceptance. See "Business -- Products and Services"
and "Business -- Product Development."
LENGTHY SALES AND IMPLEMENTATION CYCLES
The license of the Company's software products is often an enterprise-wide
decision by prospective customers and can be expected to require the Company to
engage in a lengthy sales cycle to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
In addition, the implementation of the Company's products involves a significant
commitment of resources by customers or by the Company's Interactive Services
Group ("ISG") consultants over an extended period of time. As a result, the
Company's sales and customer implementation cycles are subject to a number of
significant delays over which the Company has little or no control. In many
cases, the Company expects to recognize a substantial portion of the revenue
related to the sale of BroadVision One-To-One upon deployment or production by
the customer of the system. As a result, delays in license transactions due to
lengthy sales cycles or delays in customer production or deployment of a system
could have a material adverse effect on the Company's business, financial
condition, and operating results and can be expected to cause the Company's
operating results to vary significantly from quarter to quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT DELAYS
The information services, software, and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and emerging
industry standards. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices can
render existing products and services obsolete and unmarketable. The Company's
future success will depend, in part, on its ability to develop leading
technologies, enhance its existing products and services, develop new products
and services that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
Company's only commercially available product, the BroadVision One-To-One
application system, was introduced in December 1995, and the Company expects, in
the future, to introduce enhanced versions of this product as well as other
products and services. The development of new products and services (such as the
Company's next two products in development, a taxonomy modeling and matching
application product and a consumer online service) or enhanced versions of
existing products and services (such as Version 2.0 of the BroadVision One-To-
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One application system), entails significant technical risks. There can be no
assurance that the Company will be successful in effectively using new
technologies, adapting its products to emerging industry standards, developing,
introducing, and marketing product and service enhancements, or new products and
services, or that it will not experience difficulties that could delay or
prevent the successful development, introduction, or marketing of these products
and services, or that its new product and service enhancements will adequately
meet the requirements of the marketplace and achieve market acceptance. If the
Company is unable, for technical or other reasons, to develop and introduce new
products and services or enhancements of existing products and services in a
timely manner in response to changing market conditions or customer
requirements, or if new products and services do not achieve market acceptance,
the Company's business, financial condition, and operating results will be
materially adversely affected. See "Business -- Technology" and "Business --
Product Development."
RISKS OF PRODUCT DEFECTS
Sophisticated software products, such as those of the Company, may contain
undetected errors or failures that become apparent when the products are
introduced or when the volume of services provided increases. There can be no
assurance that, despite testing by the Company and potential customers, errors
will not be found in the Company's products, resulting in loss of revenues,
delay in market acceptance, diversion of development resources, damage to the
Company's reputation, or increased service and warranty costs, which would have
a material adverse effect on the Company's business, financial condition, and
operating results. See "Business -- Product Development."
RISKS ASSOCIATED WITH ENCRYPTION TECHNOLOGY
A significant barrier to online commerce and communication is the secure
exchange of value and confidential information over public networks. The Company
relies on encryption and authentication technology, including public key
cryptography technology licensed from RSA Data Security, Inc. ("RSA"), to
provide the security and authentication necessary to effect the secure exchange
of value and confidential information. There can be no assurance that advances
in computer capabilities, new discoveries in the field of cryptography or other
events or developments will not result in a compromise or breach of the RSA or
other algorithms used by the Company to protect customer transaction data. If
any such compromise of the Company's security were to occur, it could have a
material adverse effect on the Company's business, financial condition, and
operating results. See "Business -- Technology."
RISKS ASSOCIATED WITH EXPANDING DISTRIBUTION
To date, the Company has sold its products through its direct sales force.
The Company's ability to achieve significant revenue growth in the future will
depend in large part on its success in recruiting and training sufficient direct
sales personnel and establishing and maintaining relationships with
distributors, resellers, systems integrators, and other third parties. Although
the Company is currently investing, and plans to continue to invest, significant
resources to expand its sales force and to develop distribution relationships
with third-party distributors and resellers, the Company may at times experience
difficulty in recruiting qualified sales personnel and in establishing necessary
third-party alliances. There can be no assurance that the Company will be able
to successfully expand its direct sales force or other distribution channels or
that any such expansion will result in an increase in revenues. Any failure by
the Company to expand its direct sales force or other distribution channels
would materially adversely affect the Company's business, financial condition,
and operating results. See "-- Dependence on Key Personnel," "Business --
Strategy" and "Business -- Sales and Marketing."
DEPENDENCE ON SYSTEMS INTEGRATORS
The Company's potential customers may rely on third-party systems
integrators to develop, deploy, and manage online marketplaces. If the Company
were unable to adequately train a sufficient number of systems integrators or
if, for any reason, a large number of such integrators were to adopt a different
product or technology instead of the BroadVision One-To-One application system,
the Company's business, financial condition, and operating results could be
materially and adversely affected.
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DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS
The Company's success and ability to compete are dependent to a significant
degree on its proprietary technology. The Company relies primarily on copyright,
trade secret, and trademark law to protect its technology. The Company has no
patents. The Company has applied for a United States patent with respect to
certain aspects of the BroadVision One-To-One application system, but there can
be no assurance that a patent will be granted pursuant to the application or
that, if granted, such patent would survive a legal challenge to its validity or
provide significant protection. Likewise, effective trademark protection may not
be available for the Company's marks. For example, the Company has applied to
register "BroadVision One-To-One" as a trademark with respect to the BroadVision
One-To-One application system, but there can be no assurance that the Company
will be able to secure trademark registration or other significant protection
for this product name. It is possible that competitors of the Company or others
will adopt product names similar to "One-To-One," thereby impeding the Company's
ability to build brand identity and possibly leading to customer confusion. The
source code for the Company's proprietary software is protected both as a trade
secret and as a copyrighted work. The Company's policy is to enter into
confidentiality and assignment agreements with its employees, consultants, and
vendors and generally to control access to and distribution of its software,
documentation, and other proprietary information. Notwithstanding these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's software or other proprietary information without
authorization or to develop similar software independently. Policing
unauthorized use of the Company's products is difficult, particularly because
the global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of other
countries may afford the Company little or no effective protection of its
intellectual property. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology or that agreements
entered into for that purpose will be enforceable. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation, whether successful or unsuccessful,
could result in substantial costs and diversions of resources, either of which
could have a material adverse effect on the Company's business, financial
condition, and operating results. See "Business -- Intellectual Property and
Other Proprietary Rights."
DEFERRED TAX ASSETS
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. The Company has provided a full
valuation allowance against its net deferred tax assets as it has determined
that it is more likely than not that the deferred tax assets will not be
realized. The Company's accounting for deferred taxes under Statement of
Financial Accounting Standards No. 109 involves the evaluation of a number of
factors concerning the realizability of the Company's deferred tax assets. To
support the Company's conclusion that a full valuation allowance was required,
management primarily considered such factors as the Company's history of
operating losses and expected near-term future losses, the nature of the
Company's deferred tax assets, and the lack of significant firm sales backlog.
Although management's operating plans assume taxable and operating income in
future periods, management's evaluation of all the available evidence in
assessing the realizability of the deferred tax assets indicates that such plans
were not considered sufficient to overcome the available negative evidence.
RISK OF INFRINGEMENT
The Company may, in the future, receive notices of claims of infringement of
other parties' trademark, copyright, and other proprietary rights. Although, to
date, the Company has not received any such notices, there can be no assurance
that claims for infringement or invalidity (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company. In particular, claims could be asserted against the Company for
violation of trademark, copyright, or other laws as a result of the use by the
Company, its customers, or other third parties of the Company's products to
transmit, disseminate, or display information over or on the Internet. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays, or require the Company to enter into royalty or licensing
agreements. There can be no assurance that such licenses
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would be available on reasonable terms, if at all, and the assertion or
prosecution of any such claims could have a material adverse effect on the
Company's business, financial condition, and operating results. See "Business --
Intellectual Property and Other Proprietary Rights."
DEPENDENCE ON CERTAIN LICENSES
The Company relies in part on certain technology which it licenses from
third parties, including relational database management systems ("RDBMSs") from
Oracle Corporation ("Oracle") and Sybase, Inc. ("Sybase"), object request broker
software from IONA, Ltd. ("IONA"), and other software which is integrated with
internally developed software and used in the Company's software to perform key
functions. In this regard, all of the Company's services incorporate data
encryption and authentication technology licensed from RSA. The Company is aware
of a dispute between Cylink Corporation ("Cylink") and RSA in which Cylink
alleges that license agreements between RSA and its customers, including the
Company, relating to certain RSA software conflict with rights held by Cylink.
RSA has advised its customers that the allegations of Cylink are unfounded. RSA
and Cylink have completed an arbitration proceeding of the dispute. RSA has
taken the position that it prevailed on all material issues, and that its
licenses, including the license to the Company, are valid and unaffected by the
arbitration decision. Cylink has taken the position that the arbitration
decision may require RSA licensees, including the Company, to obtain an
additional license of certain patents controlled by Cylink. RSA has maintained
that no such additional license is required and has instituted a lawsuit against
Cylink to bar Cylink from claiming otherwise. The Company is unable to ascertain
the validity of Cylink's allegations or whether or not the arbitration decision
may require the Company to obtain any additional license. In the Company's
license agreement with RSA, RSA has agreed to defend, indemnify, and hold the
Company harmless with respect to any claim by a third party that the licensed
software infringes any patent or other proprietary right. Although the Company's
license is fully paid, there can be no assurance that the outcome of the dispute
between RSA and Cylink will not lead to royalty obligations by the Company for
which RSA is unwilling or unable to indemnify the Company, or that the Company
would be able to obtain any additional license on commercially reasonable terms
or at all. There can also be no assurance that the Company's other third-party
technology licenses will continue to be available to the Company on commercially
reasonable terms, if at all. The loss or inability to maintain any of these
technology licenses could result in delays in introduction of the Company's
products and services until equivalent technology, if available, is identified,
licensed, and integrated, which could have a material adverse effect on the
Company's business, financial condition, and operating results. See "Business --
Intellectual Property and Other Proprietary Rights."
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees, most of whom have worked together for
only a short period of time. The Company is dependent on its ability to retain
and motivate highly qualified personnel, especially its management and highly
skilled development teams. The Company does not have "key person" life insurance
policies on any of its employees. The loss of the services of any of its key
employees, particularly its founder and Chief Executive Officer, Pehong Chen,
could have a material adverse effect on the Company's business, financial
condition, and operating results. The Company's future success also depends on
its continuing ability to identify, hire, train, and retain other highly
qualified technical and managerial personnel. Competition for such personnel is
intense. There can be no assurance that the Company will be able to attract,
assimilate, or retain qualified technical and managerial personnel in the
future, and the failure of the Company to do so would have a material adverse
effect on the Company's business, financial condition, and operating results.
See "Business -- Employees" and "Management."
GOVERNMENT REGULATION
There can be no assurance that a federal, state, or foreign agency will not
attempt to regulate the Company's activities. The Company anticipates that it
may be required to comply with additional regulations, if enacted by federal or
state authorities, as the market for online commerce evolves. The Company also
may be subject to foreign laws and state and foreign sales and use tax laws. If
enacted or deemed applicable to the Company, such laws, rules, or regulations
could be imposed on the Company's activities or its business, thereby
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rendering the Company's business or operations more costly or burdensome, less
efficient, or impossible, any of which could have a material adverse effect on
the Company's business, financial condition, and operating results.
Due to the increasing popularity of the Internet, it is possible that laws
and regulations may be enacted with respect to the Internet, covering issues
such as user privacy, pricing, content, and quality of products and services.
For example, because the Company's products involve the solicitation of personal
data regarding individual consumers, the Company's business could be adversely
affected by laws regulating the solicitation, collection, or processing of such
data. The Telecommunications Act of 1996, which was enacted in January 1996,
prohibits the transmission over the Internet of certain types of information and
content. The scope of the prohibition and liability associated with any
violation of this Act are currently unsettled. The imposition upon the Company
and other software and service providers of potential liability for information
carried on or disseminated through its application systems could require the
Company to implement measures to reduce its exposure to such liability, which
may require the expenditure of substantial resources, or to discontinue certain
services. The increased attention focused upon these liability issues as a
result of the Telecommunications Act could adversely affect the growth of
Internet and private network use. Any costs incurred by the Company as a result
of such liability or asserted liability could have a material adverse effect on
the Company's business, financial condition, and operating results. In addition,
the adoption of other laws or regulations may reduce the rate of growth of the
Internet, which could in turn decrease the demand for the Company's services and
increase the Company's cost of doing business, or could otherwise have a
material adverse effect on the Company's business, financial condition, and
operating results.
The Company's software utilizes encryption technology, the export of which
is regulated by the United States government. There can be no assurance that
export regulations, either in their current form or as may be subsequently
enacted, will not limit the Company's ability to distribute its software outside
the United States. Moreover, federal or state legislation or regulation may
further limit levels of encryption or authentication technology that the Company
is able to utilize in its software. While the Company takes precautions against
unlawful exportation of its software, the global nature of the Internet makes it
difficult to effectively control the distribution of software. Any revocation or
modification of the Company's export authority, unlawful exportation of the
Company's software, or adoption of new legislation or regulation relating to
exportation of software and encryption technology could have a material adverse
effect on the Company's business, financial condition, and operating results.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company currently anticipates that its available cash resources,
combined with the net proceeds of this offering, will be sufficient to meet its
presently anticipated working capital and capital expenditure requirements for
at least the next 12 months. However, the Company may need to raise additional
funds in order to support more rapid expansion, develop new or enhanced
services, respond to competitive pressures, acquire complementary businesses or
technologies, or respond to unanticipated requirements. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
the stockholders of the Company will be reduced, stockholders may experience
additional dilution, or such equity securities may have rights, preferences, or
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company, if at all. If adequate funds are not available
or are not available on acceptable terms, the Company may be unable to develop
or enhance its products, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements, which could have a material
adverse effect on the Company's business, financial condition, and operating
results. See "Use of Proceeds," "Dilution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
MANAGEMENT OF A CHANGING BUSINESS
The Company has experienced substantial change and expansion in its business
and operations since its inception in 1993 and expects to continue to experience
periods of rapid change. The Company's past expansion has placed, and any future
expansion would place, significant demands on the Company's administrative,
operational, financial, and other resources. The Company expects operating
expenses and staffing levels to
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increase substantially in the future. In particular, the Company intends to hire
a significant number of additional personnel in 1996 and later years.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to attract, assimilate, or retain additional highly
qualified personnel in the future. The Company also expects to expend resources
with respect to future expansion of its accounting and internal management
systems and the implementation of a variety of new systems and procedures. In
addition, the Company expects that future expansion will continue to challenge
the Company's ability to train, motivate, and manage its employees, and to
attract and retain qualified senior managers and technical persons, such as
programmers and software architects. If the Company's revenues do not increase
in proportion to its operating expenses, the Company's management systems do not
expand to meet increasing demands, the Company fails to attract, assimilate, and
retain qualified personnel, or the Company's management otherwise fails to
manage the Company's expansion effectively, there would be a material adverse
effect on the Company's business, financial condition, and operating results.
See "Business -- Employees" and "Management."
RISKS ASSOCIATED WITH INTERNATIONAL STRATEGY
A component of the Company's strategy is its planned expansion of its
international activities. To date, the Company has limited experience in
developing localized versions of its products and in marketing and distributing
its products internationally. There can be no assurance that the Company will be
able to successfully market, sell, and deliver its products in international
markets. In addition, there are certain risks inherent in doing business in
international markets, such as unexpected changes in regulatory requirements,
export controls relating to encryption technology and other export restrictions,
tariffs and other trade barriers, difficulties in staffing and managing foreign
operations, political instability, fluctuations in currency exchange rates,
reduced protection for intellectual property rights in some countries, seasonal
reductions in business activity during the summer months in Europe and certain
other parts of the world, and potentially adverse tax consequences, any of which
could adversely impact the success of the Company's international operations.
There can be no assurance that one or more of such factors will not have a
material adverse effect on the Company's future international operations, if
any, and, consequently, on the Company's business, financial condition, and
operating results. See "Business -- Sales and Marketing."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The Company has not designated any specific use for the net proceeds from
the sale of Common Stock described in this Prospectus. Rather, the Company
expects to use the net proceeds for general corporate purposes, including
working capital. Consequently, the Board of Directors and management of the
Company will have significant flexibility in applying the net proceeds of this
offering. See "Use of Proceeds."
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, the Company's present directors and
executive officers and their respective affiliates will beneficially own
approximately 71.6% of the outstanding Common Stock. As a result, these
stockholders, if they act together, will be able to exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying, preventing, or
deterring a change in control of the Company. See "Principal Stockholders" and
"Description of Capital Stock -- Antitakeover Effects of Provisions of Charter
Documents and Delaware Law."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after the offering. The initial
offering price will be determined by negotiation among the Company and the
Underwriters based upon several factors. For a discussion of the factors to be
taken into account in determining the initial public offering price, see
"Underwriting." The market price of the Company's Common Stock is likely to be
highly volatile and could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new software or services by the Company or its competitors,
changes in financial estimates by securities analysts, or other events or
factors, many of which are beyond the Company's control. In addition, the stock
market has experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that
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often have been unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock. In the past, following periods of volatility in the market price
for a company's securities, securities class action litigation has often been
instituted. Such litigation could result in substantial costs and a diversion of
management attention and resources, which could have a material adverse effect
on the Company's business, financial condition, and operating results.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock. Upon completion of this offering, the Company will have outstanding an
aggregate of 20,599,484 shares of Common Stock, based upon the number of shares
outstanding as of April 16, 1996. Of these shares, all of the shares sold in
this offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless such shares are purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"). The
remaining 16,599,484 shares of Common Stock held by existing stockholders (the
"Restricted Shares") are "restricted securities" as that term is defined in Rule
144. Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701
promulgated under the Securities Act. As a result of contractual restrictions
and the provisions of Rule 144 and Rule 701, additional shares will be available
for sale in the public market as follows: (i) no Restricted Shares will be
eligible for immediate sale on the date of this Prospectus; (ii) 12,578,546
Restricted Shares will be eligible for sale upon expiration of the lock-up
agreements 180 days after the date of this Prospectus; and (iii) the remainder
of the Restricted Shares will be eligible for sale from time to time thereafter
upon expiration of their respective two-year holding periods. Pursuant to an
agreement between the Company and the holders (or their permitted transferees)
of approximately 14,934,975 shares of Common Stock, these holders are entitled
to certain rights with respect to the registration of such shares under the
Securities Act.
Prior to this offering, there has been no public market for the Common Stock
of the Company, and the effect, if any, that the sale or availability for sale
of shares of additional Common Stock will have on the trading price of the
Common Stock cannot be predicted. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the trading price of the Common Stock and could impair
the Company's future ability to raise capital through an offering of its equity
securities. See "Shares Eligible for Future Sale" and "Description of Capital
Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur immediate and
substantial dilution. To the extent outstanding options or warrants to purchase
the Common Stock are exercised, there will be further dilution. See "Dilution."
EFFECTS OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate") authorizes the Board of Directors to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, and privileges, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
Restated Certificate and Amended and Restated Bylaws (the "Restated Bylaws"),
among other things, require that stockholder actions occur at duly called
meetings of the stockholders, do not permit cumulative voting in the election of
directors, and require advance notice of stockholder proposals and director
nominations. Certain provisions contained in the Company's charter documents and
certain applicable provisions of Delaware law could serve to depress the
Company's stock price or discourage a hostile bid in which stockholders could
receive a premium for their shares. In addition, these provisions could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company, or delay, prevent, or deter a
merger, acquisition, tender offer in which the Company's stockholders could
receive a premium for their shares, or a proxy contest for control of the
Company or other change in the Company's management. See "Management" and
"Description of Capital Stock."
15
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of 4,000,000 shares of Common Stock offered
hereby, at an assumed initial public offering price of $9.00 per share, are
estimated to be $32,530,000 ($37,552,000 assuming the Underwriters'
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company.
The principal purposes of this offering are to obtain additional capital, to
create a public market for the Company's Common Stock, and to facilitate future
access by the Company to the public equity markets. The Company anticipates that
it will use the net proceeds for working capital and general corporate purposes.
Although the Company may use a portion of the net proceeds to license or acquire
new products or technologies or to acquire or invest in businesses complementary
to the Company's current business, the Company currently has no specific
agreements or commitments in this regard and no such agreements or commitments
are currently being negotiated. The Board of Directors and management of the
Company will have significant flexibility in applying the net proceeds of this
offering. The amounts and timing of the Company's actual expenditures will
depend upon numerous factors, including the status of the Company's product
development efforts, competition, and marketing and sales activities. Pending
such uses, the Company intends to invest the net proceeds of this offering in
short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends since its inception.
The Company currently intends to retain any future earnings to finance the
growth and development of its business and does not intend to pay any cash
dividends in the foreseeable future. Future dividends, if any, will be
determined by the Board of Directors.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on an actual basis, (ii) on a pro forma basis to reflect the sale
of 634,375 shares in the Series E Financing and the automatic conversion of all
outstanding shares of the Preferred Stock into 9,237,975 shares of Common Stock,
which will occur automatically upon the completion of this offering, and (iii)
as adjusted to reflect the effectiveness of the Restated Certificate and to give
effect to the sale of the 4,000,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $9.00 per share and the receipt of the
estimated net proceeds therefrom. This table should be read in conjunction with
the Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -------------
<S> <C> <C> <C>
Long-term debt and non-current portion of capital lease obligations......... $ 569 $ 569 $ 569
--------- ----------- -------------
Stockholders' equity:
Preferred Stock, issuable in series, $0.0001 par value; 10,000,000 shares
authorized, 8,603,600 shares outstanding, actual; 15,000,000 shares
authorized, no shares outstanding, pro forma; 5,000,000 shares
authorized, no shares outstanding, as adjusted (1)....................... 1 -- --
Common Stock, $0.0001 par value, 22,000,000 shares authorized, 7,344,042
shares outstanding, actual; 30,000,000 shares authorized, 16,582,017
shares outstanding, pro forma; and 50,000,000 shares authorized,
20,582,017 shares outstanding, as adjusted(1)............................ 1 2 2
Additional paid-in capital................................................ 13,088 18,143 50,673
Deferred compensation related to grant of stock options................... (2,436) (2,436) (2,436)
Deficit accumulated during the development stage.......................... (7,822) (7,822) (7,822)
--------- ----------- -------------
Total stockholders' equity.............................................. 2,832 7,887 40,417
--------- ----------- -------------
Total capitalization.................................................. $ 3,401 $ 8,456 $ 40,986
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
- ------------
(1) Excludes, as of April 16, 1996, shares of Common Stock reserved for issuance
upon exercise of (i) outstanding stock options to acquire 2,020,558 shares
of Common Stock with a weighted average exercise price of $0.86 per share,
(ii) an outstanding warrant to acquire 33,750 shares of Series C Preferred
Stock with an exercise price of $2.00 per share, which warrant will convert
into a warrant to purchase Common Stock upon the completion of this
offering, and (iii) an outstanding option to acquire 500,000 shares of
Series D Preferred Stock at an exercise price of $4.00 per share, which
option will convert into an option to purchase shares of Common Stock upon
the completion of this offering. See "Management -- Employee Benefit Plans"
and "Description of Capital Stock."
17
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was approximately $7,887,000, or $0.48 per share of Common Stock. Pro forma net
tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the pro forma number of
shares of Common Stock outstanding, after giving effect to the Series E
Financing and the conversion of all outstanding shares of Preferred Stock into
Common Stock upon the completion of this offering. Pro forma net tangible book
value dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock in the offering made hereby and the
pro forma net tangible book value per share of Common Stock immediately after
the completion of this offering. After giving effect to the sale by the Company
of 4,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $9.00 per share, after deducting underwriting discounts and
commissions and estimated offering expenses, the pro forma net tangible book
value at March 31, 1996 would have been $40,417,000, or approximately $1.96 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.48 per share to existing stockholders and an immediate dilution of
$7.04 per share to new investors purchasing Common Stock in this offering, as
illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price................................. $ 9.00
Pro forma net tangible book value at March 31, 1996................. $ 0.48
Increase attributable to new investors.............................. 1.48
---------
Pro forma net tangible book value after this offering................. 1.96
---------
Dilution to new investors........................................... $ 7.04
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors, before deducting underwriting
discounts and commissions and estimated offering expenses, at an assumed initial
public offering price of $9.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 16,582,017 80.6% $ 15,568,000 30.2% $ 0.94
New investors....................... 4,000,000 19.4 36,000,000 69.8 9.00
------------ ----- ------------- -----
Total............................. 20,582,017 100.0% $ 51,568,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
The calculation of pro forma net tangible book value and the other
computations above assume no exercise of outstanding stock options or warrants.
As of April 16, 1996, 2,020,558 shares of Common Stock were subject to
outstanding options with a weighted average exercise price of $0.86 per share,
and 33,750 shares of Series C Preferred Stock were subject to an outstanding
warrant with an exercise price of $2.00 per share. In addition, as of April 16,
1996, an option was outstanding to purchase a total of 500,000 shares of Series
D Preferred Stock with an exercise price of $4.00 per share. If all options and
warrants outstanding at April 16, 1996 were exercised for cash, the pro forma
net tangible book value per share immediately following the completion of this
offering would be $1.91 per share. This represents an immediate dilution in pro
forma net tangible book value of $7.09 per share to new investors. See
"Management -- Employee Benefit Plans" and Note 4 of Notes to Financial
Statements. See "Management -- Employee Benefit Plans" and Note 4 of Notes to
Financial Statements.
18
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 31, 1994 and
1995, and for the period from inception to December 31, 1993 and the years ended
December 31, 1994 and 1995, are derived from the Company's audited financial
statements which are included elsewhere in this Prospectus. Balance sheet data
as of December 31, 1993 are derived from the Company's audited financial
statements not included in this Prospectus. The financial data as of March 31,
1996 and for the three months ended March 31, 1995 and 1996 are derived from the
Company's unaudited financial statements included elsewhere in this Prospectus.
The unaudited financial statements have been prepared on a basis consistent with
the Company's audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, that management believes
necessary for a fair presentation of the Company's financial position and
results of operations for these periods. The selected financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Financial Statements of
the Company and Notes thereto, and other financial information included
elsewhere in this Prospectus. Historical results are not necessarily indicative
of the results to be expected in the future.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 13, 1993 YEARS ENDED THREE MONTHS CUMULATIVE
(INCEPTION) DECEMBER 31, ENDED MARCH 31, PERIOD FROM
TO DECEMBER ---------------------- ---------------------- INCEPTION TO
31, 1993 1994 1995 1995 1996 MARCH 31, 1996
------------- ---------- ---------- ---------- ---------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............... $ -- $ -- $ -- $ -- $ 1,099 $ 1,099
Services........................ -- -- 540 -- 299 839
------------- ---------- ---------- ---------- ---------- -------
Total revenues................ -- -- 540 -- 1,398 1,938
Operating expenses:
Cost of software licenses....... -- -- -- -- 164 164
Cost of services................ -- -- 23 -- 33 56
Research and development........ 12 748 2,229 371 797 3,786
Selling, general, and
administrative................. 131 1,023 2,766 500 2,109 6,029
------------- ---------- ---------- ---------- ---------- -------
Total operating expenses...... 143 1,771 5,018 871 3,103 10,035
------------- ---------- ---------- ---------- ---------- -------
Operating loss.................... (143 ) (1,771) (4,478) (871) (1,705) (8,097 )
Other income (expense), net....... 7 101 160 25 7 275
------------- ---------- ---------- ---------- ---------- -------
Net loss.......................... $ (136 ) $ (1,670) $ (4,318) $ (846) $ (1,698) $ (7,822 )
------------- ---------- ---------- ---------- ---------- -------
------------- ---------- ---------- ---------- ---------- -------
Pro forma net loss per share(1)... $ (0.23) $ (0.04) $ (0.09)
---------- ---------- ----------
---------- ---------- ----------
Shares used in computing pro forma
net loss per share(1)............ 18,543 18,888 18,576
---------- ---------- ----------
---------- ---------- ----------
<CAPTION>
DECEMBER 31,
------------------------------------- MARCH 31,
1993 1994 1995 1996
------------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 1,503 $ 808 $ 4,311 $ 2,663
Working capital......................................................... 2,358 2,208 3,916 2,073
Total assets............................................................ 2,634 2,640 5,857 6,106
Deficit accumulated during the development stage........................ (136) (1,806) (6,124) (7,822)
Total stockholders' equity.............................................. 2,478 2,526 4,254 2,832
</TABLE>
- ------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
calculation of pro forma net loss per share.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus. This
discussion contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including, but not limited to, those discussed in "Risk Factors" and elsewhere
in this Prospectus.
OVERVIEW
BroadVision provides an integrated software application system, BroadVision
One-To-One, that enables businesses to create applications for interactive
marketing and selling services on the Web. These applications are designed to
allow non-technical business managers to tailor Web site content to the needs
and interests of individual Web site visitors, personalizing each visit on a
real-time basis. From its inception in May 1993 to November 1995, the Company's
operating activities related primarily to designing and developing products, and
to building engineering, sales, marketing, and professional services
organizations. In late December 1995, the Company introduced its only
commercially available product, BroadVision One-To-One.
The Company's revenues are derived from software license fees and fees for
its services. The Company generally recognizes license fees when the software
has been delivered, the customer acknowledges an unconditional obligation to
pay, and the Company has no significant obligations remaining. Professional
service revenues generally are recognized as services are performed. Maintenance
revenues are recognized ratably over the term of the support period, which is
typically one year. See Note 2 of Notes to Financial Statements.
Since its inception, the Company has incurred substantial costs to research,
develop, and enhance its technology and products, to recruit and train a
marketing and sales group, and to establish an administrative organization. As a
result, the Company has incurred net losses in each fiscal quarter since
inception and, as of March 31, 1996, had an accumulated deficit of $7.8 million.
The Company anticipates that its operating expenses will increase substantially
in the foreseeable future as it continues the development of its technology,
increases its sales and marketing activities, and creates and expands its
distribution channels. Accordingly, the Company expects to incur additional
losses for the foreseeable future. In addition, the Company's limited operating
history makes the prediction of future results of operations difficult and,
accordingly, there can be no assurance that the Company will achieve or sustain
revenue growth or profitability.
To date, only 10 companies have licensed the BroadVision One-To-One
application system and no application has been commercially deployed using
BroadVision One-To-One. Accordingly, the Company has only a limited operating
history, and its prospects must be evaluated in light of the risks and
uncertainties frequently encountered by a company in its early stage of
development. The new and evolving markets in which the Company operates make
these risks and uncertainties particularly pronounced. To address these risks,
the Company must, among other things, successfully implement its marketing
strategy, respond to competitive developments, continue to develop and upgrade
its products and technologies more rapidly than its competitors, and
commercialize its products and services incorporating these enhanced
technologies. There can be no assurance that the Company will succeed in
addressing any or all of these risks.
The Company had 73 full-time employees at March 31, 1996, up from 46 and 14
at December 31, 1995 and 1994, respectively. The Company's ability to grow will
depend, in part, on its success in adding a substantial number of direct sales
and support personnel in 1996 and future periods. Competition for such personnel
is intense, and there can be no assurance that the Company can retain its
existing personnel or that it will be able to attract, assimilate, or retain
additional highly qualified personnel in the future. The Company also expects to
expend resources with respect to future expansion of its accounting and internal
management systems and the implementation of a variety of new systems and
procedures. In addition, the Company expects that future expansion will continue
to challenge the Company's ability to train, motivate, and manage its employees,
and to attract and retain qualified senior managers and technical persons, such
as programmers and software architects. If the Company's revenues do not
increase in proportion to its operating expenses, the Company's management
20
<PAGE>
systems do not expand to meet increasing demands, the Company fails to attract,
assimilate, and retain qualified personnel, or the Company's management
otherwise fails to manage the Company's expansion effectively, there would be a
material adverse effect on the Company's business, financial condition, and
operating results.
RESULTS OF OPERATIONS
Amounts from inception (May 13, 1993) to December 31, 1993 (the "1993
Period") are not comparable to those for the years ended December 31, 1994 and
1995 due to the different duration of the periods and the acceleration of the
Company's activities and related expenses throughout the periods.
REVENUES
SOFTWARE LICENSES. The Company's products were first commercially available
in late December 1995. The Company recognized its first license revenues,
totaling $1.1 million from six customers, during the three months ended March
31, 1996. Two customers accounted for $514,000 and $175,000, respectively, of
license revenues. Export license revenues, primarily to Asia, were $535,000 or
49% of total license revenues for the quarter. The Company derives license
revenues from the sale of three separate but related products: the BroadVision
One-To-One Development System, used by developers as a platform for developing
interactive marketing and selling applications; the BroadVision One-To-One
Deployment System, the engine for operating such applications; and the Dynamic
Command Center ("DCC"), a Windows 95-based product enabling business managers to
dynamically control business rules, such as pricing, and to obtain information
on the status of the application. The Development System and the DCC are
generally licensed on a per-seat basis, while the Deployment System is generally
licensed based on application size, consisting of two components: the number of
profiled users tracked by the application and the number of services, or content
providers, sharing the application.
SERVICES. Service revenues consist primarily of consulting and, to a lesser
extent, post-contract support and training service. The Company recognized a
total of $540,000 in consulting revenues in the year ended December 31, 1995,
with 92.6% of that total derived from a single contract development project. In
the three months ended March 31, 1996, service revenues were $299,000,
consisting primarily of $257,000 in professional service revenues related to the
design and implementation of applications based on the BroadVision One-To-One
application system, and $42,000 in maintenance revenues. To the extent that the
Company's strategy of developing strategic alliances with third parties such as
systems integrators is successful, professional service revenues as a percentage
of total revenues may decrease. However, as the size of the Company's installed
license base increases relative to new license revenues in any given period,
post-contract support revenues as a percentage of total revenues may increase.
Of the Company's total revenues for the three months ended March 31, 1996,
revenues from customers in North America accounted for 53.3% and revenues from
customers in the Asia/Pacific and European regions accounted for 46.7%. The
Company expects that international revenues will continue to account for a
significant portion of its total revenues and expects to commit significant
management time and financial resources to developing direct and indirect
international sales and support channels. There can be no assurance, however,
that the Company will be able to maintain or increase international market
demand for the BroadVision One-To-One application system. Furthermore, four
customers accounted for 83.6% of the Company's total revenues for the three
months ended March 31, 1996; thus, there can be no assurance that the Company's
revenue mix to date provides any indication of the Company's future revenue mix.
OPERATING EXPENSES
The Company's operating expenses have increased substantially since
inception. The Company believes that continued expansion of its operations is
essential to achieving its objectives and, therefore, intends to continue to
increase expenditures in all operating areas.
COST OF SOFTWARE LICENSES. Cost of software licenses includes the costs of
royalties payable to third parties for software that is embedded in, or bundled
together or sold with, the Company's products, product media and duplication,
and manuals. The amount of such royalties payable is generally related to sales
volume to the
21
<PAGE>
Company's customers. Cost of software licenses was $164,000 in the three months
ended March 31, 1996, or 14.9% of the related license revenues. There was no
cost of software licenses prior to the three months ended March 31, 1996.
COST OF SERVICES. Cost of services consists primarily of employee-related
costs and fees for third-party consultants incurred in providing consulting,
post-contract support, and training services. Cost of services were $23,000, or
4.3% of the related service revenues, in the year ended December 31, 1995 and
$33,000, or 11.0% of the related service revenues, in the three months ended
March 31, 1996. Cost of services as a percentage of service revenues can be
expected to vary significantly from period to period due to the mix of services
provided by the Company and the resources used to provide these services. The
Company does not expect to sustain the high rate of margins earned to date on
service revenues.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and other employee-related costs and consulting fees
related to the development of the Company's products. Research and development
expenses increased from $12,000 in the 1993 Period to $748,000 in the year ended
December 31, 1994 and to $2.2 million in the year ended December 31, 1995. These
expenses increased from $371,000 in the three months ended March 31, 1995 to
$797,000 in three months ended March 31, 1996. These amounts reflect significant
headcount increases in each of the periods. The Company anticipates that
research and development expenses will continue to increase in absolute dollars
for the remainder of 1996 and for 1997 and are expected to exceed $1 million in
each of the next four quarters. All expenditures related to research and
development have been expensed as incurred and, therefore, the cost of license
revenues includes no amortization of capitalized software development costs. See
Note 2 of Notes to Financial Statements.
SELLING, GENERAL, AND ADMINISTRATIVE. Selling, general, and administrative
expenses consist primarily of salaries and other employee-related costs,
commissions and other incentive compensation, travel and entertainment,
expenditures for marketing programs, such as collateral materials, trade shows,
public relations, and creative services, and fees for professional services.
Selling, general, and administrative expenses increased from $131,000 in the
1993 Period to $1.0 million in the year ended December 31, 1994 and to $2.8
million in the year ended December 31, 1995. These expenses increased from
$500,000 in the three months ended March 31, 1995 to $2.1 million in the three
months ended March 31, 1996. The Company expects to continue to expand its
direct sales and marketing efforts, add administrative staff to support expanded
operations, relocate to new facilities, and incur additional costs related to
being a public company and, therefore, expects selling, general, and
administrative expenses to increase significantly in absolute dollars.
The Company has recorded deferred compensation and compensation expense for
the difference between the exercise price and the deemed fair value of the
Company's Common Stock with respect to 1,794,000 shares issuable upon exercise
of options granted in December 1995 and the first quarter of 1996. These amounts
are initially recorded as deferred compensation and will be amortized to
selling, general, and administrative expense over the vesting periods of the
options, generally 60 months. Deferred compensation amortized to expense was
$100,000 for the year ended December 31, 1995 and $110,000 for the three months
ended March 31, 1996. The amortization of deferred compensation will have an
adverse effect on the Company's reported results of operations through the
second quarter of 2001. See Note 4 of Notes to Financial Statements.
INCOME TAXES
At March 31, 1996, the Company had federal net operating loss carryforwards
of approximately $5.6 million. Utilization of the carryforwards may be subject
to annual limitation due to changes in the Company's ownership resulting from
the Company's Preferred Stock financings and this offering. A valuation
allowance has been recorded for the entire deferred tax asset as a result of
uncertainties regarding the realization of the asset due to the lack of earnings
history of the Company. See Note 7 of Notes to Financial Statements.
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company has provided a full valuation
allowance against its net deferred tax assets as it has determined that it is
more likely than not that the deferred tax assets will not be realized. The
Company's accounting for deferred taxes under Statement of Financial Accounting
Standards
22
<PAGE>
No. 109 involves the evaluation of a number of factors concerning the
realizability of the Company's deferred tax assets. To support the Company's
conclusion that a full valuation allowance was required, management primarily
considered such factors as the Company's history of operating losses and
expected near-term future losses, the nature of the Company's deferred tax
assets, and the lack of significant firm sales backlog. Although management's
operating plans assume taxable and operating income in future periods,
management's evaluation of all the available evidence in assessing the
realizability of the deferred tax assets indicates that such plans were not
considered sufficient to overcome the available negative evidence.
FACTORS AFFECTING OPERATING RESULTS
As a result of the Company's limited operating history, the Company does not
have meaningful historical financial data for quarterly periods on which to base
planned operating expenses. The Company's expense levels are based in part on
its product development requirements as well as its expectations as to future
revenues. The Company anticipates that its operating expenses will increase
substantially for the foreseeable future as the Company continues to develop and
market its initial products, increases its sales and marketing activities,
creates and expands the distribution channels for its products, and broadens its
customer support capabilities. The inability of the Company to release its
products in a timely manner or any material shortfall in demand for the
Company's products in relation to the Company's expectations would have a
material adverse effect on the Company's business, financial condition, and
operating results.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors including, among
others, the timing of introductions or enhancements of products and services by
the Company or its competitors, the length of the Company's sales cycle, market
acceptance of new products, the pace of development of the market for online
commerce, the mix of the Company's products sold, the size and timing of
significant orders and the timing of customer production or deployment, demand
for the Company's products, changes in pricing policies by the Company or its
competitors, changes in the Company's sales incentive plans, budgeting cycles of
its customers, customer order deferrals in anticipation of new products or
enhancements by the Company or its competitors, cancellation of orders prior to
customer deployment or during the warranty period, nonrenewal of service
agreements, product life cycles, software defects and other product quality
problems, changes in strategy, changes in key personnel, the extent of
international expansion, seasonal trends, the mix of distribution channels
through which the Company's products are sold, the mix of international and
domestic sales, changes in the level of operating expenses to support projected
growth, and general economic conditions. The Company anticipates that a
significant portion of its revenues will be derived from a limited number of
orders, and the timing of receipt and fulfillment of any such orders is expected
to cause material fluctuations in the Company's operating results, particularly
on a quarterly basis. As with many software companies, the Company anticipates
that it will make the major portion of each quarter's deliveries near the end of
each quarter and, as a result, short delays in delivery of products at the end
of a quarter could adversely affect operating results for that quarter. In
addition, the Company intends, in the near term, to increase significantly its
personnel, including its domestic and international direct sales force. The
timing of such expansion and the rate at which new sales people become
productive could also cause material fluctuations in the Company's quarterly
operating results.
Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as any indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through private placements of Common and Preferred Stock, which have provided
net proceeds totaling $10.4 million through March 31, 1996 and an additional
$5.1 million in April 1996.
The Company's operating activities used cash of $1.6 million and $3.7
million in the years ended December 31, 1994 and 1995, respectively. Such
activities used cash of $767,000 in the three months ended March 31,
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<PAGE>
1995 compared to $1.5 million in the three months ended March 31, 1996. The
increases in cash used by operations are primarily attributable to higher
operating expenses and an increase in accounts receivable at March 31, 1996
compared to prior periods.
Expenditures for property and equipment, including those subsequently
financed under capitalized equipment leases, were $113,000 in the 1993 Period,
$282,000 in year ended December 31, 1994, and $679,000 in year ended December
31, 1995, and $88,000 in the three months ended March 31, 1995 compared to
$499,000 in the three months ended March 31, 1996. The increases from period to
period are primarily due to the acquisition of property and equipment, primarily
computer hardware and software, for the Company's growing employee base, as well
as for the Company's management information and communications systems. The
Company anticipates significant additional capital expenditures for the balance
of 1996 and thereafter. The Company currently has no significant capital
commitments other than commitments under equipment and facilities leases.
The Company anticipates that its available cash resources, combined with the
net proceeds of this offering, will be sufficient to meet its presently
anticipated working capital and capital expenditure requirements for at least
the next 12 months. However, the Company may need to raise additional funds in
order to support more rapid expansion, develop new or enhanced services, respond
to competitive pressures, acquire complementary businesses or technologies, or
respond to unanticipated requirements. The Company may seek to raise additional
funds through private or public sales of securities, strategic relationships,
bank or lease financings, or otherwise. If additional funds are raised through
the issuance of equity securities, the percentage ownership of the stockholders
of the Company will be reduced, stockholders may experience additional dilution,
or such equity securities may have rights, preferences, or privileges senior to
those of the holders of the Company's Common Stock. There can be no assurance
that additional financing will be available when needed on terms favorable to
the Company, if at all. If adequate funds are not available or are not available
on acceptable terms, the Company may be unable to develop or enhance its
products, take advantage of future opportunities, or respond to competitive
pressures or unanticipated requirements, which could have a material adverse
effect on the Company's business, financial condition, and operating results.
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BUSINESS
The following discussion of the Company's business contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
could 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
BroadVision provides an integrated software application system, BroadVision
One-To-One, that enables businesses to create applications for interactive
marketing and selling services on the Web. These applications are designed to
allow non-technical business managers to tailor Web site content to the needs
and interests of individual Web site visitors, personalizing each visit on a
real-time basis. The BroadVision One-To-One application system and related
vertical application solutions and services are targeted at businesses
developing Web sites for marketing and selling to consumers and business
customers, and as internal resources for employees. The Company's customers use
BroadVision One-To-One to develop Web sites that engage visitors and encourage
return visits through personalized interactions, capture marketing information
from volunteered data and observed behavior, and generate revenues from
electronic commerce activities and point-cast advertising. BroadVision
One-To-One provides these software capabilities in an architecture that supports
the full one-to-one marketing and selling life cycle. The Company believes that
these capabilities are needed by business managers and Web site application
developers to take full advantage of the potential of the Internet as a
marketplace for conducting electronic commerce and for building long-term
relationships with customers.
BACKGROUND
TRENDS IN MARKETING AND SELLING
To prevail in the intensely competitive global marketplace, business
managers must continually devise new strategies to market, sell, and distribute
their products and services. From the 1950s to the 1980s, leading businesses in
North America, Europe, and Asia advanced the sciences of mass production, mass
communication, and mass distribution to establish world markets for their
products and services. During the 1980s, these mass marketers began using new
technologies and analytical techniques to better segment and define targeted
markets in order to reach customer groups most likely to buy their products.
These new approaches helped marketers respond to increasing competition and
customer demands for improved quality, service, and product choice. The trend
toward greater specialization has continued to increase as many marketers have
used targeted marketing tools and new delivery media, such as direct mail and
telemarketing, to reach more precisely targeted market segments.
In the latter half of the 1990s, many marketing executives in both
business-to-consumer and business-to-business industries have turned their
attention to the ultimate target market segment: the market of one. In their
1993 book, THE ONE-TO-ONE FUTURE, marketing specialists Don Peppers and Martha
Rogers (members of the Company's BroadVision Advisory Council ("BVAC") and
strategic partners of the Company) describe this trend as "one-to-one marketing"
and advocate the following:
THE OLD PARADIGM, A SYSTEM OF MASS PRODUCTION, MASS MEDIA, AND MASS
MARKETING, IS BEING REPLACED BY A TOTALLY NEW PARADIGM, A ONE-TO-ONE
ECONOMIC SYSTEM. THE 1:1 FUTURE WILL BE CHARACTERIZED BY CUSTOMIZED
PRODUCTION, INDIVIDUALLY ADDRESSABLE MEDIA, AND 1:1 MARKETING, TOTALLY
CHANGING THE RULES OF BUSINESS COMPETITION AND GROWTH. INSTEAD OF MARKET
SHARE, THE GOAL OF MOST BUSINESS COMPETITION WILL BE SHARE OF CUSTOMER
-- ONE CUSTOMER AT A TIME.
One-to-one marketing and selling involves a systematic, interactive approach
to developing and managing a detailed knowledge base that integrates individual
customers' product and business requirements, personal preferences, and purchase
histories with traditional demographic statistics. This information provides the
foundation for businesses to serve customers in the form of individually
tailored products, services, information, incentives, and transactions. By
focusing on individual customers and one-to-one marketing, business managers can
develop productive relationships with their customers that maximize customer
satisfaction, develop customer loyalty, and contain the high costs associated
with new customer acquisition.
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MARKETING AND SELLING ON THE INTERNET
With the emergence of the Internet's World Wide Web as a globally
accessible, interactive, and individually addressable communications and
computing platform, businesses have the opportunity to implement one-to-one
marketing and selling on a mass basis. The proliferation of inexpensive,
easy-to-use Web browsers and affordable Internet access services has made the
Internet easy to navigate, accessible to millions of homes and businesses, and
readily adaptable to a broad range of business, entertainment, education,
commerce, and marketing applications. New technologies, such as Java from Sun
Microsystems, Inc. ("Sun") and ActiveX from Microsoft, are facilitating the
delivery of dynamic, interactive content for the Web and accelerating adaptation
of the Internet as a mainstream business and personal computing platform.
International Data Corporation has estimated that the number of individuals
worldwide with access to the Internet will reach approximately 200 million by
the end of 1999, of whom 125 million are expected to be accessing the Web. In
addition, businesses have recently begun to utilize the Internet to create
internal enterprise networking environments, called "intranets." These networks
are enabling businesses to create Web sites that serve as internal resources by
providing interactive services directly to employees. Forrester Research, Inc.
estimates that the combined Internet and intranet worldwide software market will
increase from $127 million in 1995 to $8.5 billion in 1999.
Increasingly, businesses are developing and maintaining Web sites --
Internet front offices and store fronts where visitors can learn, discover, and
purchase from the business interactively. As Internet use has grown, industry
experts have described Web sites as ideal places to develop individual customer
relationships. Whether a Web site is designed primarily for delivering content,
promoting a brand, or conducting transactions, it offers businesses an
opportunity to extend front office services directly into the homes and business
of customers and to initiate and maintain an ongoing relationship online. By
recognizing the relationship-building potential of the Web -- in particular, its
ability to interactively capture Web site visitor profiles, observations, and
feedback, and to dynamically micro-target useful information to visitors based
on this data -- business managers can utilize advanced Internet technologies to
engage in personalized dialogues with millions of customers on a one-to-one
basis.
THE BUSINESS CHALLENGE ON THE WEB
While the Internet is widely predicted to become a global platform for
providing and accessing information, there remain significant challenges to
doing business on the Web. The Internet is characterized by fluid and dynamic
content, where information is continually being updated and enhanced. Web site
visitors perceive the value of Web sites to be directly correlated to the
frequency of content updates and the dynamic behavior of the site. Creating the
best Web sites generally requires sophisticated creative and technical
expertise. Although the market has been flooded with numerous inexpensive tools
for building, updating, and downloading Web sites, many of the companies
producing and using these tools have failed to take full advantage of the
Internet's dynamic one-to-one relationship potential.
The majority of Web sites today simply present text and graphics
electronically in a static format, much like a product brochure. These
"brochureware" sites may use new Web publishing tools and multimedia techniques
to dress up their static content, but few have the interactive capability to
capture visitor profiles, target personalized interactions, remember information
from one visit to the next, or enable business managers to manage the site on a
real-time basis. Providing these additional services is a valuable next step for
companies that plan to maximize the potential of the Web for interactive
marketing and selling.
Even the small number of Web sites that have moved beyond brochureware to
provide electronic commerce and shopping have failed to capitalize fully on the
Internet's potential for building one-to-one relationships. Sites that do
support online ordering and payment often fail to satisfy customer expectations,
providing commercial experiences that are less enjoyable and cost-effective than
traditional alternatives. Most lack any form of real-time personalization and
cannot dynamically target information to Web site visitors' preferences and past
histories. Others lack integration with mainstream business systems for
supporting visitors interactively or exchanging information with corporate
databases. While some of these sites use advanced applications to support online
order and payment transactions, many still require buyers to place orders by
telephone, defeating a basic objective of electronic commerce.
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Moreover, these sites are generally cumbersome for business managers to
operate. Business rules and content, such as product and pricing data, financial
policies, promotions, and advertising campaigns, are "hard-coded" into programs
and virtually impossible for non-technical managers to change dynamically.
Applications are not scalable and require ongoing tuning and re-engineering to
keep up with visitor growth and changes in Internet technology. Development is
slow and defects are common due to the absence of productivity tools, reusable
objects, and templates.
THE TECHNOLOGY GAP ON THE WEB
In part, the limited capabilities of these Web sites are a result of the
inadequacies of the technologies available to develop Internet applications. Web
projects were initially limited to very basic tasks, such as publishing
information for online access and basic hyperlinking. As a result, most Web
developers still rely on general purpose publishing tools, such as HTML
(Hypertext Mark-up Language) editors, to develop Web pages and the links between
them. These tools were not designed to be used in the development of
sophisticated applications, which currently require a combination of
low-performance "scripting languages," such as PERL (Practical Extraction and
Report Language), high performance programming languages such as C and C++,
database platforms such as those offered by Oracle and Sybase, and Web platforms
from companies such as Netscape, OMI, and Microsoft. Using these disparate
technologies to develop and maintain sophisticated Internet applications, such
as managing customer relationships and defining dynamic business rules, is a
highly complex process requiring a breadth of expertise that is often beyond the
capabilities of in-house information technology organizations. In addition, the
cost, time, and effort of building and maintaining Internet applications in this
manner is often beyond the funding capacity of internal Internet application
development budgets. In a recent study, International Data Corporation concluded
that the cost of establishing an interactive commerce Web site is typically four
times greater than expected and that twice as much time is spent on customizing
sites as originally anticipated. While minimally functional Web sites can be
developed at a low cost, industry sources estimate that the 12-month costs for
the creation and maintenance of a more complex Web site can reach several
million dollars.
Most currently available Internet application servers, including commerce
and merchant servers, lack integrated development suites to create and maintain
interactive Web applications. Generally, they require the use of a combination
of general purpose tools, which are typically conducive only to the development
of static brochureware or applications that simply process order and payment
transactions. With these currently available application servers, business
managers do not have the capability to react to market conditions with real-time
control and management of Web sites, but instead are often constrained by slow
"change request" processes that take technical specialists days or even weeks to
implement. Moreover, most existing application servers do not permit business
managers to tailor communications, information, products, and services to the
needs of their individual Web site visitors in real time. As a result, these
existing products fall short of maximizing the potential of online one-to-one
marketing and selling.
INTERNET APPLICATION SYSTEMS FOR ONE-TO-ONE MARKETING AND SELLING
The recent trends toward personalized one-to-one marketing and selling,
together with the increasing adoption of the Internet as a platform for commerce
and communication, have fueled the need for more sophisticated application
software that enables business managers to create Web sites that build and
sustain personalized, long-term relationships with their customers. To realize
the potential of one-to-one marketing and selling, Web sites should support the
following activities:
-Attract and retain Web site visitors by providing dynamic content and
interactive communities of interest
-Develop and maintain visitor profiles, observe and remember interactions,
and engage in ongoing personalized dialogues while empowering individuals
to control the privacy of their personal data
-Provide business managers the ability to define and modify Web site
business rules and content in real time
-Dynamically target personalized products, editorials, advertising, and
marketing incentives to correspond to profile data in order to motivate
visitors to interact, follow links, and conduct transactions
-Fulfill financial and information transactions with secure electronic
commerce processes
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THE BROADVISION SOLUTION
BroadVision provides an integrated software application system, BroadVision
One-To-One, that enables businesses to create applications for interactive
marketing and selling services on the Web. These applications are designed to
allow non-technical business managers to tailor Web site content to the needs
and interests of individual Web site visitors, personalizing each visit on a
real-time basis. The BroadVision One-To-One application system and related
vertical application solutions and services are targeted at businesses
developing Web sites for marketing and selling to consumers and business
customers, and as internal resources for employees. The Company's customers use
BroadVision One-To-One to develop Web sites that engage visitors and encourage
return visits through personalized interactions, capture marketing information
from volunteered data and observed behavior, and generate revenues from
electronic commerce activities and point-cast advertising. BroadVision
One-To-One provides these software capabilities in an architecture that supports
the full one-to-one marketing and selling life cycle. The Company believes that
these capabilities are needed by business managers and Web site application
developers to take full advantage of the potential of the Internet as a
marketplace for conducting electronic commerce and for building long-term
relationships with customers.
BroadVision One-To-One supports the following steps in the one-to-one
marketing and selling life cycle:
COMMUNITY
BroadVision One-To-One facilitates the development of bulletin boards, chat
groups, and online forums to help businesses attract and retain Web site
visitors by connecting visitors with common profile characteristics and
interests into online communities. Development of these online communities is
intended to ultimately benefit the sponsoring business through word-of-mouth
referrals, user group dynamics, and increased feedback on products and services.
PROFILING
At the core of BroadVision One-To-One is the capability to develop and
maintain dynamic profiles of Web site visitors. Profile data is collected
initially when visitors volunteer information about their preferences and
interests, as well as basic background data, often in exchange for incentives,
such as discounts and coupons. This data is then augmented over time with usage
history and observation data and additional information volunteered by the Web
site visitors.
The Company believes that ensuring privacy of an individual's personal as
well as financial data will prove to be a fundamental requirement for
establishing the Web as a strategic business venue. As a result, BroadVision
One-To-One offers its customers a security model that, if employed, would enable
each visitor to control access to personal data, on an element-by-element basis.
TARGETING
BroadVision One-To-One enables business managers to deliver targeted content
to Web site visitors based on individual profiles. This feature allows Web sites
to generate, in real time, personalized product information, editorials,
pricing, advertising, coupons, incentives, and promotions for Web site visitors
who fit a certain profile or meet a set of criteria or conditions determined by
business managers.
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TRANSACTIONS
BroadVision One-To-One manages transaction processing essential for both
business-to-consumer and business-to-business electronic commerce, including
integration with existing business systems and third-party software applications
for secure online ordering and payment, order fulfillment and billing, customer
service, electronic data interchange ("EDI"), and reporting.
Picture captioned "Features of the BroadVision One-To-One Solution" with four
columns entitled "Community", "Profiling", "Targeting" and "Transactions". Under
each column heading is a list of features specific to that solution.
STRATEGY
The Company's objective is to establish one-to-one marketing and selling as
a standard feature of Web sites worldwide. To achieve this objective, the
Company has adopted the following strategies:
FOCUS ON INTERNET APPLICATIONS FOR ONE-TO-ONE MARKETING AND SELLING
Industry analysts have recently begun to divide the Internet software
marketplace into five segments: browsers, server software, tools, applets, and
packaged applications. The Company believes that the next major phase of
Internet growth will be driven by complete packaged application solutions that
leverage other software technologies and allow businesses to capitalize more
fully on the Internet as a business venue. Accordingly, the Company is focusing
exclusively on developing packaged application solutions for businesses
developing Web sites for one-to-one marketing and selling.
LEVERAGE INITIAL CUSTOMER RELATIONSHIPS WITH AGGREGATORS
To pursue market adoption of the BroadVision One-To-One application system
as an industry standard solution for one-to-one marketing and selling on the
Internet, the Company has initially focused its sales efforts on aggregators of
online services that can introduce the Company's products to their individual
content providers, who may develop their own Web site applications in the
future. BroadVision intends to pursue these companies as prospective customers
and believes the companies' experiences using BroadVision One-To-One through
aggregators will provide BroadVision an advantage in marketing its products
directly to them.
ACHIEVE TECHNOLOGY LEADERSHIP
The Company intends to continue to enhance its technology by investing
heavily in research and development activities, incorporating industry-leading
components into its products and employing its own technology and human
resources as a source of ongoing technological advantage. Through its BVAC
meetings, the Company seeks to attract industry leaders willing to share ideas
with, and provide insights into market requirements to, the Company's
executives, engineers, and marketing managers. Having employed the Common Object
Request Broker Architecture ("CORBA") standard as a cornerstone of its product
architecture, the Company intends to integrate other CORBA-compatible
technologies, such as the Java development language from Sun, into its products.
Utilizing its own products, the Company intends to design and build advanced,
custom software tools and solutions for its engineering and consulting
operations.
EXPAND AND LEVERAGE ALLIANCES WITH KEY BUSINESS PARTNERS
To accelerate the acceptance of the BroadVision One-To-One application
system and to promote the adoption of the Web as a commercial marketplace, the
Company plans to develop cooperative alliances with leading Internet technology
vendors, systems integrators, and Web site developers. The Company believes that
these alliances should also provide additional marketing and sales channels for
the Company's products, enable the Company to more rapidly incorporate
additional functions and platforms into the BroadVision One-To-One application
system, and facilitate the successful deployment of customer applications. To
develop domain expertise, the Company intends to form additional strategic
alliances with companies in the fields of marketing, advertising, and design,
such as its recent alliance with Marketing 1:1, Inc. ("Marketing 1:1"), a
company owned by marketing consultants, Don Peppers and Martha Rogers.
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DEVELOP VERTICAL APPLICATION SOLUTIONS
The Company intends to leverage its BroadVision One-To-One application
system to develop additional Web application products and services focused on
vertical markets. Utilizing its expanding libraries of reusable application
objects and templates and working closely with customers and strategic partners,
the Company believes it can deliver vertical application solutions for
one-to-one marketing and selling faster, of a higher quality, and at a lower
cost than its competitors. The Company intends to deliver vertical Web solutions
for business-to-consumer and business-to-business services in the areas of
telecommunications and online services, retail, catalogue, and consumer
products, travel and leisure, media and publishing, financial services,
wholesale and manufacturing, health care services, and pharmaceuticals.
BUILD INTERNATIONAL PRESENCE
To capitalize on the emergence of the Internet as a global network, the
Company has established sales operations in Paris, London, Zurich, Tokyo, and
Singapore and is preparing to open additional sales operations in Munich and
Hong Kong before the end of 1996. In addition, the Company intends to distribute
its products internationally through licensed distributors, value-added
resellers, and systems integrators and to certify providers of professional
services for BroadVision consulting, training, and support. The Company's
product architecture is designed to support international languages, and the
Company is currently shipping a localized version of its BroadVision One-To-One
application system for the Japanese market.
The Company's strategy involves substantial risk. There can be no assurance
that the Company will be successful in implementing its strategy or that its
strategy, even if implemented, will lead to successful achievement of the
Company's objectives. If the Company is unable to implement its strategy
effectively, the Company's business, financial condition, and operating results
would be materially adversely affected.
PRODUCTS AND SERVICES
The BroadVision One-To-One application system provides businesses with an
end-to-end solution for developing, implementing, operating, and maintaining
one-to-one marketing and selling applications tailored to the needs and
interests of individual Web site visitors. The Company's customers use
BroadVision One-To-One to develop Web sites that engage visitors and encourage
return visits through personalized interactions, capture marketing information
from volunteered data and observed behavior, and generate revenues from
electronic commerce activities and point-cast advertising. A principal feature
of BroadVision One-To-One is a set of building blocks, called "dynamic objects"
and "application templates," that implement capabilities required to conduct
one-to-one marketing and selling on Web sites. These capabilities enable
business managers to deliver content and information, promote products and
brands, fulfill financial and information transactions, and nurture long-term
relationships with their customers on a real-time basis. The key elements of the
BroadVision One-To-One application system are described below:
DEVELOPMENT SYSTEM
The BroadVision One-To-One Development System consists of application
programming interfaces ("APIs") for programming BroadVision One-To-One
applications. Since many Web sites use custom software to provide unique
capabilities to their user communities, the BroadVision One-To-One Development
System also enables developers to create integration objects, called "object
adapters," that allow external software and data to be easily integrated into
the flow of an application. Also, scheduled for release in late 1996 is a
graphical point-and-click application builder, consisting of an HTML editor
interface, dynamic objects and application templates, and tools for object
definition and preview. When commercially available, this application builder
will allow developers to place dynamic objects into the flow of Web documents in
order to generate HTML and content dynamically on the basis of business rules
and real-time dialogues with Web site visitors. Furthermore, Java applets can
serve as BroadVision One-To-One application objects and can also be used to
access BroadVision One-To-One services directly from the product's application
engine. This capability allows BroadVision One-To-One applications to be
developed entirely in Java.
DEPLOYMENT SYSTEM
The BroadVision One-To-One Deployment System enables one-to-one applications
to be installed on application servers for large-scale production Web site
operations. The Deployment System consists of an
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application engine, a session manager, object libraries, application templates,
and object adapters. This system actively manages Web site content and
interactions by assembling and organizing profile information from Web site
visitors, interpreting visitor interactions and profile information according to
application business rules and logic, dynamically targeting content, and
processing online RDBMS transactions. A key characteristic of the Deployment
System is its ability to interact with the BroadVision DCC application which,
under the control of non-technical business managers, defines business rules
that the Deployment System interprets to target information and content
individually tailored to each Web site visitor. The BroadVision One-To-One
Deployment System utilizes the CORBA standard to enhance performance and
scalability for Web sites with high volume traffic. It also contains embedded
versions of Sybase or Oracle RDBMSs for high performance transaction throughput.
DYNAMIC COMMAND CENTER
The DCC is a Windows 95 client application for editorial, advertising,
marketing, and merchandising business managers. The DCC offers managers the
ability to configure the operations of a Web site in real time using familiar,
non-technical concepts. For example, through the DCC, a business manager can
initiate a sale or promotion, send coupons to specifically targeted consumers,
or change prices dynamically. The DCC also provides a means for managers to
monitor the activity on Web sites, enabling them to evaluate the effectiveness
of content and services being offered on the site.
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The table below summarizes certain features of and price information for
each of the Company's products:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION OPERATING PLATFORMS/ U.S. LIST PRICE FOR
RDBMSS PERPETUAL LICENSE
Development System Full object-oriented -Sun Solaris 2.5 -$50,000 per
environment for operating system developer
developing, testing, -Windows NT seat for aggregators
and tuning operating system -$25,000 per
applications (scheduled for developer
introduction in seat for single
late 1996) corporate Web sites
-Oracle RDBMS
-Sybase RDBMS
Deployment System Full environment for -Sun Solaris 2.5 -License fee based on
deploying production operating system number of profiled
applications -Windows NT users tracked by
operating system application and
(scheduled for number of services
introduction in accessing profiled
late 1996) user
-Oracle RDBMS base.
-Sybase RDBMS -Ranges from $30,000
for minimum
configuration to
more than $1 million
for large, complex
configurations
Dynamic Command PC-based application -Windows 95 operating -$5,000 per seat
Center enabling business system
managers to monitor
state of Web
applications,
interactively change
business rules in
real time, and
generate reports
</TABLE>
CONSULTING AND MAINTENANCE SERVICES
The Company also offers consulting services through its ISG consultants on a
contract basis to customers seeking assistance in implementing custom
applications of BroadVision One-To-One. Services provided by ISG include:
-Analysis and design of architecture and applications
-Application development, including custom objects and templates
-Project management
-System tuning, operation, and maintenance
-Education and training regarding the Company's products
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In addition, the Company offers software maintenance on all of the products
identified above for an annual fee of 18% of the perpetual license fee, payable
annually in advance. For this fee, customers receive technical support, update
rights to new releases, and patch releases as necessary. With each sale, the
Company typically provides a 90-day warranty that the product complies with the
Company's published documentation.
The statements made in this Prospectus regarding scheduled release dates for
the Company's products under development and proposed enhancements are
forward-looking statements, and the actual release dates for such products or
enhancements could differ materially from those projected as a result of a
variety of factors, including the ability of the Company's engineers to solve
technical problems and to test products, business priorities in light of the
availability of development and other resources, and other factors, including
factors that may be outside the control of the Company, as well as the factors
discussed in "Risk Factors." There can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction, and marketing of new products, or that new products and product
enhancements will satisfy the requirements of the marketplace or achieve market
acceptance.
THE BROADVISION ONE-TO-ONE USER EXPERIENCE
BroadVision One-To-One offers benefits to three distinct user groups
involved in the process of marketing and selling on the Internet: Internet
APPLICATION DEVELOPERS that build and maintain Web sites, BUSINESS MANAGERS that
operate and manage Web sites, and WEB SITE VISITORS that utilize and interact
with Web sites for information, entertainment, shopping, education, and other
online activities.
ONE-TO-ONE APPLICATION DEVELOPERS
BroadVision One-To-One offers Internet application developers an
object-oriented development environment consisting of robust, high-performance
APIs and tools. Application developers may include employees of the Company's
customers, third-party systems integrators and resellers, or the Company's own
ISG consultants made available on a contract basis. These developers typically
require powerful tools that enable innovation, ensure that applications can be
written easily and quickly, and create high-performance applications in terms of
throughput, scalability, and response time with a minimum of system defects.
Developing a BroadVision One-To-One application involves the following steps:
-Defining and structuring Web site visitor profiles
-Designing Web site pages and interactions
-Creating re-usable logic components, such as objects, templates, and Java
applets
-Determining and modeling the flow of data and content among Web site
visitors, information servers, and existing applications
-Programming application and business logic based on the desired interaction
between Web site providers and visitors
-Testing and debugging applications
-Tuning application performance
Developers are provided a structured, object-oriented development
environment for programming server logic, and CORBA-based APIs that provide a
standardized methodology for the integration of external applications and data
sources essential to one-to-one Internet marketing and selling applications.
BUSINESS MANAGERS
Business managers are responsible for the day-to-day operation of Web
applications. They need the ability to modify application content and business
rules with a minimum of dependence on technical personnel, as well as the
ability to observe activity on Web sites to obtain real-time information on the
nature of interactions between the Web sites and Web site visitors.
Business managers interact directly and in real time with BroadVision
One-To-One by using the product's DCC application. This application offers
business managers a point-and-click interface for defining and modifying
business rules that determine how content will be presented to Web site visitors
and how interactions between the
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visitor and the Web site provider will be managed over time. For example, an
advertising manager may target advertising to specific Web site pages based on
specific criteria, such as visitor demographics or advertiser rate cards. Based
on observation of Web site activity, a marketing manager may specify that
certain product content be targeted to visitors that meet certain profile
criteria, such as site visit frequency or registered preferences. A
merchandising manager may choose to conduct a special sale or cross-selling
promotion for visitors whose profiles meet criteria that the manager determines
to be appropriate for a particular promotional program.
WEB SITE VISITORS
The Web enables anyone with Internet access to obtain information and
conduct transactions online, offering fundamentally new opportunities to
interact with businesses and engage in commercial activities. When fully
implemented, marketing and selling applications based on BroadVision One-To-One
will enable consumers, business customers, and employees to provide profile
information about preferences, interests, and habits, and to experience
distinctive Web site visits that are created specifically to appeal to visitors
based on profiles. To date, no application has been commercially deployed using
BroadVision One-To-One.
A first-time visitor entering a Web site based on BroadVision One-To-One may
be offered an incentive to provide profile information to establish the context
for personalized interaction between the Web site and the visitor. In some
cases, profiles may be provided in advance through external processes such as
product registration forms or direct mail surveys. Information from past
interactions and transactions can be added to enhance profiles, and visitors can
take advantage of a range of privacy features that may be provided by the
business to restrict third-party access to profile information.
As visitors browse and interact with a Web site, their profiles are
interpreted by application business rules, which have been previously defined by
business managers. Targeted Web content, such as product information, editorial
material, advertising, promotions, and entertainment, is then dynamically
generated and delivered to the visitor on personalized Web pages. Visitors may
pursue a wide range of activities on a Web site created with BroadVision
One-To-One, such as reading personalized online newspapers, magazines, or
product brochures, shopping with a virtual sales assistant, placing online
orders, completing customer satisfaction surveys or feedback forms on purchased
products, reviewing stock quotes, participating in community chat groups and
other forums, watching Java animations, listening to personalized Web audio, and
watching personalized Web video. All of these activities can be tailored
specifically to visitors' profiles by the business manager responsible for the
site.
Visits may result in financial transactions, information exchanges,
downloads, or electronic correspondence. Regardless of the outcome of a Web site
visit, information volunteered by a visitor during the visit or captured by the
Web site through observations of the visitor's interactions can be incorporated
into the visitor's profile for subsequent visits. Each Web site visit is likely
to be different from the previous visit, either as a result of changing content,
changing business rules or changing profile characteristics. Because of the
variety of possible profiles, business rules, and content, it is unlikely that
any two visitors would have exactly the same experience on a Web site created
with BroadVision One-To-One.
TECHNOLOGY
The Company believes its advanced technology enables the delivery of robust,
scalable, and innovative Internet marketing and selling solutions into the
market faster and at a lower cost than alternatives. The Company's technology
consists of the following key elements:
ARCHITECTURAL DESIGN
The Company believes that the technical demands of interactive one-to-one
marketing and selling on the Internet require an architectural design that
stresses standards, openness, interoperability, and flexibility. The Company has
designed its current application system as an architectural solution for
building dynamic, scalable, and extensible Internet applications. By emphasizing
reusable methods, separation of application logic, business rules, and data, and
adherence to open standards, the BroadVision One-To-One application system
provides an efficient architecture for customers and partners to build, modify,
and control applications, as well as to integrate them with external business
systems. The Company believes this architecture also provides a robust
foundation on which the Company can rapidly develop new products.
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CORBA
The Company has invested substantially in developing its architecture to
comply with CORBA, which the Company believes will become a standard widely
adopted by Internet technology providers. CORBA, defined by the Object
Management Group, a consortium of approximately 600 companies, documents an
approach to developing distributed object-oriented systems. The Company
implements CORBA in its application system architecture by embedding into the
Company's own code the Orbix software from IONA, a leading supplier of software
for CORBA compliance.
Applications that are CORBA-compliant can run on either single computers
with one or more processors or across large networks, allow replication and
relocation of object servers to improve system performance, are platform
independent, and have strongly defined APIs through the use of the Interface
Definition Language ("IDL") specified by CORBA.
Through CORBA compliance, the Company's products are fully compatible with
other CORBA-based technologies, such as Java from Sun, an increasingly widely
used language for developing Internet applications and interactive Web content,
and the recently announced Web server product line from Oracle.
THREE-TIER ARCHITECTURE
The BroadVision One-To-One application system utilizes a three-tier
architecture that logically separates application presentation, business rules,
and data. Between each of these three tiers are session manager and project
adapter interface technologies, described below, that establish seamless
interoperability between application components. As illustrated in the figure
below, this three-tier architecture partitions applications across:
-A FRONT-END tier that manages the application presentation and interface to
Web site visitors
-An APPLICATION ENGINE tier that manages the one-to-one life cycle
activities -- community, profiling, targeting, and transactions -- and the
business rules that define the interactive characteristics and behavior of
one-to-one marketing and selling applications
-A BACK-END tier that integrates underlying database management systems for
storing BroadVision One-To-One system data with external business systems
that perform specialized marketing and selling functions, such as online
credit card authorization and payment handling, sales tax and shipping
computation, online and offline order fulfillment, inventory management,
visitor demographic analysis, and data mining
Graphic depiction of rectangular shapes representing the three-tier
architecture of BroadVision's Dynamic Command Center captioned "Dynamic
Command Center" with three columns entitled "Application Presentation,"
"Busines Rules," and "Data" and connected by two-way arrows. Beneath each
title is a list of the features of that application.
The Company believes this three-tier architecture offers significant
advantages over alternative approaches, including:
-Bandwidth, database, and platform independence
-Modularity, to enable changes to be made to one area of an application with
minimal impact on other areas
-The ability for business managers to define and control business rules in
real time without requiring programming changes to application logic
-The ability to support specialized "object adapters" that reduce time and
cost to integrate BroadVision One-To-One applications with existing
business systems, the ability to perform such integration with a minimum of
programming, and the ability to localize applications to different language
and currency requirements
SESSION MANAGER
The Company has developed proprietary "session manager" technology designed
to manage the high volume of dynamic interactions that occur in online sessions
between many concurrent Web site visitors and a marketing and selling
application. The session manager, illustrated in the figure below, enables three
key activities:
-Maintaining context, or "state," between visitors and sites so that each
current and future interaction can trigger a response appropriate to the
objectives of both visitor and site provider
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-Interpreting application objects and templates at runtime, and retrieving
profile data and business rules to dynamically generate HTML that creates
content, Web pages, and interactions tailored to the needs and interests of
individual Web site visitors
-Enabling application scalability by allowing Web site providers to add
additional software processes or hardware processors to their Web systems
to support more concurrent Web site visitors without incurring performance
degradation or additional overhead in application maintenance
DYNAMIC OBJECTS AND APPLICATION TEMPLATES
The Company believes that the costs and time associated with Internet
application development and maintenance can be substantially reduced with its
technology for object-oriented application development. This technology consists
of two primary components, dynamic objects and application templates, shown in
the figure below. Utilized in combination with the Company's structured
development methodology, these technologies are designed to help customers and
partners create libraries of reusable program components that increase
application quality and reduce cost and time-to-market of new and maintained
applications. In addition, the dynamic object technology enables business
managers to define and implement business rules through the BroadVision
One-To-One DCC on a real-time basis. The Company's ISG consultants currently use
these technologies to develop application solutions for customers, and the
Company's Education Services Group offers training classes to customers and
partners on the use of dynamic objects and application templates.
Graphic depiction of the BroadVision One-to-One Application System, entitled the
same. To the left is a person seated at a computer, with the caption "Business
Manager," who is connected to a diagram of rectangular shapes representing the
One-to-One Application System, which includes the Dynamic Command Center, the
Application Templates, and the Session Manager. Underneath are rectangular
shapes representing an application engine and CORBA. Connected to the right of
the diagram is a person seated at a computer, with the caption "Visitor."
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TAXONOMY MODELING AND MATCHING
For its taxonomy modeling and matching product, currently in beta testing
for availability in late 1996, the Company is developing proprietary software
algorithms and methods that enable Web site providers to dynamically match the
profile characteristics of site visitors with Web content. These technologies
are being developed into tools designed to enable companies to define their own
taxonomy and rule bases, and classify, edit, and index Web content that can then
be dynamically matched to the demographic and psychographic profiles of Web site
visitors and their communities of interest. See "-- Product Development."
ADHERENCE TO INDUSTRY STANDARDS
In addition to CORBA, the Company uses other widely accepted standards in
developing its products, including SQL (Structured Query Language) for accessing
RDBMSs, CGI (Common Gateway Interface), and HTTP (Hypertext Transfer Protocol)
for Internet access, NSAPI (Netscape Application Programming Interface) for
access to Netscape's Internet servers, and the RC2 and MD5 encryption algorithms
supplied by RSA. BroadVision One-To-One can be operated in conjunction with
RDBMSs provided by both Oracle and Sybase. Most of the Company's programs are
written in C++, a widely accepted standard programming language for developing
object-oriented applications. Adherence to industry standards provides
compatibility with existing applications, enables ease of modification, and
reduces the need for software to be rewritten, thus protecting the customer's
investment.
CUSTOMERS AND MARKETS
The Company has licensed its BroadVision One-To-One software to 10 customers
and provided related professional services to an additional seven customers
worldwide. Types of applications being developed by licensees using BroadVision
One-To-One include cybermalls, online services, and corporate Web sites. To
date, no application has been commercially deployed using BroadVision
One-To-One. The Company's target customers include organizations that are at the
forefront of Internet marketing and selling. Customers that have acquired
licenses and professional services, to date, are Hongkong Telecom, Itochu
Internet Corporation, Matsushita Electric Industrial Co., Ltd., NetRadio
Network, NTT Data Communications Systems Corporation ("NTT Data"), Olivetti
Telemedia Videostrada, Prodigy Services Co., Sema Group, Ltd., and Virgin.net
Limited. Companies to which the Company has, to date, provided only professional
services are Advanta Corporation, Europe Online, Fujitsu, Ltd., Liberty
Financial Companies, Inc., Retesa S.A., Siemens-Nixdorf, and Telefonica I&D.
In addition, the Company believes that the three-tier architecture of
BroadVision One-To-One and its compliance with the CORBA standard enable it to
support online marketing and selling applications on interactive venues other
than the Internet, such as broadband channels, direct broadcast satellite, and
private networks. For example, Thomson-Sun Interactive has licensed BroadVision
One-To-One for development of a prototype application on OpenTV. To date, this
application has not been commercially deployed, and no assurances can be given
that such venues will prove to be viable markets for the Company's products.
Initial customers for the BroadVision One-To-One application system have
been content aggregators, which provide online marketing and selling
capabilities for multiple content providers. These customers have acquired
between one and five Development System licenses, up to 10 DCC licenses, and
Deployment System licenses for up to one million Web site visitors. If and when
the systems are deployed and the customers develop applications that attract
additional content providers and Web site visitors, additional licenses may be
required. The Company anticipates that an increasing proportion of its future
revenues may be derived from sales to businesses that participate in aggregated
online services and then intend to develop individual branded Web sites.
Per-customer revenues from such customers would typically be less than revenues
from aggregators, largely because of the Company's price structure and because
the Company expects a greater proportion of such sales to be made through
value-added resellers and systems integrators.
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The Company has targeted a number of markets that it believes to be
especially conducive to interactive marketing and selling. These markets,
identified in the table below, have historically been characterized by early
adoption of online technology or could otherwise benefit from providing
significant interactive service to their end-user customers.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
TARGET INDUSTRY SAMPLE APPLICATIONS BENEFITS OF BROADVISION ONE-TO-ONE
<S> <C> <C>
Telecommunications - Cybermalls - Selective sharing of Web visitor profiles between
and online - Online services aggregators and content providers
services
- Highly targeted, highly customized advertising and
personalized feedback for advertisers
- Online, real-time control of business rules, such as
pricing and promotions, by both cybermall operators and
individual content providers
Retail, catalogue, - Online shopping - Creation of branded communities based on profiles of
and consumer - Interactive Web site visitors
products catalogues - Online, real-time control of business rules, such as
pricing and promotions, by content providers
- Reduced transaction costs of direct purchases
Travel and leisure - Reservations - Provide travel planning advice and transaction services
- Travel planning without agents or other intermediaries
- Opportunity to cross-sell or up-sell services in
addition to basic travel reservations based on user
profiles
Media and - Purchasing digital - Ability to price digital products and services in real
publishing media time
- Match employment opportunities with job seekers
- Employment search
Financial services - Obtaining - Investment content targeted based on profiles of Web
information on and site visitors
selecting: - Nationwide service can be locally targeted
- Loans - Low-cost distribution channel
- Mutual funds
- Insurance
Wholesaling and - Business-to-business - Ability to collect large amounts of information, then
manufacturing purchasing excerpt that information based on purchaser's profile
- Maintain and make available up-to-date information
related to complex purchasing decisions
Health care - Health care provider - Practical health information and advice tailored to
services networks individual consumers
- Identify and schedule appropriate local health care
provider
Pharmaceuticals - Advertising - Target specific pharmaceutical products at physicians
with specific clinical interests
</TABLE>
To date, the Company has not licensed its products or provided related
consulting services to customers in all of these markets, and there can be no
assurance that the Company's products can be adapted to suit the needs of any
customers in these markets or that such products would achieve market
acceptance.
The market for the Company's products and services is at a very early stage
of development and is rapidly evolving. As is typical for new and rapidly
evolving industries, demand and market acceptance for recently introduced
products and services are subject to a high level of uncertainty, especially
where, as is true of the Company, acquisition of the product requires a large
capital commitment or other significant commitment of resources. With respect to
the Company, this uncertainty is compounded by the risks that consumers and
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<PAGE>
enterprises will not adopt online commerce and communication and that an
appropriate infrastructure necessary to support increased commerce and
communication on the Internet will fail to develop, in each case, to a
sufficient extent and within an adequate time frame to permit the Company to
succeed.
Adoption of online commerce and communication, particularly by those
individuals and enterprises that have historically relied upon traditional means
of commerce and communication, will require a broad acceptance of new and
substantially different methods of conducting business and exchanging
information. Moreover, the Company's products and services involve a new
approach to the conduct of online commerce and, as a result, intensive marketing
and sales efforts may be necessary to educate prospective customers regarding
the uses and benefits of the Company's products and services in order to
generate demand for the Company's systems. For example, enterprises that have
already invested substantial resources in other methods of conducting business
may be reluctant or slow to adopt a new approach that may replace, limit, or
compete with their existing systems. Similarly, individuals with established
patterns of purchasing goods and services may be reluctant to alter those
patterns or may otherwise be resistant to providing the personal data which is
necessary to support the Company's consumer profiling capability. Moreover, the
security and privacy concerns of existing and potential users of the Company's
products and services may inhibit the growth of online commerce generally and
the market's acceptance of the Company's products and services in particular.
Accordingly, there can be no assurance that a viable market for the Company's
products will emerge or be sustainable.
SALES AND MARKETING
The Company markets its products primarily through a direct sales
organization with operations in North America, Europe, and the Pacific Rim. At
April 16, 1996, the Company's direct sales force included 15 sales
representatives and managers supported by 23 persons responsible for pre-sales
support, post-sales support, and applications consulting. The Company also
contracts with commissioned agents in the Republic of Korea and Spain and in
selected portions of the Japanese market.
Although the Company generates leads from many sources, the majority of the
Company's early leads have come from businesses seeking partners to develop
interactive marketing and selling applications. Initial sales activities
typically include a demonstration of BroadVision One-To-One's capabilities at
the prospect's site, followed by one or more detailed technical reviews, usually
presented at the Company's headquarters. Because the Company's market is at an
early stage of development, the sales process usually involves a collaboration
with the prospective customer in order to specify the scope of the application.
The Company's ISG consulting staff typically plays a key role in helping
customers to design, and then develop, their applications.
The Company's marketing efforts are targeted at building market awareness
and at highlighting the value of the Company's application system as both a
marketing tool and an engine for processing sales transactions online. At April
16, 1996, 11 employees were engaged in a variety of marketing activities,
including preparing marketing research, product planning, and collateral
marketing materials, managing press coverage and other public relations,
identifying potential customers, attending trade shows, seminars, and
conferences, establishing and maintaining close relationships with recognized
industry analysts, coordinating the activities of the BVAC, and maintaining the
Company's Web site.
The license of the Company's software products is often an enterprise-wide
decision by prospective customers and can be expected to require the Company to
engage in a lengthy sales cycle to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
In addition, the implementation of the Company's products involves a significant
commitment of resources by customers or by the Company's ISG consultants over an
extended period of time. As a result, the Company's sales and customer
implementation cycles are subject to a number of significant delays over which
the Company has little or no control. Delays in license transactions as a result
of the lengthy sales cycle or delays in customer production or deployment of a
system could have a material adverse effect on the Company's business, financial
condition, and operating results, and can be expected to cause the Company's
operating results to vary significantly from quarter to quarter.
To date, the Company has sold its products through its direct sales force.
The Company's ability to achieve significant revenue growth in the future will
depend in large part on its success in recruiting and training
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<PAGE>
sufficient direct sales personnel and establishing and maintaining relationships
with distributors, resellers, systems integrators, and other third parties.
Although the Company is currently investing, and plans to continue to invest,
significant resources to expand its direct sales force and to develop
distribution relationships with third-party distributors and resellers, the
Company may at times experience difficulty in recruiting qualified sales
personnel and in establishing necessary third-party relationships. There can be
no assurance that the Company will be able to successfully expand its direct
sales force or other distribution channels or that any such expansion will
result in an increase in revenues. Any failure by the Company to expand its
direct sales force or other distribution channels would materially adversely
affect the Company's business, financial condition, and operating results.
A component of the Company's strategy is its planned expansion of its
international activities. To date, the Company has limited experience in
developing localized versions of its products and marketing and distributing its
products internationally. There can be no assurance that the Company will be
able to successfully market, sell, and deliver its products in international
markets. In addition, there are certain risks inherent in doing business in
international markets, such as unexpected changes in regulatory requirements,
export controls relating to encryption technology and other export restrictions,
difficulties in staffing and managing foreign operations, political instability,
fluctuations in currency exchange rates, reduced protection for intellectual
property rights in some countries, seasonal reductions in business activity
during the summer months in Europe and certain other parts of the world, and
potentially adverse tax consequences, any of which could adversely impact the
success of the Company's international operations. There can be no assurance
that one or more of such factors will not have a material adverse effect on the
Company's future international operations, if any, and, consequently, on the
Company's business, financial condition, and operating results.
STRATEGIC BUSINESS ALLIANCES
A critical element of the Company's sales strategy is to engage in strategic
business alliances to assist the Company in marketing, selling, and developing
customer applications. This approach is intended to increase the number of
personnel available to perform application design and development services for
the Company's customers; enhance the Company's market credibility, potential for
lead generation, and access to large accounts; and provide additional marketing
expertise in certain vertical industry segments and technical expertise in the
development of reusable objects and templates. Strategic business alliances
include Sema Group (systems integrator and subcontractor to the Company for a
prospective application) and Sun's Interactive Services Group (integration of
BroadVision One-To-One with Java). To encourage the adoption of one-to-one
marketing on the Web, the Company is forming a strategic alliance with Marketing
1:1, whose principals, Don Peppers and Martha Rogers, co-authored the 1993 book
about marketing strategy, THE ONE-TO-ONE FUTURE.
STRATEGIC TECHNOLOGY ALLIANCES
In order to ensure that the Company's products are based on industry
standards and take advantage of current and emerging technologies, the Company
emphasizes strategic technology alliances. The benefits of this approach include
enabling the Company to focus on its core competencies, reducing time to market,
and simplifying the task of designing and developing applications by both the
Company and its customers. Key strategic technology alliances to date have
included alliances with IONA, a provider of a CORBA-compliant development
platform; Oracle and Sybase, providers of standard RDBMSs; Sun, developer of the
Java language; RSA, a provider of encryption technology; and VeriFone, Inc., a
provider of payment systems. The Company's strategy is to establish additional
such alliances as new technologies and standards emerge, although no assurance
can be given that the Company will be successful in establishing such alliances.
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BROADVISION ADVISORY COUNCIL
From inception, the Company has emphasized market research to identify
trends in online marketing and selling. To that end, the Company has established
BVAC, composed of senior executives from the Company's customers and other
companies with a significant interest in Internet marketing and selling. The
Company expects to host BVAC meetings between two and four times annually. BVAC
meets with BroadVision executive, marketing, and engineering management to
present business and technical requirements for Internet marketing and selling
applications and to discuss the strategic, product, and marketing directions of
the Company. BVAC participants are also available for consultation with the
Company executives on a regular basis.
BVAC participants include the following persons: Jay Chai, Chairman and
Chief Executive Officer of Itochu International, Inc.; Norman Dawley, Principal,
Multimedia Resources, Robert Devereux, Chief Executive Officer, Virgin
Communications, Inc.; Michael Harris, Partner, Products Group, Andersen
Consulting; Dan Lynch, Chairman, CyberCash, Inc.; Clement Mok, Chairman and
Creative Director, Studio Archetypes; Oliver Novick, Chief Executive Officer,
Olivetti Telemedia Videostrada; Michael Ribero, Executive Vice President and
General Manager Consumer Division, Sega of America; Don Peppers, Chairman and
Founder, Marketing 1:1; Martha Rogers, President and Founder, Marketing 1:1; Dr.
Eric Schmidt, Vice President and Chief Technology Officer, Sun Microsystems,
Inc.; and Martin Sorrell, Chief Executive Officer, WWP Group, PLC.
Attendees receive no compensation from the Company for their participation.
Attendees participate in BVAC on an individual basis, and the identification of
any person as a BVAC participant should not create an implication that the
company identified as affiliated with such participant endorses BroadVision
products, has licensed or intends to license BroadVision products, or otherwise
conducts or intends to conduct business with the Company.
PRODUCT DEVELOPMENT
The Company believes that its future success will depend in large part on
its ability to enhance BroadVision One-To-One, develop new products, maintain
technological leadership, and satisfy an evolving range of customer requirements
for large-scale interactive online marketing and selling applications. The
Company's product development organization is responsible for product
architecture, core technology, product testing and quality assurance, writing
product user documentation, and expanding the ability of BroadVision One-To-One
to operate with the leading hardware platforms, operating systems, database
management systems, and key electronic commerce transaction processing
standards.
The Company is currently developing the following three products, all of
which are currently scheduled to be commercially available in late 1996:
-BroadVision One-To-One application system, version 2.0. Key features of
version 2.0 are expected to include point-and-click application building
capabilities, improved content targeting, and enhanced system performance.
This product is currently in development.
-A taxonomy modeling and matching product that will enable online services
and Internet publishers to dynamically match Web content with profile data.
This product is currently in beta testing.
-A consumer online service that will deliver proactive, personalized Web
information directly to consumers who register at a specified BroadVision
Web site address. This product is currently in beta testing.
Since inception, the Company has made substantial investments in product
development and related activities. Certain technologies have been acquired and
integrated into BroadVision One-To-One through licensing arrangements. As of
April 16, 1996, there were 32 employees in the Company's product development
organization. The Company's research and development expenditures in 1994 and
1995 were $748,000 and $2.2 million, respectively. To date, the Company has not
capitalized any software development costs. The Company expects to continue to
devote substantial resources to its product development activities.
The information services, software, and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and emerging
industry standards. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices can
render existing products and
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<PAGE>
services obsolete and unmarketable. The Company's future success will depend, in
part, on its ability to develop leading technologies, enhance its existing
products and services, develop new products and services that address the
increasingly sophisticated and varied needs of its prospective customers, and
respond to technological advances and emerging industry standards and practices
on a timely and cost-effective basis. There can be no assurance that the Company
will be successful in effectively using new technologies, adapting its products
to emerging industry standards, developing, introducing, and marketing product
and service enhancements, or new products and services, or that it will not
experience difficulties that could delay or prevent the successful development,
introduction, or marketing of these products and services, or that its new
product and service enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. If the Company is unable, for
technical or other reasons, to develop and introduce new products and services
or enhancements of existing products and services in a timely manner in response
to changing market conditions or customer requirements, or if new products and
services do not achieve market acceptance, the Company's business, financial
condition, and operating results will be materially adversely affected.
The statements made herein regarding scheduled release dates for the
Company's products under development and proposed enhancements are
forward-looking statements, and the actual release dates for such products or
enhancements could differ materially from those projected as a result of a
variety of factors, including the ability of the Company's engineers to solve
technical problems and to test products, business priorities in light of the
availability of development and other resources, and other factors, including
some factors which may be outside the control of the Company, as well as the
factors discussed in "Risk Factors."
COMPETITION
The market for online interactive marketing and selling applications is new,
rapidly evolving, and intensely competitive. The Company expects competition to
persist and intensify in the future. The Company's current and potential
competitors are expected to include other vendors of application software
directed at interactive commerce, Web content developers engaged to develop
custom software or to integrate other application software into custom
solutions, and companies developing their own end-to-end solutions in-house.
The Company has experienced and expects to continue to experience increased
competition. The Company currently encounters direct competition from Connect,
Netscape, and OMI, among others. In addition, Microsoft has also announced its
intention to offer Internet-based electronic commerce software. Many of these
competitors have longer operating histories, and significantly greater
financial, technical, marketing, and other resources than the Company 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 greater name recognition and more extensive customer bases that
could be leveraged, thereby gaining market share to the Company's detriment.
Such competitors may be able to undertake more extensive promotional activities,
adopt more aggressive pricing policies and offer more attractive terms to
purchasers than the Company. Moreover, certain of the Company's current and
potential competitors, such as Netscape and Microsoft, are likely to bundle
their products in a manner that may discourage users from purchasing products
offered by the Company.
The Company has also experienced competition from third-party developers,
such as Web content developers, as well as from in-house development efforts by
potential customers or partners, both of which represent significant competition
for the Company's products. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to enhance their products. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
The principal competitive factors affecting the market for BroadVision
One-To-One are depth and breadth of functionality offered, ease of application
development, time required for application development, reliance on industry
standards, reliability, scalability, product quality, price, and customer
support. The Company believes it presently competes favorably with respect to
each of these factors. However, the Company's market is still evolving, and
there can be no assurance that the Company will be able to compete successfully
with current or future competitors, or that competitive pressures faced by the
Company will not have a material adverse effect on the Company's business,
financial condition, and operating results.
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INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success and ability to compete are dependent to a significant
degree on its proprietary technology. The Company relies primarily on copyright,
trade secret, and trademark law to protect its technology. The Company has no
patents. The Company has applied for a United States patent with respect to
certain aspects of the BroadVision One-To-One application system, but there can
be no assurance that a patent will be granted pursuant to the application or
that, if granted, such patent would survive a legal challenge to its validity or
provide significant protection. Likewise, effective trademark protection may not
be available for the Company's marks. For example, the Company has applied to
register "BroadVision One-To-One" as a trademark with respect to the BroadVision
One-To-One application system, but there can be no assurance that the Company
will be able to secure trademark registration or other significant protection
for this product name. It is possible that competitors of the Company or others
will adopt product names similar to "One-To-One," thereby impeding the Company's
ability to build brand identity and possibly leading to customer confusion. The
source code for the Company's proprietary software is protected both as a trade
secret and as a copyrighted work. The Company's policy is to enter into
confidentiality and assignment agreements with its employees, consultants, and
vendors and generally to control access to and distribution of its software,
documentation, and other proprietary information. Notwithstanding these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's software or other proprietary information without
authorization or to develop similar software independently. Policing
unauthorized use of the Company's products is difficult, particularly because
the global nature of the Internet makes it difficult to control the ultimate
destination or security of software or other data transmitted. The laws of other
countries may afford the Company little or no effective protection of its
intellectual property. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technology or that agreements
entered into for that purpose will be enforceable. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation, whether successful or unsuccessful,
could result in substantial costs and diversions of resources, either of which
could have a material adverse effect on the Company's business, financial
condition, and operating results.
The Company may, in the future, receive notices of claims of infringement of
other parties' trademark, copyright, and other proprietary rights. Although, to
date, the Company has not received any such notices, there can be no assurance
that claims for infringement or invalidity (or claims for indemnification
resulting from infringement claims) will not be asserted or prosecuted against
the Company. In particular, claims could be asserted against the Company for
violation of trademark, copyright, or other laws as a result of the use by the
Company, its customers, or other third parties of the Company's products to
transmit, disseminate, or display information over or on the Internet. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays, or require the Company to enter into royalty or licensing
agreements. There can be no assurance that such licenses would be available on
reasonable terms, if at all, and the assertion or prosecution of any such claims
could have a material adverse effect on the Company's business, financial
condition, and operating results.
Some of the Company's agreements with its customers contain provisions
requiring release of source code for limited, non-exclusive use by the customer
in the event that there is a bankruptcy proceeding by or against the Company, if
the Company ceases to do business or if the Company fails to meet its
contractual obligations. The provision of source code may increase the
likelihood of misappropriation by third parties.
The Company relies upon certain software that it licenses from third
parties, including RDBMSs from Oracle and Sybase, object request broker software
from IONA, and other software which is integrated with internally developed
software and used in the Company's software to perform key functions. In this
regard, all of the Company's services incorporate data encryption and
authentication technology licensed from RSA. The Company is aware of a dispute
between Cylink and RSA in which Cylink alleges that license agreements between
RSA and its customers, including the Company, relating to certain RSA software
conflict with rights held by Cylink. RSA has advised its customers that the
allegations of Cylink are unfounded. RSA and Cylink have completed an
arbitration proceeding of the dispute. RSA has taken the position that it
prevailed on all material issues, and that its licenses, including the license
to the Company, are valid and unaffected by the
43
<PAGE>
arbitration decision. Cylink has taken the position that the arbitration
decision may require RSA licensees, including the Company, to obtain an
additional license of certain patents controlled by Cylink. RSA has maintained
that no such additional license is required and has instituted a lawsuit against
Cylink to bar Cylink from claiming otherwise. The Company is unable to ascertain
the validity of Cylink's allegations or whether or not the arbitration decision
may require the Company to obtain any additional license. In the Company's
license agreement with RSA, RSA has agreed to defend, indemnify, and hold the
Company harmless with respect to any claim by a third party that the licensed
software infringes any patent or other proprietary right. Although the Company's
license is fully paid, there can be no assurance that the outcome of the dispute
between RSA and Cylink will not lead to royalty obligations by the Company for
which RSA is unwilling or unable to indemnify the Company, or that the Company
would be able to obtain any additional license on commercially reasonable terms
or at all. There can also be no assurance that the Company's other third-party
technology licenses will continue to be available to the Company on commercially
reasonable terms, if at all. The loss or inability to maintain any of these
technology licenses could result in delays in introduction of the Company's
products and services until equivalent technology, if available, is identified,
licensed, and integrated, which could have a material adverse effect on the
Company's business, financial condition, and operating results.
EMPLOYEES
As of April 16, 1996, the Company had 79 employees and nine full-time or
nearly full-time contractors, including 32 in product development, 49 in sales
and marketing and related customer support services, and seven in
administration. Of these employees, 76 were located in the United States, six in
Europe, and six in the Pacific Rim countries. The Company believes that its
future success is dependent on attracting and retaining highly skilled
engineering, sales and marketing, and senior management personnel. Competition
for such personnel is intense, and there can be no assurance that the Company
will continue to be able to attract and retain high-caliber employees. The
Company's employees are not represented by any collective bargaining unit. The
Company has never experienced a work stoppage and considers its relations with
its employees to be good.
FACILITIES
The Company's principal administrative, sales, marketing, and product
development facility occupies approximately 16,000 square feet in Los Altos,
California pursuant to a lease that expires in June 2000. The Company maintains
additional operations in Switzerland, France, the United Kingdom, Japan, and
Singapore. Although the Company believes that its existing principal facility is
adequate for its current requirements, the Company intends to relocate to a
larger facility in the near future. While a new facility has not yet been
identified by the Company, the Company believes that additional space can be
obtained to meet its future requirements.
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MANAGEMENT
DIRECTORS, OFFICERS, AND KEY PERSONNEL
The directors, officers, and key personnel of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Pehong Chen............................... 38 Chief Executive Officer, Chairman, President, and Director
Randall C. Bolten......................... 43 Chief Financial Officer and Vice President, Operations
Clark W. Catelain......................... 48 Vice President, Engineering
Mark D. Goros............................. 45 Vice President, Business Development and General Manager of
American Operations
Rani M. Hublou............................ 31 General Manager of Consumer Services
Giuseppe Kobayashi........................ 40 Vice President and General Manager of Japan/Asia-Pacific
Operations
Robert A. Runge........................... 41 Vice President, Marketing
Francois Stieger.......................... 47 Vice President and General Manager of European Operations
Kenneth L. Guernsey....................... 44 Secretary
David L. Anderson(1)(2)................... 52 Director
Yogen K. Dalal(2)......................... 46 Director
Gregory Smitherman(1)..................... 32 Director
Koh Boon Hwee(2).......................... 45 Director
</TABLE>
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
PEHONG CHEN has served as President, Chairman, Chief Executive Officer, and
a director of the Company since its incorporation in May 1993. From 1992 to
1993, Dr. Chen served as the Vice President of Multimedia Technology at Sybase,
a supplier of client-server software products. From 1989 to 1992, Dr. Chen
served as President of Gain Technology, a provider of multimedia applications
development systems ("Gain"), which was acquired by Sybase. He received a B.S.
in Computer Science from National Taiwan University, an M.S. in Computer Science
from Indiana University, and a Ph.D. in Computer Science from the University of
California at Berkeley.
RANDALL C. BOLTEN has served as Chief Financial Officer and Vice President,
Operations, of the Company since September 1995. From 1994 to 1995, Mr. Bolten
served as a financial consultant to various entrepreneurial enterprises. From
1992 to 1994, Mr. Bolten served as the Chief Financial Officer of BioCAD
Corporation, a supplier of drug discovery software products. From 1990 to 1992,
Mr. Bolten served as Chief Financial Officer, Business Development Unit, and
then Vice President, Finance, of Teknekron Corporation, a company engaged in the
management of various high technology companies. He received an A.B. in
Economics from Princeton University and an M.B.A. from Stanford University.
CLARK W. CATELAIN has served as Vice President, Engineering, of the Company
since June 1995. From 1989 to May 1995, Mr. Catelain served as the Senior Vice
President, Engineering of Gupta Corporation, a supplier of client/server
database products. Mr. Catelain received a B.S. in Mathematics and Computer
Science from Purdue University.
MARK D. GOROS has served as Vice President, Business Development, and
General Manager of American Operations of the Company since September 1994. From
April 1992 to September 1994, Mr. Goros served as East Coast Manager of Sybase.
From September 1990 to April 1992, Mr. Goros served as Vice President,
45
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Business Development and Marketing, of Techgnosis Incorporated USA, a provider
of cross-platform data access technology for client/server environments. He
received a B.S. in Computer Science from Bowling Green State University.
RANI M. HUBLOU has served as General Manager, Consumer Services, of the
Company since September 1995. From June 1994 to August 1995, Ms. Hublou served
as Director, Online Product Development and Director, Technical Operations, at
Interactive Video Enterprises, a developer of multimedia products. From 1993 to
1994, Ms. Hublou served as Strategy Consultant at Rebuild LA, a nonprofit
organization focused on economic development in Los Angeles. From 1990 to 1993,
Ms. Hublou was an Associate at McKinsey & Company, a strategy consulting firm.
She received a B.A. and an M.A. in Industrial Engineering from Stanford
University.
GIUSEPPE P. KOBAYASHI has served as Vice President and General Manager of
Japan/Asia-Pacific of the Company since January 1995. From 1994 to the present,
Mr. Kobayashi has also served as consultant to Wind River Systems, Inc., a
supplier of software development systems. During 1993, Mr. Kobayashi was General
Manager, Japan Operations, Gain Group at Sybase. During 1992, Mr. Kobayashi was
General Manager of Operations at Gain. From 1990 to 1992, Mr. Kobayashi served
as Managing Director of Asia Pacific Operations at Teradata Corporation, a
supplier of database software. Mr. Kobayashi holds a B.S. in Computer Science
from the University of San Francisco.
ROBERT A. RUNGE has served as Vice President, Marketing, of the Company
since September 1995. From September 1992 to September 1995, Mr. Runge was
employed at Sybase as Director of Product Marketing. From November 1990 to
September 1992, Mr. Runge served as Director of Product Marketing at Gain. From
1989 to 1990, Mr. Runge served as Director of Education Services at Oracle. He
received a B.A. in Germanic Languages and Literature, a B.F.A. in Graphic Design
and an M.B.A. from the University of Illinois.
FRANCOIS STIEGER has served as Vice President and General Manager of
European Operations of the Company since January 1996. From July 1994 to
December 1995, Mr. Stieger was employed as Senior Vice President, Europe and
Middle East, for OpenVision Technologies, a supplier of distributed systems
management products and services. From 1993 to 1994, Mr. Stieger served as Vice
President, Europe of the Gain Division of Sybase. From 1987 to 1992, Mr. Stieger
served as Vice President, Europe, Central and Southern Region of Oracle, a
supplier of relational database software. Mr. Stieger holds a Diplome
Universitaire De Technologie in Mathematics and Mechanics from the University of
Strasbourg.
KENNETH L. GUERNSEY has served as Secretary of the Company since May 1995.
From May 1988 to the present, Mr. Guernsey has been a partner in the law firm of
Cooley Godward Castro Huddleson & Tatum, where he is currently the Managing
Partner. Mr. Guernsey received a B.S. in Mathematics, an M.B.A., and a J.D. from
the University of California at Los Angeles.
DAVID L. ANDERSON has served as a director of the Company since November
1993. Since 1974, Mr. Anderson has been a general partner of Sutter Hill
Ventures, a California Limited Partnership, a venture capital firm. Mr. Anderson
currently serves on the Board of Directors of Cytel Corporation, Dionex
Corporation, Molecular Devices Corporation, and Neurex Corporation. He holds a
B.S. in Electrical Engineering from the Massachusetts Institute of Technology
and an M.B.A. from Harvard University.
YOGEN K. DALAL has served as a director of the Company since November 1993.
He joined Mayfield Fund ("Mayfield"), a venture capital firm, in September 1991
and has been a general partner of several venture capital funds affiliated with
Mayfield since November 1992. Dr. Dalal currently serves on the Board of
Directors of The Vantive Corporation. He holds a B.S. in Electrical Engineering
from the India Institute of Technology, Bombay, and an M.S. and a Ph.D. in
Electrical Engineering and Computer Science from Stanford University.
GREGORY SMITHERMAN has served as a director of the Company since August
1995. Mr. Smitherman has been Director of Venture Capital at Ameritech
Development Corp., a venture capital subsidiary of Ameritech Corp., since 1990.
Mr. Smitherman holds a B.S. in Areospace Engineering from the University of
Michigan and an M.B.A. from the University of Chicago.
46
<PAGE>
KOH BOON HWEE has served as a director of the Company since February 1996.
Since 1991, Mr. Koh has been Executive Chairman of the Wuthelam Group of
Companies, a diversified Singapore company with subsidiaries engaged in, among
other things, real estate development, hotel management, and high technology.
Since 1992, he has also served as Chairman of the Board of Singapore
Telecommunications, Ltd. Mr. Koh holds a B.S. in Mechanical Engineering from the
University of London and an M.B.A. from Harvard University.
All directors currently hold office until the next annual meeting of
stockholders and until their successors have been elected and duly qualified.
Mr. Smitherman is serving as a director pursuant to an agreement with the
Company entered into in connection with the Company's Series C Preferred Stock
financing. Such agreement will expire upon the completion of this offering. Each
officer serves at the discretion of the Board of Directors. There are no family
relationships among any of the directors or officers of the Company.
BOARD COMMITTEES
The Audit Committee of the Board of Directors was formed in April 1996 to
review the internal accounting procedures of the Company and consult with and
review the services provided by the Company's independent public accountants.
The Audit Committee is composed of David L. Anderson and Gregory Smitherman. The
Compensation Committee of the Board of Directors was formed in April 1996 to
review and recommend to the Board the compensation and benefits of all officers
of the Company and review general policy relating to compensation and benefits
of employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's Equity Incentive
Plan. The Compensation Committee is composed of David L. Anderson, Yogen K.
Dalal and Koh Boon Hwee.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from the Company
for their services as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings.
In February 1996, Dr. Chen was granted an option to purchase up to 500,000
shares of Series D Preferred Stock of the Company at an exercise price of $4.00
per share. Upon the completion of this offering, this option will convert into
an option to purchase Common Stock. The shares subject to Dr. Chen's option vest
ratably on a monthly basis over a 60-month period commencing April 1, 1995. In
February 1996, Mr. Koh was granted an option to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $0.80 per share. The shares
subject to Mr. Koh's option vest over a 60-month period, commencing on February
1, 1996, with 20% of such shares vesting after one year, and 1/60 of the shares
vesting each month thereafter for the next 48 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Company did not have a Compensation Committee of the Board
of Directors, and the entire Board participated in all compensation decisions,
except that Dr. Chen, a director and the President and Chief Executive Officer
of the Company, did not participate in decisions relating to his own
compensation. In April 1996, the Board of Directors appointed the Compensation
Committee. No member of the Compensation Committee was, at any time during the
fiscal year ended December 31, 1995, or at any other time, an officer or
employee of the Company. Each of the Company's directors, or an affiliated
entity, has purchased securities of the Company. See "Certain Transactions" and
"Principal Stockholders."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to or earned by the
Company's Chief Executive Officer and the other executive officers, including
one former executive officer, whose combined salary and bonus for 1995 were in
excess of $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION (2) -------------
------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) COMPENSATION ($)(3) OPTIONS (#)
- ------------------------------------------------------- ---------- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
Pehong Chen (4) ....................................... $ 106,664 -- -- --
President and Chief Executive Officer
Mark D. Goros ......................................... 139,156 $ 9,400 $ 19,000 100,000
Vice President, Business Development
and General Manager of American Operations
Carl N. Dellar (5) .................................... 106,375 -- -- --
Former Vice President, Engineering
</TABLE>
- ------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance, or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company, and certain perquisites and other personal benefits received
by the Named Executive Officers which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table.
(2) Includes amounts earned but deferred at the election of the Named Executive
Officer under the Company's 401(k) plan.
(3) Consists of relocation payments.
(4) Amount shown represents salary earned, but deferred at the election of Dr.
Chen, from May 1995 through December 1995. Prior to May 1995, Dr. Chen was
not paid a salary for his services to the Company.
(5) Mr. Dellar, who is no longer with the Company, served as Vice President of
Engineering through March 1995. Amount shown represents payment for services
rendered as Vice President of Engineering and as a consultant during 1995,
as well as other amounts paid in connection with his termination of
employment with the Company.
STOCK OPTION INFORMATION
The following table shows, for 1995, certain information regarding options
granted to, exercised by and held at year end by the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE OR APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE OPTION TERMS ($)(4)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR (%)(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ------------------------------------ ------------- ------------------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mark D. Goros....................... 100,000 5.2% $ 0.06 3/23/05 $ 3,774 $ 9,562
</TABLE>
- ------------
(1) The option, which was granted under the Company's Stock Option Plan (which
was later amended and restated as the Equity Incentive Plan), has a term of
10 years, subject to earlier termination in certain
48
<PAGE>
events related to termination of employment. The option is immediately
exercisable and vests over a 60-month period, with 20% of the shares vesting
after one year, and 1/60 of the shares vesting each month for the next 48
months.
(2) Based on options to purchase 1,936,000 shares granted to employees of the
Company in 1995.
(3) The option was granted at an exercise price equal to the fair market value
as determined by the Board of Directors of the Company on the date of grant.
(4) The potential realizable value is calculated based on the term of the option
at the date of grant (10 years) and is calculated by assuming that the stock
price on the date of grant as determined by the Board of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last day
of its term for the appreciated price. The 5% and 10% assumed rates of
appreciation are derived from the rules of the Commission and do not
represent the Company's estimate or projection of the future Common Stock
price.
The following table sets forth certain information concerning the number and
value of unexercised stock options held as of December 31, 1995 for each of the
Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 (#)(2) DECEMBER 31, 1995($)(2)(3)
-------------------------- --------------------------
NAME (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark D. Goros..................................... 75,000(3) 225,000 $ 670,500 $ 2,011,500
</TABLE>
- ------------
(1) Neither Dr. Chen nor Mr. Dellar held options to purchase shares of the
Company's stock as of December 31, 1995, and none of the Named Executive
Officers exercised stock options in 1995.
(2) Reflects vested and unvested shares at December 31, 1995. Options granted
under the Company's Equity Incentive Plan are immediately exercisable, but
are subject to the Company's right to repurchase unvested shares on
termination of employment.
(3) There was no public trading market for the Common Stock as of December 31,
1995. Accordingly, these values have been calculated, in accordance with the
rules of the Commission, on the basis of an assumed initial public offering
price of $9.00 per share minus the applicable exercise price per share.
EMPLOYEE BENEFIT PLANS
EQUITY INCENTIVE PLAN. The Company's Equity Incentive Plan (the "Incentive
Plan") was adopted by the Board of Directors in April 1996, subject to
stockholder approval, as an amendment and restatement of the Company's Stock
Option Plan. There are currently 5,000,000 shares of Common Stock authorized for
issuance under the Incentive Plan.
The Incentive Plan provides for the grant of stock options under the
Internal Revenue Code of 1986, as amended (the "Code"), to employees (including
officers and employee-directors) and nonstatutory stock options, restricted
stock purchase awards, and stock bonuses to employees (including officers and
employee-directors) and consultants of the Company. Prior to this offering,
non-employee directors were also eligible to receive awards under the Incentive
Plan. The Incentive Plan is presently being administered by the Board of
Directors, which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof. After the completion of this offering, the Incentive
Plan may be administered by the Compensation Committee of the Board of
Directors, and references herein to the Board of Directors will be deemed
references to the Compensation Committee.
The terms of stock options granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors, but, in the case of a nonstatutory
stock option, cannot be less than 85% of the fair market value of the Common
Stock on the
49
<PAGE>
date of the option grant. In the case of an incentive stock option, the exercise
price cannot be less than 100% of the fair market value of the Common Stock on
the date of grant. Options granted under the Incentive Plan to employees have
generally provided for vesting of 20% of the shares subject to the option on the
first anniversary of the date of hire and 1/60th of such shares monthly
thereafter. No stock option may be transferred by the optionee other than by
will or the laws of descent or distribution or, in certain limited instances,
pursuant to a qualified domestic relations order. An optionee whose relationship
with the Company or any related corporation ceases for any reason (other than by
death or permanent and total disability) may exercise options in the three-month
period following such cessation (unless such options terminate or expire sooner
by their terms) or in such longer period as may be determined by the Board of
Directors.
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant, and the term of the option
does not exceed five years from the date of grant. The aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year (under all such plans of the Company and
its affiliates) may not exceed $100,000.
When the Company becomes subject to Section 162(m) of the Code (which denies
a deduction to publicly held corporations for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000 for any covered employee), no person may be granted options
under the Incentive Plan covering more than 700,000 shares of Common Stock in
any calendar year.
Shares subject to options that have lapsed or terminated again become
available for the grant of options under the Incentive Plan. Furthermore, the
Board of Directors may offer to exchange new options for existing options, with
the shares subject to the existing options again becoming available for grant
under the Incentive Plan. In the event of a decline in the value of the
Company's Common Stock, the Board of Directors has the authority to offer
optionees the opportunity to replace outstanding higher priced options with new
lower priced options.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a service vesting schedule and at a price determined by the Board of
Directors. Stock bonuses may be awarded in consideration of past services
without a purchase payment. Rights under a stock bonus or restricted stock bonus
agreement may not be transferred other than by will, the laws of descent and
distribution, or a qualified domestic relations order, while the stock awarded
pursuant to such an agreement remains subject to the agreement.
Upon certain changes in control of the Company, all outstanding awards under
the Incentive Plan shall either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
awards, and with respect to persons then performing services as employees,
directors, or consultants, the time during which such awards may be exercised
will be accelerated and the awards terminated if not exercised prior to such
change in control.
As of April 16, 1996, 1,373,109 shares of Common Stock had been issued upon
the exercise of options granted under the Incentive Plan, options to purchase
1,827,558 shares of Common Stock at a weighted average exercise price of $0.80
were outstanding and 1,799,333 shares remained available for future grant. The
Incentive Plan will terminate on April 16, 2006 unless sooner terminated by the
Board of Directors. As of April 16, 1996, no stock bonuses or restricted stock
had been granted under the Incentive Plan.
STOCK OPTIONS GRANTED OUTSIDE OF THE INCENTIVE PLAN. The Company has from
time to time granted nonstatutory options outside of the Incentive Plan
("Non-plan Options") to purchase shares of Common Stock to certain directors,
officers, and key employees of and consultants to the Company. As of April 16,
1996, Non-plan Options had been granted to a total of 10 persons and entities,
eight of whom received options containing performance-based vesting provisions.
The performance-based stock options vest in their entirety on the ninth
anniversary of the date of grant; however, if the optionees achieve certain
performance objectives, the vesting of the options may be accelerated by the
President of the Company acting in his discretion. As of April 16, 1996,
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<PAGE>
20,000 shares of Common Stock had been issued upon the exercise of Non-plan
Options, and Non-plan Options to purchase 693,000 shares at a weighted average
exercise price of $3.29 per share were outstanding, including the shares subject
to stock options held by Dr. Chen and Mr. Koh. See "Management -- Director
Compensation" and "Legal Matters."
EMPLOYEE STOCK PURCHASE PLAN. In April 1996, the Company's Board of
Directors approved the 1996 Employee Stock Purchase Plan (the "Purchase Plan")
covering an aggregate of 600,000 shares of Common Stock. The Purchase Plan will
become effective upon the completion of this offering and is intended to qualify
as an employee stock purchase plan within the meaning of Section 423 of the
Code. Under the Purchase Plan, the Board of Directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Purchase Plan. The offering period for any
offering, with the exception of the initial offering period, will typically be
no more than 12 months.
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board of Directors. Employees who
participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan and applied, on specified dates determined by the
Board of Directors, to the purchase of shares of Common Stock. The price of
Common Stock purchased under the Purchase Plan will be equal to 85% of the fair
market value of the Common Stock on (i) the commencement date of each offering
period or (ii) the relevant purchase date, whichever is lower. Employees may end
their participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
In addition to the ongoing purchases of Common Stock under the Purchase
Plan, the Board of Directors has authorized the grant to eligible employees of
rights to purchase an aggregate of approximately 30,000 shares of Common Stock,
at a price equal to 85% of (i) the price per share at which shares of the Common
Stock are first sold to the public in this offering, as specified on the cover
page of this Prospectus, or (ii) the fair market value of the Common Stock on
the applicable purchase date, whichever is lower. These rights will be first
exercisable by each participating employee approximately one year after the
effective date of the grant, and will terminate if not exercised on the earlier
of termination of employment or approximately two years after the effective date
of the grant.
In the event of a merger, consolidation, dissolution, or liquidation
involving the Company in which the Company is not a surviving corporation, or
the acquisition of beneficial ownership of at least 50% of the combined voting
power of the Company by any person, entity, or group (excluding Company employee
benefit plan ownership), the Board of Directors has discretion to provide that
each right to purchase Common Stock will be assumed or an equivalent right
substituted by the successor corporation, or the Board may shorten the offering
period and provide for all sums collected by payroll deductions to be applied to
purchase stock immediately prior to such merger or other transaction. The
Purchase Plan will terminate at the Board's direction. The Board has the
authority to amend or terminate the Purchase Plan, subject to the limitation
that no such action may adversely affect any outstanding rights to purchase
Common Stock.
401(K) PLAN. In 1994, the Company adopted a tax qualified employee savings
and retirement plan (the "401(k) Plan") under which eligible employees may elect
to defer their current compensation by up to certain statutorily prescribed
annual limits ($9,500 in 1996) and to contribute such amount to the 401(k) Plan.
The 401(k) Plan permits, but does not require, additional matching contributions
to the 401(k) Plan by the Company on behalf of all participants in the 401(k)
Plan. To date, the Company has not made any such contributions. The 401(k) Plan
is intended to qualify under Section 401 of the Code, so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on the 401(k)
Plan contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the 401(k) Plan employee salary deferrals in selected
investment options.
51
<PAGE>
CERTAIN TRANSACTIONS
From the Company's inception in May 1993 through March 1996, the Company
sold 4,266,667 shares of its Series A Preferred Stock at a price of $0.60 per
share, 1,333,333 shares of its Series B Preferred Stock at a price of $1.25 per
share and 3,003,600 shares of its Series C Preferred Stock at a price of $2.00
per share, in a series of private financings. In April 1996, the Company sold
634,375 shares of its Series E Preferred Stock at a price of $8.00 per share, in
a private financing. The Company sold these securities pursuant to preferred
stock purchase agreements and an investors' rights agreement on substantially
similar terms (except for terms relating to date and price), under which the
Company made standard representations, warranties, and covenants, and which
provided the purchasers thereunder with registration rights, information rights,
and rights of first refusal, among other provisions standard in venture capital
financings. In addition, holders of the Series C Preferred Stock and Series E
Preferred Stock received certain co-sale rights with respect to shares of Common
Stock held by Dr. Chen. Each share of Preferred Stock will convert into one
share of Common Stock upon the completion of this offering. The purchasers of
the Preferred Stock included, among others, the following holders of 5% or more
of the Company's Common Stock, directors, and entities associated with
directors:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK PURCHASED
---------------------------------------------
INVESTOR SERIES A SERIES B SERIES C SERIES E
- ------------------------------------------------------------------ ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
Mayfield VII, a California Limited Partnership (1)................ 1,910,000 237,500 237,500 --
Mayfield Associates Fund II, a California Limited
Partnership (1).................................................. 90,000 12,500 12,500 --
Sutter Hill Ventures, a California Limited Partnership (2)........ 1,941,974 242,747 242,747 --
Itochu Corporation................................................ -- 800,000 750,000(4) --
Ameritech Development Corporation (3)............................. -- -- 750,000 --
Koh Boon Hwee..................................................... 52,900 6,608 19,600 62,500(5)
</TABLE>
- ------------
(1) Yogen K. Dalal, a director of the Company, is a general partner of Mayfield
Associates Fund II and a general partner of the general partner of Mayfield
VII.
(2) Includes shares of Common Stock held of record by the general partners of
the general partner of Sutter Hill Ventures, a California Limited
Partnership ("Sutter Hill") and their related family entities. David L.
Anderson, a director of the Company, is a general partner of the general
partner of Sutter Hill.
(3) Gregory Smitherman, a director of the Company, is Director of Venture
Capital at Ameritech Development Corp.
(4) Includes 500,000 shares held by Itochu International, Inc. and 125,000
shares held by Itochu Techno-Science Corporation.
(5) Represents shares held by Seven Seas Group Ltd., in which Mr. Koh holds a
controlling interest.
In July 1993, the Company sold 4,000,000 shares of Common Stock to Dr. Chen
at a price of $0.005 per share. In October 1993, the Company sold 1,700,000
shares of Common Stock to Dr. Chen at a price of $0.02 per share. In November
1993, Dr. Chen entered into an agreement with the Company subjecting 3,700,000
of Dr. Chen's shares of Common Stock to vesting and granting the Company a right
to repurchase any unvested shares in the event that Dr. Chen ceased to be
employed by the Company at any time prior to November 1997. In November 1993,
Dr. Chen also became a party to the Investors' Rights Agreement among the
Company and certain of its stockholders whereby the Company granted such
stockholders certain registration, information, and other rights.
In February 1996, Dr. Chen was granted an option to purchase 500,000 shares
of Series D Preferred Stock of the Company at an exercise price of $4.00 per
share. The shares subject to Dr. Chen's option vest ratably on a monthly basis
over a 60-month period commencing April 1, 1995. Upon the completion of this
offering, this option will convert into an option to purchase Common Stock.
52
<PAGE>
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
The Restated Certificate and Restated Bylaws contain certain provisions
relating to the limitation of liability and indemnification of directors and
officers. The Restated Certificate provides that directors of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for any breach of fiduciary duty as a director, except for liability (i) for any
breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derives any improper personal benefit. The
Restated Certificate also provides that if the Delaware General Corporation Law
is amended after the approval by the Company's stockholders of the Restated
Certificate to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of the Company's directors
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. In addition, the Company's Restated Bylaws
provide that the Company shall indemnify its directors to the fullest extent
permitted by Delaware law, subject to certain limitations, and may also secure
insurance, again to the fullest extent permitted by Delaware law, on behalf of
any person required or permitted to be indemnified pursuant to the Restated
Bylaws.
The Company has entered into indemnity agreements with each of the Company's
directors. The form of indemnity agreement provides that the Company will
indemnify against expenses and losses incurred for claims brought against them
by reason of their status as a director, to the fullest extent permitted by the
Company's Restated Bylaws and Delaware law.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 16, 1996, after giving
effect to the conversion of all shares of Preferred Stock into shares of Common
Stock, which will occur automatically upon the completion of this offering, and
as adjusted to reflect the sale of Common Stock offered hereby for (i) each
stockholder who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each Named Executive Officer, (iii) each director of the
Company, and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED (1) OFFERING OFFERING (2)
- ----------------------------------------------------------------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Pehong Chen (3) ............................................................. 6,160,000 36.0% 29.2%
c/o BroadVision, Inc.
333 Distel Circle
Los Altos, CA 94022
Mayfield VII (4) ............................................................ 2,500,000 15.1 12.1
2800 Sand Hill Road
Menlo Park, CA 94025
Sutter Hill Ventures, a California Limited Partnership (5) .................. 2,427,468 14.6 11.8
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Itochu Corporation (6) ...................................................... 1,550,000 9.3 7.5
5-1, Kita-Aoyama, 2-Chome
Minao-ku, Tokyo 107-77
Japan
David L. Anderson (5) ....................................................... 2,427,468 14.6 11.8
Yogen K. Dalal (4) .......................................................... 2,500,000 15.1 12.1
Koh Boon Hwee (7) ........................................................... 191,608 1.2 *
Gregory Smitherman (8) ...................................................... 750,000 4.5 3.6
Mark D. Goros (9) ........................................................... 300,100 1.8 1.4
Carl N. Dellar (10) ......................................................... 204,800 1.2 1.0
All Directors and Executive Officers as a group (8 persons) (11) ............ 12,401,596 71.6 58.2
</TABLE>
- ------------
* Less than 1%
(1)Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, the Company believes, based on information
furnished by such persons, that the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 16,599,484 shares of Common Stock outstanding as of April 16, 1996
and 20,599,484 shares of Common Stock outstanding after the completion of
this offering. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options held by that person that are exercisable within 60 days
are deemed outstanding. Such shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(2)Assumes no exercise of the Underwriters' over-allotment option.
54
<PAGE>
(3)Includes 300,000 shares of Common Stock held in trust by independent
trustees for the benefit of Dr. Chen's children. Dr. Chen disclaims
beneficial ownership of such shares. Also includes 500,000 shares of Common
Stock issuable upon the exercise of stock options exercisable within 60 days
of April 16, 1996, subject to repurchase of unvested shares.
(4)Includes 2,385,000 shares held by Mayfield VII and 115,000 shares held by
Mayfield Associates Fund II. Mr. Dalal, a director of the Company, is a
general partner of the general partner of Mayfield VII, and Mayfield
Associates Fund II, and therefore may be deemed to beneficially own the
shares currently owned by such entities. Mr. Dalal disclaims beneficial
ownership of the shares held by such entities, except to the extent of his
pecuniary interest therein.
(5)Includes 1,547,722 shares of Common Stock owned by Sutter Hill Ventures, a
California Limited Partnership ("Sutter Hill"), over which Mr. Anderson, a
director of the Company, shares voting and investing power with four other
general partners of Sutter Hill Management Company, L.P., the general
partner of Sutter Hill. Includes 879,746 shares of Common Stock held of
record by the five general partners of Sutter Hill Management Company, L.P.
and their related family entities. Mr. Anderson disclaims beneficial
ownership of the shares of Common Stock held by the other persons and
entities associated with Sutter Hill, except to the extent of his pecuniary
interest therein.
(6)Includes 925,000 shares of Common Stock held by Itochu Corporation, 500,000
shares of Common Stock held by Itochu International, Inc. and 125,000 shares
of Common Stock held by Itochu Techno-Science Corporation.
(7)Includes 62,500 shares held by Seven Seas Group Ltd., in which Mr. Koh holds
a controlling interest, and 50,000 shares of Common Stock issuable upon
exercise of stock options that are exercisable within 60 days of April 16,
1996, subject to repurchase of unvested shares.
(8)Includes 750,000 shares of Common Stock held by Ameritech Development
Corporation. Mr. Smitherman, a director of the Company, is Director of
Venture Capital at Ameritech Development Corporation and may be deemed to
share voting and investment power with respect to the shares held by such
corporation. Mr. Smitherman disclaims beneficial ownership of such shares.
(9)Includes 300,000 shares of Common Stock issuable upon the exercise of stock
options that are exercisable within 60 days of April 16, 1996, subject to
repurchase of unvested shares.
(10)No longer associated with the Company.
(11)Includes the information contained in the notes above, as applicable. Also
includes 725,000 shares of Common Stock issuable upon exercise of stock
options that are exercisable within 60 days, subject to repurchase of
unvested shares.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock, par value $0.0001 per share ("Preferred Stock").
COMMON STOCK
As of April 16, 1996, there were 16,599,484 shares of Common Stock
(including shares of Preferred Stock that will be converted into Common Stock
upon completion of this offering) outstanding held of record by 97 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding shares of the Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution, or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and no right to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon the completion
of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to the Restated Certificate, the Board of Directors has the
authority, without further action by the stockholders, to issue up to 5,000,000
shares of Preferred Stock in one or more series and to fix the designations,
powers, preferences, privileges, and relative participating, optional, or
special rights and the qualifications, limitations, or restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, any or all of which may be greater than the rights
of the Common Stock. The Board of Directors, without stockholder approval, can
issue Preferred Stock with voting, conversion, or other rights that could
adversely affect the voting power and other rights of the holders of Common
Stock. Preferred Stock could thus be issued quickly with terms calculated to
delay or prevent a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of Preferred Stock may
have the effect of decreasing the market price of the Common Stock, and may
adversely affect the voting and other rights of the holders of Common Stock.
Upon the completion of this offering, there will be no shares of Preferred Stock
outstanding and the Company has no current plans to issue any of the Preferred
Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (or their
permitted transferees) of approximately 14,934,975 shares of Common Stock and
Preferred Stock ("Holders") (which Preferred Stock will automatically be
converted into Common Stock upon the completion of this offering), the Holders
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. If the Company proposes to register its Common Stock,
subject to certain exceptions, under the Securities Act, the Holders are
entitled to notice of the registration and are entitled at the Company's expense
to include such shares therein, provided that the managing underwriters have the
right to limit the number of such shares included in the registration. The
registration rights with respect to this offering have been waived. In addition,
certain of the Holders may require the Company, at its expense, on no more than
one occasion, to file a registration statement under the Securities Act with
respect to their shares of Common Stock. Such rights may not be exercised until
six months after the completion of this offering. Further, certain Holders may
require the Company, once every 12 months and at the expense of the Holders, to
register the shares on Form S-3 when such form becomes available to the Company,
subject to certain conditions and limitations. Such right expires on the tenth
anniversary of completion of this offering.
56
<PAGE>
ANTITAKEOVER EFFECTS OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE LAW
CHARTER DOCUMENTS
The Restated Certificate and Restated Bylaws include a number of provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company. First, the Restated
Certificate provides that all stockholder action must be effected at a duly
called meeting of stockholders and not by a consent in writing. Second, the
Restated Bylaws provide that special meetings of the stockholders may be called
only by (i) the Chairman of the Board of Directors, (ii) the Chief Executive
Officer, (iii) the Board of Directors pursuant to a resolution adopted by the
Board of Directors, or (iv) by the holders of not less than 10% of the
outstanding voting stock. Third, the Company's Restated Certificate does not
include a provision for cumulative voting for directors. Under cumulative
voting, a minority stockholder holding a sufficient percentage of a class of
shares may be able to ensure the election of one or more directors. Commencing
at the first annual meeting following the annual meeting record date at which
the Company has at least 800 stockholders, stockholders will no longer be able
to cumulate votes for directors. Fourth, the Restated Bylaws establish
procedures, including advance notice procedures with regard to the nomination of
candidates for election as directors and stockholder proposals. These provisions
of the Restated Certificate and Restated Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control or
management of the Company. Such provisions also may have the effect of
preventing changes. in the management of the Company. See "Risk Factors --
Effects of Certain Charter and Bylaw Provisions."
DELAWARE TAKEOVER STATUTE
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder, and
an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
American Securities Transfer Incorporated has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its telephone number is
(800) 962-4284.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the this offering, the Company will have outstanding
20,599,484 shares of Common Stock, based on the number of shares of Preferred
Stock and Common Stock outstanding as of April 16, 1996. Of these shares,
4,000,000 shares sold in this offering will be freely tradeable without
restrictions or further registration under the Securities Act. The remaining
16,599,484 shares of Common Stock held by existing stockholders are Restricted
Shares. Restricted Shares may be sold in the public market only if they are
registered or qualify for an exemption from registration under Rules 144 or 701
promulgated under the Securities Act. As a result of certain contractual
restrictions and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus, and (ii)
12,578,546 Restricted Shares (of which 800,167 would be subject to repurchase by
the Company at the original purchase price), 2,520,558 shares of Common Stock
issuable upon exercise of options outstanding as of April 16, 1996 (of which
2,095,480 shares would be subject to repurchase by the Company) and 33,750
shares of Common Stock issuable upon exercise of a currently outstanding warrant
will be eligible for sale 180 days after the date of this Prospectus upon
expiration of lock-up agreements. The Restricted Shares will be eligible for
sale from time to time after the completion of this offering.
Each officer and director who is a stockholder of the Company and holders
(including such officers and directors) of 16,560,967 shares of the Company's
Common Stock have agreed with the representatives of the Underwriters for a
period of 180 days after the effective date of this Prospectus (the "Lock-Up
Period"), subject to certain exceptions, not to offer to sell, contract to sell,
or otherwise sell, dispose of, loan, pledge, or grant any rights with respect to
any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock, or any securities convertible into or exchangeable for shares of
Common Stock owned as of the date of this Prospectus or thereafter acquired
directly by such holders or with respect to which they have or hereafter acquire
the power of disposition, without the prior written consent of Robertson,
Stephens & Company. The Company has agreed with the representatives of the
Underwriters for the Lock-Up Period, subject to certain exceptions, not to
issue, sell, contract to sell, or otherwise dispose of, any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock or any
securities convertible into, exercisable for or exchangeable for shares of
Common Stock other than the Company's sale of shares in this offering, the
issuance of Common Stock upon the exercise of outstanding options and the
Company's issuance of options and shares under existing employee stock option
and stock purchase plans.
As of April 16, 1996, there were 2,554,308 shares of Common Stock (on an
as-converted basis) subject to outstanding options or warrants. Company intends
to file registration statements under the Securities Act to register shares of
Common Stock reserved for issuance under the Incentive Plan and the Purchase
Plan, thus permitting the sale of such shares by non-affiliates in the public
market without restriction under the Securities Act. Such registration
statements will become effective immediately upon filing. Upon effectiveness of
such registration statements, holders of vested options to purchase
approximately 49,862 shares, as of April 16, 1996, will be entitled to exercise
such options and immediately sell such shares.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell, in any three-month period, a number
of shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Company's Common Stock (approximately 205,994 shares immediately
after this offering) or (ii) the average weekly trading volume of the Company's
Common Stock in the Nasdaq National Market during the four calendar weeks
immediately preceding the date on which the notice of sale is filed with the
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice, and availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who is not deemed to have been an Affiliate of the Company at any time during
the 90 days immediately preceding the sale and who has beneficially owned
Restricted Shares for at least three years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
An employee, officer, or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
58
<PAGE>
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume, and notice provisions of
Rule 144.
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or will continue after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
As described herein, only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale. Sales of substantial amounts of Common Stock of the
Company in the public market after the restrictions lapse could adversely affect
the prevailing market price and the ability of the Company to raise equity
capital in the future.
59
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, Hambrecht & Quist LLC and Wessels, Arnold &
Henderson, L.L.C. (the "Representatives"), have severally agreed with the
Company, subject to the terms and conditions of the Underwriting Agreement, to
purchase the number of shares of Common Stock set forth opposite their
respective names below. The Underwriters are committed to purchase and pay for
all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------------------------------------------------------- ----------
<S> <C>
Robertson, Stephens & Company LLC...........................................................
Hambrecht & Quist LLC.......................................................................
Wessels, Arnold & Henderson, L.L.C..........................................................
----------
Total....................................................................................... 4,000,000
----------
----------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public offering, the
public offering price, concession, and reallowance to dealers may be reduced by
the Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 600,000
additional shares of Common Stock at the same price per share as will be paid
for the 4,000,000 shares that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage of such
additional shares that the number of shares of Common Stock to be purchased by
it shown in the above table represents as a percentage of the 4,000,000 shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the 4,000,000 shares are being
sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Each officer and director who holds shares of the Company and holders
(including such officers and directors) of 16,560,967 shares of Common Stock
have agreed with the Representatives, for the Lock-Up Period, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge, or grant any rights with respect to any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock owned as
of the date of this Prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of Robertson, Stephens & Company
LLC. However, Robertson, Stephens & Company LLC may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements. There are no agreements between the Representatives and
any of the Company's stockholders providing consent by the Representatives to
the sale of shares prior to the expiration of the Lock-Up Period. In addition,
the Company has agreed that during the Lock-Up Period, the Company will not,
without the prior written consent of Robertson, Stephens & Company LLC, subject
to certain exceptions, issue, sell, contract to sell, or otherwise dispose of,
any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities
60
<PAGE>
convertible into, exercisable for or exchangeable for shares of Common Stock
other than the Company's sale of shares in this offering, the issuance of Common
Stock upon the exercise of outstanding options, and the Company's issuance of
options and shares under existing employee stock option and stock purchase
plans. See "Shares Eligible For Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Conse-quently, the initial public offering price for the Common
Stock offered hereby will be determined through negotiations among the Company
and the Representatives. Among the factors to be considered in such negotiations
are prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential of
the Company, the present state of the Company's development and other factors
deemed relevant.
61
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Cooley Godward Castro Huddleson & Tatum,
San Francisco, California. Certain legal matters will be passed upon for the
Underwriters by Brobeck, Phleger & Harrison LLP, San Francisco, California. As
of the date of this Prospectus, Cooley Godward Castro Huddleson & Tatum held an
option to purchase 2,000 shares of Common Stock, and certain partners of and
persons associated with Cooley Godward Castro Huddleson & Tatum beneficially
owned 78,339 shares of Common Stock. In addition, a partner of Cooley Godward
Castro Huddleson & Tatum is the Secretary of BroadVision.
EXPERTS
The financial statements and schedules of BroadVision, Inc. as of December
31, 1994 and 1995 and for the periods from inception (May 13, 1993) to December
31, 1993, and the years ended December 31, 1994 and 1995 have been included in
this Prospectus and Registration Statement in reliance upon the report of KMPG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein and in the Registration Statement, and upon the authority of such firm as
experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
In December 1995, the Company retained KPMG Peat Marwick LLP as the
Company's independent accountants and replaced Coopers & Lybrand LLP, the
Company's former accountants. The decision to change independent accountants was
ratified by the Company's Board of Directors. During the period from the
Company's inception through December 1995 and with respect to the Company's
financial statements for the years ended December 31, 1993 and 1994, there were
no disagreements with Coopers & Lybrand LLP regarding any matters with respect
to accounting principles or practices, financial statement disclosure or audit
scope or procedure, which disagreements, if not resolved to the satisfaction of
the former accountants, would have caused Coopers & Lybrand LLP to make
reference to the subject matter of the disagreement in connection with its
report. The former accountants reports, for the years ended December 31, 1993
and 1994, are not a part of the financial statements of the Company included in
this Prospectus and the related financial statement schedules included elsewhere
in the Registration Statement. Such reports did not contain an adverse opinion
or disclaimer of opinion or qualifications or modifications as to uncertainty,
audit scope or accounting principles. Prior to retaining KPMG Peat Marwick LLP,
the Company had not consulted with KPMG Peat Marwick LLP regarding the
application of accounting principles.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating
to the shares of Common Stock offered hereby has been filed by the Company with
the Commission under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
such Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from those offices upon the payment of certain fees prescribed by the
Commission.
62
<PAGE>
BROADVISION, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheets........................................................................ F-3
Statements of Operations.............................................................. F-4
Statements of Stockholders' Equity.................................................... F-5
Statements of Cash Flows.............................................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BroadVision, Inc.:
We have audited the accompanying balance sheets of BroadVision, Inc., a
development stage enterprise, as of December 31, 1994 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the period
from May 13, 1993 (inception) to December 31, 1993 and for the years ended
December 31, 1994 and 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BroadVision, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the period from May 13, 1993 (inception) to December 31, 1993 and for the
years ended December 31, 1994 and 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
March 12, 1996,
except as to Note 8,
which is as of April 16, 1996
F-2
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
-------------------- ----------------------
1994 1995 ACTUAL PRO FORMA
--------- --------- --------- -----------
(UNAUDITED)
----------------------
<S> <C> <C> <C> <C>
(NOTE 8)
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 808 $ 4,311 $ 2,663 $ 7,718
Short-term investments.............................................. 1,489 196 -- --
Accounts receivable, net............................................ -- 395 1,953 1,953
Prepaid expenses and other current assets........................... 25 24 162 162
--------- --------- --------- -----------
Total current assets............................................ 2,322 4,926 4,778 9,833
Property and equipment, net........................................... 309 868 1,272 1,272
Other assets.......................................................... 9 63 56 56
--------- --------- --------- -----------
Total assets.................................................... $ 2,640 $ 5,857 $ 6,106 $ 11,161
--------- --------- --------- -----------
--------- --------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 19 $ 161 $ 573 $ 573
Accrued expenses.................................................... 95 327 714 714
Deferred revenue.................................................... -- 355 1,251 1,251
Current portion, capital lease obligations.......................... -- 167 167 167
--------- --------- --------- -----------
Total current liabilities....................................... 114 1,010 2,705 2,705
Long-term portion, capital lease obligations.......................... -- 516 477 477
Other liabilities..................................................... -- 77 92 92
--------- --------- --------- -----------
Total liabilities............................................... 114 1,603 3,274 3,274
--------- --------- --------- -----------
Stockholders' equity:
Convertible preferred stock, $.0001 par value; 10,000 shares
authorized 5,600, 8,601 and 8,604 shares issued and outstanding in
1994, 1995 and 1996 (unaudited), respectively; 15,000 shares
authorized, no shares issued and outstanding, pro forma............ 1 1 1 --
Common stock, $.0001 par value; 22,000 shares authorized; 6,720;
6,308; and 7,344 shares issued and outstanding in 1994, 1995 and
1996 (unaudited), respectively; 30,000 shares authorized, 16,582
shares issued and outstanding, pro forma (unaudited)............... 1 1 1 2
Additional paid-in capital.......................................... 4,330 11,412 13,088 18,143
Deferred compensation related to grant of stock options............. -- (1,036) (2,436) (2,436 )
Deficit accumulated during the development stage.................... (1,806) (6,124) (7,822) (7,822 )
--------- --------- --------- -----------
Total stockholders' equity...................................... 2,526 4,254 2,832 7,887
--------- --------- --------- -----------
Total liabilities and stockholders' equity...................... $ 2,640 $ 5,857 $ 6,106 $ 11,161
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAY 13, 1993 THREE-MONTH PERIODS CUMULATIVE
(DATE OF YEARS ENDED DECEMBER PERIOD FROM
INCEPTION) TO 31, ENDED MARCH 31, INCEPTION
DECEMBER 31, -------------------- -------------------- TO MARCH
1993 1994 1995 1995 1996 31, 1996
--------------- --------- --------- --------- --------- -----------
(UNAUDITED)
---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses......................... $ -- $ -- $ -- $ -- $ 1,099 $ 1,099
Services.................................. -- -- 540 -- 299 839
----- --------- --------- --------- --------- -----------
-- -- 540 -- 1,398 1,938
Operating expenses:
Cost of software licenses................. -- -- -- -- 164 164
Cost of services.......................... -- -- 23 -- 33 56
Research and development.................. 12 748 2,229 371 797 3,786
Selling, general, and administrative...... 131 1,023 2,766 500 2,109 6,029
----- --------- --------- --------- --------- -----------
Total operating expenses.............. 143 1,771 5,018 871 3,103 10,035
----- --------- --------- --------- --------- -----------
Operating loss........................ (143) (1,771) (4,478) (871) (1,705) (8,097)
Interest income............................. 7 101 191 25 43 342
Other expense............................... -- -- (31) -- (36) (67)
----- --------- --------- --------- --------- -----------
Net loss.............................. $ (136) $ (1,670) $ (4,318) $ (846) $ (1,698) $ (7,822)
----- --------- --------- --------- --------- -----------
----- --------- --------- --------- --------- -----------
Pro forma net loss per share................ $ (0.23) $ (0.04) $ (0.09)
--------- --------- ---------
--------- --------- ---------
Shares used in computing pro forma net loss
per share.................................. 18,543 18,888 18,576
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
COMMON
STOCK STOCK
------------------------ -----------
SHARES AMOUNT SHARES
----------- ----------- -----------
<S> <C> <C> <C>
Issuance of common stock; 4,000 shares at $0.005 per share at July 1993; 1,700
shares at $0.02 per share at October 1993.......................................... -- $ -- 5,700
Issuance of Series A convertible preferred stock at $0.60 per share................. 4,267 1 --
Net loss............................................................................ -- -- --
----- --- -----
Balances as of December 31, 1993.................................................... 4,267 1 5,700
Issuance of common stock at $0.05 per share......................................... -- -- 1,020
Issuance of Series B convertible preferred stock at $1.25 per share................. 1,333 -- --
Net loss............................................................................ -- -- --
----- --- -----
Balance as of December 31, 1994..................................................... 5,600 1 6,720
Issuance of common stock at $0.05 to $0.12 per share................................ -- -- 334
Issuance of Series C convertible preferred stock at $2.00 per share, net of issuance
costs of $49....................................................................... 3,001 -- --
Common stock repurchased............................................................ -- -- (746)
Deferred compensation related to grant of stock options............................. -- -- --
Net loss............................................................................ -- -- --
----- --- -----
Balances as of December 31, 1995.................................................... 8,601 1 6,308
Issuance of Series C convertible preferred stock at $2.00 (unaudited)............... 3 -- --
Deferred compensation related to grant of stock options (unaudited)................. -- -- --
Issuance of common stock (unaudited)................................................ -- -- 1,036
Net loss (unaudited)................................................................ -- -- --
----- --- -----
Balances as of March 31, 1996 (unaudited)........................................... 8,604 $ 1 7,344
----- --- -----
----- --- -----
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
PAID-IN DEVELOPMENT
AMOUNT CAPITAL STAGE
----------- ----------- -------------
<S> <C> <C>
Issuance of common stock; 4,000 shares at $0.005 per share at July 1993; 1,700
shares at $0.02 per share at October 1993.......................................... $ 1 $ 53 $ --
Issuance of Series A convertible preferred stock at $0.60 per share................. -- 2,559 --
Net loss............................................................................ -- -- (136)
--- ----------- -------------
Balances as of December 31, 1993.................................................... 1 2,612 (136)
Issuance of common stock at $0.05 per share......................................... -- 51 --
Issuance of Series B convertible preferred stock at $1.25 per share................. -- 1,667 --
Net loss............................................................................ -- -- (1,670)
--- ----------- -------------
Balance as of December 31, 1994..................................................... 1 4,330 (1,806)
Issuance of common stock at $0.05 to $0.12 per share................................ -- 31 --
Issuance of Series C convertible preferred stock at $2.00 per share, net of issuance
costs of $49....................................................................... -- 5,952 --
Common stock repurchased............................................................ -- (37) --
Deferred compensation related to grant of stock options............................. -- 1,136 --
Net loss............................................................................ -- -- (4,318)
--- ----------- -------------
Balances as of December 31, 1995.................................................... 1 11,412 (6,124)
Issuance of Series C convertible preferred stock at $2.00 (unaudited)............... -- 6 --
Deferred compensation related to grant of stock options (unaudited)................. -- 1,510 --
Issuance of common stock (unaudited)................................................ -- 160 --
Net loss (unaudited)................................................................ -- -- (1,698)
--- ----------- -------------
Balances as of March 31, 1996 (unaudited)........................................... $ 1 $ 13,088 $ (7,822)
--- ----------- -------------
--- ----------- -------------
<CAPTION>
DEFERRED
COMPENSATION
RELATED TO TOTAL
GRANT OF STOCKHOLDERS'
STOCK OPTIONS EQUITY
------------- -------------
Issuance of common stock; 4,000 shares at $0.005 per share at July 1993; 1,700
shares at $0.02 per share at October 1993.......................................... $ -- $ 54
Issuance of Series A convertible preferred stock at $0.60 per share................. -- 2,560
Net loss............................................................................ -- (136)
------------- ------
Balances as of December 31, 1993.................................................... -- 2,478
Issuance of common stock at $0.05 per share......................................... -- 51
Issuance of Series B convertible preferred stock at $1.25 per share................. -- 1,667
Net loss............................................................................ -- (1,670)
------------- ------
Balance as of December 31, 1994..................................................... -- 2,526
Issuance of common stock at $0.05 to $0.12 per share................................ -- 31
Issuance of Series C convertible preferred stock at $2.00 per share, net of issuance
costs of $49....................................................................... -- 5,952
Common stock repurchased............................................................ -- (37)
Deferred compensation related to grant of stock options............................. (1,036) 100
Net loss............................................................................ -- (4,318)
------------- ------
Balances as of December 31, 1995.................................................... (1,036) 4,254
Issuance of Series C convertible preferred stock at $2.00 (unaudited)............... -- 6
Deferred compensation related to grant of stock options (unaudited)................. (1,400) 110
Issuance of common stock (unaudited)................................................ -- 160
Net loss (unaudited)................................................................ -- (1,698)
------------- ------
Balances as of March 31, 1996 (unaudited)........................................... $ (2,436) $ 2,832
------------- ------
------------- ------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 13, 1993 THREE-MONTH PERIODS CUMULATIVE
(DATE OF YEARS ENDED DECEMBER PERIOD FROM
INCEPTION) TO 31, ENDED MARCH 31, INCEPTION
DECEMBER 31, -------------------- -------------------- TO MARCH
1993 1994 1995 1995 1996 31, 1996
------------- --------- --------- --------- --------- -----------
(UNAUDITED)
---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (136) $ (1,670) $ (4,318) $ (846) $ (1,698) $ (7,822)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 3 83 120 37 95 301
Deferred compensation............................. -- -- 100 -- 110 210
Changes in operating assets and liabilities:
Accounts receivable............................. -- -- (395) -- (1,558) (1,953)
Prepaid expenses, other current assets, and
other assets................................... (21) (13) (53) (56) (131) (218)
Accounts payable and accrued expenses........... 156 (42) 374 98 799 1,287
Deferred revenue................................ -- -- 355 -- 896 1,251
Other liabilities............................... -- -- 77 -- 15 92
------------- --------- --------- --------- --------- -----------
Net cash provided by (used in) operating
activities................................... 2 (1,642) (3,740) (767) (1,472) (6,852)
------------- --------- --------- --------- --------- -----------
Cash flows from investing activities:
Acquisition of property and equipment............... (113) (282) (679) (88) (499) (1,573)
Purchase of short-term investments.................. (1,000) (1,489) (196) (1,200) -- (2,685)
Maturity of short-term investments.................. -- 1,000 1,489 1,489 196 2,685
------------- --------- --------- --------- --------- -----------
Net cash provided by (used in) investing
activities................................... (1,113) (771) 614 201 (303) (1,573)
------------- --------- --------- --------- --------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock.............. 54 51 31 -- 160 296
Proceeds from issuance of preferred stock, net of
issuance costs..................................... 2,560 1,667 5,952 -- 6 10,185
Repurchase of common stock.......................... -- -- (37) -- -- (37)
Proceeds from capital lease......................... -- -- 748 -- -- 748
Payments on capital lease........................... -- -- (65) -- (39) (104)
------------- --------- --------- --------- --------- -----------
Net cash provided by financing activities..... 2,614 1,718 6,629 -- 127 11,088
------------- --------- --------- --------- --------- -----------
Net increase (decrease) in cash and cash
equivalents.......................................... 1,503 (695) 3,503 (566) (1,648) 2,663
Cash and cash equivalents, beginning of period/
year................................................. -- 1,503 808 808 4,311 --
------------- --------- --------- --------- --------- -----------
Cash and cash equivalents, end of period/year......... $ 1,503 $ 808 $ 4,311 $ 242 $ 2,663 $ 2,663
------------- --------- --------- --------- --------- -----------
------------- --------- --------- --------- --------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) BUSINESS OF THE COMPANY
BroadVision, Inc. (the "Company") provides an integrated software
application system, BroadVision One-To-One, that enables the creation of
applications allowing non-technical business managers to tailor Internet
marketing and selling services to the needs and interests of individual World
Wide Web site visitors, personalizing each visit on a real-time basis.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. All of the
Company's cash and cash equivalents as of December 31, 1995 are on deposit with
one major U.S. bank.
As of December 31, 1995, short-term investments consisted of banker's
acceptances with maturities of three months or less and are carried at cost,
which approximates fair value. There were no short-term investments as of March
31, 1996.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a straight-line
basis over their estimated useful lives, which range from two to five years.
Leasehold improvements are amortized over their useful lives or the life of the
lease, whichever is shorter.
REVENUE RECOGNITION
The Company's revenue recognition policies are in accordance with Statement
of Position No. 91-1, SOFTWARE REVENUE RECOGNITION, and are as follows:
-Software license revenues are recognized when the software has been
delivered, the customer acknowledges an unconditional obligation to pay,
and the Company has no significant obligations remaining.
-Maintenance revenues relating to contracts which entitle customers to
receive technical support and future enhancements of the licensed software
are deferred and recognized ratably over the contract period.
-Revenues from professional services are recognized as such services are
performed.
CAPITALIZED SOFTWARE
Development costs incurred in the research and development of new software
products are expensed as incurred until technological feasibility in the form of
a working model has been established. To date, the Company's software
development has been completed concurrent with the establishment of
technological feasibility and, accordingly, no costs have been capitalized.
F-7
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be recovered.
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share is computed using net loss and is based on the
weighted average number of shares of common stock outstanding, convertible
preferred stock, on an "as-if-converted" basis, using the exchange rate in
effect at the initial public offering date and dilutive common equivalent shares
from stock options and warrants outstanding using the treasury stock method. In
accordance with certain Securities and Exchange Commission (SEC) Staff
Accounting Bulletins, such computations include all common and common equivalent
shares issued within 12 months of the offering date as if they were outstanding
for all periods presented using the treasury stock method and the anticipated
initial public offering price.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. SFAS No. 123 will be effective for fiscal years beginning after
December 15, 1995, and will require that the Company either recognize in its
financial statements costs related to its employee stock-based compensation
plans, such as stock option and stock purchase plans, or make pro forma
disclosures of such costs in a footnote to the financial statements.
The Company expects to continue to use the intrinsic value-based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its financial statements for fiscal 1996, the Company will make the required pro
forma disclosures in a footnote. SFAS No. 123 is not expected to have a material
effect on the Company's results of operations or financial position.
(3) BALANCE SHEET DETAIL
PROPERTY AND EQUIPMENT
A summary of property and equipment follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- --------- MARCH 31,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures........................................... $ 53 $ 92 $ 106
Computer and software............................................ 325 844 1,332
Leasehold improvements........................................... 17 42 42
--- --- ------
395 978 1,480
Less accumulated depreciation and amortization................... 86 110 208
--- --- ------
$ 309 $ 868 $ 1,272
--- --- ------
--- --- ------
</TABLE>
Depreciation expense was $3,000, $83,000, $120,000 and $95,000 for the
period from May 13, 1993 (inception) to December 31, 1993, for the years ended
December 31, 1994 and 1995, and the quarter ended March 31, 1996, respectively.
F-8
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) BALANCE SHEET DETAIL (CONTINUED)
ACCRUED EXPENSES
A summary of accrued expenses follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--- --------- MARCH 31,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued employee benefits................................... $ 28 $ 130 $ 328
Deferred compensation....................................... -- 107 147
Accrued amounts payable to contractors...................... 35 45 70
Other accrued liabilities................................... 32 45 169
--
--- ---
$ 95 $ 327 $ 714
--
--
--- ---
--- ---
</TABLE>
(4) STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The rights, preferences, privileges, and restrictions of the Series A, B,
and C convertible preferred stock are as follows:
-Each share of Series A, B, and C preferred stock shall be convertible at
the option of the holder, at any time after the date of issuance, into one
fully paid and nonassessable share of common stock. The conversion rate is
subject to certain antidilution provisions. Each series has voting rights
equal to one vote per share.
-Conversion is automatic upon either the closing of a public offering of the
Company's common stock at a purchase price of not less than $5.00 per share
or at the election of the holders of at least two-thirds of the outstanding
preferred stock.
-Series A, B, and C preferred stockholders are entitled to noncumulative
dividends at a rate of 8% per share per annum, when and if declared by the
Board of Directors. As of December 31, 1995, no dividends have been
declared.
-Series A, B, and C preferred stock have a liquidation preference of $.60,
$1.25, and $2.00 per share, respectively, plus all declared but unpaid
dividends.
-After payment has been made to the holders of preferred stock of the full
preferential amounts, the holders of common stock shall be entitled to
receive all remaining assets.
Convertible preferred stock issued and outstanding as of December 31, 1995
is as follows (in thousands):
<TABLE>
<CAPTION>
ISSUED AND OUTSTANDING
DECEMBER 31,
------------------------------------------
SHARES AMOUNT
-------------------- --------------------
SERIES AUTHORIZED 1994 1995 1994 1995
- ------------------------------------------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
A.......................................... 4,300 4,267 4,267 $ 2,560 $ 2,560
B.......................................... 1,400 1,333 1,333 1,667 1,667
C.......................................... 4,000 -- 3,001 -- 5,952
--------- --------- --------- ---------
5,600 8,601 $ 4,227 $ 10,179
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-9
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
As of December 31, 1995, there was one warrant outstanding to acquire 33,750
shares of the Company's Series C preferred stock at $2.00 per share. The warrant
expires in June 2002.
COMMON STOCK
The Company has reserved 4,536,800 shares of common stock for issuance under
its stock option plan. Under this plan, the Board of Directors may grant
incentive or nonqualified stock options at prices not less than 100% or 85%,
respectively, of the fair market value of the Company's common stock, as
determined by the Board of Directors, at the grant date. The vesting of
individual options may vary but in each case at least 20% of the total number of
shares subject to options will become exercisable per year.
When an employee option is exercised prior to vesting, any unvested shares
so purchased are subject to repurchase by the Company at the original purchase
price of the stock upon termination of employment. The right to repurchase
lapses at a minimum rate of 20% per year over five years from the date the
option was granted or, for new employees, the date of hire. Such right is
exercisable only within 90 days following termination of employment.
Activity in the Company's stock option plan is as follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
SHARES
AVAILABLE OPTIONS PRICE PER
FOR GRANT OUTSTANDING SHARE
----------- ----------- -----------
<S> <C> <C> <C>
Authorized............................................... 3,533 -- $ --
----------- ----------- -----------
Balances, December 31, 1993.............................. 3,533 -- --
Options granted.......................................... (1,014) 1,014 0.05-0.06
Options exercised........................................ -- (10) 0.05
----------- ----------- -----------
Balances, December 31, 1994.............................. 2,519 1,004 0.05-0.06
Authorized............................................... 1,004 --
Options granted.......................................... (1,916) 1,916 0.06-0.20
Options exercised........................................ -- (334) 0.05-0.12
Options canceled......................................... 662 (662) 0.05-0.12
----------- ----------- -----------
Balances, December 31, 1995.............................. 2,269 1,924 0.05-0.20
Options granted.......................................... (850) 850 0.20-4.50
Options exercised........................................ -- (1,012) 0.05-0.80
Options canceled......................................... 2 (2) 0.06
----------- ----------- -----------
Balances, March 31, 1996................................. 1,421 1,760 $ 0.05-4.50
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Company has outstanding options to purchase 20,000 shares with an
exercise price of $0.20 per share, granted to an employee outside of the
Company's stock option plan. These options vest in their entirety on the ninth
anniversary of the date of grant; however, if the optionee achieves certain
performance objectives, the vesting of the options may be accelerated by the
President of the Company acting in his discretion.
As of December 31, 1995 and March 31, 1996 all options were exercisable and
200,000 and 1,097,075 shares, respectively, would have been subject to
repurchase, if exercised.
The Company has recorded deferred compensation of $1,136,000 during 1995 and
an additional $1,510,000 for the three months ended March 31, 1996 for the
difference between the grant price and the deemed fair value of the common stock
underlying options granted from December 1995 through March 1996. In addition,
in
F-10
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) STOCKHOLDERS' EQUITY (CONTINUED)
April 1996 the Company intends to record deferred compensation of approximately
$218,000 related to the difference between the grant price and the deemed fair
value of the common stock underlying options granted in April 1996. This amount
is being amortized over the vesting period of the individual options, generally
five years.
(5) SIGNIFICANT CUSTOMERS
In 1995, one customer accounted for $500,000 and the other accounted for
$40,000 of the Company's revenues. Neither of these is an international
customer.
(6) COMMITMENTS AND CONTINGENCIES
LEASES
As of December 31, 1995, the Company was obligated under noncancelable
operating lease agreements expiring through 2000 for facilities and equipment.
The Company is responsible for certain maintenance costs, taxes and insurance
under the facilities lease. The Company also leases certain equipment under
capital leases expiring through 1999. A summary of future minimum lease payments
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING LEASES LEASES
- ------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1996................................................................... $ 231 $ 272
1997................................................................... 231 301
1998................................................................... 231 311
1999................................................................... 142 320
2000................................................................... -- 135
--- -----------
Total minimum lease payments........................................... 835 $ 1,339
-----------
-----------
Less amount representing imputed interest.............................. 152
---
Present value of net minimum capital lease payments.................... 683
Less current installments of obligations under capital leases.......... 167
---
Obligations under capital leases, excluding current installments....... $ 516
---
---
</TABLE>
Rent expense was $7,000, $87,000 and $264,000 for the period from May 13,
1993 (inception) to December 31, 1993 and the years ended December 31, 1994 and
1995, respectively.
EMPLOYEE BENEFIT PLAN
In November 1994, the Company adopted a 401(k) employee retirement plan
under which eligible employees may contribute up to 20% of their annual
compensation, subject to certain limitations ($9,500 in 1996). Employees vest
immediately in their contributions and earnings thereon. The plan allows for,
but does not require, Company matching contributions. To date, the Company has
not made any such matching contributions.
CONTINGENCIES
The Company has incorporated RSA Data Security, Inc.'s data encryption and
authentication technology into the Company's software pursuant to a license
agreement with RSA. The Company is aware of a dispute between Cylink Corporation
and RSA in which Cylink alleges that license agreements between RSA and its
customers, including the Company, relating to certain RSA software, conflict
with rights held by Cylink. In the Company's license agreement with RSA, RSA has
agreed to defend, indemnify and hold the Company harmless
F-11
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
with respect to any claim by a third party that the licensed software infringes
any patent or other proprietary right. The Company's management presently does
not believe the dispute between Cylink and RSA will result in significant
royalty or other liability to the Company.
(7) INCOME TAXES
The components of the net deferred tax assets as of December 31, 1994 and
1995 were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Depreciation and amortization.............................................. $ 22 $ 56
Accrued liabilities........................................................ 6 107
Capitalized research and development....................................... 42 265
Net operating losses....................................................... 620 2,159
Tax credits................................................................ 58 179
--------- ---------
Net deferred assets...................................................... 748 2,766
Less valuation allowance................................................... (748) (2,766)
--------- ---------
$ -- $ --
--------- ---------
--------- ---------
</TABLE>
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company has provided a full valuation
allowance against its net deferred tax assets as it has determined that it is
more likely than not that the deferred tax assets will not be realized. The
Company's accounting for deferred taxes under Statement of Financial Accounting
Standards No. 109 involves the evaluation of a number of factors concerning the
realizability of the Company's deferred tax assets. To support the Company's
conclusion that a full valuation allowance was required, managment primarily
considered such factors as the Company's history of operating losses and
expected near-term future losses, the nature of the Company's deferred tax
assets, and the lack of significant firm sales backlog. Although management's
operating plans assume taxable and operating income in future periods,
management's evaluation of all the available evidence in assessing the
realizability of the deferred tax assets indicates that such plans were not
considered sufficient to overcome the available negative evidence.
The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal income tax rate.............................. (34.0)% (34.0)% (34.0)%
Net operating losses not benefited............................. 34.0 34.0 34.0
----- ----- -----
Effective tax rate........................................... --% --% --%
----- ----- -----
----- ----- -----
</TABLE>
As of December 31, 1995, the Company had federal and state net operating
loss carryforwards of approximately $5,632,000 and $2,620,000, respectively,
available to offset future regular and alternative minimum taxable income. In
addition, the Company had federal and state research and development credit
carryforwards of approximately $91,000 and $88,000, respectively, available to
offset future tax liabilities. The Company's net operating loss and tax credit
carryforwards expire in 1998 through 2010, if not utilized.
The Tax Reform Act of 1986 and the California Tax Conformity Act of 1987
limit the use of net operating loss carryforwards in certain situations where
changes occur in the stock ownership of a company. The Company
F-12
<PAGE>
BROADVISION, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
believes such an ownership change, as defined, may have occurred in connection
with the issuance of the Series C preferred stock issued in 1995 (note 4).
Accordingly, $2,600,000 and $1,100,000 of the Company's federal and state net
operating loss carryforwards, respectively, may be limited in their usage to
$600,000 per year, on a cumulative basis.
(8) SUBSEQUENT EVENTS (UNAUDITED)
SERIES D PREFERRED STOCK OPTION
In February 1996, the Company granted its chief executive officer an option
to purchase 500,000 shares of Series D preferred stock at an exercise price of
$4.00 per share. The option vests on a pro rata monthly basis over a five-year
period commencing April 1995.
SERIES E PREFERRED STOCK
On April 10, 1996, the Board of Directors approved an increase in the number
of authorized shares of common and preferred stock of the Company, including the
designation of a class of Series E preferred stock. On April 16, 1996, the
Company sold 634,375 shares of Series E convertible preferred stock for proceeds
of $5,055,000, net of offering costs.
REGISTRATION STATEMENT
On April 16, 1996, the Board of Directors approved a proposed filing of a
registration statement with the SEC to sell 4,600,000 shares of the Company's
common stock to the public. If the offering is consummated under the proposed
terms, the Company's outstanding shares of Series A, B, C and E convertible
preferred stock will automatically convert into shares of its common stock. In
addition, options or warrants to purchase preferred stock will convert to
options or warrants to purchase an equivalent number of shares of common stock.
The issuance of the Series E convertible preferred stock and this conversion
have been reflected in the accompanying pro forma balance sheet as of March 31,
1996.
RESTATED CERTIFICATE OF INCORPORATION
On April 16, 1996, the Board of Directors approved the Company's restated
certificate of incorporation under which the Company will have authorized common
stock of 50,000,000 shares and preferred stock of 5,000,000 shares upon
completion of the Company's proposed initial public offering described above.
EMPLOYEE STOCK PURCHASE PLAN
On April 16, 1996, the Board of Directors approved the Employee Stock
Purchase Plan (the Purchase Plan) and reserved 600,000 shares for issuance
thereunder. The Purchase Plan will become effective upon the completion of the
Company's proposed initial public offering. The Purchase Plan permits eligible
employees to purchase common stock equivalent to a percentage of the employee's
earnings, not to exceed 15%, at a price equal to 85% of the fair market value of
the common stock at dates specified by the Board of Directors as provided in the
Plan.
EQUITY INCENTIVE PLAN
On April 16, 1996, the Board of Directors approved the Equity Incentive Plan
(the Incentive Plan) and authorized 5,000,000 shares for issuance thereunder.
The Incentive Plan provides for grant to employees of incentive stock options at
not less than fair value and nonqualified stock options at not less than 85% of
fair value.
F-13
<PAGE>
BroadVision-TM-
ONE-TO-ONE-TM-
Web Sites Tailored to the Needs and
Interest of Individual Visitors
Basic news,
chat lounge,
and shopping
services.
Generic advertisement from
sponsor site.
Visitor registers
areas of interest
and basic
demographic
information in
exchange for incentives. Ongoing
observations of visitor interactions
add to profiles over time.
Personalized
Web site with
targeted content
reflecting current
profile attributes.
Chat lounge con-
nects to others with
similar interests.
Targeted shopping
services with per-
sonalized product
displays and pricing.
Favorite hangouts
link to areas match-
ing profiled interests.
Point-cast and
community-cast
advertising.
[Pictures of three web pages, the first entitled "Annonymous Guest Web Site" and
showing a sample guest homepage, the second entitled "One-to-One Web Profile
Example" displaying a sample personal profile of a guest registering on the
anonymous guest web site, and the third entitled "One-to-One Web Site"
displaying a personalized home page for the anonymous guest web site using the
information from the personal profile.]
To date, no application has been commercially deployed using BroadVision
One-To-One.
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of Common Stock being registered. All the amounts shown are
estimates except for the SEC registration fee, the NASD filing fee and the
Nasdaq National Market application fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 15,863
NASD Filing Fee................................................... 5,100
Nasdaq National Market Application Fee............................ 50,000
Blue Sky Qualification Fee and Expenses........................... 15,000
Printing and Engraving Expenses................................... 120,000
Legal Fees and Expenses........................................... 325,000
Accounting Fees and Expenses...................................... 250,000
Transfer Agent and Registrar Fees................................. 7,500
Directors and Officers Insurance Premium.......................... 125,000
Miscellaneous..................................................... 36,537
---------
Total......................................................... $ 950,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Restated Certificate and Restated Bylaws provide for mandatory
indemnification of its directors and permissive indemnification of officers,
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant will enter into indemnification
agreements with its directors, a form of which is attached as Exhibit 10.1
hereto and incorporated herein by reference. The indemnification agreements
provide the Registrant's directors with further indemnification to the maximum
extent permitted by the Delaware General Corporation Law. The Company has also
obtained directors and officers insurance to insure its directors and officers
against certain liabilities, including liabilities under the Securities Laws.
Reference is also made to the Underwriting Agreement to be filed as Exhibit 1.1
hereto, indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its incorporation in May 1993, the Registrant has sold and issued the
following unregistered securities:
(1)During the period July 30, 1993 through January 15, 1994, the
Registrant sold an aggregate of 6,710,000 shares of the Company's
Common Stock to its founder and two other officers.
(2)In November 1993, the Registrant sold 4,266,667 shares of Series A
Preferred Stock, convertible into 4,266,667 shares of Common Stock,
to certain investors, including one director and venture capital investment
partnerships associated with two directors, for $2,560,000 in cash.
(3)During the period December 22, 1993 through April 16, 1996, the
Registrant granted stock options to employees, directors and
consultants under its Stock Option Plan (the "Option Plan") covering an
aggregate of 3,864,000 shares of the Company's Common Stock, at an average
exercise price of $0.44 per share. Of these, options covering an aggregate
of 663,333 were canceled without being exercised. During the same period,
the Registrant sold an aggregate of 1,373,109 shares of its Common Stock to
employees, directors and consultants for cash consideration in the aggregate
amount of $196,959 upon the exercise of stock options granted under the
Option Plan.
II-1
<PAGE>
(4)During the period December 22, 1993 through April 16, 1996, the
Registrant granted nonstatutory stock options to employees, directors
and consultants outside the Option Plan covering an aggregate of 713,000
shares of the Company's Common Stock, at a weighted average exercise price
of $3.16 per share. Of these options, none have been canceled and options to
acquire 20,000 have been exercised.
(5)In November 1994, the Registrant sold 1,333,333 shares of Series B
Preferred Stock, convertible into 1,333,333 shares of Common Stock,
to certain investors, including one director and venture capital investment
partnerships associated with two directors, for $1,666,666 in cash.
(6)From May 1995 to August 1995, the Registrant sold 3,000,600 shares of
Series C Preferred Stock, convertible into 3,000,600 shares of Common
Stock, to certain investors, including one officer, one director and venture
capital investment partnership associated with three directors, for
$6,001,200 in cash.
(7)In February 1996, the Registrant issued a stock option to purchase
500,000 shares of Series D Preferred Stock to one person who is both
an officer and a director of the Registrant.
(9)In February 1996, the Registrant sold 4,000 shares of the Company's
Common Stock to a consultant of the Company for $800 in cash.
(10)In February 1996, the Registrant sold 3,000 shares of Series C
Preferred Stock, convertible into 3,000 shares of Common Stock, to a
consultant to the Company for $6,000 in cash.
(11)In April 1996, the Registrant sold shares of Series E Preferred
Stock, convertible into 634,375 shares of Common Stock, to certain
investors, including two officers and a company associated with a director
of the Registrant, for $5,075,000 in cash.
The sales and issuances of securities in the transactions described in
paragraphs (1), (3) and (4) above were deemed to be exempt from registration
under the Securities Act by virtue of Rule 701 promulgated thereunder in that
they were offered and sold either pursuant to written compensatory or pursuant
to a written contract relating to compensation, as provided by Rule 701.
The sale and issuance of securities in the transaction described in
paragraphs (2) and (5) through (11) were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated thereunder as transactions not involving any public offering. The
purchasers in each case represented their intention to acquire the securities
for investment only and not with a view to the distribution thereof. Appropriate
legends are affixed to the stock certificates issued in such transactions. All
recipients either received adequate information about the Registrant or had
access, through employment or other relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
3.3 Amended and Restated Certificate of Incorporation to be effective upon the completion of the
offering
3.4* Amended and Restated Bylaws to be effective upon the completion of the offering
4.1* Reference is hereby made to Exhibits 3.1 to 3.4
4.2* Series C Preferred Stock Purchase Warrant dated June 5, 1995 issued to Lighthouse Capital
Partners, L.P.
4.3 Specimen stock certificate.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.4* Second Amended and Restated Investors' Rights Agreement dated April 15, 1996 among Registrant
and certain of its stockholders
4.5 Stock Restriction Agreement dated November 1, 1993 between Registrant and Dr. Pehong Chen
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
10.1* Form of Indemnity Agreement between the Registrant and each of its directors
10.2* Equity Incentive Plan (the "Equity Incentive Plan")
10.3 Form of Incentive Stock Option under the Equity Incentive Plan
10.4* Form of Nonstatutory Stock Option under the Equity Incentive Plan
10.5* Form of Nonstatutory Stock Option (Performance-Based)
10.6* 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
10.7* Employee Stock Purchase Plan Offering (Initial Offering)
10.8* Employee Stock Purchase Plan Offering (Subsequent Offering)
10.9* Master Equipment Lease Agreement dated May 23, 1995 between the Registrant and Lighthouse
Capital Partners L.P.
10.10*+ Terms and Conditions dated January 1, 1995 between IONA Technologies LTD and the Registrant.
10.11* Series D Preferred Stock Option Agreement dated February 27, 1996 between the Registrant and
Pehong Chen
10.12* Standard Office Lease dated February 8, 1995 between the Registrant and GVE Distel Associates,
a California General Partnership.
10.13 Stock Option Plan
10.14 Form of Incentive Stock Option under the Stock Option Plan
10.15 Form of Nonstatutory Stock Option under the Stock Option Plan
10.16 Reference is hereby made to Exhibit 4.5.
10.17 Series B Preferred Stock Purchase Agreement dated January 31, 1994 between Registrant and
Itochu Corporation.
10.18 Series B Preferred Stock Purchase Agreement dated November 7, 1994 among Registrant and
certain investors.
10.19 Series C Preferred Stock Purchase Agreement dated May 26, 1995 among Registrant and certain
investors.
10.20 Series C Preferred Stock Purchase Agreement dated June 9, 1995 among Registrant and certain
investors.
10.21 Series C Preferred Stock Purchase Agreement dated August 7, 1995 among Registrant and certain
investors.
10.22 Series C Preferred Stock Purchase Agreement dated August 31, 1995 among Registrant and certain
investors.
10.23 Series E Preferred Stock Purchase Agreement dated April 15, 1996 among Registrant and certain
investors.
16.1* Letter of Coopers & Lybrand LLP
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP. Reference is made to page II-6.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
24.1 Power of Attorney. Reference is made to page II-5.
</TABLE>
- ------------
* Previously filed.
+ Confidential treatment requested.
(b)Financial Statement Schedules.
All other schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
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
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described in Item 14 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 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 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 Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and (2) for the
purpose of determining any liability under the 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Altos, State of California, on the 29th day of May, 1996.
BROADVISION, INC.
BY: /s/ RANDALL C. BOLTEN
-----------------------------------
Randall C. Bolten
Chief Financial Officer and
Vice President, Operations
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
* PEHONG CHEN
------------------------------------------- President, Chief Executive Officer and May 29, 1996
Pehong Chen Director (PRINCIPAL EXECUTIVE OFFICER)
/s/ RANDALL C. BOLTEN Vice President, Operations and Chief
------------------------------------------- Financial Officer (PRINCIPAL FINANCIAL May 29, 1996
Randall C. Bolten AND ACCOUNTING OFFICER)
* DAVID L. ANDERSON
------------------------------------------- Director May 29, 1996
David L. Anderson
* KOH BOON HWEE
------------------------------------------- Director May 29, 1996
Koh Boon Hwee
* YOGEN K. DALAL
------------------------------------------- Director May 29, 1996
Yogen K. Dalal
* GREGORY SMITHERMAN
------------------------------------------- Director May 29, 1996
Gregory Smitherman
* By /s/ RANDALL C. BOLTEN
-------------------------------------------
Randall C. Bolten May 29, 1996
(Attorney-in-fact)
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
BroadVision, Inc.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
San Jose, California
May 29, 1996
II-6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BROADVISION, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- -------------------------------------------------------------------------------------- ------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
3.3 Amended and Restated Certificate of Incorporation to be effective upon the completion
of the offering
3.4* Amended and Restated Bylaws to be effective upon the completion of the offering
4.1* Reference is hereby made to Exhibits 3.1 to 3.4
4.2* Series C Preferred Stock Purchase Warrant dated June 5, 1995 issued to Lighthouse
Capital Partners, L.P.
4.3 Specimen stock certificate.
4.4* Second Amended and Restated Investors' Rights Agreement dated April 15, 1996 among
Registrant and certain of its stockholders
4.5 Stock Restriction Agreement dated November 1, 1993 between Registrant and Dr. Pehong
Chen
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
10.1* Form of Indemnity Agreement between the Registrant and each of its directors
10.2* Equity Incentive Plan (the "Equity Incentive Plan")
10.3 Form of Incentive Stock Option under the Equity Incentive Plan
10.4* Form of Nonstatutory Stock Option under the Equity Incentive Plan
10.5* Form of Nonstatutory Stock Option (Performance-Based)
10.6* 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan")
10.7* Employee Stock Purchase Plan Offering (Initial Offering)
10.8* Employee Stock Purchase Plan Offering (Subsequent Offering)
10.9* Master Equipment Lease Agreement dated May 23, 1995 between the Registrant and
Lighthouse Capital Partners L.P.
10.10*+ Terms and Conditions dated January 1, 1995 between IONA Technologies LTD and the
Registrant.
10.11* Series D Preferred Stock Option Agreement dated February 27, 1996 between the
Registrant and Pehong Chen
10.12* Standard Office Lease dated February 8, 1995 between the Registrant and GVE Distel
Associates, a California General Partnership.
10.13 Stock Option Plan
10.14 Form of Incentive Stock Option under the Stock Option Plan
10.15 Form of Nonstatutory Stock Option under the Stock Option Plan
10.16 Reference is hereby made to Exhibit 4.6.
10.17 Series B Preferred Stock Purchase Agreement dated January 31, 1994 between Registrant
and Itochu Corporation.
10.18 Series B Preferred Stock Purchase Agreement dated November 7, 1994 among Registrant
and certain investors.
10.19 Series C Preferred Stock Purchase Agreement dated May 26, 1995 among Registrant and
certain investors.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----------- -------------------------------------------------------------------------------------- ------
<C> <S> <C>
10.20 Series C Preferred Stock Purchase Agreement dated June 9, 1995 among Registrant and
certain investors.
10.21 Series C Preferred Stock Purchase Agreement dated August 7, 1995 among Registrant and
certain investors.
10.22 Series C Preferred Stock Purchase Agreement dated August 31, 1995 among Registrant and
certain investors.
10.23 Series E Preferred Stock Purchase Agreement dated April 15, 1996 among Registrant and
certain investors.
16.1* Letter of Coopers & Lybrand LLP
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP. Reference is made to page II-6.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-5.
</TABLE>
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* Previously filed.
+ Confidential treatment requested.
<PAGE>
Exhibit 1.1
4,000,000 SHARES(1)
BROADVISION, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
June __, 1996
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
WESSELS, ARNOLD & HENDERSON, L.L.C.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
BroadVision, Inc., a Delaware corporation (the "Company"), addresses you as
the Representatives of each of the persons, firms and corporations listed in
Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirm their respective agreements with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
4,000,000 shares of its authorized and unissued Common Stock, $0.0001 par value
per share (the "Firm Shares") to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 600,000
additional shares of the Company's Common Stock, $0.0001 par value per share
(the "Option Shares"), as provided in Section 7 hereof. As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, $0.0001 par value per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
I. The Company represents and warrants to and agrees with each
Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-3844)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission")
- -------------------
Plus an option to purchase up to 600,000 additional shares from the Company to
cover over-allotments.
<PAGE>
under the Act and has been filed with the Commission; such amendments to such
registration statement, such amended prospectuses subject to completion and such
abbreviated registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file such
additional amendments to such registration statement, such amended prospectuses
subject to completion and such abbreviated registration statements as may
hereafter be required. Copies of such registration statement and amendments, of
each related prospectus subject to completion (the "Preliminary Prospectuses"),
and of any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if Robertson, Stephens &
Company LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the Company
will prepare and promptly file an amendment to the registration statement,
including a final form of prospectus, or, if Robertson, Stephens & Company
LLC, on behalf of the several Underwriters, shall agree to the utilization of
Rule 434 of the Rules and Regulations, the information required to be
included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became
or becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files
a term sheet pursuant to Rule 434 of the Rules and Regulations, the
information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations); PROVIDED, HOWEVER, that if in reliance
on Rule 434 of the Rules and Regulations and with the consent of Robertson,
Stephens & Company LLC on behalf of the several Underwriters, the Company
shall have provided to the Underwriters a term sheet pursuant to Rule 434(b)
or (c), as applicable, prior to the time that a confirmation is sent or given
for purposes of Section 2(10)(a) of the Act, the term "Prospectus" shall mean
the "prospectus subject to completion" (as defined in Rule 434(g) of the
Rules and Regulations) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters
for such use. If in reliance on Rule 434 of the Rules and Regulations and
with the consent of Robertson, Stephens & Company LLC, on behalf of the
several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time
that a confirmation is sent or given for purposes of Section
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<PAGE>
2(10)(a) of the Act, the Prospectus and the term sheet, together, will not be
materially different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased,
(I) the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that none of the
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
(c) Each of the Company and its subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full corporate power and
authority to own, lease and operate its properties and conduct its business as
described in the Prospectus; the Company owns all of the outstanding capital
stock of its subsidiary free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; each of the Company and its subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in the United States in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiary considered as one enterprise; no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification;
each of the Company and its subsidiary is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities which are material
to the conduct of its business, all of which are valid and in full force and
effect; neither the Company nor its subsidiary is in violation of its respective
charter or bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or its subsidiary is a party
or by which it or its subsidiary or their respective properties may be bound;
and neither the Company nor its subsidiary is in material violation of any law,
order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or its subsidiary or over their respective
properties of which it has knowledge. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
4C Consultancy AG.
(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized,
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<PAGE>
executed and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable in accordance with its terms, except as
rights to indemnification and contribution hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles or the limitation on availability of equitable
remedies; the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute (I) a material
default under any material bond, debenture, note or other evidence of
indebtedness, or under any material lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument
to which the Company or its subsidiary is a party or by which it or its
subsidiary or their respective properties may be bound, (ii) a default under
the charter or bylaws of the Company or its subsidiary, or (iii) a material
default under any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its subsidiary or over their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or its subsidiary
or over their respective properties is required for the execution and
delivery of this Agreement and the consummation by the Company or its
subsidiary of the transactions herein contemplated, except such as may be
required under the Act or under state or other securities laws, all of which
requirements have been satisfied in all material respects (except for any
filings under Rule 424 of the Rules and Regulations, which filings have been
or will be made under Section 4(a) of this agreement) or Blue Sky laws.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, its
subsidiary or any of their respective officers or any of their respective
properties, assets or rights before any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or its
subsidiary or over their respective officers or properties or otherwise which
(i) would, if adversely determined, result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiary considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or its subsidiary of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement.
(f) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and the authorized and outstanding
capital stock of the Company is, in all material respects, as set forth in the
Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the instruments defining the capitalization of the Company); the Firm Shares
and the Option Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable, and will be
sold free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest; and no preemptive right, co-sale right, registration
right, right of first refusal or other similar right of stockholders exists with
respect to any of the Firm Shares or Option Shares or the issuance and sale
thereof other than those that have been expressly waived prior to the date
hereof and those that will
-4-
<PAGE>
automatically expire upon the consummation of the transactions contemplated
on the Closing Date. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the issuance and sale or transfer of the Shares except as may be required
under the Act or under state or other securities or Blue Sky laws. All
issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of or subject to any
preemptive right, or other rights to subscribe for or purchase shares and are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company,
and the notes thereto, included in the Prospectus, neither the Company nor
its subsidiary has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown by the
Act and the applicable Rules and Regulations with respect to such plans,
arrangements, options and rights.
(g) KPMG Peat Marwick LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of December 31, 1995 and 1994 for each of the years in the two-year
period ended December 31, 1995 and for the period from inception through
December 31, 1993 filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are, to the Company's
knowledge, independent accountants within the meaning of the Act and the Rules
and Regulations; the audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company and its subsidiary at the respective dates and for the respective
periods to which they apply; and all audited consolidated financial statements
of the Company, together with the related schedules and notes, and the unaudited
consolidated financial information, filed with the Commission as part of the
Registration Statement, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as may be otherwise stated therein. The selected and summary financial
and statistical data included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis consistent with the
audited financial statements presented therein. No other financial statements
or schedules are required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been
(I) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiary considered as one enterprise, (ii) any transaction that is material
to the Company and its subsidiary considered as one enterprise, except
transactions entered into in the ordinary course of business, (iii) any
obligation, direct or contingent, that is material to the Company and its
subsidiary considered as one enterprise, incurred by the Company or its
subsidiary, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the Company
or its subsidiary that is material to the Company and its subsidiary considered
as one enterprise, (v) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company or its subsidiary, or (vi) any loss
or damage (whether or not insured) to the property of the Company or its
subsidiary which has been sustained which has a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiary considered as one enterprise.
(i) Except as set forth in the Registration Statement and
Prospectus, (I) each of the Company and its subsidiary has good title to all
properties and assets described in the Registration Statement and Prospectus as
owned by it, free and clear of any pledge, lien, security interest, encumbrance,
-5-
<PAGE>
claim or equitable interest, other than such as would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiary
considered as one enterprise, (ii) the agreements to which the Company or its
subsidiary is a party described in the Registration Statement and Prospectus
are valid agreements, enforceable by the Company and its subsidiary (as
applicable), except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles or the limitation on availability of equitable remedies and, to
the best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements, and (iii) each of the Company and its subsidiary has valid and
enforceable leases for all properties described in the Registration Statement
and Prospectus as leased by it, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles or the limitation on availability of equitable
remedies. Except as set forth in the Registration Statement and Prospectus,
the Company owns or leases all such properties as are necessary to its
operations as now conducted.
(j) The Company and its subsidiary have timely filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the best of the Company's knowledge, might properly and validly be
asserted against the Company or its subsidiary that would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiary considered as
one enterprise; and all tax liabilities are adequately provided for on the books
of the Company and its subsidiary.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its businesses and consistent with insurance coverage maintained by
similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company or
its subsidiary against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full force
and effect; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiary considered as one enterprise.
(l) To the best of Company's executive officers' knowledge, no
labor disturbance by the employees of the Company or its subsidiary exists or is
imminent; and the executive officers of the Company are not aware of any
existing or imminent labor disturbance by the employees of any of the Company's
principal suppliers, subassemblers, value added resellers, subcontractors,
original equipment manufacturers, authorized dealers or international
distributors that might be expected to result in a material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiary considered as one
enterprise. No collective bargaining agreement exists with any of the Company's
employees and, to the best of the Company's knowledge, no such agreement is
imminent.
(m) Each of the Company and its subsidiary owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its business as described in the Registration Statement and
Prospectus; the Company has not received any notice of, and the executive
officers of the Company have no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to
-6-
<PAGE>
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names or copyrights; and the Company has not received
any notice of, and the executive officers of the Company have no knowledge
of, any infringement of or conflict with asserted rights of others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiary considered as one enterprise.
(n) The Common Stock has been approved for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to use its
best efforts to conduct, its affairs in such a manner as to ensure that it will
not become an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute
prior to the later of (I) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) Neither the Company nor its subsidiary has at any time
during the last five (5) years (I) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any such contribution
in violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company and the beneficial
owners of 99% of the outstanding shares of Common Stock and Preferred Stock as
of the date hereof have agreed in writing that such person will not, for the
period beginning on the date that the Registration Statement is filed with the
Commission and ending 180 days after the Registration is declared effective by
the Commission (the "Lock-up Period"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(I) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to limited
partners or stockholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (iii) with the
prior written consent of Robertson, Stephens & Company LLC. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the agreements pursuant to which
its officers, directors and stockholders have agreed to such or similar
restrictions (the "Lock-up Agreements") presently in effect or effected hereby.
The Company hereby represents and warrants that it will not release any of its
officers, directors or other
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<PAGE>
stockholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of Robertson, Stephens & Company
LLC.
(t) Except as set forth in the Registration Statement and
Prospectus, (I) the Company is in material compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and
(iv) no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601,
ET SEQ.), or otherwise designated as a contaminated site under applicable state
or local law.
(u) The Company and its subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
(I) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(w) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by wire
transfer, certified or official bank check or checks drawn in same-day funds,
payable to the order of the Company, at the option of the Company, at the
offices of Cooley Godward Castro Huddleson & Tatum, One Maritime Plaza, 20th
Floor, San Francisco, California 94111 (or at such other place as may be agreed
upon among the Representatives and the Company, at 7:00 A.M., San Francisco time
(a) on the third (3rd) full business day following the first day that Shares are
traded, (b) if this Agreement is executed and delivered after 1:30 P.M., San
Francisco time, the fourth (4th) full business day following the day that this
Agreement is executed and delivered or (c) at such other time and date not later
than seven (7) full business days following the first day that Shares are traded
as the Representatives and the Company may determine (or at such time and date
to which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date";
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PROVIDED, HOWEVER, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following
delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in
New York City, as you may reasonably request for checking at least one (1)
full business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2)
full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), in the paragraph
on page [2], concerning stabilization and over-allotment by the Underwriters,
and in the first, second, third and last two paragraphs and third sentence of
the fifth paragraph under the caption "Underwriting" in any Preliminary
Prospectus and in the final form of Prospectus filed pursuant to Rule 424(b)
constitutes the only information furnished by the Underwriters to the Company
for inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement, and you, on behalf of the respective Underwriters, represent and
warrant to the Company that the statements made therein do not include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed,
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within the time period prescribed, with the Commission pursuant to
subparagraph (7) of Rule 424(b) of the Rules and Regulations; if for any
reason the filing of the final form of Prospectus is required under Rule
424(b)(3) of the Rules and Regulations, it will provide evidence satisfactory
to you that the Prospectus contains such information and has been filed with
the Commission within the time period prescribed; it will notify you promptly
of any request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which,
in the opinion of counsel for the several Underwriters, Brobeck, Phleger &
Harrison LLP ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which
the Prospectus or any other prospectus relating to the Shares as then in
effect would include any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more after
the effective date of the Registration Statement in connection with the sale
of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus which
shall not previously have been submitted to you a reasonable time prior to
the proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act and the Rules and
Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction for such purpose.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term
sheet under Rule 434, in no event later than the first (1st) full business
day following the first day that Shares are traded, copies of the
Registration Statement (three of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments
or supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you
may from time to time reasonably request. Notwithstanding the foregoing, if
Robertson, Stephens & Company LLC, on behalf of the several Underwriters,
shall agree to the utilization of Rule 434 of the Rules and Regulations, the
Company shall provide to you copies of a Preliminary Prospectus updated in
all respects through the date specified by you in such quantities as you may
from time to time reasonably request.
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<PAGE>
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act (including,
at the election of the Company, Rule 158 of the Rules and Regulations) and
covering a twelve (12) month period beginning after the effective date of the
Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request
(i) concurrently with furnishing such reports to its stockholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's stockholders, (ii) concurrently with furnishing to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants,
(iii) as soon as they are available, copies of all reports (financial or other)
mailed to stockholders, (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or the National Association of Securities Dealers, Inc.
("NASD"), (v) every material press release and every material news item or
article in respect of the Company or its affairs which was generally released to
stockholders or prepared by the Company or its subsidiary, and (vi) any
additional information of a public nature concerning the Company or its
subsidiary, or its business which you may reasonably request. During such five
(5) year period, if the Company shall have active subsidiary, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its subsidiary are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary which
is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If at any time during the twenty-five (25) day period after
the Registration Statement becomes effective until the later of (A) twenty five
days after the date of the Prospectus and (B) the date the Representitives
advise the Company that the distribution of shares has been completed which in
the absence of express notice will be deemed to be the closing of the sale of
the Option Shares or the termination or expiration of the option period set
forth in section 7(a), any rumor, publication or event relating to or affecting
the Company shall occur as a result of which in your opinion the market price of
the Common Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus), the Company will, after written notice from you
advising the Company to the effect set forth above, forthwith prepare, consult
with you concerning the substance of and disseminate a press release or other
public statement, reasonably satisfactory to you, responding to or commenting on
such rumor, publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any
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<PAGE>
Securities other than the sale of the Firm Shares and the Option Shares
hereunder and the Company's issuance of options or Common Stock under the
Company's presently authorized Stock Option Plan adopted in December 1993 and
Employee Stock Purchase Plan adopted in April 1996 (the "Plans") or pursuant
to equipment or lease financing activities entered into in the ordinary
course of the Company's business, in connection with the acquisition, by the
Company, of another business, product or technology, or to a strategic
investor or partner of the Company in conjunction with an agreement involving
a technical, manufacturing or marketing collaboration in the ordinary course
of business, provided that in each case, the parties agree not to make a
Disposition of Securities and are bound to the Lock-up Agreement for the days
remaining in the Lock-up Period.
(l) During a period of thirty (30) days from the effective date
of the Registration Statement, the Company will not file a registration
statement registering shares under the Plans or other employee benefit plan.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Preliminary Blue Sky Survey and any Supplemental
Blue Sky Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes, if any,
the cost of all certificates representing the Shares and transfer agents' and
registrars' fees; the fees and disbursements of counsel for the Company; all
fees and other charges of the Company's independent certified public
accountants; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
NASD filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
reasonable and customary disbursements of Underwriters' Counsel in connection
with such NASD filings and Blue Sky qualifications); and all other expenses
directly incurred by the Company in connection with the performance of their
obligations hereunder.
(ii) In addition to its other obligations under
Section 8(a) hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses reasonably incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by the Commission,
a court or arbitration tribunal of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Company together with
interest, compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) listed
from time to time in The Wall Street Journal which represents the base rate on
corporate loans posted by a substantial majority of the nation's thirty (30)
largest banks (the "Prime Rate"). Any such interim reimbursement payments which
are not made to the Underwriters within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
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(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(b) hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses reasonably
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in
Sections 5(a)(ii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis on
which such amounts shall be apportioned among the reimbursing parties, shall be
settled by arbitration conducted under the provisions of the Constitution and
Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant
to the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections 5(a)(ii)
and 5(b) hereof and will not resolve the ultimate propriety or enforceability of
the obligation to indemnify for expenses which is created by the provisions of
Sections 8(a) and 8(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(d) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company herein, to the performance by
the Company of their respective obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiary considered as one enterprise
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<PAGE>
from that set forth in the Registration Statement or Prospectus, which, in
your reasonable judgment, is material and adverse and that makes it, in your
reasonable judgment, impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, the following
opinion of counsel for the Company, dated the Closing Date or such later date on
which Option Shares are purchased addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters,
to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation;
(ii) The Company has the corporate power and authority
to own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) To such Counsel's knowledge, the Company is
duly qualified to do business as a foreign corporation and is in good
standing in each state of the United States, if any, in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiary considered as one
enterprise. To such counsel's knowledge, the Company does not own or
control, directly or indirectly, any corporation, association or other
entity other than 4C Consultancy AG;
(iv) The authorized, issued and outstanding capital
stock of the Company was as set forth in the Prospectus under the
caption "Capitalization" as of the date stated therein, the issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, have not been issued in violation of or subject
to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) The Firm Shares or the Option Shares, as the case
may be, have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive right,
or, to such counsel's knowledge co-sale right, registration right,
right of first refusal or other similar right of stockholders;
(vi) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares;
(vii) This Agreement has been duly authorized by
all necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification and contribution provisions may be
limited by applicable law and except as enforceability may be limited
by bankruptcy, insolvency, reorganization,
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moratorium or similar laws relating to or affecting creditors'
rights generally or by general equitable principles and limitations
on availability of equitable remedies;
(viii) The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted
or are pending or threatened under the Act;
(ix) The Registration Statement and the Prospectus, and
each amendment or supplement thereto (other than the financial
statements (including supporting schedules) and financial and
statistical data contained therein as to which such counsel need
express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
(x) The information in the Prospectus under the
caption "Description of Capital Stock," to the extent that it
constitutes matters of law or legal conclusions, has been reviewed by
such counsel and is a fair summary of such matters and conclusions to
the extent required by the Act and the applicable Rules and
Regulations; and the form of certificate evidencing the Common Stock
and filed as an exhibit to the Registration Statement complies with
Delaware law;
(xi) The descriptions in the Registration Statement and
the Prospectus under the caption "Risk Factors - Effects of Certain
Charter and Bylaw Provisions" and "Description of Capital Stock" of
the charter and bylaws of the Company are accurate and fairly present
the information required to be presented by the Act and the applicable
Rules and Regulations, and the descriptions in the Registration
Statement and the Prospectus of statutes (except the
Telecommunications Act of 1996 as to which such counsel need express
no opinion) are accurate in all material respects and fairly present
the information required to be presented by the Act and the applicable
Rules and Regulations;
(xii) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company is a
party of a character required under the Act and the applicable Rules
and Regulations to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or referred to therein
or filed as required;
(xiii) The performance of this Agreement and the
consummation of the transactions herein contemplated (other than
performance of the Company's indemnification and contribution
obligations hereunder, concerning which no opinion need be expressed)
will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach
or violation of any of the terms and provisions of, or constitute a
material default under, any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed
of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, and which has been identified to us by
the Company as material and filed as exhibits 10.1 to 10.24 to the
Registration Statement or any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any order, writ
or decree of any court, government or governmental agency or body
having jurisdiction over the Company or its subsidiary, or over any of
their properties or operations; except such as may be required
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<PAGE>
under securities or Blue Sky laws of the various states in connection
with the purchase and distribution of the Shares by the Underwriters.
(xiv) No consent, approval, authorization or order
of or qualification with any court, government or governmental agency
in the United States having jurisdiction over the Company over any of
its properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated,
except such as have been obtained under the Act or such as may be
required under state or other securities or Blue Sky laws in
connection with the purchase and the distribution of the Shares by the
Underwriters;
(xv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
its subsidiary of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(xvi) To such counsel's knowledge, except as set
forth in the Registration Statement and Prospectus, no holders of
Common Stock or other securities of the Company have registration
rights with respect to securities of the Company and, except as set
forth in the Registration Statement and Prospectus, the rights, known
to such counsel, of holders, to register their shares of Common Stock
or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering
contemplated thereby been waived or such rights have expired by reason
of lapse of time following notification of the Company's intent to
file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full
satisfaction of such rights.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective, as the case may
be, the Registration Statement and any amendment or supplement thereto (other
than the financial statements, including supporting schedules, and other
financial and statistical information contained therein as to which such counsel
need express no comment) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or at the Closing Date or any later
date on which the Option Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
(other than the financial statements, including supporting schedules, and other
financial and statistical information contained therein) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions
of law not involving the laws of the United States or the State of California
and the corporate laws of the State of Delaware upon opinions of local counsel,
and as to questions of fact upon representations or certificates of officers of
the Company, and of government officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
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(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of Brobeck, Phleger & Harrison LLP, in form and substance reasonably
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have reasonably
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from KPMG Peat Marwick LLP addressed to the Company and the Underwriters, dated
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations and based upon the procedures
described in such letter delivered to you concurrently with the execution of
this Agreement (herein called the "Original Letter"), but carried out to a date
not more than five (5) business days prior to the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be,
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, and
(ii) setting forth any revisions and additions to the statements and conclusions
set forth in the Original Letter which are necessary to reflect any changes in
the facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiary considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your reasonable
judgment, is material and adverse and that makes it, in your reasonable
judgment, impracticable or inadvisable to proceed with the public offering of
the Shares as contemplated by the Prospectus. The Original Letter from KPMG
Peat Marwick LLP shall be addressed to or for the use of the Underwriters in
form and substance satisfactory to the Underwriters and shall (i) represent, to
the extent true, that KPMG Peat Marwick LLP are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth their opinion with
respect to their examination of the consolidated balance sheet of the Company as
of December 31, 1995 and 1994, and related consolidated statements of
operations, stockholders' equity, and cash flows for the two-year period ended
December 31, 1995 and for the period from inception through December 31, 1993,
(iii) state that KPMG Peat Marwick LLP has performed the procedure set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of KPMG Peat Marwick LLP as
described in SAS 71 on the financial statements for each of the quarters
presented in the Prospectus, and (iv) address other matters agreed upon by KPMG
Peat Marwick LLP and you. In addition, you shall have received from KPMG Peat
Marwick LLP a letter addressed to the Company and made available to you for the
use of the Underwriters stating that their review of the Company's system of
internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's consolidated
financial statements as of December 31, 1995, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be reasonably satisfied that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and the Company has
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complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased,
as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the delivery of
such certificate, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, contained all material
information required to be included therein by the Act and the Rules
and Regulations, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations, the
Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and does
not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and,
since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiary considered as one
enterprise, (b) any transaction that is material to the Company and
its subsidiary considered as one enterprise, except license and other
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and
its subsidiary considered as one enterprise, incurred by the Company
or its subsidiary, except obligations incurred in the ordinary course
of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or its subsidiary that is material to the
Company and its subsidiary considered as one enterprise, (e) any
dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or its subsidiary, or (f) any loss or
damage (whether or not insured) to the property of the Company or its
subsidiary which has been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiary considered as one enterprise.
(h) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, and the beneficial
owners of at least 99% of the outstanding shares of Common Stock and Preferred
Stock as of the date hereof in writing prior to the date hereof that such person
will not, during the Lock-up Period, effect the Disposition of any Securities
now owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to limited
partners or stockholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (iii) with the
prior written consent of Robertson, Stephens & Company LLC. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
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(i) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder).
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a nontransferable option to purchase up to an aggregate of
________ Option Shares at the purchase price per share for the Firm Shares set
forth in Section 3 hereof. Such option may be exercised by the Representatives
on behalf of the several Underwriters on one occasion in whole or in part during
the period of thirty (30) days after the date on which the Firm Shares are
initially offered to the public, by giving written notice to the Company. The
number of Option Shares to be purchased by each Underwriter upon the exercise of
such option shall be the same proportion of the total number of Option Shares to
be purchased by the several Underwriters pursuant to the exercise of such option
as the number of Firm Shares purchased by such Underwriter (set forth in
Schedule A hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (set forth in Schedule A hereto), adjusted by the
Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same-day funds, payable to the order of the Company. In the
event of any breach of the foregoing, the Company shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the
offices of Cooley Godward Castro Huddleson & Tatum, One Maritime Plaza, 20th
Floor, San Francisco, California 94111 or at such other place as may be agreed
upon among the Representatives and the Company (i) on the Closing Date, if
written notice of the exercise of such option is received by the Company at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company receives written notice of the exercise of such option, if such
notice is received by the Company less than two (2) full business days prior to
the Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
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payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the condition that all proceedings taken at or
prior to the payment date in connection with the sale and transfer of such
Option Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may reasonably request in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements, the performance of any of the covenants or agreements of the
Company or the compliance with any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein contained,
(ii) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each Underwriter for any legal or other
related expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, such Preliminary Prospectus or the
Prospectus, or any such amendment or supplement thereto, in reliance upon, and
in conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter, directly or through you, specifically for use
in the preparation thereof and, PROVIDED FURTHER, that the indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
losses, claims, damages, liabilities or actions based upon any untrue statement
or alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
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(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(b) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof, and agrees to reimburse
the Company for any legal or other expenses reasonably incurred by the Company
in connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, and each person, if any, who controls the Company within the meaning of
the Act or the Exchange Act. This indemnity agreement shall be in addition to
any liabilities which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 8(a) or 8(b) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect
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of any amounts paid in settlement of any action unless the indemnifying party
shall have approved the terms of such settlement; PROVIDED that such consent
shall not be unreasonably withheld. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter in excess of the amount of damages which such Underwriter
has otherwise been required to pay and (ii) no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(d) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls the Underwriters or the Company within the meaning
of the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
within the meaning of the Act or the Exchange Act, or by or on behalf of the
Company or any of its officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
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If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares so
agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company shall be liable to
any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company, and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
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(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be,
(i) if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, including, without limitation, any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiary considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your reasonable
judgment, is material and adverse, or (ii) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or
(iv) if there shall have been a material adverse change in the general political
or economic conditions or financial markets as in your reasonable judgment makes
it inadvisable or impracticable to proceed with the offering, sale and delivery
of the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the reasonable opinion of
the Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to 333 Distel Circle, Los Altos, California
94022, telecopier number (415) 934-3701, Attention: Pehong Chen, Chief Executive
Officer.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or corporation. No purchaser
of any of the Shares from any Underwriter shall be construed a successor or
assign by reason merely of such purchase.
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In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be entitled
to act and rely upon any statement, request, notice or agreement made or given
by you jointly or by Robertson, Stephens & Company LLC on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
BROADVISION, INC.
By
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
WESSELS, ARNOLD & HENDERSON, L.L.C.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
ROBERTSON, STEPHENS & COMPANY LLC
By ROBERTSON, STEPHENS & COMPANY LLC
By
Authorized Signatory
-25-
<PAGE>
SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
- ----------------------- -------------
Robertson, Stephens & Company LLC . . . . . . . . . . . . . .
Hambrecht & Quist LLC
Wessels, Arnold & Henderson, L.L.C.
-------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . .
-------------
-------------
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BROADVISION, INC.
The undersigned, Pehong Chen and Kenneth L. Guernsey, hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of BroadVision, Inc., a Delaware corporation, incorporated in the
State of Delaware on May 13, 1993.
TWO: The Amended and Restated Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follow:
I.
The name of this corporation is BroadVision, Inc. (the "Corporation").
II.
The registered agent and the address of the registered office in the
State of Delaware are:
The Prentice-Hall Corporation System, Inc.
1013 Centre Road
Wilmington, Delaware 19805
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is fifty-five
million (55,000,000) shares. Fifty million (50,000,000) shares shall be Common
Stock, each having a par value of one-hundredth of one cent ($.0001). Five
million (5,000,000) shares shall be Preferred Stock, each having a par value of
one-hundredth of one cent ($.0001).
<PAGE>
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
(1) The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors shall be
fixed exclusively by one or more resolutions adopted by the Board of Directors.
(2) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
directors shall be elected at each annual meeting of stockholders for a term of
one year. Each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
(3) The Board of Directors shall have the power to adopt, amend
or repeal Bylaws.
B.
(1) The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
(2) No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and, following the closing of the initial public
offering of the Common Stock, no action shall be taken by the stockholders by
written consent.
2.
<PAGE>
(3) Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this reservation.
VIII.
THREE: The foregoing amendment and restatement has been duly approved by
the Board of Directors of said corporation.
FOUR: The foregoing amendment and restatement of this Certificate of
Incorporation has been duly adopted in accordance with Sections 228, 242 and 245
of the General Corporation Law of Delaware by the Board of Directors and
stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was ________________________
(________________) shares of Common Stock, four million two hundred sixty-six
thousand six hundred sixty-seven (4,266,667) shares of Series A Preferred Stock,
one million three hundred thirty-three thousand three hundred thirty-three
(1,333,333) shares of Series B Preferred Stock, three million six thousand
(3,006,000) shares of Series C Preferred Stock and ___________________
(___________) shares of Series E Preferred Stock. A majority of the outstanding
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series E Preferred Stock approved this Amended and
Restated Certificate of Incorporation by Written Consent
3.
<PAGE>
in accordance with Section 228 of the General Corporation Law of Delaware and
written notice of such was given by the Corporation in accordance with said
Section 228.
IN WITNESS WHEREOF, BroadVision, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by the President and
Secretary in San Francisco, California, this ___ day of ____________, 1996.
--------------------------------------
Dr. Pehong Chen, President
--------------------------------------
Kenneth L. Guernsey, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Amended and Restated Certificate of Incorporation and they know the
contents thereof, and that the statements therein are true. Executed at San
Francisco, California, on the _____ day of ____________, 1996.
--------------------------------------
Dr. Pehong Chen, President
--------------------------------------
Kenneth L. Guernsey, Secretary
4.
<PAGE>
NUMBER SHARES
COMMON STOCK COMMON STOCK
BROADVISION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 111412 10 2
THIS CERTIFIES THAT SEE REVERSE FOR CERTAIN
DEFINITIONS AND A STATEMENT AS
TO THE POWERS, DESIGNATIONS,
PREFERENCES, RESTRICTIONS
AND RIGHTS OF SHARES
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $0.0001
PAR VALUE PER SHARE, OF
BROADVISION, INC.
transferable on the Books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate is not valid until countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY [SEAL] PRESIDENT
AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. BOX 1596
DENVER, COLORADO 80201
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
- ---------------------------------------------------------
AMERICAN BANK NOTE COMPANY MAY 16, 1996
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 043782fc
(310) 989-2333
(FAX) (310) 426-7450 12MX REV2
- ---------------------------------------------------------
<PAGE>
BROADVISION, INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights, so far as the same shall have
been fixed, and of the authority of the Board of Directors to designate and
fix any preferences, rights and limitations of any wholly unissued series.
Such request shall be made to the Corporation's Secretary at the principal
office of the Corporation.
The following abbreviations, when used in the inception on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in UNIF GIFT MIN ACT -- .....Custodian .....
common (Cust) (Minor)
TEN ENT -- as tenants by under Uniform Gifts to Minors
the entireties ACT..........................
(State)
JT TEN -- as joint tenants UNIF TRF MIN ACT -- ....Custodian (until age ...)
with rights of (Cust)
survivorship ...........under Uniform Transfers
and not as (Minor)
tenants in common to Minors Act.....................
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
---------------------
X
---------------------------------------
X
---------------------------------------
NOTICE: THE SIGNATURE(S) TO THE ASSIGNMENT MUST
CORRESPOND WITH THE NAMES AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By
----------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS STOCKBROKERS,
SAVINGS AND LOANS ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
- ---------------------------------------------------------
AMERICAN BANK NOTE COMPANY MAY 14, 1996
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90607 043782BK
(310) 989-2333
(FAX) (310) 426-7450 REV1
- ---------------------------------------------------------
<PAGE>
BROADVISION, INC.
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (the "Agreement") is made and entered
into as of November 1, 1993, by and between BROADVISION, INC., a Delaware
corporation (the "Company"), and PEHONG CHEN ("Shareholder").
RECITALS
A. As of the date hereof, Shareholder owns five million three
hundred sixty thousand (5,360,000) shares of Common Stock of the Company issued
on July 30, 1993 and October 20, 1993 ("Total Shares"). The use of the term
"Vesting Shares" herein refers to three million seven hundred thousand
(3,700,000) of the Total Shares and to all securities received with respect to
such shares pursuant to or in consequence of any stock dividend, stock split,
recapitalization, merger, reorganization, exchange of shares or other similar
event.
B. In order to provide assurance to persons who may purchase shares
of stock of the Company in the future and thereby to assist in the equity
financing of the Company, Shareholder is willing to enter into this Agreement
for the benefit of the Company and any person or entity who holds stock of the
Company from time to time.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. RIGHT OF COMPANY TO REPURCHASE SHARES.
1.1 REPURCHASE RIGHT. All of the Vesting Shares shall be subject to
the option set forth in this paragraph 1 ("Purchase Option"). Subject to the
provisions of Section 1.3, in the event Shareholder shall cease to be employed
by the Company (including a parent or subsidiary of the Company) at any time
prior to November 1, 1997, the Company shall have the right, at any time within
90 days after the date Shareholder ceases to be so employed, to exercise the
Purchase Option, which consists of the right to purchase from the Shareholder or
his personal representative, as the case may be, up to but not exceeding the
number of Shares which have not vested under the provisions of Section 1.2
below, upon the terms hereinafter set forth. The purchase price to be paid on
exercise of the Purchase Option shall be $0.02 per share for the first 1,700,000
shares purchased and $0.005 per share for any shares in excess of 1,700,000.
1.2 LAPSE OF RIGHT TO EXERCISE PURCHASE OPTION. Subject to Section
1.3, the Company may exercise the Purchase Option for a maximum number of Shares
as set forth in the following formula: 3,700,000 shares, minus 77,083 1/3 shares
for each full month that Shareholder is employed by the Company after October
31, 1993.
1.
<PAGE>
1.3 ACCELERATED VESTING. The Purchase Option shall lapse, and all
Vesting Shares shall become fully vested upon the occurrence of any of the
following events: (i) any merger or consolidation of the Company with or into
another entity; (ii) any sale, transfer or other disposition of all or
substantially all of the assets of the Company; (iii) any transaction or series
of related transactions in which more than 50% of the outstanding voting
securities of the Company are transferred; or (iv) any termination of the
employment of the Shareholder which is not voluntary by the Shareholder,
provided that the Shareholder agrees if requested as part of such termination to
continue as a consultant to the Company on reasonable terms for up to 10% of the
business days each month until the earlier of November 1, 1997 or an event
specified in clause (i), (ii) or (iii) above.
1.4 REPURCHASE PROCEDURE. The Company's Purchase Option shall
terminate if not exercised by written notice from the Company to Shareholder
within 90 days from the date on which Shareholder ceases to be employed by the
Company. As security for Shareholder's performance of the terms of this
Agreement and to ensure that the Shares will be available for delivery upon
exercise of the Purchase Option, Shareholder agrees to deliver to and deposit
with Linda L. Carloni of Cooley Godward Castro Huddleson & Tatum ("Escrow
Agent"), as Escrow Agent in this transaction, two Stock Assignments duly
endorsed (with date and number of shares blank) in the form attached hereto as
Exhibit A, together with the certificate or certificates evidencing the Shares;
such documents are to be held by the Escrow Agent and delivered by the Escrow
Agent pursuant to the Joint Escrow Instructions of the Company and Shareholder
set forth in Exhibit B attached hereto and incorporated by this reference, which
instructions shall be delivered to the Escrow Agent.
1.5 BINDING EFFECT. The Company's Purchase Option shall inure to the
benefit of the successors and assigns of the Company and shall be binding upon
any representative, executor, administrator, heir or legatee of Shareholder.
2. STOCK CERTIFICATE RESTRICTIVE LEGEND. Shareholder agrees that the
certificate(s) representing the Shares shall bear a legend which substantially
reads as follows:
"The shares represented by this certificate are subject to an option
set forth in an agreement between the Company and the registered holder, or
the predecessor in interest, a copy of which is on file at the principal
office of this corporation. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written
consent of the issuer of these shares."
2.
<PAGE>
3. BINDING EFFECT. Subject to the limitations set forth in this
Agreement, this Agreement shall be binding upon, and inure to the benefit of,
the executors, administrators, heirs, legal representatives, successors and
assigns of the parties hereto.
4. DAMAGES. Shareholder shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of Shares which is not in conformity with the provisions of this
Agreement.
5. GOVERNING LAW AND ATTORNEY'S FEES. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts entered into and wholly to be performed within the State
of California by California residents. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions hereof, the prevailing party shall be entitled to recover reasonable
attorney's fees and all other costs incurred in such action or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BROADVISION, INC.
By: /s/ Pehong Chen
---------------------------
Pehong Chen
President
Shareholder hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement.
/s/ Pehong Chen
------------------------------
PEHONG CHEN
3.
<PAGE>
EXHIBIT A
TO
STOCK RESTRICTION AGREEMENT
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Pehong Chen hereby sells, assigns and transfers unto
BroadVision, Inc., a Delaware corporation (the "Company"), pursuant to that
certain Stock Restriction Agreement, dated November __, 1993, by and between the
undersigned and the Company (the "Agreement"), ____________________________
______________________________ (___________) shares of Common Stock of the
Company standing in the undersigned's name on the books of the Company
represented by Certificate No(s). _______ and does hereby irrevocably constitute
and appoint ________________________ attorney to transfer said stock on the
books of the Company with full power of substitution in the premises. This
Assignment may only be used in connection with the repurchase of shares of
Common Stock pursuant to the Agreement that remain subject to the Company's
right of repurchase in accordance with and subject to the terms and conditions
of the Agreement.
Dated as of:
---------------
------------------------------
Pehong Chen
<PAGE>
EXHIBIT B
TO
STOCK RESTRICTION AGREEMENT
JOINT ESCROW INSTRUCTIONS
Linda L. Carloni, Esq.
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Dear Madam:
As Escrow Agent for both BroadVision, Inc. (the "Company") and the
undersigned person denoted "Shareholder," you are hereby authorized and directed
to hold the documents delivered to you pursuant to the terms of that certain
Stock Restriction Agreement ("Agreement"), dated November __, 1993, to which a
copy of these Joint Escrow Instructions is attached as Exhibit B, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") shall elect to exercise
the Purchase Option set forth in the Agreement, the Company shall give to
Shareholder and you a written notice specifying the number of shares of Common
Stock (the "Stock") to be purchased, the purchase price, and the time for a
closing thereunder at the principal office of the Company. Shareholder and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (i) to date the stock assignment
necessary for the transfer in question, (ii) to fill in the number of shares
being transferred, and (iii) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price for the number of shares of
the Stock being purchased pursuant to the exercise of the Purchase Option.
3. Shareholder irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of the Stock to be held by you hereunder and any
additions and substitutions to said shares as referred to in the Agreement.
Shareholder does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such shares all documents necessary or appropriate to make such securities
negotiable and complete any transaction herein contemplated, including but not
limited to any appropriate filing with state securities officials. Subject to
the provisions of this paragraph 3, Shareholder shall exercise all rights and
privileges of a shareholder of the Company while the Stock is held by you.
1.
<PAGE>
4. This escrow shall terminate upon termination of the Purchase Option
under the Agreement.
5. If at the time of termination of this escrow you should have in your
possession in your capacity as Escrow Agent any documents, securities or other
property belonging to Shareholder, you shall deliver all of same to Shareholder
and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Shareholder while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders of a duly authorized arbitrator or arbitration panel,
orders or process of courts of law, and are hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court. In case you
obey or comply with any such order, judgment or decree of any court, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
2.
<PAGE>
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Assistant Secretary of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint your successor as Assistant Secretary of the Company as successor
Escrow Agent.
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned, by arbitration or a final order, decree or judgment of a
court of competent jurisdiction after the time for appeal has expired and no
appeal has been perfected, but you shall be under no duty whatsoever to
institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: BROADVISION, INC.
93 Ridgeview Drive
Atherton CA 94027
Attention: President
SHAREHOLDER: PEHONG CHEN
93 Ridgeview Drive
Atherton CA 94027
ESCROW AGENT: Linda L. Carloni, Esq.
Cooley Godward, et.al.
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
15. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
3.
<PAGE>
16. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, you may rely upon the advice of such counsel, and you may
pay such counsel reasonable compensation therefor.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Dated: November __, 1993
Very truly yours,
BROADVISION, INC.
By:
--------------------------------
Pehong Chen
President
SHAREHOLDER
-----------------------------------
Pehong Chen
ESCROW AGENT
By:
--------------------------------
Linda L. Carloni
4.
<PAGE>
May 28, 1996
BroadVision, Inc.
333 Distel Circle
Los Altos, CA 94022-1404
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by BroadVision, Inc. (the "Company") of a Registration Statement
on Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission"), covering an underwritten public offering of up to
4,600,000 shares of Common Stock (the "Common Stock").
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Certificate of Incorporation, as amended, and Amended and Restated
Bylaws, and the originals or copies certified to our satisfaction of such
records, documents, certificates, memoranda and other instruments as in our
judgment are necessary or appropriate to enable us to render the opinion
expressed below, (ii) assumed that the Amended and Restated Certificate of
Incorporation, as amended, as set forth in Exhibit 3.3 to the Registration
Statement, will have been duly approved and filed with the office of the
Delaware Secretary of State and (iii) assumed that the shares of Common Stock
will be sold by the Underwriters at a price established by the Pricing
Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be duly and validly issued, fully paid
and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
/s/ KENNETH L. GUERNSEY
By ----------------------------
Kenneth L. Guernsey
<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
BROADVISION, INC.
STOCK OPTION AGREEMENT
BROADVISION, INC. (the "Company") is pleased to inform you that its Board
of Directors has granted you an option to purchase shares of the common stock of
the Company ("Common Stock") under the BroadVision, Inc. Stock Option Plan (the
"Plan").
The details of your option are as follows:
OPTIONEE NAME:
-------------------
NUMBER OF SHARES:
----------------
EXERCISE PRICE: $ per share, being not less than the fair market
value of the Common Stock on the date of grant of this option.
GRANT DATE:
----------------------
EXPIRATION DATE: , unless it ends sooner for the reasons described
in Section 5 of the Supplemental Terms and Conditions attached.
VESTING COMMENCEMENT DATE:
-------------
VESTING SCHEDULE: % on first anniversary of Vesting Commencement Date
-------
% each monthly anniversary thereafter until fully vested
-------
TAX QUALIFICATION: This option _X__ is ___ is not intended to qualify for the
federal income tax benefits available to an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
ADDITIONAL TERMS AND OPTIONEE'S ACKNOWLEDGEMENTS: This option is also subject
to all the terms of the Supplemental Terms and Conditions attached to this
Agreement. The undersigned optionee acknowledges receipt of this option
agreement, the Supplemental Terms and Conditions, and the exhibits referred to
in both documents, and understands and agrees to all their terms. Optionee
further acknowledges that as of the date of grant of this option, this option
and its exhibits set forth the entire understanding between optionee and the
Company and regarding the acquisition of stock in the Company and supersedes all
prior oral and written agreements on that subject with the exception of (i) the
option agreements previously granted and delivered to optionee under the Plan,
and (ii) the following agreements only:
OTHER AGREEMENTS:
--------------------------------
--------------------------------
--------------------------------
BROADVISION, INC. OPTIONEE:
By:
------------------------------- --------------------------------------
Signature
Name:
------------------------------
Date: Date:
------------------------------ ----------------------------------
<PAGE>
BROADVISION, INC.
SUPPLEMENTAL TERMS AND CONDITIONS OF THE
INCENTIVE STOCK OPTION AGREEMENT
1. METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of this option. You may make payment
of the exercise price in cash or by check at the time of exercise.
Notwithstanding the foregoing, this option may also be exercised as part of a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or a check) by the Company before Common
Stock is issued.
2. EARLY EXERCISE OF OPTION (EXERCISE OF UNVESTED SHARES).
(a) At any time during your service with the Company or a
parent or subsidiary (as defined in Section 424 of the Internal Revenue Code
(the "Code") and defined as a "Related Company" in this document), you may
exercise any or all of the shares subject to this option whether or not the
shares have vested, PROVIDED, HOWEVER, that:
i. a partial exercise of this option will be deemed to
cover vested shares first and then the earliest vesting installment of unvested
shares;
ii. any unvested shares at the date of exercise will be
subject to the purchase option in favor of the Company which is described in the
Notice of Exercise and Stock Purchase Agreement (the "Notice of Exercise")
attached as an exhibit to this option;
iii. you will enter into the Notice of Exercise which
will contain the same vesting schedule as in this option agreement; and
iv. this option may not be exercised under this
paragraph 2 if the exercise would cause the aggregate fair market value of any
shares subject to incentive stock options granted to you by the Company or a
Related Company (valued as of their grant date) which would become exercisable
for the first time during any calendar year to exceed $100,000.
(b) Your right to purchase unvested shares ends upon
termination of your service with the Company and all Related Companies.
3. WHOLE SHARES. You may exercise this option only for whole shares
and the Company shall be under no obligation to issue any fractional shares of
Common Stock to you.
4. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained in this option, this option may not be exercised unless the
shares issuable upon exercise of this option are then registered under the
Securities Act of 1933, as amended (the "Act") or, if the shares are not
registered at that time, the Company has determined that the exercise and
issuance would be exempt from the registration requirements of the Act.
1.
<PAGE>
This option has been granted under the terms of a compensatory benefit
plan established by the Company to provide financial incentives for the
Company's employees (including officers) and certain directors and consultants
to work for the financial success of the Company and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Act.
5. TERM OF OPTION. The term of this option begins on the date you
were granted this option and, unless it ends sooner for the reason described
below, terminates on the Expiration Date set forth in the Stock Option
Agreement. You may not, under any circumstances, exercise this option after the
Expiration Date. By delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
This option will also terminate prior to the end of its term if your
service as an employee or an advisor or consultant with the Company and all
Related Companies is terminated for any reason or for no reason. Your option
will then terminate three (3) months after the date on which you are no longer
providing services to the Company or any Related Company unless one of the
following circumstances exists:
(a) Your termination of service is due to your disability.
This option will then terminate on the earlier of the Expiration Date or twelve
(12) months following the termination of your service. You should be aware that
if your disability is not considered a permanent and total disability within the
meaning of Section 422(c)(6) of the Code, and you exercise this option more than
three (3) months following the date of your termination of employment, your
exercise will be treated for tax purposes as the exercise of a "nonstatutory
stock option" instead of an "incentive stock option."
(b) Your termination of service is due to your death. This
option will then terminate on the earlier of the Expiration Date or twelve (12)
months after your death.
(c) If during any part of the three (3) month period you may
not exercise your option solely because of the condition described in paragraph
4 above, then your option will not terminate until the earlier of the Expiration
Date or until this option shall become exercisable for an aggregate period of
three (3) months after the termination of your service.
(d) If your exercise of the option within three (3) months
after termination of your service with the Company and all Related Companies
will result in liability under Section 16(b) of the Securities Exchange Act of
1934, as amended, then your option will terminate on the earlier of (i) the
Expiration Date, (ii) the tenth (10th) day after the last date on which your
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your service with the Company and all Related
Companies.
Only the shares which are vested on the date of your termination of
service may be exercised following the termination of your service.
2.
<PAGE>
In order to obtain the federal income tax advantages associated with an
incentive stock option, the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or a
Related Company, except in the event of your death or disability. The Company
has provided for continued vesting or extended exercisability for your option
under certain circumstances for your benefit, but cannot guarantee that your
option will necessarily be treated as an incentive stock option if you provide
services to the Company or a Related Company as a consultant or exercise your
option more than three (3) months after the date your employment with the
Company and all Related Companies terminates.
6. EXERCISE OF OPTION.
a. You may exercise this option to the extent specified above,
by delivering the Notice of Exercise attached to this option as an exhibit
together with the exercise price to the Secretary of the Company, or another
person designated by the Company, during regular business hours, together with
any additional documents required in the Notice of Exercise.
b. By exercising this option you agree that:
i. the Company may require you to pay to the Company
any tax withholding obligation of the Company arising from (1) your exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of the shares
of Common Stock you acquired upon the exercise of this option;
ii. you will notify the Company in writing within
fifteen (15) days after the date on which you dispose of any of the shares of
the Common Stock issued to you upon your exercise of this option if the
disposition of shares occurs prior to the earlier of two (2) years after the
date on which you were granted this option or one (1) year after the date on
which you exercised this option; and
iii. in connection with the first underwritten
registration of the offering of any securities of the Company under the Act, the
Company (or a representative of the underwriters) may require that you not sell
or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during a period not to exceed one hundred eighty (180)
days following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act. For purposes of this restriction
you will be considered to own securities which (i) you own directly or
indirectly, including securities held for your benefit by nominees, custodians,
brokers or pledgees; (ii) you may acquire within sixty (60) days of the
Effective Date; (iii) are owned directly or indirectly, by or for your brothers
or sisters (whether by whole or half blood), spouse, ancestors and lineal
descendants; or (iv) are owned, directly or indirectly, by or for a corporation,
partnership, estate or trust of which you are a shareholder, partner or
beneficiary, but only to the extent of your proportionate interest in the
corporation, partnership, estate or trust as a shareholder, partner or
beneficiary. You further agree that the Company may impose stop-transfer
instructions on the securities subject to these restrictions until the end of
the period.
3.
<PAGE>
7. OPTION NOT TRANSFERABLE. This option may not be transferred,
except by will or by the laws of descent and distribution, and may be exercised
during your life only by you.
8. OPTION NOT AN EMPLOYMENT CONTRACT. This option is not an
employment contract and nothing in this option creates in any way whatsoever any
obligation on your part to continue in the employ of the Company, or of the
Company to continue your employment with the Company.
9. NOTICES. Any notices provided for in this option or the Plan will
be given in writing and will be considered to have been given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you later designate in
writing to the Company.
10. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, which is attached as an exhibit to this option. All
provisions of the Plan are hereby made a part of this option. This option is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be set forth and adopted under the Plan. In the event of
any conflict between the provisions of this option and those of the Plan, the
provisions of the Plan shall control.
ATTACHMENTS:
Exhibit A: BroadVision, Inc. Stock Option Plan
Exhibit B: Regulation 260.141.11
Exhibit C: Notice of Exercise and Stock Purchase Agreement
4.
<PAGE>
BROADVISION, INC.
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
Pursuant to a stock option (the "Stock Option") granted by BroadVision,
Inc. (the "Company") to the undersigned purchaser ("Purchaser") on the Stock
Option grant date set forth below, Purchaser hereby elects to exercise his or
her Stock Option and to purchase shares of the Company's common stock ("Common
Stock") and the Company hereby agrees to sell shares of Common Stock to the
Purchaser upon the following terms and conditions:
NAME OF PURCHASER:
-----------------------------------
STOCK OPTION GRANT DATE:
-----------------------------
TYPE OF EXERCISE: TYPE OF OPTION:
/ / Vested shares only / / Incentive Stock Option
/ / Early exercise (some unvested shares)(1) / / Non Qualified Stock Option
NUMBER OF SHARES: Purchaser hereby exercises his or her option as
to vested shares of Common Stock and unvested shares of
Common Stock (the "Unvested Stock") for a total of shares (the
"Stock").
REGISTERED NAME: Stock certificates for the Stock to be issued in name of
- --------------------------------------------------------------------------------
- -------------------------------.
TOTAL EXERCISE PRICE: $ , consisting of a cash payment delivered with
this notice.
ADDITIONAL TERMS AND PURCHASER'S ACKNOWLEDGEMENTS: This agreement is also
subject to all the terms of the Supplemental Terms and Conditions attached to
this agreement. The Purchaser acknowledges receipt of this agreement, the
Supplemental Terms and Conditions, and the exhibits referred to in both
documents, and understands and agrees to all their terms. Purchaser further
acknowledges that as of the date of this agreement, this agreement and its
exhibits set forth the entire understanding between Purchaser and the Company
and regarding the acquisition of stock in the Company and supersedes all prior
oral and written agreements on that subject with the exception of (i) the option
agreements previously granted and delivered to Purchaser under the Company's
Stock Option Plan (the "Plan"), and (ii) the following agreements only:
OTHER AGREEMENTS:
----------------------------------------
----------------------------------------
----------------------------------------
BROADVISION, INC. PURCHASER:
By:
--------------------------------- ----------------------------------------
Signature
Name:
-------------------------------
Date: Date:
------------------------------- -----------------------------------
(1) If you are exercising your option as to unvested shares, you should
determine whether you wish to make a section 83(b) election. Such election must
be made and filed with the Internal Revenue Service within thirty (30) days of
the date you exercise this option. In short, a section 83(b) election provides
for the determination of taxable income (regular income tax for nonqualified
stock options and alternative minimum tax for incentive stock options) on the
date of exercise rather than the later date on which the stock vests. More
detailed information on section 83(b) elections, as well as election forms, are
available from the Company.
<PAGE>
BROADVISION, INC.
SUPPLEMENTAL TERMS AND CONDITIONS OF THE
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
1. SALE AND PURCHASE. Purchaser hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to Purchaser, the total number of
shares of the common stock (the "Stock") of the Company set forth in the Notice
of Exercise and Stock Purchase Agreement (the "Notice"), for the exercise price
set forth in the Notice, payable in cash. These Supplemental Terms and
Conditions together with the Notice shall be referred to herein as the
"Agreement."
2. CLOSING.
a. LOCATION. The closing hereunder shall occur at the offices
of the Company on the date of this Agreement or at such other time and place as
the parties may mutually agree upon in writing.
b. STOCK ASSIGNMENTS AND ESCROW. At the closing, Purchaser
shall deliver the total exercise price in cash. In addition, to the extent that
the Purchaser is purchasing any Unvested Shares herewith, Purchaser shall also
deliver three (3) stock assignments in the form of Exhibit B duly endorsed (with
date and number of shares left blank) and joint escrow instructions (the "Joint
Escrow Instructions") in the form of Exhibit C, duly executed by Purchaser.
c. STOCK CERTIFICATES. At the closing or as soon thereafter
as practicable, the Company shall deliver to the Purchaser share certificates
for the Vested Stock. In addition, to the extent that the Purchaser is
purchasing Unvested Stock, the Company shall deliver to the Escrow Agent (as
defined in paragraph 8 below) share certificates for all of the Unvested Stock
that is to be subject to the Purchase Option (as defined in paragraph 3 below).
3. COMPANY'S REPURCHASE OPTION. In accordance with the provisions of
section 408(b) of the California General Company Law, the Unvested Stock to be
purchased by Purchaser pursuant to this Agreement shall be subject to the
following option ("Purchase Option"):
a. PURCHASE OPTION. In the event that Purchaser shall cease
to be an employee of the Company for any reason (including Purchaser's death),
or no reason, with or without cause, the Purchase Option may be exercised. The
Company shall have the right at any time within the ninety (90) day period after
Purchaser's termination of service with the Company and all affiliates of the
Company or such longer period as may be agreed to by the Company and Purchaser
(for example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Internal Revenue Code) to purchase from Purchaser or his personal
representative, as the case may be, at the price per share paid by Purchaser
pursuant to this Agreement ("Option Price"), up to but not exceeding the number
of shares of the Unvested Stock, adjusted as set forth below.
1.
<PAGE>
b. RELEASE FROM PURCHASE OPTION. The number of shares of the
Stock deemed to be "Unvested Stock" shall be equal to (x) the total number of
shares of the Stock granted to the Purchaser pursuant to the Stock Option less
(y) the number of shares of the Stock that have vested under the vesting
schedule set forth in the Stock Option as of the date of the termination of the
Purchaser's services with the Company.
c. CHANGE OF CONTROL. In addition, and without limiting the
foregoing Purchase Option, if at any time during the term of the Purchase
Option, there occurs: (a) a dissolution or liquidation of the Company; (b) a
merger or consolidation involving the Company in which the Company is not the
surviving corporation; (c) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of other securities, cash or otherwise; or
(d) any other capital reorganization in which more than fifty percent (50%) of
the shares of the Company entitled to vote are exchanged, then: (i) if there
will be no successor to the Company, the Company shall have the right to
exercise its Purchase Option as to all or any portion of the Stock then subject
to the Purchase Option set forth above to the same extent as if Purchaser's
employment by the Company had ceased on the date preceding the date of
consummation of said event or transaction, or (ii) the Purchase Option may be
assigned to any successor of the Company, and the Purchase Option shall apply if
Purchaser shall cease for any reason to be an employee of such successor on the
same basis as set forth above. In that case, references herein to the "Company"
shall be deemed to refer to such successor.
d. PAYMENT. The Company shall be entitled to pay for any
shares purchased pursuant to its Purchase Option at the Company's option in
cash, by offset against any indebtedness owing to the Company and given in
payment for the Stock by Purchaser, or a combination of both.
e. NOT AN EMPLOYMENT CONTRACT. This Agreement is not an
employment contract and nothing in this Agreement shall be deemed to create in
any way whatsoever any obligation on the part of the Purchaser to continue in
the employ of the Company, or of the Company to continue Purchaser in the employ
of the Company.
f. EXERCISE OF PURCHASE OPTION. In the event that the Stock's
Fair Market Value (as defined in the Plan) is equal to or exceeds the Option
Price on the date that the Purchaser ceases to be employed, the Company, in its
sole discretion, may exercise its purchase option to the extent permitted by
law.
g. NOTICE OF EXERCISE. The Purchase Option may be exercised
by giving written notice of exercise delivered or mailed as provided in
paragraph 11. Upon providing such notice and payment or tender of the purchase
price, the Company shall become the legal and beneficial owner of the Stock
being purchased and all rights and interests therein or related thereto.
2.
<PAGE>
h. DISTRIBUTIONS, DIVIDENDS ETC. If from time to time during
the term of the Purchase Option there is any stock dividend or liquidating
dividend or distribution of cash and/or property, stock split or other change in
the character or amount of any of the outstanding securities of the Company,
then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of his ownership of the
Unvested Stock will be immediately subject to the Purchase Option and be
included in the words "Unvested Stock" for all purposes of the Purchase Option
with the same force and effect as the shares of Unvested Stock then subject to
the Purchase Option. While the total Option Price shall remain the same after
each such event, the Option Price per share of Unvested Stock upon exercise of
the Purchase Option shall be appropriately adjusted.
4. LEGENDS. All certificates representing any shares of Stock of the
Company subject to the provisions of this Agreement shall have endorsed thereon
legends in substantially the following form:
a. "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
b. Any legend required to be placed thereon by the California
Commissioner of Corporations.
In additions, certificates representing shares of Unvested Stock shall have
endorsed thereon a legend in substantially the following form:
c. "The shares represented by this certificate are subject to
an option set forth in an agreement between the corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this corporation. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
5. PURCHASER REPRESENTATIONS AND ACKNOWLEDGEMENTS.
a. SECURITIES ACT. Purchaser acknowledges that he is aware that
the Stock to be issued to him by the Company pursuant to this Agreement has not
been registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Company is relying on the following
representations: Purchaser warrants and represents to the Company that he is
acquiring the Stock for investment and not with a view to or for sale in
connection with any distribution of the Stock or with any present intention of
distributing or selling the Stock and he does not presently have reason to
anticipate any change in circumstances or any particular occasion or event which
would cause him to sell the Stock. Purchaser recognizes that the Stock must be
held indefinitely unless it is subsequently registered under the Act or an
3.
<PAGE>
exemption from such registration is available and, further, recognizes that the
Company is under no obligation to register the Stock or to comply with any
exemption from such registration.
b. RESALE OF STOCK. Purchaser is aware that the Stock may not
be sold pursuant to Rule 144 adopted under the Act unless certain conditions are
met and until Purchaser has held the Stock for at least two (2) years. Among
the conditions for use of Rule 144 is the availability of specified current
public information about the Company. Purchaser recognizes that the Company
presently has no plans to make such information available to the public.
c. RECEIPT OF SECTION 260.141.11. Purchaser acknowledges
receipt of a copy of Section 260.141.11 of Title 10 of the California
Administrative Code, attached hereto as Exhibit A.
6. TRANSFER RESTRICTIONS.
a. IN GENERAL. Whether or not the Purchase Option is exercised
or has lapsed, Purchaser agrees not to make any disposition of any of the Stock
in any event unless and until:
i. There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
ii. (1) Purchaser shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and
(2) Purchaser shall have given the Company an opinion of counsel, which opinion
and counsel shall be satisfactory to the Company, to the effect that such
disposition will not require registration of the Stock under the Act.
b. WITH RESPECT TO UNVESTED STOCK. Purchaser shall not sell
or transfer any of the Unvested Stock subject to the Purchase Option or any
interest therein so long as such Unvested Stock is subject to the Purchase
Option.
c. EFFECT ON COMPANY. The Company shall not be required
(i) to transfer on its books any shares of Common Stock of the Company which
shall have been sold or transferred in violation of any of the provisions set
forth in this Agreement or (ii) to treat as owner of such shares or to accord
the right to vote as such owner or to pay dividends to any transferee to whom
such shares shall have been so transferred.
7. ESCROW ARRANGEMENTS. As security for his faithful performance of
the terms of this Agreement and to insure the availability for delivery of
Purchaser's Stock upon exercise of the Purchase Option herein provided for,
Purchaser agrees, at the closing hereunder (or as soon thereafter as
practicable) to deliver (or have the Company deliver on the Purchaser's behalf)
to and deposit with the Secretary of the Company, as escrow agent in this
transaction (the "Escrow Agent"), three (3) stock assignments duly endorsed
(with date and number of shares left blank) in the form attached hereto as
Exhibit B, together with a certificate or
4.
<PAGE>
certificates evidencing all of the Unvested Stock subject to the Purchase
Option; said documents are to be held by the Escrow Agent and delivered by said
Escrow Agent pursuant to the Joint Escrow Instructions of the Company and
Purchaser set forth in Exhibit C attached hereto and incorporated herein by this
reference, which instructions shall also be delivered to the Escrow Agent at the
closing hereunder (or as soon thereafter as practicable).
8. STOCKHOLDER RIGHTS. Subject to the provisions of paragraph 6
above, Purchaser (but not any unapproved transferee) shall, during the term of
this Agreement, exercise all rights and privileges of a stockholder of the
Company with respect to the Unvested Stock.
9. AGREEMENT NOT TO SELL. Purchaser further agrees that, if required
by the Company (or a representative of the underwriters) in connection with the
first underwritten registration of the offering of any securities of the Company
under the Act, Purchaser will not sell or otherwise transfer or dispose of any
shares of Common Stock or other securities of the Company during a period not to
exceed one hundred eighty (180) days following the effective date (the
"Effective Date") of the registration statement of the Company filed under the
Act. For purposes of this restriction Purchaser will be considered to own
securities that (i) are owned directly or indirectly by Purchaser, including
securities held for Purchaser's benefit by nominees, custodians, brokers or
pledgees; (ii) may be acquired by Purchaser within sixty (60) days of the
Effective Date; (iii) are owned directly or indirectly, by or for Purchaser's
brothers or sisters (whether by whole or half blood), spouse, ancestors and
lineal descendants; or (iv) are owned, directly or indirectly, by or for a
corporation, partnership, estate or trust of which Purchaser is a shareholder,
partner or beneficiary, but only to the extent of Purchaser's proportionate
interest in the corporation, partnership, estate or trust as a shareholder,
partner or beneficiary. Purchaser further agrees that the Company may impose
stop-transfer instructions with respect to securities subject to the
restrictions, described above, until the end of such period.
10. ADDITIONAL DOCUMENTS. Purchaser agrees to provide any additional
documents Company may reasonably require to complete the exercise of this option
and the issuance of shares of the Common Stock of the Company in accordance with
all applicable laws.
11. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in any United States Post Office Box, by registered or certified
mail with postage and fees prepaid, addressed to the other party hereto as his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
12. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, inure to the benefit of and be
binding upon Purchaser, his heirs, executors, administrators, successors, and
assigns. Without limiting the generality of the foregoing, the Purchase Option
of the Company hereunder shall be assignable by the Company at any time or from
time to time, in whole or in part. Should the right of repurchase be assigned
by the
5.
<PAGE>
Company, the assignee shall pay to the Company cash equal to the excess, if any,
of the Stock's Fair Market Value (as defined in the Plan) over the Option Price.
13. CAPITALIZED TERMS. Capitalized terms used but not defined in
these Supplemental Terms and Conditions shall have the respective meanings given
thereto in the Notice of Exercise and Stock Purchase Agreement.
14. GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California, without giving effect to principles of
conflicts of laws.
15. HEADINGS. The titles of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
ATTACHMENTS:
Exhibit A Cal. Admin. Code, Title 10, Section 260.141.11
ADDITIONAL ATTACHMENTS IF UNVESTED SHARES BEING PURCHASED:
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
<PAGE>
BROADVISION, INC.
STOCK OPTION PLAN
ADOPTED DECEMBER 22, 1993
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
1.
<PAGE>
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means BroadVision, Inc., a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "COVERED EXECUTIVE" means each Employee, Director or Consultant
subject to Section 16 of the Exchange Act with respect to the Company.
(i) "DIRECTOR" means a member of the Board.
(j) "DISINTERESTED PERSON" means a Director: (i) who either (A) was
not during the one year prior to service as an administrator of the Plan granted
or awarded equity securities pursuant to the Plan or any other plan of the
Company or any of its affiliates entitling the participants therein to acquire
equity securities of the Company or any of its affiliates except as
2.
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permitted by Rule 16b-3(c)(2)(i); or (B) who is otherwise considered to be a
"disinterested person" in accordance with Rule 16b-3(c)(2)(i), or any other
applicable rules, regulations or interpretations of the Securities and Exchange
Commission; AND (ii) who either (A) is not a current Employee, is not a former
Employee receiving compensation for prior services (other than benefits under a
tax qualified pension plan), was not an officer of the Company or an affiliate
at any time, and is not currently receiving compensation for personal services
in any capacity other than as a Director, or (B) is otherwise considered an
outside director for purposes of Section 162(m) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reporting in the Wall Street Journal or such
other source as the Board deems reliable;
3.
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(2) If the common stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(s) "OPTIONED STOCK" means the common stock of the Company subject to
an Option.
(t) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(u) "PLAN" means this Stock Option Plan.
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(v) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how each Option shall
be granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need not
be identical), including the time or times such Option may be exercised in whole
or in part; and the number of shares for which an Option shall be granted to
each such person.
(2) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in Section 11.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons if required by the provisions
of subsection 3(d). If administration is delegated to a Committee, the
Committee shall have, in connection with the administration
5.
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of the Plan, the powers theretofore possessed by the Board (and references in
this Plan to the Board shall thereafter be to the Committee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the date of the first registration of an equity security of the Company
under Section 12 of the Exchange Act, and notwithstanding anything to the
contrary contained herein, the Board may delegate administration of the Plan to
any person or persons and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. Notwithstanding anything in
this Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant options to
eligible persons who are not then subject to Section 16 of the Exchange Act.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (A) prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, or (B) if the Board or the Committee expressly declares that such
requirement shall not apply. Any Disinterested Person shall otherwise comply
with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate three million five hundred thirty-three thousand
(3,533,000) shares of the Company's common stock. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan.
6.
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(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Options may be granted, or in the determination of the
number of shares which may be covered by Options granted to the Director:
(A) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (B) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5(b)
shall not apply (i) prior to the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act, or (ii) if the
Board or Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
7.
<PAGE>
(d) Subsequent to the registration of equity securities of the Company
under the Exchange Act, no person shall be eligible to be granted Options
covering more than one million (1,000,000) shares of the Company's common stock
during any three (3) year period.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred
8.
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pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder (a
"QDRO"), and shall be exercisable during the lifetime of the person to whom the
Option is granted only by such person or any transferee pursuant to a QDRO. The
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The
9.
<PAGE>
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. The vesting provisions of individual Options
may vary but in each case will provide for vesting of at least twenty percent
(20%) per year of the total number of shares subject to the Option. The
provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan
10.
<PAGE>
as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period, WHICH IN NO EVENT SHALL BE LESS
THAN THIRTY (30) DAYS, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, WHICH IN NO
EVENT SHALL BE LESS THAN SIX (6) MONTHS, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or
her Option
11.
<PAGE>
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only within the
period ending on the earlier of (i) the date eighteen (18) months following the
date of death (or such longer or shorter period, WHICH IN NO EVENT SHALL BE LESS
THAN SIX (6) MONTHS, specified in the Option Agreement), or (ii) the expiration
of the term of such Option as set forth in the Option Agreement. If, at the
time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
death, the Optionee's estate or a person who acquired the right to exercise the
Option by bequest or inheritance does not exercise the Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate PROVIDED,
HOWEVER, that the right to repurchase at the original purchase price shall lapse
at a minimum rate of twenty percent
12.
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(20%) per year over five (5) years from the date the Option was granted and such
right shall be exerciseable only within ninety (90) days following termination
of employment for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is less
than the stock's Fair Market Value.
(k) WITHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the Option;
or (3) delivering to the Company owned and unencumbered shares of the common
stock of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; PROVIDED, HOWEVER,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the
13.
<PAGE>
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
(b) Throughout the term of any Option, the Company shall deliver to
the holder of such Option, not later than one hundred twenty (120) days after
the close of each of the Company's fiscal years during the Option term, a
balance sheet and an income statement. This section shall not apply when
issuance is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate or
to continue acting as a Director or Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable
14.
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for the first time by any Optionee during any calendar year under all plans of
the Company and its Affiliates exceeds one hundred thousand dollars ($100,000),
the Options or portions thereof which exceed such limit (according to the order
in which they were granted) shall be treated as Nonstatutory Stock Options.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding Options.
(b) In the event of: (1) a merger or consolidation in which the
Company is not the surviving corporation or (2) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise then to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under the Plan or shall
substitute similar Options for those outstanding under the Plan, or (ii) such
Options shall continue in full force and effect. In the event any surviving
corporation refuses to assume or continue such Options, or to substitute similar
options for those outstanding under the Plan, then such Options shall be
terminated if not exercised prior to such event. In the event of a dissolution
or liquidation of the Company, any Options outstanding under the Plan shall
terminate if not exercised prior to such event.
15.
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11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under
the Plan;
(2) Modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code, comply with the stockholder approval requirements of
Section 162(m) of the Code, if applicable, or to comply with the requirements of
Rule 16b-3, if applicable.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(c) Rights and obligations under any Option granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
16.
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12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 21, 2003. No Options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
<PAGE>
INCENTIVE STOCK OPTION
___________, Optionee:
BROADVISION, INC. (the "Company"), pursuant to its Stock Option Plan (the
"Plan") has this day granted to you, the optionee named above, an option to
purchase shares of the common stock of the Company ("Common Stock"). This
option is intended to qualify as an "incentive stock option" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option
is ___________ (___________). Subject to the limitations contained herein, this
Option may be exercised, in whole or in part, with respect to shares on or after
the date of vesting applicable to such shares. Vesting shall occur in
accordance with Schedule 1 attached, provided that shares shall vest only so
long as you remain employed by the Company.
2. a. The exercise price of this option is Twelve cents ($0.12)
per share, being not less than the fair market value of the Common Stock on the
date of grant of this option.
b. Payment of the exercise price per share is due in full in
cash (or by check) upon exercise.
c. Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or check) by the Company
prior to the issuance of Common Stock.
3. a. Subject to the provisions of this option you may elect at
any time during your employment with the Company or an affiliate thereof, to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the date of earliest exercise ("vesting") stated in paragraph 1 hereof;
PROVIDED, HOWEVER, that:
i. a partial exercise of this option shall be deemed to
cover first vested shares and then the earliest vesting installment of unvested
shares;
ii. any shares so purchased from installments which have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto; and
1.
<PAGE>
iii. you shall enter into an Early Exercise Stock
Purchase Agreement in the form attached hereto with a vesting schedule that will
result in the same vesting as if no early exercise had occurred.
iv. this option shall not be exercisable under this
paragraph 3 to the extent such exercise would cause the aggregate fair market
value of any shares subject to incentive stock options granted you by the
Company or any affiliate (valued as of their grant date) which would become
exercisable for the first time during any calendar year to exceed $100,000.
b. The election provided in this paragraph 3 to purchase
shares upon the exercise of this option prior to the vesting dates shall cease
upon termination of your employment with the Company or an affiliate thereof and
may not be exercised after the date thereof.
4. This option may not be exercised for any number of shares which
would require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary contained herein, this
option may not be exercised unless the shares issuable upon exercise of this
option are then registered under the Act or, if such Shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on ___________
(ten (10) years from the date this option is granted). In no event may this
option be exercised on or after the date on which it terminates. This option
shall terminate prior to the expiration of its term as follows: three (3)
months after the termination of your employment with the Company or an affiliate
of the Company (as defined in the Plan) for any reason or for no reason unless:
a. such termination of employment is due to your disability,
in which event the option shall terminate on the earlier of the termination date
set forth above or twelve (12) months following such termination of employment;
or
b. such termination of employment is due to your death, in
which event the option shall terminate on the earlier of the termination date
set forth above or twelve (12) months after your death; or
c. during any part of such three (3) month period the option
is not exercisable solely because of the condition set forth in paragraph 5
above, in which event the option shall not terminate until the earlier of the
termination date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of employment; or
d. exercise of the option within three (3) months after
termination of your employment with the Company or with an affiliate would
result in liability under section 16(b)
2.
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of the Securities Exchange Act of 1934, in which case the option will terminate
on the earlier of (i) the termination date set forth above, (ii) the tenth
(10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your employment with the Company or an affiliate.
However, this option may be exercised following termination of employment
only as to that number of shares as to which it was exercisable on the date of
termination of employment under the provisions of paragraph 1 of this option.
7. a. This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to the Plan.
b. By exercising this option you agree that:
i. the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise;
ii. you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the
Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option;
iii. the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters; PROVIDED, HOWEVER, that
such restriction shall apply only if, on the Effective Date, you are an officer,
director, or owner of more than one percent (1%) of the outstanding securities
of the Company. For purposes of this restriction you will be deemed to own
securities which (i) are owned directly or indirectly by you, including
securities held for your benefit by nominees, custodians, brokers or pledgees;
(ii) may be acquired by you within sixty (60) days of the Effective Date;
(iii) are owned directly or indirectly, by or for your brothers or sisters
(whether by whole or half blood) spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which you are a shareholder, partner or beneficiary, but only
to the extent of your proportionate interest therein as a shareholder, partner
or beneficiary thereof. You further agree that the
3.
<PAGE>
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such period; and
iv. the shares issuable on exercise of this option shall
be subject to the right of first refusal set forth in the Company's Bylaws.
8. This option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you.
9. This option is not an employment contract and nothing in this
option shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company.
10. Any notices provided for in this option or the Plan shall be given
in writing and shall be deemed effectively given upon personal delivery,
delivery by express courier or delivery by facsimile (confirmed by mail) or four
(4) days after deposit in the United States mail, postage prepaid, addressed to
you at the address specified below or at such other address as you hereafter
designate by written notice to the Company or to the Company at its principal
executive offices.
11. This option is subject to all the provisions of the Plan, a copy
of which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of the Plan relating to
option provisions, and is further subject to all interpretations, amendments,
rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of
this option and those of the Plan, the provisions of the Plan shall control.
Dated the ___________.
Very truly yours,
BROADVISION, INC.
BY
------------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Stock Option Plan
Form of Exercise
Early Exercise Stock Purchase Agreement
Bylaws - Right of First Refusal
4.
<PAGE>
THE UNDERSIGNED:
(A) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
-------------
(Initial)
OTHER
-----------------------------
-----------------------------
-----------------------------
--------------------------------------
OPTIONEE
ADDRESS:
------------------------
------------------------
5.
<PAGE>
SCHEDULE 1
OPTIONEE:
---------------
GRANT DATE:
---------------
% OF SHARES THAT VEST IF
VESTING DATE EMPLOYED ON VESTING DATE
- ------------ ------------------------
<PAGE>
NOTICE OF EXERCISE
BroadVision, Inc.
333 Distal Drive Circle
Los Altos, CA 94022-1404 Date of Exercise:
-----------------------
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / /
Stock option dated:
--------------------------
Number of shares as
to which option is
exercised:
--------------------------
Certificates to be
issued in name of:
--------------------------
Total exercise price: $
--------------------------
Cash payment delivered
herewith: $
--------------------------
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Stock Option Plan, (ii) to provide for
the payment by me to you (in the manner designated by you) of your withholding
obligation, if any, relating to the exercise of this option, and (iii) if this
exercise relates to an incentive stock option, to notify you in writing within
fifteen (15) days after the date of any disposition of any of the shares of
Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are deemed to constitute
"restricted securities" under Rule 701 and
1.
<PAGE>
"control securities" under Rule 144 promulgated under the Act. I warrant and
represent to the Company that I have no present intention of distributing or
selling said Shares, except as permitted under the Act and any applicable state
securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety days after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply
to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters; PROVIDED, HOWEVER, that such restriction
shall apply only if, on the Effective Date, I am an officer, director, or owner
of more than one percent (1%) of the outstanding securities of the Company. For
purposes of this restriction I will be deemed to own securities that (i) are
owned directly or indirectly by me, including securities held for my benefit by
nominees, custodians, brokers or pledgees; (ii) may be acquired by me within
sixty (60) days of the Effective Date; (iii) are owned directly or indirectly,
by or for my brothers or sisters (whether by whole or half blood), spouse,
ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by
or for a corporation, partnership, estate or trust of which I am a shareholder,
partner or beneficiary, but only to the extent of my proportionate interest
therein as a shareholder, partner or beneficiary thereof. I further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
Very truly yours,
---------------------------------------------
2.
<PAGE>
NONSTATUTORY STOCK OPTION
___________, Optionee:
BROADVISION, INC. (the "Company"), pursuant to its Stock Option Plan (the
"Plan") has this day granted to you, the optionee named above, an option to
purchase shares of the common stock of the Company ("Common Stock"). This
option is not intended to qualify as and will not be treated as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option
("Shares") is ___________ (___________). Subject to the limitations contained
herein, this Option may be exercised, in whole or in part, with respect to
shares on or after the date of vesting applicable to such shares. Vesting shall
occur in accordance with Schedule 1 attached, provided that shares shall vest
only so long as you remain employed by the Company.
2. (a) The exercise price of this option is ___________
(___________) per share, being not less than the fair market value of the Common
Stock on the date of grant of this option.
(b) Payment of the exercise price per share is due in full in
cash (or by check) upon exercise.
(c) Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or check) by the Company
prior to the issuance of Common Stock.
3. (a) Subject to the provisions of this option you may elect at
any time during your employment with the Company or an affiliate thereof, to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the date of earliest exercise ("vesting") stated in paragraph 1 hereof;
PROVIDED, HOWEVER, that:
(i) a partial exercise of this option shall be deemed to
cover first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto; and
1.
<PAGE>
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form attached hereto with a vesting schedule that will
result in the same vesting as if no early exercise had occurred.
(b) The election provided in this paragraph 3 to purchase
shares upon the exercise of this option prior to the vesting dates shall cease
upon termination of your employment with the Company or an affiliate thereof and
may not be exercised after the date thereof.
4. This option may not be exercised for any number of shares which
would require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary contained herein, this
option may not be exercised unless the shares issuable upon exercise of this
option are then registered under the Act or, if such Shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on ___________
(ten (10) years from the date this option is granted). In no event may this
option be exercised on or after the date on which it terminates. This option
shall terminate prior to the expiration of its term as follows: three (3)
months after the termination of your employment with the Company or an affiliate
of the Company (as defined in the Plan) for any reason or for no reason unless:
(a) such termination of employment is due to your disability,
in which event the option shall terminate on the earlier of the termination date
set forth above or twelve (12) months following such termination of employment;
or
(b) such termination of employment is due to your death, in
which event the option shall terminate on the earlier of the termination date
set forth above or twelve (12) months after your death; or
(c) during any part of such three (3) month period the option
is not exercisable solely because of the condition set forth in paragraph 5
above, in which event the option shall not terminate until the earlier of the
termination date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of employment; or
(d) exercise of the option within three (3) months after
termination of your employment with the Company or with an affiliate would
result in liability under section 16(b) of the Securities Exchange Act of 1934,
in which case the option will terminate on the earlier of (i) the termination
date set forth above, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your employment with the Company or an affiliate.
2.
<PAGE>
However, this option may be exercised following termination of employment
only as to that number of shares as to which it was exercisable on the date of
termination of employment under the provisions of paragraph 1 of this option.
7. (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise;
(ii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters; PROVIDED, HOWEVER, that
such restriction shall apply only if, on the Effective Date, you are an officer,
director, or owner of more than one percent (1%) of the outstanding securities
of the Company. For purposes of this restriction you will be deemed to own
securities which (i) are owned directly or indirectly by you, including
securities held for your benefit by nominees, custodians, brokers or pledgees;
(ii) may be acquired by you within sixty (60) days of the Effective Date;
(iii) are owned directly or indirectly, by or for your brothers or sisters
(whether by whole or half blood) spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which you are a shareholder, partner or beneficiary, but only
to the extent of your proportionate interest therein as a shareholder, partner
or beneficiary thereof. You further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period; and
(iii) the shares issuable on exercise of this option shall
be subject to the right of first refusal set forth in the Company's Bylaws.
8. This option is not transferable, except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder (a "QDRO"), and is exercisable during your life only by you
or any transferee pursuant to a QDRO.
3.
<PAGE>
9. This option is not an employment contract and nothing in this
option shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company. In the event that this option is granted to
you in connection with the performance of services as a consultant or director,
references to employment, employee and similar terms shall be deemed to include
the performance of services as a consultant or a director, as the case may be,
PROVIDED, HOWEVER, that no rights as an employee shall arise by reason of the
use of such terms.
10. Any notices provided for in this option or the Plan shall be given
in writing and shall be deemed effectively given upon personal delivery,
delivery by express courier or delivery by facsimile (confirmed by mail) or four
(4) days after deposit in the United States mail, postage prepaid, addressed to
you at the address specified below or at such other address as you hereafter
designate by written notice to the Company or to the Company at its principal
executive offices.
11. This option is subject to all the provisions of the Plan, a copy
of which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of the Plan relating to
option provisions, and is further subject to all interpretations, amendments,
rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of
this option and those of the Plan, the provisions of the Plan shall control.
Dated the .
-----------
Very truly yours,
BROADVISION, INC.
BY
----------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Stock Option Plan
Form of Exercise
Early Exercise Stock Purchase Agreement
Bylaws - Right of First Refusal
4.
<PAGE>
THE UNDERSIGNED:
(A) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
--------------
(Initial)
OTHER
------------------------------------------
------------------------------------------
-------------------------------------
OPTIONEE
ADDRESS: ----------------------------
----------------------------
5.
<PAGE>
SCHEDULE 1
OPTIONEE:
------------------
GRANT DATE:
------------------
% OF SHARES THAT VEST IF
VESTING DATE EMPLOYED ON VESTING DATE
- ------------ ------------------------
<PAGE>
NOTICE OF EXERCISE
BroadVision, Inc.
3 Lagoon Drive, Suite 350
Redwood City, CA 94065 Date of Exercise:
--------------------
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / /
Stock option dated:
------------------------------------
Number of shares as
to which option is
exercised:
------------------------------------
Certificates to be
issued in name of:
------------------------------------
Total exercise price: $
------------------------------------
Cash payment delivered
herewith: $
------------------------------------
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Stock Option Plan, (ii) to provide for
the payment by me to you (in the manner designated by you) of your withholding
obligation, if any, relating to the exercise of this option, and (iii) if this
exercise relates to an incentive stock option, to notify you in writing within
fifteen (15) days after the date of any disposition of any of the shares of
Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are deemed to constitute
"restricted securities" under Rule 701 and "control securities" under Rule 144
promulgated under the Act. I warrant and represent to the
1.
<PAGE>
Company that I have no present intention of distributing or selling said Shares,
except as permitted under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety days after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply
to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters; PROVIDED, HOWEVER, that such restriction
shall apply only if, on the Effective Date, I am an officer, director, or owner
of more than one percent (1%) of the outstanding securities of the Company. For
purposes of this restriction I will be deemed to own securities that (i) are
owned directly or indirectly by me, including securities held for my benefit by
nominees, custodians, brokers or pledgees; (ii) may be acquired by me within
sixty (60) days of the Effective Date; (iii) are owned directly or indirectly,
by or for my brothers or sisters (whether by whole or half blood), spouse,
ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by
or for a corporation, partnership, estate or trust of which I am a shareholder,
partner or beneficiary, but only to the extent of my proportionate interest
therein as a shareholder, partner or beneficiary thereof. I further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
Very truly yours,
--------------------------------------------
2.
<PAGE>
BROADVISION, INC.
-------------------------------------------
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
JANUARY 31, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES B PREFERRED STOCK............ 1
1.1 Authorization...................................................... 1
1.2 Sale of Preferred.................................................. 1
1.3 Closing Date....................................................... 1
1.4 Delivery........................................................... 1
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 1
2.1 Organization and Standing. ....................................... 1
2.2 Corporate Power.................................................... 1
2.3 Subsidiaries....................................................... 2
2.4 Capitalization..................................................... 2
2.5 Authorization...................................................... 2
2.6 Material Liabilities............................................... 3
2.7 Compliance with Other Instruments, etc............................. 3
2.8 Litigation, etc.................................................... 3
2.9 Registration Rights................................................ 3
2.10 Governmental Consent, etc.......................................... 3
2.11 Offering........................................................... 4
2.12 Certain Transactions............................................... 4
2.13 Intellectual Property.............................................. 4
2.14 Employee and Consultant Agreements................................. 5
2.15 Disclosure......................................................... 5
2.16 Brokers or Finders................................................. 5
2.17 No Dividends....................................................... 5
2.18 Contracts.......................................................... 5
2.19 Employee Compensation Plans........................................ 5
2.20 Related-Party Transactions......................................... 5
2.21 Manufacturing and Marketing Rights................................. 5
2.22 Corporate Documents................................................ 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.................... 6
3.1 Authorization...................................................... 6
3.2 Experience......................................................... 6
3.3 Investment......................................................... 6
3.4 Rule 144........................................................... 6
3.5 Ability to Bear Economic Risk...................................... 7
3.6 No Public Market................................................... 7
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.7 Access to Data..................................................... 7
3.8 Accredited Investor Status......................................... 7
SECTION 4 CONDITIONS TO CLOSING OF INVESTOR................................. 7
4.1 Representations and Warranties..................................... 7
4.2 Covenants.......................................................... 7
4.3 No Material Adverse Change......................................... 7
4.4 Blue Sky........................................................... 8
4.5 Board of Directors................................................. 8
4.6 Compliance Certificate............................................. 8
4.7 Opinion of Counsel................................................. 8
4.8 Investors' Rights Agreement........................................ 8
4.9 Certificate of Designation......................................... 8
SECTION 5 CONDITIONS TO CLOSING OF COMPANY.................................. 8
5.1 Representations and Warranties..................................... 8
5.2 Covenants. ........................................................ 8
5.3 Blue Sky........................................................... 8
5.4 Investors' Rights Agreement........................................ 8
SECTION 6 AFFIRMATIVE COVENANTS OF THE INVESTOR............................. 9
6.1 Covenant Not To Transfer........................................... 9
SECTION 7 AFFIRMATIVE COVENANTS OF THE COMPANY.............................. 9
7.1 Financial Information.............................................. 9
7.2 Assignment of Rights to Financial Information...................... 9
7.3 Company Strategy Briefings......................................... 10
7.4 Termination of Covenants........................................... 10
SECTION 8 MISCELLANEOUS..................................................... 10
8.1 Governing Law...................................................... 10
8.2 Survival........................................................... 10
8.3 Successors and Assigns............................................. 10
8.4 Entire Agreement................................................... 10
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.5 Rights of Investor................................................. 10
8.6 Notices, etc....................................................... 10
8.7 Expenses........................................................... 11
8.8 Counterparts....................................................... 11
8.9 Severability....................................................... 11
8.10 California Corporate Securities Law................................ 11
8.11 Approval of Amendments and Waivers................................. 11
EXHIBITS
A - Schedule of Investor
B - Certificate of Designation of Preferences
C - Schedule of Exceptions
D - Investors' Rights Agreement
E - Form of Legal Opinion to the Investor from Cooley Godward Castro
Huddleson & Tatum
iii.
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of January 31, 1994 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investor as set forth in Exhibit A
hereto ("Investor").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES B PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of
800,000 shares of its Series B Preferred Stock (the "Preferred") having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Designation of Preferences in the form attached to this Agreement as Exhibit B
(the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof,
Investor agrees to purchase and the Company agrees to sell and issue to Investor
the number of shares of Preferred set forth opposite Investor's name on Exhibit
A at a price of $1.25 per share.
1.3 CLOSING DATE. The closing of the purchase and sale of the Preferred
hereunder (the "Closing") shall be held at the law offices of Cooley Godward
Castro Huddleson & Tatum ("Cooley Godward"), 5 Palo Alto Square, 4th Floor,
Palo Alto, California 94306, on the date of this Agreement or at such other time
and place upon which the Company and the Investor shall agree (the date of the
Closing is hereinafter referred to as the "Closing Date").
1.4 DELIVERY. At the Closing the Company will deliver to Investor a
certificate representing the shares of Preferred that Investor is purchasing
against payment of the purchase price therefor by wire transfer or by check
payable to the order of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to Investor as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Investors' Rights Agreement
1.
<PAGE>
substantially in the form attached hereto as Exhibit D (the "Investors' Rights
Agreement") (the Agreement and the Investors' Rights Agreement are hereinafter
collectively referred to as the "Agreements"), to sell and issue the Preferred
under this Agreement, to issue the Common Stock issuable upon conversion of the
Preferred and to carry out and perform its obligations under the terms of the
Agreements, including all exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists,
or immediately prior to the Closing will consist, of 17,000,000 shares of Common
Stock, of which 5,700,000 are issued and outstanding and 6,000,000 shares of
Preferred Stock, of which 4,300,000 are designated Series A Preferred Stock (of
which 4,266,667 are issued and outstanding), and 1,400,000 are designated Series
B Preferred Stock (of which 800,000 will be issued and outstanding immediately
after the Closing). The outstanding shares of Common and Series A Preferred
Stock are owned by the shareholders set forth and in the numbers specified on
Exhibit C. No other shares of capital stock are outstanding. All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. The Preferred has the rights, preferences,
privileges and restrictions set forth in the Certificate. Except for (i) the
conversion privileges of the Series A Preferred Stock and the Series B Preferred
Stock specified in the Certificate of Incorporation of the Company, as amended,
and the Certificate, (ii) the obligations of the holders of the Series A
Preferred Stock to purchase Series B Preferred Stock; and (iii) the arrangements
with respect to employee stock set forth in Exhibit C, there are no options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company. All outstanding
securities of the Company were issued in compliance with the registration or
qualification provisions of all applicable U.S. federal and state securities
laws.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Preferred, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements and under applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Preferred has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions under the Agreements, the right
of first refusal provided in the Company's Bylaws, and applicable federal
2.
<PAGE>
and state securities laws. The Preferred is not subject to any preemptive
rights or rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
formation and ongoing business of the Company, the issuance of Common Stock to
its founder and the issuance of the Preferred in connection with this Agreement;
(3) liabilities incurred in the ordinary course of business that do not exceed
$50,000 in the aggregate; and (4) as set forth in Exhibit C.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of its
Certificate of Incorporation or Bylaws or any term or provision of any mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any order, statute, rule or regulation
applicable to the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
basis therefor). There is no judgment, decree, or order of any court in effect
against the Company and the Company is not in default with respect to any order
of any governmental authority to which the Company is a party or by which it is
bound. There is no action, suit, proceeding, or investigation by the Company
currently pending or which the Company presently intends to initiate.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
3.
<PAGE>
2.11 OFFERING. Subject to the accuracy of the representations set forth in
Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to this
Agreement and the issuance of the Common Stock to be issued upon conversion of
the Preferred constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material transaction other than as approved by its Board of Directors or in the
ordinary course of business or agreed to any of the foregoing other than with
respect to transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license on commercially reasonable terms sufficient legal rights
to all patents, copyrights, trade secrets, information, proprietary rights and
processes (collectively "Proprietary Information") necessary for its business as
now conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers, employees and consultants substantially in the forms referenced in
Section 2.14 below, there are no outstanding options, licenses, or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed, violate or infringe any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of and
consultants to the Company, nor the conduct of the Company's business as now
conducted or as proposed, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant, or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
4.
<PAGE>
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants of
the Company have entered into proprietary information and inventions agreements,
substantially in the Company's standard forms and, to the best of the Company's
knowledge, none of the Company's current or former employees or consultants is
in violation of such agreements.
2.15 DISCLOSURE. None of the representations or warranties made by the
Company in this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement or
arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting aside
for payment or other distribution in respect of any of the Company's capital
stock or any direct or indirect redemption, repurchase or other acquisition of
any of such stock.
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party to
any contract or agreement (i) with expected receipts or expenditures in excess
of $10,000, (ii) involving a license or grant of rights to or from the Company
involving patents, trademarks, copyrights, or other proprietary information
applicable to the business of the Company, (iii) with provisions restricting or
affecting the development, manufacture, or distribution of the Company's
products or services, or (iv) that provides indemnification by the Company with
respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other employee compensation
agreements. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may have
business relationships with or may compete with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person,
5.
<PAGE>
corporation, partnership or other entity, and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products, and has not licensed or sold any of
its technology or proprietary information to any person, corporation,
partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investor with
copies of the Certificate of Incorporation and Bylaws as currently in effect.
Said copies are true, correct, and complete and contain all amendments through
the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
Investor hereby represents and warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of Investor, enforceable in accordance with their terms except as
the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Investor is authorized and has full right and power to purchase the
Preferred, and the person signing the Agreements and any other instrument
executed and delivered hereby on behalf of such entity has been duly authorized
by such entity and has full power and authority to do so.
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any Common
Stock issuable upon conversion of the Preferred) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the
6.
<PAGE>
securities to be sold, the sale being through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and the
number of shares being sold during any three-month period not exceeding
specified limitations. The Investor is aware that the conditions for resale set
forth in Rule 144 have not been satisfied and that the Company has no plan to
satisfy these conditions in the foreseeable future.
3.5 ABILITY TO BEAR ECONOMIC RISK. The Investor understands that
investment in the Preferred involves a high degree of risk, and represents that
it is able, without impairing its financial condition, to hold the Preferred for
an indefinite period of time and to suffer a complete loss on its investment.
3.6 NO PUBLIC MARKET. The Investor understands that no public market now
exists for any of the securities issued by the Company and that it is unlikely
that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material.
3.8 ACCREDITED INVESTOR STATUS. Investor is an "accredited investor" as
that term is defined in Regulation D, Rule 501 by reason of being a corporation,
not formed for the specific purpose of acquiring the securities being purchased
hereunder, with total assets in excess of US $5,000,000.
SECTION 4
CONDITIONS TO CLOSING OF INVESTOR
Investor's obligation to purchase the Preferred at the Closing is subject
to the fulfillment to its satisfaction on or prior to the Closing Date of the
following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 2 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's financial condition, affairs or prospects between the
date of this Agreement and the Closing Date, if different.
7.
<PAGE>
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company immediately
following the Closing will consist of Pehong Chen, David L. Anderson and Yogen
K. Dalal.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investor shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investor shall have
entered into the Investors' Rights Agreement.
4.9 CERTIFICATE OF DESIGNATION. The Certificate shall have been filed
with the Secretary of State of Delaware.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Investor contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by Investor on or prior to the Closing Date shall have
been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investor shall have
entered into the Investors' Rights Agreement.
8.
<PAGE>
SECTION 6
AFFIRMATIVE COVENANTS OF THE INVESTOR
6.1 COVENANT NOT TO TRANSFER. Investor hereby agrees not to transfer the
Preferred (and any Common Stock into which the Preferred may be converted)
except upon the conditions set forth in the Section 1.1 of the Investors' Rights
Agreement.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
7.1 FINANCIAL INFORMATION. The Company will furnish the following reports
to Investor for so long as Investor is a holder of (or is entitled to receive
upon conversion) Registrable Securities (as defined in the Investors' Rights
Agreement, hereinafter referred to as the "Registrable Securities" for purposes
of this Section 7) equalling not less than 1 percent of the Company's then
outstanding shares (calculated on an as-converted basis).
(a) As soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, audited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
audited consolidated statements of income, shareholders' equity and cash flow of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and certified by independent public accountants of recognized national
standing selected by the Company;
(b) As soon as practicable after the end of every quarter in each
fiscal year of the Company and in any event within 30 days thereafter, an
unaudited consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such quarterly period, and consolidated statements of
income and cash flow of the Company and its subsidiaries for such period and for
the current fiscal year to date prepared in accordance with generally accepted
accounting principles (other than for accompanying notes), all in reasonable
detail and signed, subject to changes resulting from year-end audit adjustments,
by the principal financial or accounting officer of the Company;
(c) Contemporaneously with delivery to the holders of Common Stock, a
copy of each report of the Company delivered to holders of Common Stock.
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 7.1 may be assigned or otherwise conveyed by the Investor
(or by any permitted transferee of any such rights) only in connection with the
transfer to a single transferee of Registrable Securities equalling not less
than 1 percent of the Company's then outstanding shares (calculated on an as-
converted basis) (including, for such purposes transfers by affiliates of a
transferror) or upon the written consent of the Company which consent shall not
be unreasonably withheld.
9.
<PAGE>
7.3 COMPANY STRATEGY BRIEFINGS. The Company will conduct semi-annual
reviews of Company strategy with Investor, which shall include the presentation
of information with respect to the Company's operating budget, at the offices of
the Company at times mutually agreeable to the Company and the Investor.
7.4 TERMINATION OF COVENANTS. The covenants set forth in Sections 7.1,
7.2 and 7.3 shall terminate and be of no further force or effect after the
earlier of (a) the date upon which a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
public offering of its securities first becomes effective, or (b) the date when
none of the Preferred is outstanding.
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Investor and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed to be
made as of the date of this Agreement, and not necessarily as of some later
date.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investor to purchase the Preferred shall
not be assignable without the consent of the Company.
8.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
8.5 RIGHTS OF INVESTOR. Each holder of the Preferred (and Common Stock
issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
8.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid,
10.
<PAGE>
or otherwise delivered by hand or by messenger, addressed (a) if to the
Investor, to Investors' addresses set forth on the signature page hereof or at
such other address as shall have been furnished to the Company in writing by
Investor or (b) if to the Company, to the address of its principal executive
office and addressed to the attention of the Corporate Secretary, or at such
other address or addresses as the Company shall have furnished in writing to the
Investor. All notices and other communications mailed pursuant to the
provisions of this Section 8.6 shall be deemed delivered when mailed.
8.7 EXPENSES. Each party to this Agreement shall bear its own expenses
and legal fees incurred by it with respect to this Agreement and all related
transactions and agreements.
8.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
8.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities which
are the subject of this Agreement has not been qualified with the Commissioner
of corporations of the state of California, and the issuance of such securities
or the payment or receipt of any part of the consideration therefor prior to
such qualification, if required by law, is unlawful. The rights of all parties
to this agreement are expressly conditioned upon such qualification being
obtained, if required by law.
8.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not consenting) all shares previously disposed of by the Investor
or transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 thereunder. Any amendment, termination
or waiver effected in accordance with this section shall be binding upon each
holder of any securities issued pursuant to this Agreement (including securities
into which
11.
<PAGE>
such securities have been converted or exchanged), each future holder of any or
all such securities and the Company.
The foregoing Agreement is hereby executed as of the date first above
written.
BROADVISION, INC.
By: /s/ Pehong Chen
--------------------------------
PEHONG CHEN
President
Address: 3 Lagoon Drive, Suite 350
Redwood City, CA 94065
INVESTOR
ITOCHU CORPORATION
By: /s/ Bunei Yoshizumi
--------------------------------
Address: 5-1, Kita-Aoyama, 2-Chome
Minato-Ku, Tokyo 107-77
Japan
12.
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
SERIES B
PREFERRED SHARES PRICE
Itochu Corporation 800,000 $1,000,000.00
<PAGE>
BROADVISION, INC.
-------------------------------------------
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
NOVEMBER 7, 1994
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES B PREFERRED STOCK........ 1
1.1 Authorization................................................. 1
1.2 Sale of Preferred............................................. 1
1.3 Closing Date.................................................. 1
1.4 Delivery...................................................... 1
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 1
2.1 Organization and Standing. .................................. 1
2.2 Authorization................................................. 1
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS............... 2
3.1 Authorization................................................. 2
3.2 Experience.................................................... 2
3.3 Investment.................................................... 2
3.4 Rule 144...................................................... 2
3.5 Accredited Investors.......................................... 3
3.6 No Public Market.............................................. 3
3.7 Access to Data................................................ 3
SECTION 4 CONDITIONS TO CLOSING OF INVESTORS............................ 3
4.1 Representations and Warranties................................ 3
4.2 Covenants..................................................... 3
4.3 Blue Sky...................................................... 3
SECTION 5 CONDITIONS TO CLOSING OF COMPANY.............................. 4
5.1 Representations and Warranties................................ 4
5.2 Covenants. ................................................... 4
5.3 Blue Sky...................................................... 4
SECTION 6 MISCELLANEOUS................................................. 4
6.1 Governing Law................................................. 4
6.2 Survival...................................................... 4
6.3 Successors and Assigns........................................ 4
6.4 Entire Agreement.............................................. 4
6.5 Rights of Investors........................................... 4
6.6 Notices, etc.................................................. 5
6.7 Expenses...................................................... 5
6.8 Counterparts.................................................. 5
6.9 Severability.................................................. 5
6.10 California Corporate Securities Law........................... 5
6.11 Approval of Amendments and Waivers............................ 5
i.
<PAGE>
EXHIBITS
A - Schedule of Investors
B - Certificate of Designation of Preferences of Series B Preferred
ii.
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 7, 1994 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto ("Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES B PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale
of 533,333 shares of its Series B Preferred Stock (the "Preferred") having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Designation of Preferences of Series B Preferred Stock in the form attached to
this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof,
each Investor severally agrees to purchase and the Company agrees to sell and
issue to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of $1.25 per share.
1.3 CLOSING DATE. The closing of the purchase and sale of the
Preferred hereunder (the "Closing") shall be held at the principal office of
BroadVision Inc., 3 Lagoon Drive, Suite 350, Redwood City, California
4065-1561, on the date of this Agreement or at such other time and place upon
which the Company and the Investors shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
1.4 DELIVERY. At the Closing the Company will deliver to each
Investor a certificate representing the shares of Preferred that such Investor
is purchasing against payment of the purchase price therefor by wire transfer or
by check payable to the order of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Preferred (and the Common
Stock issuable upon conversion of the Preferred) and the performance of the
Company's obligations under this Agreement has been taken or will be taken
<PAGE>
prior to the Closing. This Agreement constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency, the relief of debtors,
general equity principles, and limitations upon rights to indemnity. The
Preferred, when issued in compliance with the provisions of this Agreement, will
be duly and validly issued, fully paid and nonassessable. The Common Stock
issuable upon conversion of the Preferred has been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement, will be
duly and validly issued, fully paid and nonassessable. The Preferred is not
subject to any preemptive rights or rights of first refusal.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally
binding obligations of such Investor, enforceable in accordance with their terms
except as the enforceability thereof may be subject to the effect of (i) any
applicable bankruptcy, insolvency, reorganization or other law relating to or
affecting creditors' rights generally, and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Such Investor is authorized and has full right and power to
purchase the Preferred, and the person signing the Agreements and any other
instrument executed and delivered hereby on behalf of such entity has been duly
authorized by such entity and has full power and authority to do so.
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any
Common Stock issuable upon conversion of the Preferred) for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public
2.
<PAGE>
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than two years after a party
has purchased and paid for the securities to be sold, the sale being through a
"broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations. The Investor is aware
that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plan to satisfy these conditions in the foreseeable
future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982.
3.6 NO PUBLIC MARKET. The Investor understands that no public market
now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss
the Company's business, management and financial affairs with its management.
The Investor understands that such discussions, as well as any written
information issued by the Company, were intended to describe the aspects of the
Company's business and prospects which the Company believes to be material.
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
4.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
3.
<PAGE>
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Investors on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Investors and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in this Agreement or in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed to be made as of the date of this Agreement, and not necessarily as of
some later date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
6.4 ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common
Stock issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
4.
<PAGE>
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 6.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. Each party to this Agreement shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement
may be amended or terminated and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the Company and the
holders of a majority of the outstanding Preferred Stock sold under this
Agreement, and Common Stock issued upon conversion thereof (calculated on an
as-converted basis), excluding from the determination of such a majority (both
in determining the total number of such shares outstanding and the number of
such shares consenting or not consenting) all shares previously disposed of by
the Investors or transferees pursuant to one or more registration statements
under the Securities Act or pursuant to Rule 144 thereunder. Any amendment,
termination or waiver effected in accordance with this section shall be binding
upon each holder of any securities issued pursuant to this Agreement (including
securities into which such securities have been converted or exchanged), each
future holder of any or all such securities and the Company.
5.
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
BROADVISION, INC.
By: /s/ Pehong Chen
-------------------------------------
PEHONG CHEN
President
Address: 3 Lagoon Drive, Suite 350
Redwood City, CA 94065-1561
INVESTORS
STANFORD UNIVERSITY
By: /s/ Carol Gilmer
-------------------------------------
CAROL GILMER
Address: Stanford Management Company
2770 Sand Hill Road
Menlo Park, CA 94025
GC&H INVESTMENTS,
A CALIFORNIA GENERAL PARTNERSHIP
By: /s/ John L. Cardoza
-------------------------------------
JOHN L. CARDOZA,
EXECUTIVE PARTNER
Address: One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
6.
<PAGE>
/s/ Koh Boon Hwee
- ----------------------------------------
KOH BOON HWEE
Address: c/o Wuthlem Holdings, Ltd.
177 River Valley Road, #05-01
Liang Court Complex
Singapore 0617
/s/ Ikuo Minakata
- ----------------------------------------
IKUO MINAKATA
Address: Info Systems Lab.
1006, Kadoma, Kadoma-Shi
Osaka, 571 Japan
/s/ Andy Chase
- ----------------------------------------
ANDY CHASE
Address: 3000 San Hill Road, 3-190
Menlo Park, CA 94025
THE SIEBEL TRUST
By: /s/ Tom Siebel
-------------------------------------
Tom Siebel
Address: 2909 Woodside Road
Woodside, CA 94062
7.
<PAGE>
/s/ Elserino Piol
- ----------------------------------------
ELSERINO PIOL
Address: c/o Ms. Alexandra Giurgiu
Managing Director
Olivetti Management Inc.
70 E. 55th Street
New York, NY 10022
MAYFIELD VII
By /s/ Yogen K. Dalal
--------------------------------------
Address: 2800 Sand Hill Road
Menlo Park, CA 94025
SUTTER HILL VENTURES,
A CALIFORNIA LIMITED PARTNERSHIP
By /s/ David L. Anderson
--------------------------------------
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
TOW PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By /s/ Paul M. Wythes
--------------------------------------
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
8.
<PAGE>
ANVEST, L.P.
By /s/ David L. Anderson
------------------------------------
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker
------------------------------------
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
/s/ William H. Younger, Jr.
- ----------------------------------------
WILLIAM H. YOUNGER, JR.
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
/s/ Tench Coxe
- ----------------------------------------
TENCH COXE
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
/s/ Ronald L. Perkins
- ----------------------------------------
RONALD L. PERKINS
Address: 755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
9.
<PAGE>
GENSTAR INVESTMENT CORPORATION
By /s/ Richard D. Paterson
------------------------------------
Address: Metro Tower, Suite 1170
Foster City, CA 94404
Attn: R.D. Paterson
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO G. LEONARD BAKER, JR.
By /s/ Christopher M. Peterson
------------------------------------
Address: P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attn: Vicki Bandel
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO DAVID L. ANDERSON
By /s/ Christopher M. Peterson
------------------------------------
Address: P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attn: Vicki Bandel
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO TENCH COXE
By /s/ Christopher M. Peterson
------------------------------------
Address: P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attn: Vicki Bandel
10.
<PAGE>
MAYFIELD ASSOCIATES FUND II
By /s/ Yogen K. Dalal
--------------------------------------
Address: 2800 Sand Hill Road
Suite 250
Menlo Park, CA 94025
Attn: Deborah Kranz
11.
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
Series B
Preferred
Shares Price
--------- -----
Stanford University 11,564 $14,455.00
GC&H Investments, a California general partnership 6,075 7,593.75
Koh Boon Hwee 6,608 8,260.00
Ikuo Minakata 826 1,032.00
Andy Chase 3,304 4,130.00
The Siebel Trust 3,304 4,130.00
Elserino Piol 1,652 2,065.00
Mayfield VII 237,500 296,875.00
Mayfield Associates Fund II 12,500 15,625.00
Sutter Hill Ventures, a California limited partnership 183,823 229,778.75
Tow Partners, a California limited partnership 15,702 19,627.50
Anvest, L.P. 1,653 2,066.25
Saunders Holdings, L.P. 8,265 10,331.25
William H. Younger, Jr. 8,265 10,331.25
Tench Coxe 2,066 2,582.50
Ronald L. Perkins 1,770 2,212.50
Genstar Investment Corporation 4,902 6,127.50
Wells Fargo Bank, Trustee SHV M/P/T FBO G.
Leonard Baker, Jr. 7,438 9,297.50
Wells Fargo Bank, Trustee SHV M/P/T FBO
David L. Anderson 14,050 17,562.50
Wells Fargo Bank, Trustee SHV M/P/T FBO 2,066 2,582.50
Tench Coxe
533,333 666,666.25
<PAGE>
BROADVISION, INC.
- -------------------------------------------------------------------------------
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
- -------------------------------------------------------------------------------
MAY 26, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK. . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Preferred . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Subsequent Sale of Series C Preferred Stock . . . . . . . . . . 1
1.5 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 2
2.1 Organization and Standing. . . . . . . . . . . . . . . . . . . 2
2.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Material Liabilities. . . . . . . . . . . . . . . . . . . . . . 3
2.7 Compliance with Other Instruments, etc. . . . . . . . . . . . . 3
2.8 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Governmental Consent, etc.. . . . . . . . . . . . . . . . . . . 4
2.11 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Certain Transactions. . . . . . . . . . . . . . . . . . . . . . 4
2.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . 4
2.14 Employee and Consultant Agreements. . . . . . . . . . . . . . . 5
2.15 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . 5
2.17 No Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Employee Compensation Plans . . . . . . . . . . . . . . . . . . 6
2.20 Related-Party Transactions. . . . . . . . . . . . . . . . . . . 6
2.21 Manufacturing and Marketing Rights. . . . . . . . . . . . . . . 6
2.22 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS . . . . . . . . 6
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Experience. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Accredited Investors. . . . . . . . . . . . . . . . . . . . . . 7
3.6 No Public Market. . . . . . . . . . . . . . . . . . . . . . . . 7
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.7 Access to Data. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4 CONDITIONS TO CLOSING OF INVESTORS. . . . . . . . . . . . . . . 8
4.1 Representations and Warranties. . . . . . . . . . . . . . . . . 8
4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 No Material Adverse Change. . . . . . . . . . . . . . . . . . . 8
4.4 Blue Sky. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . 8
4.7 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . 8
4.9 Amended and Restated Certificate of Incorporation . . . . . . . 8
SECTION 5 CONDITIONS TO CLOSING OF COMPANY. . . . . . . . . . . . . . . . 9
5.1 Representations and Warranties. . . . . . . . . . . . . . . . . 9
5.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Blue Sky. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . 9
5.5 Amended and Restated Certificate of Incorporation . . . . . . . 9
SECTION 6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 9
6.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Rights of Investors . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 California Corporate Securities Law . . . . . . . . . . . . . . 10
6.11 Approval of Amendments and Waivers. . . . . . . . . . . . . . . 11
ii.
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 26, 1995 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto ("Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of
up to four million (4,000,000) shares of its Series C Preferred Stock (the
"Preferred") having the rights, preferences, privileges and restrictions set
forth in the Amended and Restated Certificate of Incorporation in the form
attached to this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof,
each Investor severally agrees to purchase and the Company agrees to sell and
issue to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of two dollars ($2.00) per share.
1.3 CLOSING DATE. The first closing of the purchase and sale of the
Preferred hereunder (the "First Closing") shall be held at the law offices of
Cooley Godward Castro Huddleson & Tatum ("Cooley Godward"), One Maritime Plaza,
20th Floor, San Francisco, CA 94111. The First Closing shall be held on the
date of this Agreement or at such other time and place upon which the Company
and the Investors shall agree (the date of the First Closing is hereinafter
referred to as the "First Closing Date").
1.4 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. The second closing
(the "Second Closing") shall be held on June 7, 1995 or at such other time
and place upon which the Company and the Investors shall agree (the date of
the Second Closing is hereinafter referred to as the "Second Closing Date").
If less than four million (4,000,000) shares of Preferred are sold at the
First Closing and Second Closing, then, subject to the terms and conditions
of this Agreement, the Company may sell, on or before August 8, 1995, up to
the balance between four million (4,000,000) shares of Preferred and the
number of shares sold at the First Closing and Second Closing to such persons
as the Company may determine at the same price per share as the Preferred
purchased and sold at the First Closing and Second Closing. Any sale
pursuant to this Section 1.4 shall be upon the same terms and conditions as
those contained herein (provided that the Schedule of Exceptions may be
adjusted to reflect subsequent events), and such persons or entities shall
become parties to this Agreement and Investors' Rights Agreement (as defined
in Section 2.2) by the execution of a copy of such agreements and each such
person or entity shall have the rights and obligations of a Purchaser
hereunder and thereunder. The term "Closing" shall apply to the First
Closing, the Second Closing and each subsequent closing pursuant to this
Section 1.4 unless otherwise specified, and the term "Closing Date" shall
apply
<PAGE>
to the First Closing Date, the Second Closing Date and each subsequent
closing date pursuant to this Section 1.4 unless otherwise specified.
1.5 DELIVERY. At the Closing the Company will deliver to each Investor
a certificate representing the shares of Preferred that such Investor is
purchasing against payment of the purchase price therefor by wire transfer or by
check payable to the order of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Investor as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Amended and Restated Investors' Rights Agreement substantially in the form
attached hereto as Exhibit D (the "Investors' Rights Agreement") (the Agreement
and the Investors' Rights Agreement are hereinafter collectively referred to as
the "Agreements"), to sell and issue the Preferred under this Agreement, to
issue the Common Stock issuable upon conversion of the Preferred and to carry
out and perform its obligations under the terms of the Agreements, including all
exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists, or immediately prior to the Closing will consist, of: twenty-two
million (22,000,000) shares of Common Stock, of which six million thirty-two
thousand eight hundred (6,032,800) are issued and outstanding; and ten million
(10,000,000) shares of Preferred Stock, of which four million three hundred
thousand (4,300,000) are designated "Series A Preferred Stock" (of which four
million two hundred sixty-six thousand six hundred sixty-seven (4,266,667) are
issued and outstanding); one million four hundred thousand (1,400,000) are
designated "Series B Preferred Stock" (of which one million three hundred
thirty-three thousand three hundred thirty-three (1,333,333) are issued and
outstanding); and four million (4,000,000) are designated "Series C Preferred
Stock" (of which one million seven hundred fifty thousand (1,750,000) will be
issued and outstanding immediately after the First Closing). All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. The Preferred has the rights, preferences,
privileges and restrictions set forth in the Certificate.
2.
<PAGE>
Except (i) for the conversion privileges of the Preferred specified in the
Certificate, (ii) as set forth in the Investors' Rights Agreement, and (iii) the
arrangements with respect to employee stock set forth in Exhibit C, there are no
options, warrants, conversion privileges or other rights presently outstanding
to purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company. All outstanding
securities of the Company were issued in compliance with the registration or
qualification provisions of all applicable U.S.federal and state securities
laws.
2.5 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of the Agreements by the Company, the
authorization, sale, issuance and delivery of the Preferred (and the Common
Stock issuable upon conversion of the Preferred) and the performance of the
Company's obligations under the Agreements has been taken or will be taken prior
to the Closing. The Agreements, when executed and delivered by the Company,
will constitute valid and binding obligations of the Company enforceable in
accordance with their terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors, general equity principles, and
limitations upon rights to indemnity. The Preferred, when issued in compliance
with the provisions of this Agreement, will be duly and validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions under the Agreements and under applicable federal and state
securities laws. The Common Stock issuable upon conversion of the Preferred has
been duly and validly reserved and, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements, the right of first refusal provided in the Company's Bylaws, and
applicable federal and state securities laws. The Preferred is not subject to
any preemptive rights or rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
ongoing business of the Company, and the issuance of the Preferred in connection
with this Agreement; and (3) liabilities incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and
will not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Certificate or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any order, statute, rule or regulation
applicable to the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency. To the best of the
3.
<PAGE>
Company's knowledge, there is no judgment, decree, or order of any court in
effect against the Company and the Company is not in default with respect to any
order of any governmental authority to which the Company is a party or by which
it is bound. There is no action, suit, proceeding, or investigation by the
Company currently pending or which the Company presently intends to initiate.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
2.11 OFFERING. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to
this Agreement and the issuance of the Common Stock to be issued upon conversion
of the Preferred constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material transaction other than as approved by its Board of Directors or in the
ordinary course of business or agreed to any of the foregoing other than with
respect to transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license
4.
<PAGE>
on commercially reasonable terms sufficient legal rights to all patents,
copyrights, trade secrets, information, proprietary rights and processes
(collectively "Proprietary Information") necessary for its business as now
conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers and employees, substantially in the forms referenced in Section 2.14
below, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed, violate or infringe any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of and
consultants to the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants
of the Company have entered into proprietary information and inventions
agreements, substantially in the Company's standard forms and, to the best of
the Company's knowledge, none of the Company's current or former employees or
consultants is in violation of such agreements.
2.15 DISCLOSURE. To the best of the Company's knowledge after
reasonable investigation, none of the representations or warranties made by the
Company in this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement
or arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party
to any contract or agreement (i) with expected receipts or expenditures in
excess of $10,000, (ii) involving a license or grant of rights to or from the
Company involving patents, trademarks, copyrights, or other proprietary
information applicable to the business of the Company, (iii) with provisions
restricting or affecting the development, manufacture, or distribution of the
5.
<PAGE>
Company's products or services, or (iv) that provides indemnification by the
Company with respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other employee compensation
agreements. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, corporation, partnership or other entity, and is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products, and has not
licensed or sold any of its technology or proprietary information to any person,
corporation, partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investors with
copies of the Certificate and Bylaws as currently in effect. Said copies are
true, correct, and complete and contain all amendments through the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of such Investor, enforceable in accordance with their terms except
as the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Such Investor is authorized and has full right and power to purchase the
Preferred, and the person signing the Agreements and any other instrument
executed and delivered hereby on behalf of such entity has been duly authorized
by such entity and has full power and authority to do so.
6.
<PAGE>
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any
Common Stock issuable upon conversion of the Preferred) for investment for its
own account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The Investor
is aware that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plan to satisfy these conditions in the
foreseeable future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982, as described in Exhibit F hereto.
3.6 NO PUBLIC MARKET. The Investor understands that no public market
now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material.
3.8 RESIDENCE. If the Purchaser is an individual, then the purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office
7.
<PAGE>
or offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on Exhibit A.
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date, if different.
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company
immediately following the Closing will consist of Pehong Chen, David L. Anderson
and Yogen K. Dalal.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investors shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
4.9 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
8.
<PAGE>
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investors contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Investors on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
5.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by Investors and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in this Agreement or in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed to be made as of the date of this Agreement, and not necessarily as of
some later date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
9.
<PAGE>
6.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common
Stock issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 8.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of one (1) special counsel for the Purchasers, not to exceed ten thousand
dollars ($10,000), and shall reimburse such special counsel for reasonable
expenses incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
10.
<PAGE>
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not consenting) all shares previously disposed of by the Investors
or transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 thereunder. Any amendment, termination
or waiver effected in accordance with this section shall be binding upon each
holder of any securities issued pursuant to this Agreement (including securities
into which such securities have been converted or exchanged), each future holder
of any or all such securities and the Company.
11.
<PAGE>
IN WITNESS WHEREOF, the foregoing Series C Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
BROADVISION, INC.
By: /s/ Pehong Chen
-----------------------------
PEHONG CHEN
President
INVESTORS:
4C VENTURES, L.P.
By: 4C Associates, L.P.,
its General Partner
By: 4C Associates, Inc.,
its General Partner
By: /s/ Jeanne M. Sullivan
-------------------------------------
Name: Jeanne M. Sullivan
-------------------------------------
Title: Managing Director
-------------------------------------
ITOCHU INTERNATIONAL, INC.
By: /s/ Yoichi Okuda
-------------------------------------
Name: Yoichi Okuda
-------------------------------------
Title:
-------------------------------------
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PEREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
MAYFIELD VII
By: /s/ Yogen K. Dalal
-------------------------------------
Name: Yogen K. Dalal
-------------------------------------
Title: General Partner
-------------------------------------
MAYFIELD ASSOCIATES FUND II
By: /s/ Yogen K. Dalal
-------------------------------------
Name: Yogen K. Dalal
-------------------------------------
Title: General Partner
-------------------------------------
SUTTER HILL VENTURES,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ David L. Anderson
-------------------------------------
Name: David L. Anderson
-------------------------------------
Title:
-------------------------------------
TOW PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ David L. Anderson
-------------------------------------
Name: David L. Anderson
-------------------------------------
Title: Under power of attorney
for Paul M. Wythe
-------------------------------------
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PEREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ David L. Anderson
- -------------------------------------
DAVID L. ANDERSON
ANVEST, L.P.
By: /s/ David L. Anderson
-------------------------------------
Name: David L. Anderson
-------------------------------------
Title: General Partner
-------------------------------------
WILLIAM H. YOUNGER, JR., TRUSTEE OF
THE YOUNGER LIVING TRUST
By: /s/ William H. Younger, Jr.
-------------------------------------
Name: William H. Younger
-------------------------------------
Title:
-------------------------------------
/s/ Tench Coxe
- ----------------------------------------
TENCH COXE
/s/ Ronald L. Perkins
- ----------------------------------------
RONALD L. PERKINS
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PEREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
Series C
Preferred
Shares Price
---------- ------
FIRST CLOSING
4C Ventures, L.P. 750,000 $1,500,000
c/o MeesPierson Trust (Curacao) N.V.
6 John B. Gorsiraweg, PO Box 3889
Curacao, Netherlands Antilles
Itochu International, Inc. 500,000 $1,000,000
335 Madison Avenue
New York, NY 10017
Mayfield VII 237,500 $475,000
2800 Sand Hill Road
Menlo Park, CA 94025
Mayfield Associates Fund II 12,500 $ 25,000
2800 Sand Hill Road
Menlo Park, CA 94025
Sutter Hill Ventures, 183,823 $367,646
a California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tow Partners, 15,702 $31,404
a California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
David L. Anderson 14,050 $28,100
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
<PAGE>
Anvest, L.P. 1,653 $3,306
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr., 8,265 $16,530
Trustee of the Younger Living Trust
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tench Coxe 4,132 $8,264
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Ronald L. Perkins 1,770 $3,540
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
____________ ____________
TOTAL 1,729,395 $3,458,790
2.
<PAGE>
BROADVISION, INC.
-------------------------------------------
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
SECOND CLOSING
JUNE 9, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK . . . . . . 1
1.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Preferred. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Subsequent Sale of Series C Preferred Stock. . . . . . . . . . . . 1
1.5 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 2
2.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . 2
2.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Compliance with Other Instruments, etc.. . . . . . . . . . . . . . 3
2.8 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . 4
2.11 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Employee and Consultant Agreements . . . . . . . . . . . . . . . . 5
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 No Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Employee Compensation Plans. . . . . . . . . . . . . . . . . . . . 6
2.20 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . 6
2.21 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . 6
2.22 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS . . . . . . . . . . . . 6
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Accredited Investors . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . 7
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.7 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Residence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS. . . . . . . . . . . . . . . . . . . 8
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 8
4.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . 8
4.4 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 8
4.9 Amended and Restated Certificate of Incorporation. . . . . . . . . 8
SECTION 5
CONDITIONS TO CLOSING OF COMPANY. . . . . . . . . . . . . . . . . . . . 8
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 9
5.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 9
5.5 Amended and Restated Certificate of Incorporation. . . . . . . . . 9
SECTION 6
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Rights of Investors. . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 California Corporate Securities Law. . . . . . . . . . . . . . . . 10
6.11 Approval of Amendments and Waivers . . . . . . . . . . . . . . . . 10
ii.
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of June 9, 1995 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto ("Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of up
to four million (4,000,000) shares of its Series C Preferred Stock (the
"Preferred") having the rights, preferences, privileges and restrictions set
forth in the Amended and Restated Certificate of Incorporation in the form
attached to this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, each
Investor severally agrees to purchase and the Company agrees to sell and issue
to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of two dollars ($2.00) per share.
1.3 CLOSING DATE. The second closing of the purchase and sale of the
Preferred hereunder (the "Second Closing") shall be held at the law offices of
Cooley Godward Castro Huddleson & Tatum ("Cooley Godward"), One Maritime Plaza,
20th Floor, San Francisco, CA 94111. The Second Closing shall be held on the
date of this Agreement or at such other time and place upon which the Company
and the Investors shall agree (the date of the Second Closing is hereinafter
referred to as the "Second Closing Date"). The first closing hereunder,
consisting of the purchase and sale of 1,729,395 shares of the Preferred (the
"First Closing"),
1.4 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. If less than an
aggregate of four million (4,000,000) shares of Preferred are sold at the First
Closing and the Second Closing, then, subject to the terms and conditions of
this Agreement, the Company may sell, on or before August 8, 1995, up to the
balance between four million (4,000,000) shares of Preferred and the number of
shares sold at the First Closing and the Second Closing to such persons as the
Company may determine at the same price per share as the Preferred purchased at
the First Closing and the Second Closing. Any sale pursuant to this Section 1.4
shall be upon the same terms and conditions as those contained herein (provided
that the Schedule of Exceptions may be adjusted to reflect subsequent events),
and such persons or entities shall become parties to this Agreement and
Investors' Rights Agreement (as defined in Section 2.2) by the execution of a
copy of such agreements and each such person or entity shall have the rights and
obligations of a Purchaser hereunder and thereunder. The term "Closing" shall
apply to the Second Closing and each subsequent closing pursuant to this Section
1.4 unless otherwise specified, and the term "Closing Date" shall apply to the
Second Closing Date and each subsequent closing date pursuant to this Section
1.4 unless otherwise specified.
1.5 DELIVERY. At the Closing, the Company will deliver to each Investor a
certificate representing the shares of Preferred that such Investor is
purchasing against payment of the purchase price therefor by wire transfer or by
check payable to the order of the Company.
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Investor as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Amended and Restated Investors' Rights Agreement substantially in the form
attached hereto as Exhibit D (the "Investors' Rights Agreement") (the Agreement
and the Investors' Rights Agreement are hereinafter collectively referred to as
the "Agreements"), to sell and issue the Preferred under this Agreement, to
issue the Common Stock issuable upon conversion of the Preferred and to carry
out and perform its obligations under the terms of the Agreements, including all
exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists,
or immediately prior to the Closing will consist, of: twenty-two million
(22,000,000) shares of Common Stock, of which six million five hundred forty-
four thousand (6,544,000) are issued and outstanding; and ten million
(10,000,000) shares of Preferred Stock, of which four million three hundred
thousand (4,300,000) are designated "Series A Preferred Stock" (of which four
million two hundred sixty-six thousand six hundred sixty-seven (4,266,667) are
issued and outstanding); one million four hundred thousand (1,400,000) are
designated "Series B Preferred Stock" (of which one million three hundred
thirty-three thousand three hundred thirty-three (1,333,333) are issued and
outstanding); and four million (4,000,000) are designated "Series C Preferred
Stock" (of which one million seven hundred twenty-nine thousand three hundred
ninety-five (1,729,395) are issued and outstanding immediately prior to the
Second Closing). All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
Preferred has the rights, preferences, privileges and restrictions set forth in
the Certificate. Except (i) for the conversion privileges of the Preferred
specified in the Certificate, (ii) as set forth in the Investors' Rights
Agreement, (iii) the arrangements with respect to employee stock set forth in
Exhibit C and (iv) as otherwise set forth in Exhibit C, there are no options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company. All outstanding
securities of the Company were issued in
2.
<PAGE>
compliance with the registration or qualification provisions of all applicable
U.S. federal and state securities laws.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Preferred, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements and under applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Preferred has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions under the Agreements, the right
of first refusal provided in the Company's Bylaws, and applicable federal and
state securities laws. The Preferred is not subject to any preemptive rights or
rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
ongoing business of the Company, and the issuance of the Preferred in connection
with this Agreement; and (3) liabilities incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Certificate or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any order, statute, rule or regulation
applicable to the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency. To the best of the Company's knowledge, there is no
judgment, decree, or order of any court in effect against the Company and the
Company is not in default with respect to any order of any governmental
authority to which the Company is a party or by which it is bound. There is no
action, suit, proceeding, or investigation by the Company currently pending or
which the Company presently intends to initiate.
3.
<PAGE>
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
2.11 OFFERING. Subject to the accuracy of the representations set forth in
Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to this
Agreement and the issuance of the Common Stock to be issued upon conversion of
the Preferred constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material transaction other than as approved by its Board of Directors or in the
ordinary course of business or agreed to any of the foregoing other than with
respect to transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license on commercially reasonable terms sufficient legal rights
to all patents, copyrights, trade secrets, information, proprietary rights and
processes (collectively "Proprietary Information") necessary for its business as
now conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers and employees, substantially in the forms referenced in Section 2.14
below, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or
4.
<PAGE>
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company has not received any communications alleging that the
Company has violated or infringed or that the Company would, by conducting its
business as proposed, violate or infringe any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity. Neither the execution nor delivery of
this Agreement, nor the carrying on of the Company's business by the employees
of and consultants to the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants of
the Company have entered into proprietary information and inventions agreements,
substantially in the Company's standard forms and, to the best of the Company's
knowledge, none of the Company's current or former employees or consultants is
in violation of such agreements.
2.15 DISCLOSURE. To the best of the Company's knowledge after reasonable
investigation, none of the representations or warranties made by the Company in
this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement or
arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting aside
for payment or other distribution in respect of any of the Company's capital
stock or any direct or indirect redemption, repurchase or other acquisition of
any of such stock.
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party to
any contract or agreement (i) with expected receipts or expenditures in excess
of $10,000, (ii) involving a license or grant of rights to or from the Company
involving patents, trademarks, copyrights, or other proprietary information
applicable to the business of the Company, (iii) with provisions restricting or
affecting the development, manufacture, or distribution of the Company's
products or services, or (iv) that provides indemnification by the Company with
respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other
5.
<PAGE>
employee compensation agreements. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, corporation, partnership or other entity, and is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products, and has not
licensed or sold any of its technology or proprietary information to any person,
corporation, partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investors with
copies of the Certificate and Bylaws as currently in effect. Said copies are
true, correct, and complete and contain all amendments through the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of such Investor, enforceable in accordance with their terms except
as the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Such Investor is authorized and has full right and power to purchase the
Preferred, and the person signing the Agreements and any other instrument
executed and delivered hereby on behalf of such entity has been duly authorized
by such entity and has full power and authority to do so.
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
6.
<PAGE>
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any Common
Stock issuable upon conversion of the Preferred) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The Investor
is aware that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plan to satisfy these conditions in the
foreseeable future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982, as described in Exhibit F hereto.
3.6 NO PUBLIC MARKET. The Investor understands that no public market now
exists for any of the securities issued by the Company and that it is unlikely
that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material.
3.8 RESIDENCE. If the Purchaser is an individual, then the purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made is located at the address or addresses
of the Purchaser set forth on Exhibit A.
SECTION 4
7.
<PAGE>
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 2 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's financial condition, affairs or prospects between the
date of this Agreement and the Closing Date, if different.
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company immediately
following the Closing will consist of Pehong Chen, David L. Anderson and Yogen
K. Dalal.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investors shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
4.9 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
8.
<PAGE>
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Investors contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by Investors on or prior to the Closing Date shall
have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
5.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Investors and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed to be
made as of the date of this Agreement, and not necessarily as of some later
date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
6.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common Stock
issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of
9.
<PAGE>
any obligation of the Company under this Agreement and to enter into an
agreement with the Company for the purpose of modifying this Agreement or any
agreement affecting any such modification, and such holder shall not incur any
liability to any other holder or holders of Preferred with respect to exercising
or refraining from exercising any such right or rights.
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 8.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement. The Company shall, at the Closing, reimburse the reasonable fees of
one (1) special counsel for the Purchasers, not to exceed ten thousand dollars
($10,000), and shall reimburse such special counsel for reasonable expenses
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities which
are the subject of this Agreement has not been qualified with the Commissioner
of corporations of the state of California, and the issuance of such securities
or the payment or receipt of any part of the consideration therefor prior to
such qualification, if required by law, is unlawful. The rights of all parties
to this agreement are expressly conditioned upon such qualification being
obtained, if required by law.
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not
10.
<PAGE>
consenting) all shares previously disposed of by the Investors or transferees
pursuant to one or more registration statements under the Securities Act or
pursuant to Rule 144 thereunder. Any amendment, termination or waiver effected
in accordance with this section shall be binding upon each holder of any
securities issued pursuant to this Agreement (including securities into which
such securities have been converted or exchanged), each future holder of any or
all such securities and the Company.
[THIS SPACE INTENTIONALLY LEFT BLANK]
11.
<PAGE>
IN WITNESS WHEREOF, the foregoing Series C Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
BROADVISION, INC.
By: /s/ Pehong Chen
-------------------------------------
PEHONG CHEN
President
INVESTORS:
/s/ Andy Chase
- ----------------------------------------
ANDREW CHASE
GC&H INVESTMENTS,
A CALIFORNIA GENERAL PARTNERSHIP
By: /s/ John L. Cardoza
-------------------------------------
John L. Cardoza
Executive Partner
GENSTAR INVESTMENT CORPORATION
By: /s/ Richard D. Paterson
-------------------------------------
Name: Richard D. Paterson
-----------------------------------
Title: Executive Vice President
----------------------------------
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Koh Boon Hwee
- ----------------------------------------
KOH BOON HWEE
ITOCHU CORPORATION
By: /s/ Bunei Yoshizumi
-------------------------------------
Name: Bunei Yoshizumi
-----------------------------------
Title: General Manager
----------------------------------
ITOCHU TECHNO-SCIENCE CORPORATION
By: /s/ Hiro Satake
-------------------------------------
Name: Hiro Satake
-----------------------------------
Title: President
----------------------------------
/s/ Ikuo Minakata
- ----------------------------------------
IKUO MINAKATA
STANFORD UNIVERSITY
By: /s/ Carol Gilmer
-------------------------------------
Name: Carol Gilmer
-----------------------------------
Title: Assistant Secretary
----------------------------------
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO G. LEONARD BAKER, JR.
By: /s/ Christopher M. Peterson
-------------------------------------
Name: Christopher M. Petersen
-----------------------------------
Title: Assistant Vice President
----------------------------------
/s/ Elserino Piol
- ----------------------------------------
ELSERINO PIOL
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
SERIES C
PREFERRED
SHARES PRICE
Andrew Chase 10,000 $20,000
3000 Sand Hill Road, 3-190
Menlo Park, CA 94025
GC&H Investments, 18,000 $36,000
a California General Partnership
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attn: John L. Cardoza
Genstar Investment Corporation 4,902 $9,804
Metro Tower, Suite 1170
Foster City, CA 94404
Attn: Mr. R.D. Paterson
(415) 286-2366
Koh Boon Hwee 19,600 $39,200
11 Mount Echo Park
Singapore 1024
Itochu Corporation 125,000 $250,000
5-1 Kita-Aoyama, 2-chome
Minato-ku, Tokyo 107-77
Japan
Itochu Techno-Science Corporation 125,000 $250,000
16-7, Komazawa 1-chome
Setagaya-ku, Tokyo 154
Japan
<PAGE>
SERIES C
PREFERRED
SHARES PRICE
Elserino Piol 4,800 $9,600
c/o Alexandra Giurgiu
Managing Director
Olivetti Management Inc.
70 East 55th Street
New York, NY 10022
Stanford University 17,200 $34,400
2770 Sand Hill Road
Menlo Park, CA 94025
Attn: Carol Gilmer
Wells Fargo Bank, Trustee 15,703 $31,406
SHV M/P/T FBO G. Leonard Baker, Jr.
Attn: Chris Petersen
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
(415) 396-2260
---------- ----------
TOTAL 340,205 $680,410
<PAGE>
BROADVISION, INC.
-----------------------------------
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-----------------------------------
THIRD CLOSING
AUGUST 7, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK............ 1
1.1 Authorization...................................................... 1
1.2 Sale of Preferred.................................................. 1
1.3 Closing Date....................................................... 1
1.4 Subsequent Sale of Series C Preferred Stock........................ 1
1.5 Delivery........................................................... 2
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 2
2.1 Organization and Standing. ....................................... 2
2.2 Corporate Power.................................................... 2
2.3 Subsidiaries....................................................... 2
2.4 Capitalization..................................................... 2
2.5 Authorization...................................................... 3
2.6 Material Liabilities............................................... 3
2.7 Compliance with Other Instruments, etc............................. 3
2.8 Litigation, etc.................................................... 3
2.9 Registration Rights................................................ 4
2.10 Governmental Consent, etc.......................................... 4
2.11 Offering........................................................... 4
2.12 Certain Transactions............................................... 4
2.13 Intellectual Property.............................................. 4
2.14 Employee and Consultant Agreements................................. 5
2.15 Disclosure......................................................... 5
2.16 Brokers or Finders................................................. 5
2.17 No Dividends....................................................... 5
2.18 Contracts.......................................................... 5
2.19 Employee Compensation Plans........................................ 6
2.20 Related-Party Transactions......................................... 6
2.21 Manufacturing and Marketing Rights................................. 6
2.22 Corporate Documents................................................ 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS................... 6
3.1 Authorization...................................................... 6
3.2 Experience......................................................... 6
3.3 Investment......................................................... 7
3.4 Rule 144........................................................... 7
3.5 Accredited Investors............................................... 7
3.6 No Public Market................................................... 7
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.7 Access to Data..................................................... 7
3.8 Residence.......................................................... 7
SECTION 4 CONDITIONS TO CLOSING OF INVESTORS................................ 8
4.1 Representations and Warranties..................................... 8
4.2 Covenants.......................................................... 8
4.3 No Material Adverse Change......................................... 8
4.4 Blue Sky........................................................... 8
4.5 Board of Directors................................................. 8
4.6 Compliance Certificate............................................. 8
4.7 Opinion of Counsel................................................. 8
4.8 Investors' Rights Agreement........................................ 8
4.9 Amended and Restated Certificate of Incorporation.................. 8
SECTION 5 CONDITIONS TO CLOSING OF COMPANY.................................. 8
5.1 Representations and Warranties..................................... 9
5.2 Covenants. ........................................................ 9
5.3 Blue Sky........................................................... 9
5.4 Investors' Rights Agreement........................................ 9
5.5 Amended and Restated Certificate of Incorporation.................. 9
SECTION 6 MISCELLANEOUS..................................................... 9
6.1 Governing Law...................................................... 9
6.2 Survival........................................................... 9
6.3 Successors and Assigns............................................. 9
6.4 Entire Agreement................................................... 9
6.5 Rights of Investors................................................ 9
6.6 Notices, etc....................................................... 10
6.7 Expenses........................................................... 10
6.8 Counterparts....................................................... 10
6.9 Severability....................................................... 10
6.10 California Corporate Securities Law................................ 10
6.11 Approval of Amendments and Waivers................................. 10
ii
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 7, 1995 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto ("Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of
up to four million (4,000,000) shares of its Series C Preferred Stock (the
"Preferred") having the rights, preferences, privileges and restrictions set
forth in the Amended and Restated Certificate of Incorporation in the form
attached to this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, each
Investor severally agrees to purchase and the Company agrees to sell and issue
to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of two dollars ($2.00) per share.
1.3 CLOSING DATE. The third closing of the purchase and sale of the
Preferred hereunder (the "Third Closing") shall be held at the law offices of
Cooley Godward Castro Huddleson & Tatum ("Cooley Godward"), One Maritime Plaza,
20th Floor, San Francisco, CA 94111. The Third Closing shall be held on the
date of this Agreement or at such other time and place upon which the Company
and the Investors shall agree (the date of the Third Closing is hereinafter
referred to as the "Third Closing Date"). The first closing hereunder,
consisting of the purchase and sale of 1,729,395 shares of the Preferred (the
"First Closing") took place of May 26, 1995. The second closing hereunder
consisting of the sale and purchase of 340,205 shares of the Preferred (the
"Second Closing") took place on June 9, 1995.
1.4 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. If less than an
aggregate of four million (4,000,000) shares of Preferred are sold at the First
Closing, the Second Closing and the Third Closing, then, subject to the terms
and conditions of this Agreement, the Company may sell, on or before August 8,
1995, up to the balance between four million (4,000,000) shares of Preferred and
the number of shares sold at the First Closing, the Second Closing and the Third
Closing to such persons as the Company may determine at the same price per share
as the Preferred purchased at the First Closing, the Second Closing and the
Third Closing. Any sale pursuant to this Section 1.4 shall be upon the same
terms and conditions as those contained herein (provided that the Schedule of
Exceptions may be adjusted to reflect subsequent events), and such persons or
entities shall become parties to this Agreement and Investors' Rights Agreement
(as defined in Section 2.2) by the execution of a copy of such agreements and
each such person or entity shall have the rights and obligations of a Purchaser
hereunder and thereunder. The term "Closing" shall apply to the Third Closing
and each subsequent closing pursuant to this Section 1.4 unless otherwise
specified, and the term "Closing Date" shall apply
1.
<PAGE>
to the Third Closing Date and each subsequent closing date pursuant to this
Section 1.4 unless otherwise specified.
1.5 DELIVERY. At the Closing, the Company will deliver to each Investor
a certificate representing the shares of Preferred that such Investor is
purchasing against payment of the purchase price therefor by wire transfer or by
check payable to the order of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Investor as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Amended and Restated Investors' Rights Agreement substantially in the form
attached hereto as Exhibit D (the "Investors' Rights Agreement") (the Agreement
and the Investors' Rights Agreement are hereinafter collectively referred to as
the "Agreements"), to sell and issue the Preferred under this Agreement, to
issue the Common Stock issuable upon conversion of the Preferred and to carry
out and perform its obligations under the terms of the Agreements, including all
exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists, or immediately prior to the Closing will consist, of: twenty-two
million (22,000,000) shares of Common Stock, of which six million one hundred
seven thousand eight hundred (6,107,800) are issued and outstanding; and ten
million (10,000,000) shares of Preferred Stock, of which four million three
hundred thousand (4,300,000) are designated "Series A Preferred Stock" (of which
four million two hundred sixty-six thousand six hundred sixty-seven (4,266,667)
are issued and outstanding); one million four hundred thousand (1,400,000) are
designated "Series B Preferred Stock" (of which one million three hundred
thirty-three thousand three hundred thirty-three (1,333,333) are issued and
outstanding); and four million (4,000,000) are designated "Series C Preferred
Stock" (of which two million sixty-nine thousand six hundred (2,069,600) are
issued and outstanding immediately prior to the Third Closing). All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. The Preferred has the rights, preferences,
privileges and restrictions set forth in the Certificate.
2.
<PAGE>
Except (i) for the conversion privileges of the Preferred specified in the
Certificate, (ii) as set forth in the Investors' Rights Agreement, (iii) the
arrangements with respect to employee stock set forth in Exhibit C and (iv) as
otherwise set forth in Exhibit C, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock or
other securities of the Company. All outstanding securities of the Company were
issued in compliance with the registration or qualification provisions of all
applicable U.S. federal and state securities laws.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Preferred, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements and under applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Preferred has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions under the Agreements, the right
of first refusal provided in the Company's Bylaws, and applicable federal and
state securities laws. The Preferred is not subject to any preemptive rights or
rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
ongoing business of the Company, and the issuance of the Preferred in connection
with this Agreement; and (3) liabilities incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Certificate or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any order, statute, rule or regulation
applicable to the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency. To the best of the
3.
<PAGE>
Company's knowledge, there is no judgment, decree, or order of any court in
effect against the Company and the Company is not in default with respect to any
order of any governmental authority to which the Company is a party or by which
it is bound. There is no action, suit, proceeding, or investigation by the
Company currently pending or which the Company presently intends to initiate.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
2.11 OFFERING. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to
this Agreement and the issuance of the Common Stock to be issued upon conversion
of the Preferred constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material transaction other than as approved by its Board of Directors or in the
ordinary course of business or agreed to any of the foregoing other than with
respect to transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license
4.
<PAGE>
on commercially reasonable terms sufficient legal rights to all patents,
copyrights, trade secrets, information, proprietary rights and processes
(collectively "Proprietary Information") necessary for its business as now
conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers and employees, substantially in the forms referenced in Section 2.14
below, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed, violate or infringe any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of and
consultants to the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants of
the Company have entered into proprietary information and inventions agreements,
substantially in the Company's standard forms and, to the best of the Company's
knowledge, none of the Company's current or former employees or consultants is
in violation of such agreements.
2.15 DISCLOSURE. To the best of the Company's knowledge after reasonable
investigation, none of the representations or warranties made by the Company in
this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement
or arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party
to any contract or agreement (i) with expected receipts or expenditures in
excess of $10,000, (ii) involving a license or grant of rights to or from the
Company involving patents, trademarks, copyrights, or other proprietary
information applicable to the business of the Company, (iii) with provisions
restricting or affecting the development, manufacture, or distribution of the
5.
<PAGE>
Company's products or services, or (iv) that provides indemnification by the
Company with respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other employee compensation
agreements. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, corporation, partnership or other entity, and is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products, and has not
licensed or sold any of its technology or proprietary information to any person,
corporation, partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investors with
copies of the Certificate and Bylaws as currently in effect. Said copies are
true, correct, and complete and contain all amendments through the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of such Investor, enforceable in accordance with their terms except
as the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Such Investor is authorized and has full right and power to purchase the
Preferred, and the person signing the Agreements and any other instrument
executed and delivered hereby on behalf of such entity has been duly authorized
by such entity and has full power and authority to do so.
6.
<PAGE>
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any Common
Stock issuable upon conversion of the Preferred) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The Investor
is aware that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plan to satisfy these conditions in the
foreseeable future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982, as described in Exhibit F hereto.
3.6 NO PUBLIC MARKET. The Investor understands that no public market now
exists for any of the securities issued by the Company and that it is unlikely
that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material.
3.8 RESIDENCE. If the Purchaser is an individual, then the purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office
7.
<PAGE>
or offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on Exhibit A.
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date, if different.
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company
immediately following the Closing will consist of Pehong Chen, David L. Anderson
and Yogen K. Dalal.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investors shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
4.9 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
8.
<PAGE>
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investors contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Investors on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
5.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Investors and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed to be
made as of the date of this Agreement, and not necessarily as of some later
date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
9.
<PAGE>
6.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common Stock
issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 8.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of one (1) special counsel for the Purchasers, not to exceed ten thousand
dollars ($10,000), and shall reimburse such special counsel for reasonable
expenses incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
10.
<PAGE>
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not consenting) all shares previously disposed of by the Investors
or transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 thereunder. Any amendment, termination
or waiver effected in accordance with this section shall be binding upon each
holder of any securities issued pursuant to this Agreement (including securities
into which such securities have been converted or exchanged), each future holder
of any or all such securities and the Company.
[THIS SPACE INTENTIONALLY LEFT BLANK]
11.
<PAGE>
IN WITNESS WHEREOF, the foregoing Series C Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
BROADVISION, INC.
By: /s/ Pehong Chen
------------------------------------
PEHONG CHEN
President
INVESTOR:
AMERITECH DEVELOPMENT CORP.
By: /s/ Thomas W. Touton
------------------------------------
Name: Thomas W. Touton
----------------------------------
Title: Vice President, Venture Capital
---------------------------------
/s/ Ronald C. Conway
- ---------------------------------------
RONALD C. CONWAY
/s/ Carl Dellar
- ---------------------------------------
CARL N.R. DELLAR
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
(THIRD CLOSING)
SERIES C
PREFERRED
INVESTOR SHARES PRICE
- -------- ------ -----
Ameritech Development Corp. 750,000 $1,500,000
30 South Wacker Drive, 37th Floor
Chicago, IL 60606
Ronald C. Conway 25,000 50,000
76 Adam Way
Atherton, CA 94027
Carl N. R. Dellar 6,000 12,000
10390 Farallone Drive
Cupertino, CA 95014
------- ----------
Total 781,000 $1,562,000
<PAGE>
BROADVISION, INC.
___________________________________________
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
___________________________________________
FOURTH CLOSING
AUGUST 31, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK . . . . . 1
1.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Preferred. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Subsequent Sale of Series C Preferred Stock. . . . . . . . . . . 1
1.5 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . 2
2.1 Organization and Standing. . . . . . . . . . . . . . . . . . . 2
2.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Material Liabilities . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Compliance with Other Instruments, etc.. . . . . . . . . . . . . 3
2.8 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . 4
2.11 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 4
2.14 Employee and Consultant Agreements . . . . . . . . . . . . . . . 5
2.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 No Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Employee Compensation Plans. . . . . . . . . . . . . . . . . . . 6
2.20 Related-Party Transactions . . . . . . . . . . . . . . . . . . . 6
2.21 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . 6
2.22 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. . . . . . . . . 6
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Accredited Investors . . . . . . . . . . . . . . . . . . . . . . 7
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.6 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Residence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4 CONDITIONS TO CLOSING OF INVESTORS . . . . . . . . . . . . . . . 8
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . 8
4.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 8
4.4 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . 8
4.7 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . 8
4.9 Amended and Restated Certificate of Incorporation. . . . . . . . 8
SECTION 5 CONDITIONS TO CLOSING OF COMPANY . . . . . . . . . . . . . . . . 8
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . 9
5.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . 9
5.5 Amended and Restated Certificate of Incorporation. . . . . . . . 9
SECTION 6 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 9
6.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Rights of Investors. . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 California Corporate Securities Law. . . . . . . . . . . . . . . 10
6.11 Approval of Amendments and Waivers . . . . . . . . . . . . . . . 10
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
EXHIBIT A: SCHEDULE OF INVESTORS
EXHIBIT B: CERTIFICATE OF INCORPORATION
EXHIBIT C: SCHEDULE OF EXCEPTIONS
EXHIBIT D: INVESTORS' RIGHTS AGREEMENT
EXHIBIT E: OPINION OF COOLEY GODWARD
EXHIBIT F: ACCREDITED INVESTORS DEFINITION
EXHIBIT G: FIRST AMENDMENT
EXHIBIT H: CO-SALE AGREEMENT
iii.
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 31, 1995 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto ("Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES C PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of up
to four million (4,000,000) shares of its Series C Preferred Stock (the
"Preferred") having the rights, preferences, privileges and restrictions set
forth in the Amended and Restated Certificate of Incorporation in the form
attached to this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, each
Investor severally agrees to purchase and the Company agrees to sell and issue
to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of two dollars ($2.00) per share.
1.3 CLOSING DATE. The closing of the purchase and sale of the Preferred
hereunder (the "Fourth Closing") shall be held at the law offices of Cooley
Godward Castro Huddleson & Tatum ("Cooley Godward"), One Maritime Plaza, 20th
Floor, San Francisco, CA 94111. The Fourth Closing shall be held on the date of
this Agreement or at such other time and place upon which the Company and the
Investors shall agree (the date of the Fourth Closing is hereinafter referred to
as the "Fourth Closing Date"). The first closing hereunder, consisting of the
purchase and sale of 1,729,395 shares of the Preferred (the "First Closing")
took place of May 26, 1995. The second closing hereunder consisting of the sale
and purchase of 340,205 shares of the Preferred (the "Second Closing") took
place on June 9, 1995. The third closing hereunder consisting of the sale and
purchase of 781,000 shares of the Preferred (the "Third Closing") took place on
August 7, 1995.
1.4 SUBSEQUENT SALE OF SERIES C PREFERRED STOCK. If less than an
aggregate of four million (4,000,000) shares of Preferred are sold at the First
Closing and each subsequent Closing then, subject to the terms and conditions of
this Agreement, the Company may sell, on or before September 29, 1995, up to the
balance between four million (4,000,000) shares of Preferred and the number of
shares sold at the First Closing and each subsequent Closing to such persons as
the Company may determine at the same price per share as the Preferred purchased
at the First Closing and each subsequent Closing. Any sale pursuant to this
Section 1.4 shall be upon the same terms and conditions as those contained
herein (provided that the Schedule of Exceptions may be adjusted to reflect
subsequent events), and such persons or entities shall become parties to this
Agreement, the First Amendment to this Agreement, the Investors' Rights
Agreement and the Co-Sale Agreement (each as defined in Section 2.2), by the
execution of a copy of such
1.
<PAGE>
agreements and each such person or entity shall have the rights and obligations
of a Purchaser hereunder and thereunder. The term "Closing" shall apply to the
Fourth Closing and each subsequent closing pursuant to this Section 1.4 unless
otherwise specified, and the term "Closing Date" shall apply to the Fourth
Closing Date and each subsequent closing date pursuant to this Section 1.4
unless otherwise specified.
1.5 DELIVERY. At the Closing, the Company will deliver to each Investor a
certificate representing the shares of Preferred that such Investor is
purchasing against payment of the purchase price therefor by wire transfer or by
check payable to the order of the Company.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Investor as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, the
First Amendment to this Agreement attached hereto as Exhibit G (the "First
Amendment"), the Amended and Restated Investors' Rights Agreement substantially
in the form attached hereto as Exhibit D (the "Investors' Rights Agreement") and
the Co-Sale Agreement attached hereto as Exhibit H (the Agreement, the First
Amendment, the Investors' Rights Agreement, and the Co-Sale Agreement are
hereinafter collectively referred to as the "Agreements"), to sell and issue the
Preferred under this Agreement, to issue the Common Stock issuable upon
conversion of the Preferred and to carry out and perform its obligations under
the terms of the Agreements, including all exhibits and schedules hereto and
thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists,
or immediately prior to the Closing will consist, of: twenty-two million
(22,000,000) shares of Common Stock, of which six million one hundred seven
thousand eight hundred (6,107,800) are issued and outstanding; and ten million
(10,000,000) shares of Preferred Stock, of which four million three hundred
thousand (4,300,000) are designated "Series A Preferred Stock" (of which four
million two hundred sixty-six thousand six hundred sixty-seven (4,266,667) are
issued and outstanding); one million four hundred thousand (1,400,000) are
designated "Series B Preferred Stock" (of which one million three hundred
thirty-three thousand three hundred thirty-three
2.
<PAGE>
(1,333,333) are issued and outstanding); and four million (4,000,000) are
designated "Series C Preferred Stock" (of which two million eight hundred fifty
thousand six hundred (2,850,600) are issued and outstanding immediately prior to
the Fourth Closing). All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
Preferred has the rights, preferences, privileges and restrictions set forth in
the Certificate. Except (i) for the conversion privileges of the Preferred
specified in the Certificate, (ii) as set forth in the Investors' Rights
Agreement, (iii) the arrangements with respect to employee stock set forth in
Exhibit C and (iv) as otherwise set forth in Exhibit C, there are no options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company. All outstanding
securities of the Company were issued in compliance with the registration or
qualification provisions of all applicable U.S. federal and state securities
laws.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Preferred, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements and under applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Preferred has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions under the Agreements, the right
of first refusal provided in the Company's Bylaws, and applicable federal and
state securities laws. The Preferred is not subject to any preemptive rights or
rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
ongoing business of the Company, and the issuance of the Preferred in connection
with this Agreement; and (3) liabilities incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Certificate or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and
3.
<PAGE>
performing the Agreements and the transactions contemplated thereunder be, in
violation of any order addressed specifically to the Company nor, to the best of
the Company's knowledge, any order, statute, rule or regulation applicable to
the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency. To the best of the Company's knowledge, there is no
judgment, decree, or order of any court in effect against the Company and the
Company is not in default with respect to any order of any governmental
authority to which the Company is a party or by which it is bound. There is no
action, suit, proceeding, or investigation by the Company currently pending or
which the Company presently intends to initiate.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
2.11 OFFERING. Subject to the accuracy of the representations set forth in
Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to this
Agreement and the issuance of the Common Stock to be issued upon conversion of
the Preferred constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material
4.
<PAGE>
transaction other than as approved by its Board of Directors or in the ordinary
course of business or agreed to any of the foregoing other than with respect to
transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license on commercially reasonable terms sufficient legal rights
to all patents, copyrights, trade secrets, information, proprietary rights and
processes (collectively "Proprietary Information") necessary for its business as
now conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers and employees, substantially in the forms referenced in Section 2.14
below, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed, violate or infringe any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of and
consultants to the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant, or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants of
the Company have entered into proprietary information and inventions agreements,
substantially in the Company's standard forms and, to the best of the Company's
knowledge, none of the Company's current or former employees or consultants is
in violation of such agreements.
2.15 DISCLOSURE. To the best of the Company's knowledge after reasonable
investigation, none of the representations or warranties made by the Company in
this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement or
arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting aside
for payment or other distribution in respect of any of the Company's capital
stock or any direct or indirect redemption, repurchase or other acquisition of
any of such stock.
5.
<PAGE>
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party to
any contract or agreement (i) with expected receipts or expenditures in excess
of $10,000, (ii) involving a license or grant of rights to or from the Company
involving patents, trademarks, copyrights, or other proprietary information
applicable to the business of the Company, (iii) with provisions restricting or
affecting the development, manufacture, or distribution of the Company's
products or services, or (iv) that provides indemnification by the Company with
respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other employee compensation
agreements. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, corporation, partnership or other entity, and is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products, and has not
licensed or sold any of its technology or proprietary information to any person,
corporation, partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investors with
copies of the Certificate and Bylaws as currently in effect. Said copies are
true, correct, and complete and contain all amendments through the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of such Investor, enforceable in accordance with their terms except
as the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity
6.
<PAGE>
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Such Investor is authorized and has full right and power to
purchase the Preferred, and the person signing the Agreements and any other
instrument executed and delivered hereby on behalf of such entity has been duly
authorized by such entity and has full power and authority to do so.
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any Common
Stock issuable upon conversion of the Preferred) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
3.4 RULE 144. The Investor acknowledges that the Preferred must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The Investor
is aware that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plan to satisfy these conditions in the
foreseeable future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982, as described in Exhibit F hereto.
3.6 NO PUBLIC MARKET. The Investor understands that no public market now
exists for any of the securities issued by the Company and that it is unlikely
that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to
7.
<PAGE>
describe the aspects of the Company's business and prospects which the Company
believes to be material.
3.8 RESIDENCE. If the Purchaser is an individual, then the purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made is located at the address or addresses
of the Purchaser set forth on Exhibit A.
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 2 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's financial condition, affairs or prospects between the
date of this Agreement and the Closing Date, if different.
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company immediately
following the Closing will consist of Pehong Chen, David L. Anderson and Yogen
K. Dalal.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investors shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
8.
<PAGE>
4.9 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Investors contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by Investors on or prior to the Closing Date shall
have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
5.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Investors and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed to be
made as of the date of this Agreement, and not necessarily as of some later
date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
9.
<PAGE>
6.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common Stock
issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 8.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement. The Company shall, at the Closing, reimburse the reasonable fees of
one (1) special counsel for the Purchasers, not to exceed ten thousand dollars
($10,000), and shall reimburse such special counsel for reasonable expenses
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities which
are the subject of this Agreement has not been qualified with the Commissioner
of corporations of the state of California, and the issuance of such securities
or the payment or receipt of any part of the consideration therefor prior to
such qualification, if required by law, is unlawful. The rights of all parties
to this agreement are expressly conditioned upon such qualification being
obtained, if required by law.
10.
<PAGE>
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not consenting) all shares previously disposed of by the Investors
or transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 thereunder. Any amendment, termination
or waiver effected in accordance with this section shall be binding upon each
holder of any securities issued pursuant to this Agreement (including securities
into which such securities have been converted or exchanged), each future holder
of any or all such securities and the Company.
[THIS SPACE INTENTIONALLY LEFT BLANK]
11.
<PAGE>
IN WITNESS WHEREOF, the foregoing Series C Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
BROADVISION, INC.
By: /s/ Pehong Chen
---------------------------
PEHONG CHEN
President
INVESTOR:
SIPPL MACDONALD VENTURES I, L.P.
By: /s/ Jackie MacDonald
-------------------------
JACKIE MACDONALD
General Partner
SIGNATURE PAGE TO BROADVISION, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
(FOURTH CLOSING)
SERIES C
PREFERRED
INVESTOR SHARES PRICE
- -------- ------ -----
Sippl Macdonald Ventures I, L.P. 150,000 $300,000
81 Lorlei Lane
Menlo Park, CA 94025
Attn: Jacqueline A. Macdonald
------- --------
Total 150,000 $300,000
<PAGE>
BROADVISION, INC.
- --------------------------------------------------------------------------------
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
APRIL 15, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 AUTHORIZATION AND SALE OF THE SERIES E PREFERRED STOCK............ 1
1.1 Authorization...................................................... 1
1.2 Sale of Preferred.................................................. 1
1.3 Closing Date....................................................... 1
1.4 Subsequent Closings................................................ 1
1.5 Delivery........................................................... 1
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 2
2.1 Organization and Standing. ....................................... 2
2.2 Corporate Power.................................................... 2
2.3 Subsidiaries....................................................... 2
2.4 Capitalization..................................................... 2
2.5 Authorization...................................................... 3
2.6 Material Liabilities............................................... 3
2.7 Compliance with Other Instruments, etc............................. 3
2.8 Litigation, etc.................................................... 3
2.9 Registration Rights................................................ 4
2.10 Governmental Consent, etc.......................................... 4
2.11 Offering........................................................... 4
2.12 Certain Transactions............................................... 4
2.13 Intellectual Property.............................................. 4
2.14 Employee and Consultant Agreements................................. 5
2.15 Disclosure......................................................... 5
2.16 Brokers or Finders................................................. 5
2.17 No Dividends....................................................... 5
2.18 Contracts.......................................................... 5
2.19 Employee Compensation Plans........................................ 5
2.20 Related-Party Transactions......................................... 6
2.21 Manufacturing and Marketing Rights................................. 6
2.22 Corporate Documents................................................ 6
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS................... 6
3.1 Authorization...................................................... 6
3.2 Experience......................................................... 6
3.3 Investment......................................................... 7
3.4 Rule 144........................................................... 7
3.5 Accredited Investors............................................... 7
3.6 No Public Market................................................... 7
3.7 Access to Data..................................................... 7
3.8 Residence.......................................................... 7
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 4 CONDITIONS TO CLOSING OF INVESTORS................................ 8
4.1 Representations and Warranties..................................... 8
4.2 Covenants.......................................................... 8
4.3 No Material Adverse Change......................................... 8
4.4 Blue Sky........................................................... 8
4.5 Board of Directors................................................. 8
4.6 Compliance Certificate............................................. 8
4.7 Opinion of Counsel................................................. 8
4.8 Investors' Rights Agreement........................................ 8
4.9 Amended and Restated Certificate of Incorporation.................. 8
SECTION 5 CONDITIONS TO CLOSING OF COMPANY.................................. 8
5.1 Representations and Warranties..................................... 9
5.2 Covenants. ........................................................ 9
5.3 Blue Sky........................................................... 9
5.4 Investors' Rights Agreement........................................ 9
5.5 Amended and Restated Certificate of Incorporation.................. 9
SECTION 6 MISCELLANEOUS..................................................... 9
6.1 Governing Law...................................................... 9
6.2 Survival........................................................... 9
6.3 Successors and Assigns............................................. 9
6.4 Entire Agreement................................................... 9
6.5 Rights of Investors................................................ 9
6.6 Notices, etc....................................................... 10
6.7 Expenses........................................................... 10
6.8 Counterparts....................................................... 10
6.9 Severability....................................................... 10
6.10 California Corporate Securities Law................................ 10
6.11 Approval of Amendments and Waivers................................. 10
ii.
<PAGE>
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of April 15, 1996 between BROADVISION, INC., a
Delaware corporation (the "Company") and the investors as set forth in Exhibit A
hereto (the "Investors").
SECTION 1
AUTHORIZATION AND SALE OF THE SERIES E PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the issuance and sale of
up to one million two hundred fifty thousand (1,250,000) shares of its Series E
Preferred Stock (the "Preferred") having the rights, preferences, privileges and
restrictions set forth in the Amended and Restated Certificate of Incorporation
in the form attached to this Agreement as Exhibit B (the "Certificate").
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, each
Investor severally agrees to purchase and the Company agrees to sell and issue
to each Investor the number of shares of Preferred set forth opposite such
Investor's name on Exhibit A at a price of eight dollars ($8.00) per share.
1.3 CLOSING DATE. The first closing of the purchase and sale of the
Preferred hereunder (the "First Closing") shall be held at the law offices of
Cooley Godward Castro Huddleson & Tatum ("Cooley Godward"), One Maritime Plaza,
20th Floor, San Francisco, CA 94111. The First Closing shall be held on the
date of this Agreement or at such other time and place upon which the Company
and the Investors shall agree (the "First Closing Date").
1.4 SUBSEQUENT CLOSINGS. If less than one million two hundred fifty
thousand (1,250,000) shares of the Preferred are sold at the First Closing,
then, subject to the terms and conditions hereof, the Company may sell on or
before May 30, 1996, up to the balance between one million two hundred fifty
thousand (1,250,000) shares and the number of shares of Preferred sold at the
First Closing to such persons as the Company may determine at the same price per
share as the Preferred purchased and sold at the First Closing. Any sale
pursuant to this Section 1.4 shall be upon the same terms and conditions as
those contained herein (provided that the Schedule of Exceptions may be adjusted
to reflect subsequent events), and such persons or entities shall become parties
to the Agreement and the Investors' Rights Agreement (as defined in Section 2.2)
by the execution of a copy of such agreements and each such person or entity
shall have the rights and obligations of a Purchaser hereunder and thereunder.
The term "Closing" shall apply to the First Closing and each subsequent closing
pursuant to this Section 1.4 unless otherwise specified, and the term "Closing
Date" shall apply to the First Closing Date and each subsequent closing date
pursuant to this Section 1.4 unless otherwise specified.
1.5 DELIVERY. At the Closing the Company will deliver to each Investor a
certificate representing the shares of Preferred that such Investor is
purchasing against payment of the purchase price therefor by wire transfer or by
check payable to the order of the Company.
1.
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Investor as
follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction in which
such qualification is presently required.
2.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Second Amended and Restated Investors' Rights Agreement substantially in the
form attached hereto as Exhibit D (the "Investors' Rights Agreement") (the
Agreement and the Investors' Rights Agreement are hereinafter collectively
referred to as the "Agreements"), to sell and issue the Preferred under this
Agreement, to issue the Common Stock issuable upon conversion of the Preferred
and to carry out and perform its obligations under the terms of the Agreements,
including all exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, association or business entity.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists, or immediately prior to the Closing will consist, of: thirty million
(30,000,000) shares of Common Stock, of which seven million, three hundred
sixty-two thousand, nine hundred forty-two (7,362,942) are issued and
outstanding; and fifteen million (15,000,000) shares of Preferred Stock, of
which (i) four million three hundred thousand (4,300,000) are designated "Series
A Preferred Stock" (of which four million two hundred sixty-six thousand six
hundred sixty-seven (4,266,667) are issued and outstanding), (ii) one million
four hundred thousand (1,400,000) are designated "Series B Preferred Stock" (of
which one million three hundred thirty-three thousand three hundred thirty-three
(1,333,333) are issued and outstanding), (iii) four million (4,000,000) are
designated "Series C Preferred Stock" (of which three million six thousand
shares (3,006,000) are issued and outstanding; five hundred thousand (500,000)
are designated "Series D Preferred Stock" (none of which are issued and
outstanding); and one million two hundred seventy-five thousand (1,275,000) are
designated "Series E Preferred Stock" (none of which are issued and
outstanding). All such issued and outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. The Preferred has the
rights, preferences, privileges and restrictions set forth in the Certificate.
Except (i) for the conversion privileges of the Preferred specified in the
Certificate, (ii) as set forth in the Investors' Rights Agreement, and (iii) as
set forth in Exhibit C, there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock or other
securities of the Company. All outstanding securities of the Company were
issued in compliance with the registration or qualification provisions of all
applicable U.S., federal and state securities laws.
2.
<PAGE>
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of the Company's obligations
under the Agreements has been taken or will be taken prior to the Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles, and limitations
upon rights to indemnity. The Preferred, when issued in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions under
the Agreements and under applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Preferred has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions under the Agreements, the right
of first refusal provided in the Company's Bylaws, and applicable federal and
state securities laws. The Preferred is not subject to any preemptive rights or
rights of first refusal.
2.6 MATERIAL LIABILITIES. The Company has no material indebtedness or
liabilities, absolute or contingent (individually or in the aggregate), except
(1) with respect to services rendered by its employees or consultants; (2) with
respect to unpaid legal and other fees and costs incurred in connection with the
ongoing business of the Company, and the issuance of the Preferred in connection
with this Agreement; and (3) liabilities incurred in the ordinary course of
business that do not exceed $50,000 in the aggregate.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation of any term of the
Certificate or Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any order addressed specifically to the Company nor, to the
best of the Company's knowledge, any order, statute, rule or regulation
applicable to the Company.
2.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency. To the best of the Company's knowledge, there is no
judgment, decree, or order of any court in effect against the Company and the
Company is not in default with respect to any order of any governmental
authority to which the Company is a party or by which it is bound. There is no
action, suit, proceeding, or investigation by the Company currently pending or
which the Company presently intends to initiate.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
Section 1.2 of the Investors' Rights Agreement) any of its presently outstanding
securities or any of its securities that may hereafter be issued.
3.
<PAGE>
2.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred) or the consummation
of any other transaction contemplated thereby, except for (a) the filing of the
Certificate in the Office of the Secretary of State of the State of Delaware and
(b) the filing of a Notice with the California Commissioner of Corporations
pursuant to Section 25102(f) of the California Corporations Code and/or such
other filings as may be required under other applicable blue sky laws, which
filings, if required, will be accomplished in a timely manner prior to or
promptly upon completion of the Closing, as applicable.
2.11 OFFERING. Subject to the accuracy of the representations set forth
in Section 3 hereof, the offer, sale and issuance of the Preferred pursuant to
this Agreement and the issuance of the Common Stock to be issued upon conversion
of the Preferred constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
2.12 CERTAIN TRANSACTIONS. Since its date of incorporation, the Company
has not (a) discharged or satisfied any obligation or liability other than as
authorized by its Board of Directors, or in the ordinary course of business or
in amounts less than $100,000 in the aggregate, (b) declared or made any payment
or distribution to its shareholders or redeemed or purchased any of its shares
of capital stock or securities, (c) mortgaged or subjected to encumbrances any
of its assets, (d) sold, transferred or leased to third parties any of its
assets except in the ordinary course of business, (e) canceled or compromised
any material debt or any claim or waived or released any right of material
value, suffered any physical damage or destruction or loss materially and
adversely affecting its properties, operations or business, (f) made any loans
or advances to any persons other than immaterial amounts (both individually and
in the aggregate) in the ordinary course of business or (g) entered into any
material transaction other than as approved by its Board of Directors or in the
ordinary course of business or agreed to any of the foregoing other than with
respect to transactions relating to this Agreement.
2.13 INTELLECTUAL PROPERTY. To the best of its knowledge (but without
having conducted any special investigation or patent search), the Company has or
will be able to license on commercially reasonable terms sufficient legal rights
to all patents, copyrights, trade secrets, information, proprietary rights and
processes (collectively "Proprietary Information") necessary for its business as
now conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. Except for agreements with its own
officers and employees, substantially in the forms referenced in Section 2.14
below, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or infringed or that the Company would, by conducting its business as
proposed, violate or infringe any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. Neither the execution nor delivery of this Agreement,
nor the
4.
<PAGE>
carrying on of the Company's business by the employees of and consultants to the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
2.14 EMPLOYEE AND CONSULTANT AGREEMENTS. All employees and consultants of
the Company have entered into proprietary information and inventions agreements,
substantially in the Company's standard forms and, to the best of the Company's
knowledge, none of the Company's current or former employees or consultants is
in violation of such agreements.
2.15 DISCLOSURE. To the best of the Company's knowledge after reasonable
investigation, none of the representations or warranties made by the Company in
this Agreement and no information in the Exhibits hereto 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 not misleading.
2.16 BROKERS OR FINDERS. The Company has not entered into any agreement
or arrangement giving rise to any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Agreements.
2.17 NO DIVIDENDS. The Company has not made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
2.18 CONTRACTS. Except as listed on Exhibit C, the Company is not party
to any contract or agreement (i) with expected receipts or expenditures in
excess of $10,000, (ii) involving a license or grant of rights to or from the
Company involving patents, trademarks, copyrights, or other proprietary
information applicable to the business of the Company, (iii) with provisions
restricting or affecting the development, manufacture, or distribution of the
Company's products or services, or (iv) that provides indemnification by the
Company with respect to infringements of proprietary rights.
2.19 EMPLOYEE COMPENSATION PLANS. Except as listed on Exhibit C, the
Company is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
profit sharing plans, retirement agreements, or other employee compensation
agreements. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.20 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company, nor
is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has
5.
<PAGE>
a business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company.
2.21 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person, corporation, partnership or other entity, and is not bound
by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market, or sell its products, and has not
licensed or sold any of its technology or proprietary information to any person,
corporation, partnership or other entity.
2.22 CORPORATE DOCUMENTS. The Company has furnished the Investors with
copies of the Certificate and Bylaws as currently in effect. Said copies are
true, correct, and complete and contain all amendments through the Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally, for itself, and not jointly represents and
warrants to the Company as follows:
3.1 AUTHORIZATION. The Agreements constitute valid and legally binding
obligations of such Investor, enforceable in accordance with their terms except
as the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Such Investor is authorized and has full right and power to purchase the
Preferred, and the person signing the Agreements and any other instrument
executed and delivered hereby on behalf of such entity has been duly authorized
by such entity and has full power and authority to do so.
3.2 EXPERIENCE. The Investor has, from time to time, evaluated
investments in new, high technology companies and has, either individually or
through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in new, high technology
companies. The Investor has such knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
its investment in the Preferred and it is able to protect its own interests in
connection with this transaction.
3.3 INVESTMENT. The Investor is acquiring the Preferred (and any Common
Stock issuable upon conversion of the Preferred) for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The Investor understands that the Preferred (and any
Common Stock issuable upon conversion of the Preferred) to be purchased has not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed herein.
6.
<PAGE>
3.4 RULE 144. The Investor acknowledges that the Preferred must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The Investor
is aware that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plan to satisfy these conditions in the
foreseeable future.
3.5 ACCREDITED INVESTORS. The Investor is an "accredited investor"
pursuant to Rule 501, Regulation D, promulgated by the Securities Exchange on
March 8, 1982, as described in Exhibit F hereto.
3.6 NO PUBLIC MARKET. The Investor understands that no public market now
exists for any of the securities issued by the Company and that it is unlikely
that a public market will ever exist for the Preferred.
3.7 ACCESS TO DATA. The Investor has had an opportunity to discuss the
Company's business, management and financial affairs with its management. The
Investor understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which the Company believes to be material.
3.8 RESIDENCE. If the Purchaser is an individual, then the purchaser
resides in the state or province identified in the address of the Purchaser set
forth on Exhibit A; if the Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of the Purchaser
in which its investment decision was made is located at the address or addresses
of the Purchaser set forth on Exhibit A.
SECTION 4
CONDITIONS TO CLOSING OF INVESTORS
Each Investor's obligation to purchase the Preferred at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
7.
<PAGE>
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's financial condition, affairs or prospects
between the date of this Agreement and the Closing Date, if different.
4.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
4.5 BOARD OF DIRECTORS. The Board of Directors of the Company
immediately following the Closing will consist of Pehong Chen, David L.
Anderson, Yogen K. Dalal, Koh Boon Hwee and Gregory Smitherman.
4.6 COMPLIANCE CERTIFICATE. The Company shall have delivered on the
Closing Date a certificate signed by an officer of the Company certifying that
the conditions specified in Sections 4.1 through 4.4 have been fulfilled.
4.7 OPINION OF COUNSEL. The Investors shall have received from Cooley
Godward, counsel for the Company, an opinion in substantially the form of
Exhibit E attached to this Agreement.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
4.9 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 5
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to issue and sell the Preferred at the Closing is
subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investors contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by Investors on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred and Common Stock issuable upon
conversion of the Preferred.
5.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investors shall have
entered into the Investors' Rights Agreement.
8.
<PAGE>
5.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The Certificate
shall have been filed with the Secretary of State of Delaware.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Investors and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed to be
made as of the date of this Agreement, and not necessarily as of some later
date.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Investors to purchase the Preferred shall
not be assignable without the consent of the Company.
6.4 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
6.5 RIGHTS OF INVESTORS. Each holder of the Preferred (and Common Stock
issued upon conversion of the Preferred) shall have the absolute right to
exercise or refrain from exercising any right or rights that such holder may
have by reason of this Agreement or ownership of any Preferred, including
without limitation the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement affecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred with respect to exercising or refraining from exercising
any such right or rights.
6.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to the Investors, to Investors' addresses set forth on the
signature page hereof or at such other address as shall have been furnished to
the Company in writing by such Investors or (b) if to the Company, to the
address of its principal executive office and addressed to the attention of the
Corporate Secretary, or at such other address or addresses as the Company shall
have furnished in writing to the Investors. All notices and other
communications mailed pursuant to the provisions of this Section 8.6 shall be
deemed delivered when mailed.
6.7 EXPENSES. Each party to this Agreement shall pay its own costs and
expenses with respect to the negotiation, execution, delivery and performance of
the Agreement.
9.
<PAGE>
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.10 CALIFORNIA CORPORATE SECURITIES LAW. The sale of the securities
which are the subject of this Agreement has not been qualified with the
Commissioner of corporations of the state of California, and the issuance of
such securities or the payment or receipt of any part of the consideration
therefor prior to such qualification, if required by law, is unlawful. The
rights of all parties to this agreement are expressly conditioned upon such
qualification being obtained, if required by law.
6.11 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding Preferred Stock sold under this Agreement, and
Common Stock issued upon conversion thereof (calculated on an as-converted
basis), excluding from the determination of such a majority (both in determining
the total number of such shares outstanding and the number of such shares
consenting or not consenting) all shares previously disposed of by the Investors
or transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 thereunder. Any amendment, termination
or waiver effected in accordance with this section shall be binding upon each
holder of any securities issued pursuant to this Agreement (including securities
into which such securities have been converted or exchanged), each future holder
of any or all such securities and the Company.
10.
<PAGE>
IN WITNESS WHEREOF, the foregoing Series E Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.
BROADVISION, INC.
By: /s/Pehong Chen
---------------------------
PEHONG CHEN
President
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ R. Urushizaki
- --------------------------------
Signature
R. Urushizaki
- --------------------------------
Printed Name
Deputy Senior General Manager
Electronics Div.
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Dan Lynch
- --------------------------------
Signature
Dan Lynch
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Thomas M. Siebel
- --------------------------------
Signature
Thomas M. Siebel
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ William G. McCabe
- --------------------------------
Signature
William G. McCabe
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
INVESTORS:
/s/ Ronald Conway
- --------------------------------
Signature
Ronald Conway
- --------------------------------
Printed Name
- --------------------------------
Title
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Andrew Chase
- --------------------------------
Signature
Andrew Chase
- --------------------------------
Printed Name
Trustee
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Norman L. Dawley
- --------------------------------
Signature
Norman L. Dawley
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ K.R.A. Ibbett
- --------------------------------
Signature
K.R.A. Ibbett
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
INVESTORS:
MR. CLEMENT MOK
/s/ Clement Mok
- --------------------------------
Signature
Clement Mok
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Donald A. Peppers
- --------------------------------
DONALD A. PEPPERS
PAINE WEBBER INCORPORATED, NOT IN ITS CORPORATE
CAPACITY, BUT SOLELY AS CUSTODIAN OF THE INDIVIDUAL
RETIREMENT ACCOUNT OF DON PEPPERS (ACCOUNT #VN-85407-1-44)
By: /s/ Allison M. Parke
-----------------------------
Allison M. Parke
- --------------------------------
Printed Name
Asst. Vice President
- --------------------------------
Title
PAINE WEBBER INCORPORATED, NOT IN ITS CORPORATE
CAPACITY, BUT SOLELY AS CUSTODIAN OF THE ROLLOVER INDIVIDUAL
RETIREMENT ACCOUNT OF DON PEPPERS (ACCOUNT #VN-84412-1-44)
By: /s/ Allison M. Parke
-----------------------------
Allison M. Parke
- --------------------------------
Printed Name
Asst. Vice President
- --------------------------------
Title
/s/ Martha Rogers
- --------------------------------
MARTHA ROGERS
/s/ Robert L. Dorf
- --------------------------------
ROBERT L. DORF
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Francois Stieger
- --------------------------------
Signature
Francois Stieger
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Gerald Maguire
- --------------------------------
Signature
Gerald Maguire
- --------------------------------
Printed Name
- --------------------------------
Title, if applicable
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
/s/ Jung Yun Tahk
- --------------------------------
Signature
Jung Yun Tahk
- --------------------------------
Printed Name
- --------------------------------
Title
SIGNATURE PAGE TO BROADVISION, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
SERIES E
PREFERRED
SHARES PRICE
--------- -----
WPP Group (UK) Ltd. 250,000 $2,000,000
27 Farm Street
London W1X 6RD
England
Attn: Mr. Andrew Hall
cc: Carol Weinstein, Esq.
Davis & Gilbert
1740 Broadway
New York, NY 10019
Nichimen Corporation 112,500 $900,000
1-23, Shiba 4 chome
Minato-ku
Tokyo 108 Japan
Attn: Toshikazu Saito
Seven Seas Group Limited 62,500 $500,000
Room 821, China Insurance Group Bldg.
141 Des Veoux Road Central
Hong Kong
Daniel C. Lynch 31,250 $250,000
25660 Lalanne Court
Los Altos Hills, CA 94022
Robert Devereux 31,250 $250,000
186 Campden Hill Road
London W8 7th
United Kingdom
Thomas M. Siebel 12,500 $100,000
c/o Siebel Systems
4005 Bohannon Drive
Menlo Park, CA 94025
<PAGE>
William McCabe 20,000 $160,000
400 Oyster Point Blvd
Suite 401
South San Francisco, CA 94080
Ronald C. Conway 12,500 $100,000
173 Jefferson Drive
Menlo Park, CA 94025
Andrew Chase 12,500 $100,000
3000 Sand Hill Road, 3-190
Menlo Park, CA 94025
Norman Dawley 2,000 $16,000
301 Johnson Ct.
Lusby, MD 20657
Kenneth Ibbett 1,250 $10,000
186 Campden Hill Road
London W8 7th
United Kingdom
Clement Mok 1,250 $10,000
600 Townsend Street
Penthouse
San Francisco, CA 94103
Martha Rogers 6,250 $50,000
65 Back Bay Road
Bowling Green, OH 43402
Don Peppers 5,000 $40,000
Marketing 1:1
700 Canal Street
Stamford, CT 06902
Paine Webber Incorporated, not in its 3,000 $24,000
corporate capacity, but solely as
custodian of the rollover individual
retirement account of Don Peppers
(Account #VN-84412-1-44)
One Commercial Place
Suite 1120
Norfolk, VA 23510
Attn: Allison Parke
2.
<PAGE>
Paine Webber Incorporated, not in its 1,625 $13,000
corporate capacity, but solely as
custodian of the individual
retirement account of Don Peppers
(Account #VN-85407-1-44)
One Commercial Place
Suite 1120
Norfolk, VA 23510
Attn: Allison Parke
Robert L. Dorf 4,000 $32,000
411 Soundview Avene
Wallacks Point
Stamford, CT 06902
Francois Stieger 31,250 $250,000
BroadVision Switzerland AG
Rigistrasse 3
CH-8802
Kilchberg, Switzerland
Gerald J. Maguire 31,250 $250,000
BroadVision, Inc.
Julianalaan 4-404
3743 JG Baarn
The Netherlands
Jung Y. Tahk 2,500 $20,000
15829 Del Cerro Ct.
Los Gatos, CA 95032-4831
----------- ------------
TOTAL 634,375 $5,075,000
3.
<PAGE>
Exhibit 21.1
Subsidiaries
4C Consultancy AG, a corporation organized under the laws of Switzerland,
doing business as BroadVision, Inc.
