As filed with the Securities and Exchange Commission on March 4, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BROADVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3184303
(State of Incorporation) (I.R.S. Employer Identification No.)
585 Broadway
Redwood City, California 94063
(650) 261-5100
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
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PEHONG CHEN
President and Chief Executive Officer
BroadVision, Inc.
585 Broadway
Redwood City, California 94063
(650) 261-5100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
KENNETH L. GUERNSEY THOMAS A. BEVILACQUA
JAMIE E. CHUNG Brobeck, Phleger & Harrison LLP
MITCHELL R. TRUELOCK Two Embarcadero Place, 2200 Geng Road
Cooley Godward LLP Palo Alto, CA 94303
One Maritime Plaza, 20th Floor (650) 424-0160
San Francisco, CA 94111
(415) 693-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
===============================================================================================================
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered (1) Per Share (2) Price (2) Registration Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value .. 3,795,000 $ 12.125 $46,014,375 $13,575
===============================================================================================================
<FN>
(1) Includes 495,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, and
based upon the average high and low sales prices on February 26, 1998, as
reported on the Nasdaq National Market.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, 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.
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<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.
SUBJECT TO COMPLETION, DATED MARCH 4, 1998
PROSPECTUS
[BROADVISION LOGO GOES HERE]
3,300,000 Shares
Common Stock
Of the 3,300,000 shares of Common Stock offered hereby, 3,000,000 shares
are being issued and sold by BroadVision, Inc. ("BroadVision" or the "Company")
and 300,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholders. On March 3, 1998, the last sale price of the Company's Common
Stock, as reported on the Nasdaq National Market, was $13.25 per share. See
"Price Range of Common Stock." The Company's Common Stock is traded on the
Nasdaq National Market under the symbol "BVSN."
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The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" beginning on page 6.
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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.
================================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions Company (1) Stockholders
- --------------------------------------------------------------------------------
Per Share ......... $ $ $ $
Total(2) .......... $ $ $ $
================================================================================
(1) Before deducting expenses payable by the Company, estimated at $350,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 495,000 shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Stockholders 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 BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.
BancAmerica Robertson Stephens
Hambrecht & Quist
Wessels, Arnold & Henderson
The date of this Prospectus is , 1998
<PAGE>
No dealer, sales representative or any other person has been authorized in
connection with this offering made hereby to give any information or to make
any representation other than those contained in this Prospectus and, if given
or made, such information and representation must not be relied upon as having
been authorized by the Company, any Selling Stockholder or the Underwriters.
This Prospectus does not constitute an offer to sell, or solicitation of an
offer to buy, securities other than the registered securities to which it
relates or an offer to, or solicitation of, any person in any jurisdiction
where an offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any offer or 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.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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<S> <C>
Summary .............................................................................. 4
Risk Factors ......................................................................... 6
Use of Proceeds ...................................................................... 16
Price Range of Common Stock .......................................................... 16
Dividend Policy ...................................................................... 16
Capitalization ....................................................................... 17
Dilution ............................................................................. 18
Selected Consolidated Financial Data ................................................. 19
Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Business ............................................................................. 28
Management ........................................................................... 45
Principal and Selling Stockholders ................................................... 48
Description of Capital Stock ......................................................... 50
Underwriting ......................................................................... 52
Legal Matters ........................................................................ 54
Experts .............................................................................. 54
Available Information ................................................................ 54
Additional Information ............................................................... 54
Incorporation of Certain Documents by Reference ...................................... 55
Index to Consolidated Financial Statements ........................................... F-1
</TABLE>
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BroadVision(R) is a registered trademark of the Company, and BroadVision
One-To-One(TM) is a trademark of the Company. Trade names and trademarks of
other companies appearing in this Prospectus are the property of their
respective holders.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Investors
should consider carefully the information discussed under the heading "Risk
Factors." This Prospectus contains forward-looking statements that 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 those set forth under "Risk Factors" and elsewhere
in this Prospectus.
The Company
BroadVision develops, markets, and supports applications software
solutions for one-to-one relationship management for the extended enterprise.
These solutions enable businesses to use the Internet as a platform to conduct
commerce, provide self-service, and deliver targeted information to their
customers, suppliers, distributors, employees, and other constituents of their
extended enterprises. The BroadVision One-To-One product family allows
businesses to tailor Web site content to the needs and interests of individual
users by personalizing each visit on a real-time basis. BroadVision One-To-One
applications achieve this result by interactively capturing Web site visitor
profile information, organizing the enterprise's content, targeting that
content to each visitor based on easily constructed business rules, and
executing transactions. The Company believes the benefits of these applications
include enhanced customer satisfaction and loyalty, increased business volume,
reduced costs to service customers and execute transactions, and enhanced
employee productivity.
The emergence of the Internet as a low-cost, interactive, and individually
addressable communications and computing platform has provided enterprises with
access to millions of people on a real-time basis. The Company believes that,
to capitalize fully on this opportunity, businesses require flexible, robust,
and scalable packaged software solutions that are easier to develop, implement,
and maintain, integrate more easily with existing business systems, and offer
faster time to market and richer functionality than solutions built from
low-level development tools. Accordingly, the Company is focusing exclusively
on developing packaged extended enterprise relationship management ("EERM")
application solutions and currently offers four such products: the BroadVision
One-To-One Application System, One-To-One Commerce, One-To-One Financial, and
One-To-One Knowledge.
BroadVision has licensed its products to over 150 customers, including
approximately 50 partners worldwide. These customers and partners have used
BroadVision software to implement a variety of applications, including product
merchandising, retail financial services, and knowledge management. Over 30
customers have commercially deployed applications using BroadVision products.
The Company targets the Global 2000 organizations, and its current customers
include American Airlines, Baan Company, Banco Santander, Citibank, Eastman
Kodak, Grolier, Hewlett-Packard, Hongkong Telecom, IBM, JP Morgan, Liberty
Financial, Metronet, Micron Technology, Phillips Electronics, Quick & Reilly,
Siemens-Nixdorf, US West Communications and Virgin.net.
The Company maintains operations worldwide to sell and support its products
through a direct sales force and reseller partners. To accelerate the acceptance
of its applications solutions, the Company is enhancing its products and
broadening its professional services capabilities. BroadVision has also
developed key alliances with leading Internet technology vendors and systems
integration and consulting organizations throughout the world, including
Andersen Consulting, Cambridge Technology Partners, Cap Gemini, Computer
Sciences Corporation, Daimler-Benz Information Systems, Sage IT Partners, and
Sema Group.
The Company was incorporated in Delaware in May 1993. The Company's
principal executive offices are located at 585 Broadway, Redwood City,
California 94063, and its telephone number is (650) 261-5100. The Company's Web
site is located at http://www.broadvision.com. Information contained in 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 ..................... 3,000,000 shares
Common Stock Offered by the Selling Stockholders ......... 300,000 shares
Common Stock Outstanding after the Offering .............. 23,343,516 shares(1)
Use of Proceeds .......................................... For working capital and other general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol ............................ BVSN
</TABLE>
<TABLE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<CAPTION>
Period from
May 31, 1993 Years Ended December 31,
(inception) to -------------------------------------------------------
December 31, 1993 1994 1995 1996 1997
------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ........................................ $ -- $ -- $ 540 $ 10,882 $ 27,105
Operating loss .................................. (143) (1,771) (4,478) (10,697) (7,638)
Net loss ........................................ (136) (1,670) (4,318) (10,145) (7,373)
Basic and diluted net loss per share(2) ......... $ (0.36) $ (0.54) $ (0.36)
Shares used in per share computation(2) ......... 11,976 18,815 20,208
</TABLE>
December 31, 1997
---------------------------
As
Actual Adjusted(3)
------------ ------------
Balance Sheet Data:
Cash and cash equivalents .......... $ 8,277 $ 45,391
Working capital .................... 11,485 48,599
Total assets ....................... 27,342 64,456
Accumulated deficit ................ (23,642) (23,642)
Long-term obligations .............. 3,081 3,081
Total stockholders' equity ......... 15,121 52,235
- ------------
(1) Based on the number of shares outstanding on December 31, 1997. Excludes,
as of such date, 3,701,950 shares issuable upon exercise of outstanding
stock options, at a weighted average exercise price of approximately $4.41
per share and 93,750 shares of Common Stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of approximately
$6.16 per share. See "Description of Capital Stock."
(2) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of per share amounts.
(3) As adjusted to give effect to the sale of 3,000,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of
$13.25 per share and the application of the estimated net proceeds
therefrom after deducting estimated underwriting discounts and commissions
and offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization."
Except as set forth in the Consolidated Financial Statements or as otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. See "Underwriting."
5
<PAGE>
RISK FACTORS
In addition to the other information included or incorporated by reference
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 that 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.
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 December 31, 1997, had an accumulated
deficit of $23.6 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. 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."
Fluctuations in Quarterly Operating Results
As a result of the Company's relatively short operating history, the
Company has only limited 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 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
6
<PAGE>
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."
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 an 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 electronic commerce and knowledge management 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 electronic commerce and knowledge management, 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 business 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 business 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 non-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.
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
7
<PAGE>
that customer. Typically, profile information is often 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 products
are 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 of substantial security and privacy
concerns, whether or not valid, may indirectly 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 regulator 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.
Competition
The market for online interactive relationship management applications is
new, rapidly evolving, and intensely competitive. The Company expects
competition to persist and intensify in the future. The Company's primary
competition comes from in-house development efforts by potential customers or
partners. The Company's competitors also include other vendors of application
software directed at interactive commerce and financial services and Web
content developers engaged to develop custom software or to integrate other
application software into custom solutions. The Company currently encounters
direct competition from Edify Corporation ("Edify"), InterWorld Corporation
("InterWorld"), Microsoft Corporation ("Microsoft"), Netscape Communications
Corporation ("Netscape"), and Open Market Inc. ("OMI"), among others. 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. 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 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.
See "Business--Competition."
Product and Customer 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
8
<PAGE>
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.
In 1997, software license and service revenues from Metronet,
Kommunikationsdienste Gmbh & Co. KG. ("Metronet") accounted for approximately
11% of the Company's total revenues.
Lengthy Sales and Implementation Cycles
The license of the Company's software products is often an enterprise-wide
decision by prospective customers, requiring 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 Worldwide Professional
Services Organization 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 its products upon deployment or production by the
customer of the products. As a result, delays in license transactions due to
lengthy sales cycles or delays in customer production or deployment of a
product 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.
Risks Associated with Expanding Distribution
To date, the Company has sold its products primarily 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.
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.
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. 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
9
<PAGE>
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 and adversely affected.
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.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept two digit entries in the date code field. These date code fields will
need to accept four digit entries to distinguish 21st century dates from 20th
century dates. As a result, in less than two years, computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. Although the Company's products are Year 2000
compliant, the Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues as companies expend
significant resources to correct or patch their current software systems for
Year 2000 compliance. These expenditures may result in reduced funds available
to purchase software products such as those offered by the Company, which could
have a material adverse effect on the Company's business, financial condition,
and operating results. In addition, even if the Company's products are Year
2000 compliant, other systems or software used by the Company's customers may
not be Year 2000 compliant. The failure of such noncompliant third-party
software or systems could affect the perceived performance of the Company's
products, which could have a material adverse effect on the Company's business,
financial condition, and operating results.
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.
Dependence on Intellectual Property Rights
The Company's success and ability to compete are dependent to a
significant degree on its proprietary technology. Although the Company holds a
patent, issued in January 1998, on elements of its BroadVision One-To-One
Application System, there can be no assurance as to the degree of intellectual
property protection such patent will provide. The Company has relied primarily
on copyright, trade secret, and trademark law to protect its technology and has
registered "BroadVision" and applied for registration of "BroadVision One-To-
One" as trademarks in the United States. 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 Company provides its products to end users generally
under nonexclusive, nontransferable licenses during the term of the agreement,
which is usually in perpetuity. Under the general terms and conditions of the
Company's standard license agreement, the licensed software may be used solely
for internal operations pursuant to BroadVision's published licensing
practices. The Company
10
<PAGE>
makes source code available for certain portions of its products. The source
code for the Company's proprietary software is protected both as a trade secret
and as a copyrighted work. The provision of source code may increase the
likelihood of misappropriation by third parties. 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."
Risk of Infringement
The Company may, in the future, receive notices of claims of infringement
of other parties' trademark, copyright, and other proprietary rights. 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. 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 Technologies, Inc. ("IONA"), database access
technology from Rogue Wave Software, Inc. ("Rogue Wave"), 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. There can be no assurance that the Company's 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.
Dependence on Key Personnel
The Company's performance is substantially dependent on the performance of
its executive officers and key employees. 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.
11
<PAGE>
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 "Management."
Risks Associated with International Strategy
In 1997, approximately 52% of the Company's total revenues were derived
from sales outside of North America. A component of the Company's strategy is
its planned expansion of its international activities. There can be no
assurance that the Company will be able to maintain and expand its activities
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
current or future international operations and, consequently, on the Company's
business, financial condition, and operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 6 of Notes to Consolidated Financial Statements.
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 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 (the
"Telecommunications Act"), 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 the
Telecommunications
12
<PAGE>
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, cash
generated from operations, and amounts available under its commercial credit
facilities, combined with the net proceeds of this offering, will be sufficient
to meet its presently anticipated working capital and capital expenditure
requirements for the foreseeable future. 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 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resouces."
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 increase substantially in the
future. In particular, the Company intends to hire a significant number of
additional personnel in 1998 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
13
<PAGE>
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.
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 by the Company 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 39.8% 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 and Selling
Stockholders."
Volatility of Stock Price
The market price of the Company's Common Stock is highly volatile and
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 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. 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 "Price Range of
Common Stock."
Shares Eligible for Future Sale
Upon completion of this offering, the Company will have outstanding an
aggregate of 23,358,033 shares of Common Stock, assuming no exercise of the
Underwriters' over allotment option and no exercise of outstanding options and
based upon the number of shares outstanding as of January 31, 1998.
Substantially all of these shares will be freely tradeable without restriction
or further registration under the Securities Act of 1933, as amended (the
"Securities Act") (unless such shares are subject to an agreement not to sell
described below). The Company, its executive officers and directors, and
certain stockholders who own in the aggregate 8,598,753 shares of Common Stock,
have agreed, subject to certain limited exceptions, that they will not, without
the prior written consent of BancAmerica Robertson Stephens, sell or otherwise
dispose of any of their shares of Common Stock during the period ending 90 days
from the effective date of this Prospectus (the "Lock-Up Period"). BancAmerica
Robertson Stephens may, in its sole discretion, release all or any portion of
the securities subject to lock-up agreements. 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.
14
<PAGE>
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, or tender offer in which the Company's stockholders could
receive a premium for their shares, a proxy contest for control of the Company,
or other change in the Company's management. See "Description of Capital
Stock."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $37.1 million
($43.3 million if the Underwriters' over-allotment option is exercised in full)
at the assumed public offering price of $13.25 per share after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company.
The Company intends to use the net proceeds from this offering 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 agreement or commitments in
this regard and no such agreement 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. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders. See
"Principal and Selling Stockholders."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "BVSN." Public trading of the Common Stock commenced on June 26,
1996. Prior to that, there was no public market for the Common Stock. The
following table sets forth, for the periods indicated, the high and low sale
price per share of the Common Stock on the Nasdaq National Market.
1996 High Low
---- ---- ---
Second Quarter (from June 26, 1996) ........... $ 7.13 $ 6.88
Third Quarter ................................. $ 8.38 $ 5.38
Fourth Quarter ................................ $ 9.06 $ 6.56
1997
----
First Quarter ................................. $ 10.38 $ 7.50
Second Quarter ................................ $ 9.13 $ 4.38
Third Quarter ................................. $ 7.38 $ 5.00
Fourth Quarter ................................ $ 8.69 $ 5.88
1998
----
First Quarter (through March 3, 1998) ......... $ 15.38 $ 6.00
As of March 2, 1998, there were approximately 254 holders of record of the
Company's Common Stock. On March 3, 1998, the last sale price reported on the
Nasdaq National Market for the Company's Common Stock was $13.25 per share.
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>
<TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 and as adjusted to reflect the receipt of the estimated net
proceeds from the sale of the 3,000,000 shares of Common Stock offered hereby
at the assumed public offering price of $13.25 per share and the application of
the estimated net proceeds therefrom:
<CAPTION>
December 31, 1997
---------------------------
Actual As Adjusted
------------ ------------
(in thousands)
<S> <C> <C>
Long-term debt and non-current portion of capital lease
obligations .................................................... $ 3,081 $ 3,081
--------- ---------
Stockholders' equity:
Preferred Stock, issuable in series, $0.0001 par value;
5,000,000 shares authorized, no shares outstanding, actual
and as adjusted ............................................. -- --
Common Stock, $0.0001 par value, 50,000,000 shares
authorized, 20,343,516 shares outstanding, actual;
23,343,516 shares outstanding, as adjusted(1) ............... 2 2
Additional paid-in capital ...................................... 40,366 77,480
Deferred compensation related to grant of stock options ......... (1,605) (1,605)
Accumulated deficit ............................................. (23,642) (23,642)
--------- ---------
Total stockholders' equity ................................... 15,121 52,235
--------- ---------
Total capitalization ...................................... $ 18,202 $ 55,316
========= =========
<FN>
- ------------
(1) Excludes, as December 31, 1997, 3,701,950 shares issuable upon exercise of
outstanding stock options, at a weighted average exercise price of
approximately $4.41 per share and 93,750 shares of Common Stock issuable
upon exercise of outstanding warrants at a weighted average exercise price
of approximately $6.16 per share. See "Description of Capital Stock."
</FN>
</TABLE>
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<PAGE>
DILUTION
The net tangible book value of the Company on December 31, 1997 was $15.1
million, or $0.74 per share of Common Stock. After giving effect to the sale by
the Company of 3,000,000 shares of Common Stock in this offering at the assumed
public offering price of $13.25 per share, the net tangible book value of the
Company at December 31, 1997 would have been $52.2 million (calculated after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by the Company) or $2.24 per share. This represents an
immediate increase in net tangible book value of $1.50 per share to existing
stockholders and an immediate dilution in net tangible book value of $11.01 per
share to new investors purchasing shares in this offering. The following table
illustrates the calculation of the per-share dilution described above:
Assumed public offering price(1) ...................... $ 13.25
Net tangible book value before offering(2)(3) ...... $ 0.74
Increase attributable to new investors ............. 1.50
-------
Net tangible book value after offering(2)(3) .......... 2.24
--------
Dilution to new investors ............................. $ 11.01
========
- ------------
(1) Before deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company.
(2) Net tangible book value per share represents the amount of total tangible
assets less total liabilities of the Company, divided by the number of
shares of Common Stock outstanding.
(3) Based on the number of shares outstanding on December 31, 1997. Excludes,
as of such date, 3,701,950 shares issuable upon exercise of outstanding
stock options, at a weighted average exercise price of approximately $4.41
per share and 93,750 shares of Common Stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of approximately
$6.16 per share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of December
31, 1996 and 1997, and for the years ended December 31, 1995, 1996 and 1997,
are derived from the Company's audited financial statements, which are included
elsewhere in this Prospectus. The statement of operations data for the period
from inception to December 31, 1993 and for the fiscal year ended December 31,
1994 and balance sheet data as of December 31, 1993, 1994 and 1995 are derived
from the Company's consolidated audited financial statements not included in
this Prospectus. The selected consolidated financial data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Consolidated 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
(Inception) to Year Ended December 31,
December 31, ------------------------------------------------------
1993 1994 1995 1996 1997
--------------- ----------- ----------- ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software licenses .............................. $ -- $ -- $ -- $ 7,464 $ 18,973
Services ....................................... -- -- 540 3,418 8,132
------ -------- -------- --------- --------
Total revenues ............................... -- -- 540 10,882 27,105
------ -------- -------- --------- --------
Cost of revenues:
Cost of software licenses ...................... -- -- -- 330 1,664
Cost of services ............................... -- -- 249 2,164 4,284
------ -------- -------- --------- --------
Total cost of revenues ....................... -- -- 249 2,494 5,948
------ -------- -------- --------- --------
Gross profit .................................... -- -- 291 8,388 21,157
------ -------- -------- --------- --------
Operating expenses:
Research and development ....................... 12 748 2,575 4,985 7,392
Sales and marketing ............................ 31 512 1,348 12,066 18,413
General and administrative ..................... 100 511 846 2,034 2,990
------ -------- -------- --------- --------
Total operating expenses ..................... 143 1,771 4,769 19,085 28,795
------ -------- -------- --------- --------
Operating loss .................................. (143) (1,771) (4,478) (10,697) (7,638)
Other income, net ............................... 7 101 160 552 265
------ -------- -------- --------- --------
Net loss ........................................ $ (136) $ (1,670) $ (4,318) $ (10,145) $ (7,373)
====== ======== ======== ========= ========
Basic and diluted net loss per share(1) ......... $ (0.36) $ (0.54) $ (0.36)
======== ========= =========
Shares used in per share computation(1) ......... 11,976 18,815 20,208
======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ----------- ---------- ----------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ....... $ 1,503 $ 808 $ 4,311 $ 17,608 $ 8,277
Working capital ................. 2,358 2,208 3,916 18,258 11,485
Total assets .................... 2,634 2,640 5,857 28,930 27,342
Long-term obligations ........... -- -- 593 587 3,081
Accumulated deficit ............. (136) (1,806) (6,124) (16,269) (23,642)
Total stockholders' equity ...... 2,478 2,526 4,254 21,016 15,121
<FN>
- ------------
(1) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of per share amounts.
</FN>
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information contained or incorporated by reference
herein, the following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
under the caption "Risk Factors" and elsewhere in this Prospectus. Any such
forward-looking statements speak only as of the date such statements are made.
Overview
BroadVision develops, markets and supports application software solutions
for one-to-one relationship management for the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
commerce, provide self-service, and deliver targeted information to their
customers, suppliers, distributors, employees, and other constituents of their
extended enterprises. The BroadVision One-To-One product family allows
businesses to tailor Web site content to the needs and interests of individual
users by personalizing each visit on a real-time basis. BroadVision One-To-One
applications achieve this result by interactively capturing Web site visitor
profile information, organizing the enterprise's content, targeting that
content to each visitor based on easily constructed business rules, and
executing transactions. The Company believes the benefits of these applications
include enhanced customer satisfaction and loyalty, increased business volume,
reduced costs to service customers and execute transactions, and enhanced
employee
productivity.
The Company's core product, the BroadVision One-To-One Application System,
was first made commercially available in December 1995. Version 3.0, the
Company's latest version, was released during the fourth quarter of 1997 and
supports five languages (English, German, Japanese, Chinese, and Korean) and
four major client/server databases (Oracle, Sybase, Informix and Microsoft SQL
Server). In 1997, the Company released a complementary family of three packaged
application products: One-To-One Commerce, One-To-One Financial, and One-To-One
Knowledge. These products are built upon and tightly integrated with the
Company's core technology and provide specifically enhanced functionality. They
are designed to address the distinct customer requirements for managing
one-to-one relationships with product merchandising, financial services, and
knowledge management.
The Company sells its products and services worldwide through a direct
sales force, independent distributors, value-added resellers, and system
integrators. It also has a global network of strategic business relationships
with key industry platform and Web developer partners.
The Company's revenues are derived from software license fees and fees
charged 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 services revenues generally are recognized as services are
performed. Software maintenance revenues are recognized ratably over the term
of the support period, which is typically one year.
20
<PAGE>
Results of Operations
The following table sets forth certain items reflected in the Company's
consolidated statements of operations as a percentage of total revenues for the
periods indicated.
Year Ended December 31,
-------------------------------------------
1995 1996 1997
------------- ------------ ------------
Revenues:
Software licenses ................. --% 68.6% 70.0%
Services .......................... 100.0 31.4 30.0
------ ----- -----
Total revenues .................. 100.0 100.0 100.0
------ ----- -----
Cost of revenues:
Cost of software licenses ......... -- 3.0 6.1
Cost of services .................. 46.1 19.9 15.8
------ ----- -----
Total cost of revenues .......... 46.1 22.9 21.9
------ ----- -----
Gross profit ....................... 53.9 77.1 78.1
------ ----- -----
Operating expenses:
Research and development .......... 476.9 45.8 27.3
Sales and marketing ............... 249.6 110.9 67.9
General and administrative ........ 156.7 18.7 11.1
------ ----- -----
Total operating expenses ........ 883.2 175.4 106.3
------ ----- -----
Operating loss ..................... (829.3) (98.3) (28.2)
Other income, net .................. 29.7 5.1 1.0
------ ----- -----
Net loss ........................... (799.6)% (93.2)% (27.2)%
====== ===== =====
Revenues
Total revenues for the Company were $27.1 million in 1997 as compared to
$10.9 million in 1996, which represents an increase of 149% year-over-year.
During 1995, the Company's software products were under development and total
revenues were $540,000, consisting principally of domestic consulting services.
In 1997 and 1996, North American revenues were $12.9 million and $4.4 million,
or 48% and 41% of total revenues, respectively; revenues to Europe were $10.9
million and $3.3 million, or 40% and 30% of total revenues, respectively; and
revenues to Asia/Pacific were $3.4 million and $3.2 million, or 12% and 29% of
total revenues, respectively. The 149% increase in total revenues for 1997 as
compared to 1996 is a result of strong market acceptance of the Company's
cornerstone product, the BroadVision One-to-One Application System, which was
facilitated by the introduction in 1997 of new complementary application
products, One-To-One Commerce, One-To-One Financial, and One-To-One Knowledge.
The significant increase for 1996 as compared to 1995 is a result of the
introduction of the BroadVision One-To-One Application System in late 1995.
Although the Company has experienced revenue growth in recent periods,
historical growth rates may not be sustained and may not be indicative of
future operating results. The Company anticipates that international revenues
will continue to account for a significant amount of total revenues, and
management expects to continue to commit significant time and financial
resources to the maintenance and ongoing development of 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
acceptance for its family of products.
Software Licenses. The Company's software license revenues were $19.0
million in 1997 as compared to $7.5 million in 1996, which represents an
increase of 154% year-over-year. There were no software license revenues in
1995. In 1997 and 1996, North American software license revenues were $8.6
million and $3.1 million, or 45% and 41% of the Company's total software
license revenues, respectively; software license revenues to Europe were $8.8
million and $2.3 million, or 47% and 30% of the Company's total software
license revenues, respectively; and software license revenues to Asia/Pacific
were $1.6 million and $2.1 million, or 8% and 29% of the Company's total
software license revenues, respectively.
21
<PAGE>
Services. Services revenues consist primarily of professional services and
maintenance. The Company's professional services include its Strategic Services
Group, its Interactive Services Group, its Content and Creative Services Group
and its Education Services Group. Professional services are generally offered
on a time and materials basis. Maintenance revenue is generally derived from
annual service agreements and is recognized ratably over the period of the
agreement. Maintenance fees are based on a percentage of the list price for the
related software.
Total services revenues were $8.1 million in 1997 as compared to $3.4
million in 1996, which represents an increase of 138% year-over-year. During
1995, the Company was in its early stages of development and services revenues
were $540,000. In 1997 and 1996, North American services revenues were $4.3
million and $1.3 million, or 53% and 39% of the Company's total services
revenues, respectively; services revenues in Europe were $2.0 million and $1.0
million, or 25% and 30% of the Company's total services revenues, respectively;
and services revenues in Asia/Pacific were $1.8 million and $1.1 million, or
22% and 31% of the Company's total services revenues, respectively.
Professional services revenues were $6.0 million in 1997 as compared to
$2.8 million in 1996, which represents an increase of 114% year-over-year. In
1995, professional services revenues were $540,000 and related principally to a
single domestic contract development project. Professional services revenues as
a percentage of total services revenues were 74%, 83%, and 100% in 1997, 1996,
and 1995, respectively. The 114% increase in professional services revenues for
1997 as compared to 1996 is a result of higher business volumes and greater
utilization of the Company's professional consultants. The significant increase
for 1996 as compared to 1995 is primarily the result of comparing a full year
of operations during 1996 with the 1995 period, which was a development stage
period. The Company's professional services revenues as a percentage of total
revenues may decline to the extent the Company's strategy of developing
business alliances with third parties, such as system integrators, continues to
expand.
Maintenance revenues were $2.1 million in 1997 as compared to $599,000 in
1996, which represents an increase of 251% year-over-year. There were no
maintenance revenues in 1995. Maintenance revenues as a percentage of total
services revenues were 26%, 18%, and 0% in 1997, 1996, and 1995, respectively.
The increase in maintenance revenues is a result of expanding software sales
and the corresponding maintenance fees relating to a larger installed base of
software licenses. As the Company's installed license base grows, its
maintenance revenues as a percentage of total revenues may increase.
Operating Expenses
Cost of Software Licenses. Cost of software licenses includes royalties
payable to third parties for software that is either embedded in, or bundled
and sold with, the Company's products; commissioned agent fees paid to
distributors; and the costs of product media, duplication, packaging and other
associated manufacturing costs. In 1997 and 1996, cost of software licenses was
$1.7 million and $330,000, or 9% and 4% of related software license revenues,
respectively, consisting principally of third-party royalties and commissioned
agent fees. There were no software license costs in 1995. Cost of software
licenses increased in both absolute dollar and percentage terms during 1997 as
compared to 1996 due to expanded sales volumes and higher commissioned agent
fees as a result of increased distributor sales. Commissioned agent fees were
$703,000 in 1997 as compared to $80,000 in 1996. To a lesser extent, an
increased number of third-party products bundled with or embedded in the
Company's products also contributed to the increases.
Cost of Services. Cost of services consists primarily of employee-related
costs and fees of third-party consultants incurred in providing consulting,
post-contract customer support, and training services. In 1997, 1996, and 1995,
cost of services were $4.3 million, $2.2 million, and $249,000, or 53%, 63%,
and 46% of related services revenues, respectively. Cost of services increased
98% in absolute dollars during 1997 as compared to 1996 due to expanded
business volumes, as represented by the 138% increase in total services
revenues. The higher level of costs is attributable to additions to the
Company's consulting staff, the employment of outside consultants to meet
short-term consulting arrangements, an increasing number of licenses with
support or maintenance components, and a higher level of fixed costs resulting
from the Company's expansion of its services organization to meet higher
business volumes. The decrease in cost of services as a percentage of total
services revenues in 1997 as compared to 1996 is a result of increased
utilization of professional staff and overall higher business volumes in
relation to fixed overhead costs. During 1995, the Company was in its
development
22
<PAGE>
stage and generally in the process of building its support services
infrastructure. The Company expects that services costs will continue to
increase in absolute dollars as the Company continues to expand its services
organization to support anticipated higher levels of business.
Research and Development. Research and development expenses consist
primarily of salaries, other employee-related costs, and consulting fees
relating to the development of the Company's products. In 1997, 1996, and 1995,
research and development expenses were $7.4 million, $5.0 million, and $2.6
million, respectively. Research and development expenses increased by 48% in
1997 as compared to 1996 and increased by 94% in 1996 as compared to 1995. The
increases in research and development expenses are primarily attributable to
costs associated with additional personnel within those operations for the
enhancement of existing products and the development of new products. The
Company anticipates that research and development expenses will continue to
increase in absolute dollars for 1998. Development costs incurred in research
and development of new software products are expensed as incurred until
technological feasibility in the form of a working model has been established,
at which time such costs are capitalized, subject to recoverability. As of
December 31, 1997, no software development costs had been capitalized.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other employee-related costs, commissions and other incentive
compensation, travel and entertainment, and expenditures for marketing programs
such as collateral materials, trade shows, public relations, and creative
services. In 1997, 1996, and 1995, sales and marketing expenses were $18.4
million, $12.1 million, and $1.3 million, respectively. Sales and marketing
expenses increased by 53% in 1997 as compared to 1996 and increased by 795% in
1996 as compared to 1995. During 1995, the Company was still in the development
stage and sales and marketing expenses in percentage terms increased
significantly year-over-year. The overall increases in sales and marketing
expenditures reflect the cost of hiring additional sales and marketing
personnel, developing and expanding its sales distribution channels, deploying
new products, and expanding promotional activities. The Company expects to
continue to expand its direct sales and marketing efforts and expects sales and
marketing expenses to continue to increase in absolute dollars.
General and Administrative. General and administrative expenses consist
primarily of salaries, other employee-related costs, and professional service
fees. In 1997, 1996, and 1995 general and administrative expenses were $3.0
million, $2.0 million, and $846,000, respectively. General and administrative
expenses increased by 47% in 1997 as compared to 1996 and increased by 140% in
1996 as compared to 1995. The increases in general and administrative expenses
are attributable to the hiring of additional administrative and management
personnel, increased professional fees, additional provision for doubtful
accounts, and additional infrastructure to support the expansion of the
Company's operations. The Company expects to continue to add administrative
staff to support broadened operations. As a result, the Company expects that
general and administrative expenses will continue to increase in absolute
dollars.
Prior to the Company's initial public offering in June 1996, the Company
recorded deferred compensation 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. The total amount was
recorded as deferred compensation and is being amortized to cost of services,
research and development, selling and marketing, and general and administrative
expenses over the vesting periods of the options, generally 60 months. Deferred
compensation amortization for 1997, 1996, and 1995 was $428,000, $513,000, and
$100,000, respectively. The amortization of deferred compensation will have an
adverse effect on the Company's reported results of operations through 2003,
but such effect will be significantly reduced beginning in the third quarter of
2001.
Income taxes. Deferred taxes are recognized as a result of temporary
differences that arise between the tax basis of assets and liabilities and the
related financial statement carrying amounts, as measured using the tax rates
that are expected to be in effect when the temporary differences reverse.
During 1997, 1996, and 1995, the Company generated pre-tax losses of $7.4
million, $10.1 million, and $4.3 million, respectively. The Company has
approximately $10.0 million in net deferred tax assets, however, it has not
reported any associated income tax benefit because the net deferred tax assets
are fully reserved due to uncertainties regarding the realization of the
assets, given the lack of earnings history for the Company. See "Risk
Factors--Deferred Tax Assets" and Note 6 to Consolidated Financial Statements.
At December 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $17.1 million and $6.4 million, respectively. In
addition, the Company had federal and state research
23
<PAGE>
and development credit carryforwards of approximately $585,000 and $451,000,
respectively, available to offset future tax liabilities. The Company's net
operating loss and tax credit carryforwards expire in 1999 through 2013, if not
utilized. 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 its public stock offerings.
Quarterly Results of Operations
The following tables set forth certain unaudited consolidated statement of
operations data for the eight quarters ended December 31, 1997, as well as such
data expressed as a percentage of the Company's total revenues for the period
indicated. This data has been derived from unaudited consolidated financial
statements that, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information when read in conjunction with the Consolidated
Financial Statements and Notes thereto. The unaudited quarterly information
should be read in conjunction with the Consolidated Financial Statements of the
Company and Notes thereto included elsewhere in this Prospectus. The Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
24
<PAGE>
<TABLE>
<CAPTION>
1996 Quarter Ended
-------------------------------------------------------
Mar. 31 June 30 Sep. 30 Dec. 31
------------- ------------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software licenses .................. $ 1,099 $ 1,564 $ 2,074 $ 2,727
Services ........................... 299 738 1,026 1,356
-------- ------- ------- -------
Total revenues ................... 1,398 2,302 3,100 4,083
-------- ------- ------- -------
Cost of revenues:
Cost of software licenses .......... 96 93 72 69
Cost of services ................... 165 331 520 1,148
-------- ------- ------- -------
Total cost of revenues ........... 261 424 592 1,217
-------- ------- ------- -------
Gross profit ........................ 1,137 1,878 2,508 2,866
-------- ------- ------- -------
Operating expenses:
Research and development ........... 917 1,277 1,320 1,472
Sales and marketing ................ 1,585 2,486 3,574 4,421
General and administrative ......... 340 320 592 782
-------- ------- ------- -------
Total operating expenses ......... 2,842 4,083 5,486 6,675
-------- ------- ------- -------
Operating loss ...................... (1,705) (2,205) (2,978) (3,809)
Other income (expense), net ......... 7 25 304 216
-------- ------- ------- -------
Net loss ............................ $ (1,698) $(2,180) $(2,674) $(3,593)
======== ======= ======= =======
As a Percentage of Revenues:
Revenues:
Software licenses .................. 78.7% 67.9% 66.9% 66.8%
Services ........................... 21.3 32.1 33.1 33.2
-------- ------- ------- -------
Total revenues ................... 100.0 100.0 100.0 100.0
-------- ------- ------- -------
Cost of revenues:
Cost of software licenses .......... 6.9 4.0 2.3 1.7
Cost of services ................... 11.8 14.4 16.8 28.1
-------- ------- ------- -------
Total cost of revenues ........... 18.7 18.4 19.1 29.8
-------- ------- ------- -------
Gross profit ........................ 81.3 81.6 80.9 70.2
-------- ------- ------- -------
Operating expenses:
Research and development ........... 65.6 55.5 42.6 36.1
Sales and marketing ................ 113.5 108.0 115.3 108.3
General and administrative ......... 24.3 13.9 19.1 19.2
-------- ------- ------- -------
Total operating expenses ......... 203.4 177.4 177.0 163.5
-------- ------- ------- -------
Operating loss ...................... (122.1) (95.8) (96.1) (93.3)
Other income (expense), net ......... 0.5 1.1 9.8 5.3
-------- ------- ------- -------
Net loss ............................ (121.6)% (94.7)% (86.3)% (88.0)%
======== ======= ======= =======
<CAPTION>
1997 Quarter Ended
------------------------------------------------------
Mar. 31 June 30 Sep. 30 Dec. 31
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Software licenses .................. $ 3,148 $ 4,098 $ 5,513 $ 6,213
Services ........................... 2,143 1,929 1,641 2,420
------- ------- ------- -------
Total revenues ................... 5,291 6,027 7,154 8,633
------- ------- ------- -------
Cost of revenues:
Cost of software licenses .......... 214 425 460 566
Cost of services ................... 1,143 1,001 1,010 1,130
------- ------- ------- -------
Total cost of revenues ........... 1,357 1,426 1,470 1,696
------- ------- ------- -------
Gross profit ........................ 3,934 4,601 5,684 6,937
------- ------- ------- -------
Operating expenses:
Research and development ........... 1,680 1,802 2,113 1,797
Sales and marketing ................ 4,204 4,257 4,630 5,323
General and administrative ......... 746 700 763 780
------- ------- ------- -------
Total operating expenses ......... 6,630 6,759 7,506 7,900
------- ------- ------- -------
Operating loss ...................... (2,696) (2,158) (1,822) (963)
Other income (expense), net ......... 209 49 131 (123)
------- ------- ------- -------
Net loss ............................ $(2,487) $(2,109) $(1,691) $(1,086)
======= ======= ======= =======
As a Percentage of Revenues:
Revenues:
Software licenses .................. 59.5% 68.0% 77.1% 72.0%
Services ........................... 40.5 32.0 22.9 28.0
------- ------- ------- -------
Total revenues ................... 100.0 100.0 100.0 100.0
------- ------- ------- -------
Cost of revenues:
Cost of software licenses .......... 4.0 7.1 6.4 6.6
Cost of services ................... 21.6 16.6 14.1 13.1
------- ------- ------- -------
Total cost of revenues ........... 25.6 23.7 20.5 19.6
------- ------- ------- -------
Gross profit ........................ 74.4 76.3 79.5 80.4
------- ------- ------- -------
Operating expenses:
Research and development ........... 31.8 29.9 29.5 20.8
Sales and marketing ................ 79.4 70.6 64.7 61.7
General and administrative ......... 14.1 11.6 10.7 9.0
------- ------- ------- -------
Total operating expenses ......... 125.3 112.1 104.9 91.5
------- ------- ------- -------
Operating loss ...................... (50.9) (35.8) (25.4) (11.1)
Other income (expense), net ......... 3.9 0.8 1.8 ( 1.4)
------- ------- ------- -------
Net loss ............................ (47.0)% (35.0)% (23.6)% (12.6)%
======= ======= ======= =======
</TABLE>
25
<PAGE>
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
The Company has funded its operations to date primarily through the
private placement of Common and Preferred Stock and an initial public offering
of 3,360,000 shares of Common Stock. Through May 1996, private placements
provided net proceeds totaling $15.5 million, and in June 1996 the initial
public offering yielded net proceeds of $20.7 million. At December 31, 1997,
the Company had $10.5 million in cash and cash equivalents, restricted cash,
and restricted short-term investments, which represents a decrease of $9.2
million as compared to $19.7 million at December 31, 1996. The Company
currently has no significant capital commitments other than obligations under
equipment and operating leases and $2.7 million outstanding under a term debt
credit facility with its commercial bank. Effective February 1998, the
Company's commercial bank increased its credit facility to provide for total
borrowings of up to $6.5 million.
Cash used in operating activities was $8.7 million, $8.4 million, and $3.7
million in 1997, 1996, and 1995, respectively. The primary use of cash in
operating activities was to fund ongoing operations and support higher levels
of trade receivables as a result of significant year-over-year increases in
revenues. Cash used in investing activities was $3.6 million and $4.4 million
in 1997 and 1996, respectively, and was primarily for the acquisition of
property and equipment, net of $2.1 million of short-term investment maturities
in 1997 and additional uses for the purchase of short-term investments in 1996.
Cash provided by investing activities was $614,000 in 1995 and was primarily
attributable to the maturity of short-term investments net of property and
equipment acquisitions of $679,000. Cash provided by financing activities was
$2.9 million, $26.1 million, and $6.6 million in 1997, 1996, and 1995,
respectively. The primary source of cash provided by financing activities was
proceeds from the issuance of stock and, to a lesser extent, borrowings.
The Company believes that its available cash resources, cash generated
from operations and amounts available under its commercial credit facilities,
combined with the net proceeds of this offering, will be sufficient to meet its
expected working capital and capital expenditure requirements for the
foreseeable future. This estimate is a forward-looking statement that involves
risks and uncertainties, and actual results may vary as a result of a number of
factors, including those discussed under "Risk Factors" and elsewhere herein.
The
26
<PAGE>
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 debt, financing under
leasing arrangements, 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 on acceptable terms, 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.
27
<PAGE>
BUSINESS
The following discussion of the Company's business contains
forward-looking statements that 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 develops, markets and supports application software solutions
for one-to-one relationship management for the extended enterprise. These
solutions enable businesses to use the Internet as a platform to conduct
commerce, provide self-service, and deliver targeted information to their
customers, suppliers, distributors, employees, and other constituents of their
extended enterprises. The BroadVision One-To-One product family allows
businesses to tailor Web site content to the needs and interests of individual
users by personalizing each visit on a real-time basis. BroadVision One-To-One
applications achieve this result by interactively capturing Web site visitor
profile information, organizing the enterprise's content, targeting that
content to each visitor based on easily constructed business rules, and
executing transactions. The Company believes the benefits of these applications
include enhanced customer satisfaction and loyalty, increased business volume,
reduced costs to service customers and execute transactions, and enhanced
employee productivity.
Background
Trends in One-to-One Relationship Management
To prevail in the intensely competitive global marketplace, business
managers must continually devise new strategies to market, sell, distribute,
and support 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. One-to-one
relationship management 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 relationship
management, business managers can develop more productive relationships with
their customers that maximize customer satisfaction, develop customer loyalty,
and contain the high costs associated with new customer acquisition.
One-to-One Relationship Management on the Internet
With the emergence of the Internet as a globally accessible, interactive,
and individually addressable communications and computing platform, businesses
have the opportunity to implement one-to-one relationship management 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, education, commerce, entertainment, and marketing
applications. Technologies such as Java from Sun Microsystems, Inc. ("Sun") are
facilitating the delivery of content over the Internet and accelerating
adoption of the Internet as a mainstream business and personal computing
platform. In addition, businesses are utilizing the Internet to create internal
enterprise networking environments called "intranets" or "extranets." These
networks are enabling businesses to create Internet applications that provide
new ways of interacting with employees, partners, and customers.
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<PAGE>
As Internet use has grown, industry experts have described the Internet as
the ideal platform for deploying applications that enable companies to develop
individual one-to-one relationships across their entire enterprise. Whether an
Internet application is designed primarily for delivering knowledge, conducting
commerce, or customer self-service, it offers businesses an opportunity to
extend front office services in a personalized and cost effective way to all
constituents in their extended enterprise. By recognizing the
relationship-building potential of the Internet--in particular, the ability to
interactively capture visitor profile information, observations, and feedback
and to dynamically target useful information to visitors based on this
data--business managers can utilize advanced Internet technologies to engage in
personalized dialogs with millions of customers on a one-to-one basis.
The Business Challenge on the Internet
While the Internet is increasingly becoming a global platform for
providing and accessing information, there remain significant challenges to
doing business on the Internet. The Internet is characterized by fluid and
dynamic content, where information is continually being updated and enhanced.
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 and updating 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.
Many Web sites today simply present text and graphics electronically in a
static format, much like a product brochure. There has recently been a dramatic
shift away from companies simply building these "brochureware" sites to
companies making a significant investment in building mission-critical Internet
applications. These Internet applications have the interactive capability to
capture visitor profiles, conduct personalized interactions, remember
information from one visit to the next, enable business managers to manage the
site on a real-time basis, and integrate into existing business systems.
Providing these additional capabilities is a valuable next step for companies
that plan to maximize the potential of the Internet for relationship management
across their extended enterprise.
However, most of the Web sites that have moved beyond brochureware to
provide electronic commerce or knowledge management applications still have
failed to capitalize fully on the Internet's potential for building one-to-one
relationships. Sites that do support commerce 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 based on a 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
online businesses.
The Technology Gap on the Internet
Web 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 often "hard-coded" into
programs and virtually impossible for non-technical managers to change
dynamically. Most applications are not scalable and require ongoing tuning and
re-engineering to keep up with visitor growth and changes in Internet
technology. Development is often slow and defects are common due to the
limitations of most productivity tools. Generally, with 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.
In part, the limited capabilities of these static Web sites are a result
of the inadequacies of the technologies used to develop Internet applications.
Many 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. Many of today's Web development toolkits that assist in Web site
development do not offer capabilities for generating personalized, dynamic Web
pages or for easily maintaining site content and page generation logic. These
tools were not designed to be used in the development of sophisticated
applications offering enterprise-scale
29
<PAGE>
implementations of business processes, such as product marketing, sales, or
customer support. Using low-level toolkits and commerce and merchant servers 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 application development budgets.
Application Systems for One-to-One Relationship Management
The recent trends toward one-to-one relationship management and the rapid
adoption of the Internet as a technology platform for conducting business have
fueled the need for sophisticated packaged application software that enables
companies to create applications that build personalized, long-term
relationships with customers, partners, and employees. Early adopting companies
have built successful online relationship management applications and these
online businesses are creating pressures for their competitors to come to
market quickly with online business sites. To build these sites, the Company
believes that more of these companies are turning toward the purchase of
packaged enterprise Internet applications. These packaged applications provide
an attractive alternative to in-house or third-party custom application
development, enabling companies to get to market more quickly with a solution
that is more readily extensible and maintainable as the business evolves.
To realize the potential of one-to-one relationship management, Internet
applications must support the following activities:
* Attract and retain visitors by providing dynamic content, interactive
dialogs, and communities of interest
* Develop and maintain visitor profiles, observe and remember interactions,
and engage in ongoing personalized dialogs while empowering individuals to
control the privacy of their personal data
* Provide business managers the ability to define and modify the Internet
application's business rules and content in real time
* Dynamically target personalized content, products, and incentives to
correspond to profile data in order to motivate visitors to interact and
conduct transactions
* Fulfill financial and information transactions with secure electronic
commerce processes
The BroadVision Solution
BroadVision offers a family of packaged applications for automating
relationship management in the extended enterprise. The BroadVision One-To-One
product family enables companies to use the Internet for selling, marketing,
and supporting all of their business constituents: employees, customers,
suppliers, distributors, and others.
The Company develops, markets, and supports its BroadVision One-to-One
family of Internet applications for relationship management and associated
software tools that are used to customize and maintain these applications.
These applications are designed to allow non-technical business managers to
build relationships by tailoring content to the needs and interests of
individual visitors, personalizing each experience on a real-time basis. The
Company's customers use BroadVision solutions to deploy Internet applications
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. The Company believes
that these capabilities are needed by business managers and Internet
application developers to take full advantage of the potential of the Internet
as a marketplace for conducting business and for building long-term
relationships with customers.
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<PAGE>
Strategy
The Company's objective is to establish one-to-one relationship management
as a standard feature of Web sites worldwide. To achieve this objective, the
Company has adopted the following strategies:
Focus on EERM by Providing Packaged Application Solutions
The Company is focusing exclusively on developing packaged application
solutions for businesses developing Web sites as profitable business channels
for managing relationships with their customers, partners, employees, and other
constituents. The Company believes that the next major phase of Internet growth
will be driven by complete packaged application solutions that allow businesses
to capitalize more fully on the Internet as a business venue for interacting
with the constituents of their extended enterprise. Businesses will implement
these packaged applications in order to speed time to market, rely on a vendor
rather than an internal development organization to maintain and update the
technology underlying the business application, and reduce total cost and risk
of application deployment.
Enhance Targeted Application Solutions
The Company will continue to leverage its BroadVision One-To-One
Application System to enhance its Web application products and services focused
on specific horizontal and/or 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 a
targeted application solution for one-to-one relationship management faster, of
a higher quality, and at a lower cost than its competitors. The Company has
delivered targeted application solutions for business-to-consumer and
business-to-business commerce, for retail financial services and for knowledge
management. The Company intends to remain nimble and flexible at developing
other applications products in the general area of relationship management, in
response to market opportunities that may arise.
Expand and Leverage Alliances with Key Business Partners
To accelerate the acceptance of the BroadVision One-To-One products and to
promote the adoption of the Web as a commercial marketplace, the Company has
developed cooperative alliances with leading Internet technology vendors,
systems integrators, and Web site developers. The Company believes that these
alliances will 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 products, and
facilitate the successful deployment of customer applications. The Company has
signed nearly 50 partnerships to date worldwide, which has expanded the
Company's sales and support infrastructure and post-sales implementation
capabilities, and broadened market awareness for the Company.
Maintain Technology Leadership
The Company believes that it offers the most complete EERM solution
available today. The Company intends to maintain this leadership position by
continuing to enhance its technology through heavy investment 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. Having employed the Common Object Request
Broker Architecture ("CORBA") standard as a cornerstone of its product
architecture, the Company has integrated other CORBA-compatible technologies,
such as the Java development language, into its products. Utilizing in-house
expertise and experiences with customers, the Company intends to maintain its
leadership position in providing a scalable, innovative, and open architecture.
Grow International Presence
To capitalize on the emergence of the Internet as a global network, the
Company has established sales operations in Amsterdam, Basel, Hong Kong,
London, Munich, Paris, and Tokyo. In addition, the Company distributes its
products in these and additional countries through licensed distributors,
value-added resellers, and systems integrators in Brazil, Finland, Korea, South
Africa, Spain, and Sweden. The Company intends to continue to certify providers
of professional services for BroadVision products in these and other countries.
The Company's partners include multinational systems integrators, as well as
partners with single-country scope of operations. The Company's product
architecture is designed to support international languages, and the Company is
currently shipping localized versions of its BroadVision One-To-One Application
System in English, German, Japanese, Korean, and Chinese.
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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 Company develops, markets and supports a family of EERM applications
products and associated software tools for use in customizing and maintaining
solutions built with these applications.
Applications
BroadVision offers four applications products--the BroadVision One-To-One
Application System, One-To-One Commerce, One-To-One Financial, and One-To-One
Knowledge--that provide a spectrum of capabilities that offer numerous business
functions and support the needs of companies in different industries.
BroadVision One-To-One Application System is the Company's core product.
It is a flexible, generic yet robust application for deploying relationship
management processes on the Internet. It utilizes an open, scalable application
architecture for Web session management, secure user authentication and
authorization, dynamic and personalized page generation, user profiling,
content management, and transaction handling. The BroadVision One-To-One
Application System provides the following capabilities designed to meet the
needs of companies delivering personalized relationship management on their Web
sites:
Profiling -- BroadVision One-To-One applications store and maintain
dynamic profiles of Web site visitors. Profile data can be collected from
information in existing customer information files, from information
provided explicitly by site visitors, and by observation of visitors'
behavior on the site. Visitors' session information is saved in a
transaction log and can be used to update and enrich the visitors'
profiles. Profile information is stored in any of several widely used
third-party relational databases.
Content Management -- BroadVision One-To-One applications deliver
dynamic content to the user in response to their interests and needs.
Content items available for display to visitors comprise one of six types:
templates (Web page designs and layouts), products, editorials,
advertisements, incentives, and discussion groups. Each of these content
types has a rich set of attributes that describe its properties and key
features. This content is managed within a BroadVision One-To-One
application with tools to create, classify, organize, and publish the
content.
Matching -- BroadVision One-To-One applications provide tools for
business managers to create and manage "if-then" rules and taxonomy-based
matching schemes that determine which content to deliver to Web site
visitors and the conditions under which the content should be delivered.
The criteria for content selection can include the visitor's demographic or
psychographic variables, historical behavior, current session behavior,
context information such as date and time, and marketing logic for
delivering incentives, promotions, and recommendations. This allows Web
sites to personalize product information, editorials, pricing, advertising,
coupons, incentives, and promotions for Web site visitors who fit specified
profiles or the predetermined criteria as established by the company's
business managers.
Transactions -- BroadVision One-To-One applications incorporate a number
of transactional capabilities required for merchandising and financial
services applications. These capabilities include electronic wallets, order
tracking, persistent shopping cart, taxing and shipping charge computation,
discount and coupon handling, payment authorization, between- and
within-account exchanges, and news and stock feeds.
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Features of the Broadvision One-To-One Solution
[GRAPHIC GOES HERE -- INFORMATION CONTAINED BELOW]
Profiling Content Matching Transactions
Demographics Product Rule-based Electronic
Preferences information Taxonomy-based Wallet
Interests Editorials Ordering
Usage history Advertising Payment
Observation Incentives Order Fulfillment
Permissions Discussion Billing
groups Taxing
Page templates Reporting
Shopping Cart
During 1997, the Company expanded its product line by introducing three new
applications products in the BroadVision One-To-One family: One-To-One Commerce,
One-To-One Financial, and One-To-One Knowledge. These three additional
applications products are built upon and extend the functionality of the
flagship BroadVision One-To-One Application System. They are designed to meet
the needs of customers in certain industries and the needs of customers with
more specific one-to-one relationship management requirements for product
merchandising, retail financial services, or knowledge management.
One-To-One Commerce is a turnkey application solution for rapid deployment
and dynamic personalization of high-end Internet commerce services. Companies
implementing One-To-One Commerce can rapidly implement an end-to-end commerce
solution offering a personalized storefront to visitors and full commerce
transaction capabilities at the back end. The application includes rich
functionality for product catalog management, electronic wallets, ordering, tax
and shipping charge computation, payment handling, and discount and incentive
tracking. One-To-One Commerce provides businesses with a sample commerce
application (including reusable objects), business rules, and templates that
can be easily customized to meet critical time-to-market demands.
One-To-One Financial enables banks and other financial institutions to
rapidly deploy secure, personalized, retail relationship management Internet
sites to their financial services customers. The product delivers a financial
transaction framework and a set of core financial services that allows
customers to access account information and a rich set of transactions within
and between accounts.
One-To-One Knowledge is designed to increase the productivity of a
knowledge-intensive extended enterprise in its management of information
delivery to employees, customers, channels, and other partners. The product
enables a repository of corporate information (e.g., sales and marketing
information, technical information, human resources information) to be
organized into customizable channels accessible through Web browsers. Documents
in the content archive are "tagged" with attributes that describe their subject
matter, content category, viewing permissions, and other factors pertinent to
determining how to target readers. Business rules used in conjunction with
visitors' self-declared preferences determine the selection, filtering, and
display of "tagged" information presented to the visitors on each trip to the
Web site.
The Company designed all of these applications products for use in
mission-critical, high-performance environments by customers with demanding
architecture, deployment, and maintenance requirements. The key capabilities of
the applications include:
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* Broad applicability -- robust functionality to support business-to-
business, business-to-consumer, and business-to-employee relationship
management, including personalized marketing and communications, selling
and commerce transaction handling, and customer self-service.
* Scalability -- architected for high performance and fast response while
supporting large numbers of simultaneous users accessing the system over
the public Internet or private intranets or extranets.
* Component-based, reusable application code -- object-oriented application
code written in C++, which allows developers and integrators to use,
modify, adapt, or extend the dynamic objects to rapidly customize products
to meet the specific business requirements of a particular corporate
customer.
* Support for industry standards -- supports the CORBA standard for
object-oriented computing, to permit distribution of the application
across multiple processors. This design enables high-volume performance,
flexible application deployment, and easy integration with other third
party or legacy applications.
* Transaction processing -- handles a wide-range of commerce and financial
services transactions -- including order pricing and discount/incentive
handling, tax computation, shipping and handling charges, payment
authorization, credit card charge processing, order tracking, news and
stock feeds--through a combination of built-in functionality and
integration with other products.
* Platform independence -- versions available for multiple operating
systems, including Sun Solaris, Windows NT, and HP-UX. Databases supported
include Oracle, Sybase, Informix, and Microsoft SQL Server.
* Multi-lingual -- available in English, German, Japanese, Korean, and
Chinese.
Tools
BroadVision applications are customized and maintained using tools that
are licensed to customers separately from the applications products. Inherent
to the functionality of the Company's applications is a set of building blocks
called "dynamic objects," "application templates," and "rule sets" that are
instrumental in rapidly building and easily maintaining One-To-One-based
applications. A description of the Company's tools products follows.
Visual Development Center. The BroadVision One-To-One Visual Development
Center (the "VDC") provides advanced Web site development tools rich in
object-oriented features for building BroadVision One-To-One applications.
Because most businesses have little time for application development, the
BroadVision One-To-One VDC supports visual, point-and-click application
construction; default templates for basic business functions (order entry,
payment clearing) for rapid application creation and deployment; and browser-
independent, dynamic Web page generation. In addition, there is an extensive
library of dynamic objects that provide access to One-To-One services,
including profile management, electronic commerce services such as virtual
shopping carts and order processing, targeted content, and ad insertion. These
features enhance existing templates and provide an extensive amount of
sub-classes, which can be used to build new objects. Furthermore, the VDC
supports HTML, Java, and JavaScript as well as any third-party HTML editor.
Dynamic Command Center. The BroadVision One-To-One 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 define and manage the customer segments, the content organization,
and the matching rules of a Web site in real time using familiar, non-technical
concepts. For example, a business manager can initiate a sale or promotion,
send coupons to specifically targeted consumers, or change prices dynamically.
The rules editor of the DCC enables the business manager to define in English
the "if-then" relationships that determine the selection and presentation of
various types of content to the site visitor, based on profile attributes or
session information. 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.
Content Management Center. The BroadVision One-To-One Content Management
Center (the "CMC") provides workflow tools to automate the content creation and
classification process. The CMC is a Java-based Web application that enables
business people to easily manage the process of developing, indexing, tagging,
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staging, publishing, and updating content. This content can then be effectively
targeted and matched based on user preferences and profiles. Site
administrators can control who can create and update specific areas in the Web
site. Editors can track the overall efficiency and quality of the content while
carefully managing a content calendar. The CMC also enables a process of
collaboration between all authors, editors, and Web site administrators working
from remote locations.
Other Products
In addition to its proprietary products, the Company has entered into
agreements which enable it to resell third-party software products from
CyberSource Corporation, Verity, Inc., Oracle, and Sybase. These are
sublicensed to end users and either incorporated in or sold as options to the
Company's own products. License revenue from these third-party products was
insignificant and constituted less than 1% of total software product license
revenues in 1997 and 1996.
The table below summarizes certain features of and price information for
each of the Company's products:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
U.S. List Price for
Product Description Perpetual License
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Application Products: Full object-oriented environ- * $25,000 and up per
ment for developing, testing, developer seat
* BroadVision One-To-One and tuning EERM applications
Application System
* One-To-One Commerce
* One-To-One Financial
* One-To-One Knowledge
- --------------------------------------------------------------------------------------------------
Deployment System Full environment for deploying * License fee based on num-
production EERM applications ber of profiled users tracked
by application and number
of services accessing profiled
user base.
* Ranges from $30,000 mini-
mum configuration to more
than $1 million for large
complex configurations
- --------------------------------------------------------------------------------------------------
Visual Development Center PC-based application enabling * One copy included with
applications developers to development license
quickly and easily build dynamic
Web page templates * Additional copies start at
$600 per seat
- --------------------------------------------------------------------------------------------------
Dynamic Control Command PC-based application enabling * $5,000 per seat
Center business managers to monitor
state of Web applications, inter-
actively change business rules in
real time, and generate reports
- --------------------------------------------------------------------------------------------------
Content Management Center Browser-based application en- * Starts at $2,500
abling content developers and per seat
editors to manage the publish-
ing of new content to the Web
site
- --------------------------------------------------------------------------------------------------
</TABLE>
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Professional Services
The Company's Worldwide Professional Services Organization ("WPSO")
provides a broad range of consulting services in support of BroadVision's total
product line. The Company's WPSO provides comprehensive business application
expertise, technical know-how, and product knowledge to complement its products
and to provide total solutions to customer business requirements. A summary of
the consulting services provided by the Company follows.
Strategic Services provides business strategy and process consulting,
assisting customers in defining and planning profitable online businesses.
Services include in-depth needs analysis, customer segmentation, site
storyboarding, and preparing detailed plans and procedures necessary to achieve
timely and successful implementations of the Company's software products.
Strategic Services consulting is generally offered on a time and materials
basis.
Interactive Services provides technical services for development of
customized BroadVision-based applications, custom interfaces, data conversions,
and system integration. These consultants participate in a wide range of
activities, including requirements definition and application design,
development and implementation. These consultants also provide advanced
technology services focused on application development for custom objects and
templates and database administration and tuning. Interactive Services
consulting is generally offered on a time and materials basis.
Content and Creative Services is a group specializing in content
management, sourcing, workflow processes, and user-interface design. The group
is made up of One-To-One design experts and a variety of leading design houses.
This unique team combines years of interactive design and marketing experience
to build purposeful user-interfaces that meet customers pre-defined goals.
Content and Creative Services consulting is generally offered on a time and
materials basis.
Education Services are offered to customers either at the Company's
education facilities or at the customers' locations, as either standard or
customized classes. These classes are priced at either fixed daily rates or on
a per-class basis.
Technical Support
The Company provides technical support, including telephone support,
upgrade rights to new releases, including patch releases as necessary, and
product enhancements, under the Company's standard maintenance agreements,
which all of the Company's licensed customers have entered into. The annual
maintenance fee for these services is based upon a percentage of the
then-current list price for the perpetual licensed software fee, payable
annually in advance.
Customers and Markets
The Company has licensed its product to over 150 customers, including
approximately 50 partners worldwide. The types of applications being developed
by licensees using BroadVision software include product merchandising, retail
financial services, and corporate knowledge management for employees, partners,
and customers. Over 30 customers have commercially deployed applications using
BroadVision products. The Company's target customers include Global 2000
organizations that are at the forefront of building innovative Internet
applications to increase revenues and reduce operational costs. In 1997,
software license and service revenues from Metronet accounted for approximately
11% of the Company's total revenues.
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<TABLE>
The Company has targeted a number of markets that it believes to be
especially conducive to one-to-one relationship management applications. 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.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Target Sample
Industry Sample Applications Benefits of BroadVision Solutions Customers
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telecom- * Commerce: Business- * Selectively share visitor profiles Hongkong Telecom
munications to-business and between aggregators and content TELUS Advanced
business-to-consumer providers Communications
US West Communica-
* Online services * Online, real-time control of tions
business rules, such as pricing and
* Self-service promotions
(e.g., call centers)
- ---------------------------------------------------------------------------------------------------------------
Retail and * Online shopping * Create branded communities Eastman Kodak
distribution based on visitor profiles The Good Guys
* Interactive Metronet
catalogues * Online, real-time control of Phillips Electronics
business rules, such as pricing and RS Components
promotions, by content providers
* Reduce ransaction costs of direct
purchases
---------------------------------------------------------------------------------------------------------------
Travel and * Reservations * Provide travel planning advice and American Airlines
leisure transaction services without agents Thomas Cook
* Travel planning or other intermediaries
* Brand projection, loy- * Opportunity, based on user profiles,
alty programs, and to cross-sell or up-sell services in
affinity addition to basic travel reservations
marketing
- ---------------------------------------------------------------------------------------------------------------
Media and * Purchasing digital * Price digital products and Grolier
publishing media services in real time Metromail
Milwaukee Journal
* Knowledge * Dynamically target relevant Virgin.net
management information to individuals
- ---------------------------------------------------------------------------------------------------------------
Financial * Home banking * Target investment content based Banco Santander
services on profiles of visitors Citibank
* Obtaining information JP Morgan
on and * Nationwide service can be locally Liberty Financial
selecting: targeted Quick & Reilly
--Loans
* Low-cost distribution channel
--Mutual funds
* Tremendous cross-selling and
--Insurance up-selling opportunity
- ---------------------------------------------------------------------------------------------------------------
High * Knowledge * Disseminate large amounts Baan Company
technology management of knowledge/information in a Hewlett-Packard
and personalized way based on IBM
manufacturing * Business-to-business purchaser's profile Micron Technology
purchasing Siemens-Nixdorf
* Maintain and make available
up-to-date information related to
complex purchasing decisions
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
The market for the Company's products and services is at an 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 electronic commerce and knowledge management 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 electronic commerce and knowledge management, 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 business 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 business 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 Asia/Pacific. On
December 31, 1997, the Company's direct sales organization included 63 sales
representatives, managers, applications consultants, and pre-sales support and
post-sales support personnel. The Company has a sales office at its
headquarters in Redwood City, California and has North American sales offices
in Atlanta, Chicago, Dallas, and New York. The Company has subsidiaries in
France, Germany, Japan, the Netherlands, Switzerland, and the United Kingdom
and has an established sales office in Hong Kong. A component of the Company's
strategy is continued planned expansion of its international activities. The
Company intends to broaden its presence in international markets by expanding
its international sales force and by entering into additional distribution
agreements. The Company also contracts with commissioned agents in the Republic
of Korea, 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
one-to-one relationship management applications. Initial sales activities
typically include a demonstration of BroadVision One-To-One capabilities at the
prospect's site, followed by one or more detailed technical reviews, often
presented at the Company's headquarters. The sales process usually involves a
collaboration with the prospective customer in order to specify the scope of
the application. The Company's professional services organization typically
plays a key role in helping customers to design, and then develop, their
applications.
The Company's marketing efforts are targeted at product strategy
development and product management; building market awareness through press and
analysts; producing and maintaining marketing information and sales tools;
generating and developing customer leads; and sourcing and managing
relationships with systems integrators, value-added resellers, creative design
and advertising agencies, and technology partners. As of December 31, 1997, 20
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, and maintaining the Company's Web site.
The license of the Company's software products is often an enterprise-wide
decision by prospective customers, requiring the Company to engage in a lengthy
sales cycle to provide a significant level of education
38
<PAGE>
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 the customers or by the Company's WPSO
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 primarily derived sales 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, system integrators, and other third
parties.
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. The
Company has developed business alliances with approximately 50 systems
integration, design, consulting, and other services organizations, including
Andersen Consulting, LLP, Cambridge Technology Partners, Cap Gemini U.K. plc,
Computer Sciences Corporation, Daimler-Benz Information Systems AG (Debis),
Dimension AB, Gran Via, NTT Data Corporation, Sage IT Partners, Inc., Sema
Group plc, Siemens-Nixdorf Information System AG, Silicon Valley Internet
Partners, and others.
Competition
The market for online interactive relationship management applications is
new, rapidly evolving, and intensely competitive. The Company expects
competition to persist and intensify in the future. The Company's primary
competition comes from in-house development efforts by potential customers or
partners. The Company's competitors also include other vendors of application
software directed at interactive commerce and financial services and Web
content developers engaged to develop custom software or to integrate other
application software into custom solutions. The Company currently encounters
direct competition from Edify, InterWorld, Microsoft, Netscape, and OMI, among
others. 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. 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 the Company's
products are depth and breadth of functionality offered, ease of application
development, time required for application development, reliance on industry
standards, reliability, scalability, maintainability, personalization and other
features, 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.
39
<PAGE>
Technology
The Company believes its advanced technology enables the delivery of
robust, scalable, and innovative Internet relationship management 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
relationship management 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
applications family 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.
Adherence to Industry Standards
The Company has invested substantially in developing its architecture to
comply with CORBA, a standard for applications software design and development
widely adopted in the commercial software industry. 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 specified by CORBA.
Through CORBA compliance, the Company's products are fully compatible with
other CORBA-based technologies, such as Java.
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, SSL (Secure Socket Layer)
for secure transmissions over networks, and the RC2 and MD5 encryption
algorithms supplied by RSA. BroadVision One-To-One can be operated in
conjunction with RDBMSs provided by Oracle, Informix, Microsoft, 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.
N-Tier Architecture
The BroadVision One-To-One application system utilizes an N-tier
architecture that logically separates application presentation, business rules,
and data. Between each of these 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 architecture partitions applications across:
* A front-end tier that manages the application presentation and interface
to Web site visitors
* Application engine tier(s) that manage 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 relationship management applications. Due to the
object-oriented design of this code and the reliance on CORBA, this code
can be distributed across multiple logical and physical processors, thus
enabling the N-tier design of the application.
* A back-end tier that integrates underlying database management systems
for storing BroadVision One-To-One data with external business systems
that perform specialized relationship management functions, such as online
credit card authorization and payment handling, sales tax and shipping
computation, online and off-line order fulfillment, inventory management,
visitor demographic analysis, and data mining.
40
<PAGE>
The Company believes this N-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 relationship
management application. The session manager 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
* 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.
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 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.
Product Development
The Company believes that its future success will depend in large part on
its ability to enhance the BroadVision One-To-One product family, develop new
products, maintain technological leadership, and satisfy an evolving range of
customer requirements for large-scale interactive online relationship
management 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 products to operate with the leading hardware
platforms, operating systems, database management systems, and key electronic
commerce transaction processing standards.
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 products through licensing arrangements.
As of December 31, 1997, there were 52 employees in the Company's product
development organization. The Company's research and development expenses were
$7.4 million, $5.0 million,
41
<PAGE>
and $2.6 million in 1997, 1996, and 1995, 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 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.
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 Sun, Hewlett-Packard Company, and Silicon
Graphics, Inc., providers of enterprise server hardware and systems software;
IONA, a provider of a CORBA-compliant development platform; Oracle, Sybase, and
Informix Corporation, providers of standard RDBMSs; RSA, a provider of
encryption technology; and VeriFone, Inc. and CyberCash, Inc., providers 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 or maintaining
such alliances.
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 provides its
products to end users generally under nonexclusive, nontransferable licenses
during the term of the agreement, which is usually in perpetuity. Under the
general terms and conditions of the Company's standard license agreement, the
licensed software may be used solely for internal operations pursuant to
BroadVision's published licensing practices.
The Company holds a patent on its core technology for personalized
business on the Internet. The United States Patent Office issued Patent
5,710,887 on January 20, 1998 to the Company, covering certain elements of the
BroadVision One-To-One(TM) Application System. There can be assurance that this
patent would survive a legal challenge to its validity or provide significant
protection.
The Company has registered "BroadVision" and applied for registration of
"BroadVision One-To-One" as trademarks in the United States. Although the
Company takes steps to protect its trade secrets, there can be no assurance
that misappropriation will not occur or that copyright and trade secret
protection will be available in certain countries.
42
<PAGE>
The source code for the Company's proprietary software is protected both
as a trade secret and as a copyrighted work. The Company makes source code
available for certain portions of its products. In addition, 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
the Company ceases to do business or the Company fails to support its products.
The provision of source code may increase the likelihood of misappropriation by
third parties. 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. 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.
The Company relies upon certain software that it licenses from third
parties, including RDBMSs from Oracle and Sybase, object request broker
software from IONA, database access technology from Rogue Wave, 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. There can also be no assurance that the Company's
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 December 31, 1997, the Company employed a total of 188 full-time
employees, including 83 in sales and marketing, 52 in product development, 34
in professional services and client support, and 19 in finance, administration,
and operations.
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<PAGE>
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 employee relations to be good.
Facilities
The Company's principal administration, research and development, sales,
consulting, and support facilities are located in Redwood City, California,
where the Company occupies approximately 60,000 square feet pursuant to a lease
that expires in 2007. The Company also rents space in various cities to support
its sale and field support activities. The Company believes that its existing
facilities are adequate to meet its needs for the foreseeable future.
44
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Personnel
The director, executive officers and key personnel of the Company and
their ages at February 28, 1998 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------- ----- --------------------------------------------------------------------
<S> <C> <C>
Pehong Chen ...................... 40 Chairman of the Board, Chief Executive Officer and President
Randall Bolten ................... 45 Chief Financial Officer and Vice President, Operations
Clark W. Catelain ................ 50 Vice President, Engineering
Eric J. Golin .................... 38 Vice President of Worldwide Professional Services
Michael A. Kennedy ............... 35 Vice President of Global Strategic Alliances
Giuseppe Kobayashi ............... 42 Vice President and General Manager of Japan/Asia-Pacific Operations
Francois Stieger ................. 48 Vice President and General Manager of European Operations
James W. Thanos .................. 49 Vice President and General Manager, Americas
Perry W. Thorndyke ............... 48 Vice President, Marketing
Kenneth L. Guernsey .............. 46 Secretary
David L. Anderson (1)(2) ......... 54 Director
Yogen K. Dalal (2) ............... 47 Director
Koh Boon Hwee (2) ................ 47 Director
Carl Pascarella .................. 45 Director
</TABLE>
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Pehong Chen has served as Chairman of the Board, Chief Executive Officer
and President 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. Dr. Chen founded and, from 1989
to 1992, served as President of Gain Technology ("Gain"), a provider of
multimedia applications development systems, 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 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 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.
Eric J. Golin has been employed at the Company since September 1994 and
has served as Vice President of Worldwide Professional Services of the Company
since September 1997. From September 1993 to September 1994, Mr. Golin was a
principal architect for OpenVision Technology. From September 1989 to September
1993, Mr. Golin was Assistant Professor of Computer Science at the University
of Illinois at Champaign-Urbana. Mr. Golin received an Sc.B., Sc.M., and a
Ph.D. in Computer Science from Brown University.
45
<PAGE>
Michael A. Kennedy has served as Vice President, Global Strategic
Alliances, since September 1997. From September 1995 to August 1997, Mr.
Kennedy served as Senior Director, Marketing of the Company. From August 1993
to August 1995, Mr. Kennedy served as Director, New Media Business Development
for Oracle Corporation, supplier of database software. From December 1989 to
July 1993, Mr. Kennedy served as Senior Product Marketing Manager for Oracle
Corporation. Mr. Kennedy received a B.Sc. in Computer Science from the Aberdeen
University, Scotland.
Giuseppe Kobayashi has served as Vice President and General Manager of
Japan/Asia-Pacific Operations 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.
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, Inc., 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.
James W. Thanos has served as Vice President and General Manager, Americas
of the Company since January 1998. From January 1995 to January 1998, Mr.
Thanos served as Senior Vice President of Worldwide Operations of Aurum
Software, a sales force automation company. From January 1993 to December 1994,
Mr. Thanos served as Vice President of Sales of Harvest Software, an optical
character recognition software company. From December 1988 to January 1993, Mr.
Thanos served as Vice President of Sales Operations of Metaphor, Inc., a
decision support software company. Mr. Thanos holds a B.A. in International
Relations from Johns Hopkins University.
Perry W. Thorndyke has served as Vice President, Marketing, of the Company
since August 1996. From February 1995 to January 1996, Dr. Thorndyke served as
a management consultant to and then Vice President, Marketing for Quintus
Corporation, a supplier of client/server solutions for customer information
management. From February 1994 to January 1995, Dr. Thorndyke served as an
management consultant on technology strategy for customer information
management systems to independent software vendors and user organizations. From
May 1992 to January 1994, Dr. Thorndyke served as Vice President and Division
Manager for retail banking systems at Wells Fargo Bank. From 1990 to May 1992,
Dr. Thorndyke served as Senior Manager of Marketing and Business Development at
Metaphor Computer Systems. a supplier of client/server software applications
for PC-based support decision products. Dr. Thorndyke received a B.A. in
Computer and Information Sciences from Yale University and a Ph.D. in Cognitive
Psychology from Stanford University.
Kenneth L. Guernsey has served as Secretary of the Company since May 1995.
From 1988 to the present, Mr. Guernsey has been a partner in the law firm of
Cooley Godward LLP, where he served as Managing Partner from April 1990 to
October 1996. 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 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 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 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.
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 currently serves on the Board of Directors of
Excel Machine Tools Ltd., Raffles Medical Group Ltd., and Qad Inc. Mr. Koh
holds a B.S. in Mechanical Engineering from the University of London and an
M.B.A. from Harvard University.
Carl Pascarella has served as a director of the Company since September
1997. Since August 1993, Mr. Pascarella has been President and Chief Executive
Officer of Visa USA. From January 1983 to August 1993, he was Assistant Chief
General Manager of the Asia-Pacific region of Visa USA. Before joining Visa
USA, Mr. Pascarella was Vice President of the International Division of Crocker
National Bank. He also served as Vice President of Metropolitan Bank at
BankersTrust Company. Mr. Pascarella holds a B.A. from the University of
Buffalo and an M.B.A. from Stanford University.
47
<PAGE>
<TABLE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 31, 1998 by: (i) each director;
(ii) the Company's Chief Executive Officer and the four other most highly
compensated executive officers for the fiscal year ended December 31, 1997;
(iii) all executive officers and directors of the Company as a group; (iv) each
person or entity known by the Company to be a beneficial owner of more than
five percent of its Common Stock; and (v) the Selling Stockholders.
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned After
Offering(1) Shares Offering(1)(2)
---------------------- Being -----------------------
Beneficial Owner Number Percent Offered Number Percent
- ----------------------------------------------- ----------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Pehong Chen (3) ............................... 5,875,000 28.2% -- 5,875,000 24.6%
c/o BroadVision, Inc.
585 Broadway
Redwood City, CA 94063
Mayfield VII (4) .............................. 2,500,000 12.3 -- 2,500,000 10.7
2800 Sand Hill Road
Menlo Park, CA 94025
Itochu Corporation (5) ........................ 1,330,000 6.5 -- 1,330,000 5.7
5-1, Kita-Aoyama, 2-Chome
Minao-ku, Tokyo 107-77
Japan
GeoCapital Corp. .............................. 1,082,500 5.3 -- 1,082,500 4.6
767 Fifth Ave. 45th Floor
New York, NY 10153
David L. Anderson (6) ......................... 420,236 2.1 -- 420,236 1.8
Yogen K. Dalal (4)(7) ......................... 2,552,500 12.5 -- 2,552,500 10.9
Clark W. Catelain (8) ......................... 216,900 1.1 -- 216,900 *
Koh Boon Hwee (9) ............................. 193,541 * -- 193,541 *
Randall C. Bolten (10) ........................ 193,442 * -- 193,442 *
Robert A. Runge ............................... 17,976 * -- 17,976 *
Perry W. Thorndyke(11) ........................ 180,411 * -- 180,411 *
Carl Pascarella ............................... -- -- -- -- --
All Selling Stockholders as a group ........... 300,000
All directors and executive officers as a group
(7 persons) (12) ............................. 9,451,619 45.4 300,000 9,451,619 39.8
<FN>
- ------------
* Less than one percent
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "Commission"). Unless otherwise indicated in
the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
20,358,033 shares outstanding on January 31, 1998 and 23,358,033 shares of
Common Stock outstanding after the completion of this offering, adjusted
as required by rules promulgated by the Commission and assuming no
exercise of the Underwriters' over-allotment option. 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.
(3) Includes 500,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares. Excludes 300,000 shares of Common Stock
held in trust by independent trustees for the benefit of Dr. Chen's
children.
48
<PAGE>
(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 725,000 shares of Common Stock held by Itochu Corporation,
500,000 shares of Common Stock held by Itochu International, Inc. and
100,000 shares of Common Stock held by Itochu Techno-Science Corporation.
(6) Includes 87,704 shares of Common Stock owned by Sutter Hill Ventures, a
California Limited Partnership ("Sutter Hill"), over which Mr. Anderson, a
director of the Company, exercises voting and investing power as a
managing director of Sutter Hill Ventures LLC, the general partner of
Sutter Hill. Includes 73,406 shares of Common Stock owned by Anvest L.P.,
over which Mr. Anderson exercises voting and investing power. 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. Includes 50,000 shares of Common
Stock issuable upon the exercise of a stock option exercisable within 60
days of January 31, 1998, subject to repurchase of unvested shares.
(7) Includes 50,000 shares of Common Stock issuable upon the exercise of a
stock option exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(8) Includes 16,900 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(9) Includes 64,433 shares of Common Stock held by Seven Seas Group Ltd., in
which Mr. Koh holds a controlling interest, and 50,000 shares of Common
Stock issuable upon the exercise of a stock option exercisable within 60
days of January 31, 1998, subject to repurchase of unvested shares.
(10) Includes 40,000 shares of Common Stock held in trust by Mr. Bolten and his
wife for their benefit and 26,800 shares of Common Stock issuable upon the
exercise of stock options exercisable within 60 days of January 31, 1998,
subject to repurchase of unvested shares.
(11) Includes 175,000 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of January 31, 1998, subject to
repurchase of unvested shares.
(12) Includes the information contained in the notes above, as applicable.
</FN>
</TABLE>
49
<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, par value $0.0001
per share, and 5,000,000 shares of Preferred Stock, par value $0.0001 per share
("Preferred Stock").
Common Stock
As of January 31, 1998 there were 20,358,033 shares of Common Stock
outstanding held of record by 274 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. There are no shares of Preferred Stock outstanding and the Company has
no current plans to issue any of the Preferred Stock.
Warrants
As of January 31, 1998, the Company had outstanding warrants to purchase
93,750 shares of Common Stock at a weighted average exercise price of
approximately $6.16 per share. The warrants, which expire in June 2002 and
February 2007, contain provisions for the adjustment of the exercise price and
the aggregate number of shares issuable upon the exercise of the warrants under
certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications, and consolidations.
Registration Rights
Pursuant to an agreement between the Company and the holders (or their
permitted transferees) of approximately 12,775,000 shares of Common Stock
("Holders"), 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. 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
50
<PAGE>
such form becomes available to the Company, subject to certain conditions and
limitations. The foregoing registration rights terminate on June 21, 2006 or,
as to any individual Holder who owns less than 1% of the then outstanding
registrable securities, at such time as all registrable securities held by such
Holder can be sold pursuant to Rule 144 promulgated under the Act.
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. Fourth, the
Restated Bylaws establish procedures, including advance notice procedures with
regard to the nomination of candidates or 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.
51
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, Hambrecht & Quist LLC and Wessels, Arnold &
Henderson, L.L.C. (the "Representatives"), have severally agreed, subject to
the terms and conditions of an Underwriting Agreement, to purchase from the
Company and the Selling Stockholders 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.
Number
Underwriter of Shares
----------- ---------
BancAmerica Robertson Stephens ..............
Hambrecht & Quist LLC .......................
Wessels, Arnold & Henderson, L.L.C. .........
---------
Total ................................. 3,300,000
=========
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the public
at the 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 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 the
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 495,000
additional shares of Common Stock at the same price per share as will be paid
for the 3,300,000 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
3,300,000 shares offered hereby. If purchased, such additional shares will be
sold by the Underwriters on the same terms as those on which the 3,300,000
shares are being sold.
The Underwriting Agreement contains covenants of indemnity, among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
Pursuant to the terms of a Lock-Up Agreement, the holders of approximately
8,598,753 shares of the Company's Common Stock (including the Company's
executive officers, directors, and certain stockholders), 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 BancAmerica Robertson Stephens. However, BancAmerica
Robertson Stephens 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 BancAmerica Robertson Stephens, subject to certain
exceptions,
52
<PAGE>
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 or warrants,
and the Company's issuance of options and shares under existing employee stock
option and stock purchase plans.
The Representatives have advised the Company that, pursuant to Regulation
M under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions and the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of the Common Stock on behalf of the
Underwriters for the purpose of fixing or maintaining the price of the Common
Stock. A "syndicate covering transaction" is the bid for or the purchase of the
Common Stock on behalf of the Underwriters to reduce a short position incurred
by the Underwriters in connection with the offering. A "penalty bid" is an
arrangement permitting the Representatives to reclaim the selling concession
otherwise accruing to an Underwriter or syndicate member in connection with the
offering if the Common Stock originally sold by such Underwriter or syndicate
member is purchase by the Representatives in a syndicate covering transaction
and has therefore not been effectively placed by such Underwriter or syndicate
member. The Representatives have advised the Company that such transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.
In connection with this offering, certain Underwriters and selling group
members (if any) who are qualified market makers on the Nasdaq National Market
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934, as amended, during the business day prior to
the pricing of the offering before the commencement of offers or sales of the
Common Stock. Passive market makers must comply with applicable volume and
price limitations and must be identified as such. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid of such security; if all independent bids are lowered below the passive
market maker's bid, however, such bid must then be lowered when certain
purchase limits are exceeded.
53
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon the Company by its counsel, Cooley Godward LLP, San Francisco, California.
Certain legal matters will be passed upon for the Underwriters by Brobeck,
Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of BroadVision, Inc. as
of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997 have been included in this Prospectus and
Registration Statement in reliance upon the report of KPMG 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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the Commission's Regional Offices located at Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials
can be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
Reports, proxy statements and other information filed electronically by the
Company with the Commission are available at the Commission's worldwide web
site at http://www.sec.gov. The Common Stock is listed on the Nasdaq National
Market, and reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the National Association of
Securities Dealers, Inc. 1735 K. Street, N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (together with all amendments, exhibits and schedules thereto,
the "Registration Statement") has been filed with the Commission under the
Securities Act. This Prospectus does not contain all of the information
contained in such Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement. The Registration Statement may
be inspected without charge at the Securities and Exchange Commission's
principal office at 450 Fifth Street, Washington D.C. 20549, and copies of all
or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549, upon payment of the prescribed fees.
54
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
2. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company hereby undertakes to
provide without charge to each person, including any beneficial owner, to whom
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any and all of the documents referred to above which have
been or may be incorporated by reference into this Prospectus and deemed to be
part hereof, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. Requests for such
documents should be directed to Corporate Secretary, BroadVision, Inc., 585
Broadway, Redwood City, California 94063, telephone (650) 261-5100.
55
<PAGE>
BROADVISION, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents
Report of Independent Accountants ............................... F-2
Consolidated Balance Sheets ..................................... F-3
Consolidated Statements of Operations ........................... F-4
Consolidated Statements of Stockholders' Equity ................. F-5
Consolidated Statements of Cash Flows ........................... F-6
Consolidated Notes to Consolidated Financial Statements ......... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
BroadVision, Inc.:
We have audited the accompanying consolidated balance sheets of
BroadVision, Inc. and subsidiaries, as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
BroadVision, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Mountain View, California
January 28, 1998, except as to note 11,
which is as of March 1, 1998
F-2
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
December 31,
--------------------------
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................................... $ 8,277 $ 17,608
Restricted cash ............................................................... 1,400 --
Short-term investments, restricted in 1997 .................................... 796 2,112
Accounts receivable, less allowance for doubtful accounts and returns of
$671 and $191, for 1997 and 1996, respectively................................ 9,586 5,548
Prepaid expenses and other current assets ..................................... 566 317
--------- ---------
Total current assets ....................................................... 20,625 25,585
Property and equipment, net ...................................................... 6,467 3,024
Other assets ..................................................................... 250 321
--------- ---------
Total assets ............................................................... $ 27,342 $ 28,930
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................................. $ 1,863 $ 958
Accrued expenses .............................................................. 2,168 2,526
Unearned revenue .............................................................. 1,335 2,625
Deferred maintenance .......................................................... 2,552 924
Current portion of capital lease obligations .................................. 773 294
Current portion of long-term debt ............................................. 449 --
--------- ---------
Total current liabilities .................................................. 9,140 7,327
Capital lease obligations, excluding current portion ............................. 803 495
Long-term debt, excluding current portion ........................................ 2,202 --
Other liabilities ................................................................ 76 92
--------- ---------
Total liabilities .......................................................... 12,221 7,914
--------- ---------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.0001 par value; 5,000 shares authorized; none
issued and outstanding. ....................................................... -- --
Common stock, $0.0001 par value; 50,000 shares authorized; 20,343 and 19,908
shares issued and outstanding in 1997 and 1996, respectively. ................. 2 2
Additional paid-in capital ...................................................... 40,366 39,316
Deferred compensation ........................................................... (1,605) (2,033)
Accumulated deficit ............................................................. (23,642) (16,269)
--------- ---------
Total stockholders' equity ................................................. 15,121 21,016
--------- ---------
Total liabilities and stockholders' equity ................................. $ 27,342 $ 28,930
========= =========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Years Ended December 31,
--------------------------------------------
1997 1996 1995
----------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Software licenses .................................................. $ 18,973 $ 7,464 $ --
Services ........................................................... 8,132 3,418 540
-------- ---------- ---------
Total revenues .................................................. 27,105 10,882 540
Cost of revenues:
Cost of software licenses .......................................... 1,664 330 --
Cost of services ................................................... 4,284 2,164 249
-------- ---------- ---------
Total cost of revenues .......................................... 5,948 2,494 249
-------- ---------- ---------
Gross profit ................................................. 21,157 8,388 291
Operating expenses:
Research and development ........................................... 7,392 4,985 2,575
Sales and marketing ................................................ 18,413 12,066 1,348
General and administrative ......................................... 2,990 2,034 846
-------- ---------- ---------
Total operating expenses .......................................... 28,795 19,085 4,769
-------- ---------- ---------
Operating loss ............................................... (7,638) (10,697) (4,478)
Other income, net ..................................................... 265 552 160
-------- ---------- ---------
Net loss ..................................................... $ (7,373) $ (10,145) $ (4,318)
======== ========== =========
Basic and diluted net loss per share .................................. $ (0.36) $ (0.54) $ (0.36)
======== ========== =========
Shares used in computing basic and diluted net loss per share ......... 20,208 18,815 11,976
======== ========== =========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except per share amounts)
<CAPTION>
Convertible
Preferred Stock Common Stock
-------------------- -------------------
Shares Amount Shares Amount
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balances as of December 31, 1994 .................... 5,600 $ 1 6,720 $ 1
Issuance of Series C convertible preferred stock
at $2.00 per share, net of issuance costs of $49.... 3,001 -- -- --
Issuance of common stock at $ 0.05 to
$ 0.12 per share.................................... -- -- 334 --
Common stock repurchased ............................ -- -- (746) --
Deferred compensation related to grant of stock
options ............................................ -- -- -- --
Amortization of deferred compensation ............... -- -- -- --
Net loss ............................................ -- -- -- --
----- ---- ----- ---
Balances as of December 31, 1995 .................... 8,601 1 6,308 1
Issuance of Series C convertible preferred stock
at $2.00 per share ................................. 3 -- -- --
Issuance of Series E convertible preferred stock
at $8.00 per share.................................. 634 -- -- --
Conversion of preferred Series A, B, C and E to
common stock ....................................... (9,238) (1) 9,258 1
Issuance of common stock through initial public
offering ........................................... -- -- 3,360 --
Issuance of stock under employee stock
purchase plan ...................................... -- -- -- --
Issuance of common stock from exercise
of options ......................................... -- -- 1,112 --
Common stock repurchased ............................ -- -- (130) --
Deferred compensation related to grant of stock
options ............................................ -- -- -- --
Amortization of deferred compensation ............... -- -- -- --
Net loss ............................................ -- -- -- --
------ ----- ----- ---
Balances as of December 31, 1996 .................... -- -- 19,908 2
Issuance of stock under employee stock
purchase plan ...................................... -- -- 242 --
Issuance of common stock from exercise
of options ......................................... -- -- 255 --
Common stock repurchased ............................ -- -- (62) --
Amortization of deferred compensation ............... -- -- -- --
Net loss ............................................ -- -- -- --
------ ----- ------ ---
Balances as of December 31, 1997 .................... -- $-- 20,343 $ 2
====== ===== ====== ===
<CAPTION>
Total
Additional Accumulated Deferred Stockholders'
Paid-in Capital Deficit Compensation Equity
----------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances as of December 31, 1994 .................... $ 4,330 $ (1,806) $ -- $ 2,526
Issuance of Series C convertible preferred stock
at $2.00 per share, net of issuance costs of $49.... 5,952 -- -- 5,952
Issuance of common stock at $ 0.05 to
$ 0.12 per share.................................... 31 -- -- 31
Common stock repurchased ............................ (37) -- -- (37)
Deferred compensation related to grant of stock
options ............................................ 1,136 -- (1,136) --
Amortization of deferred compensation ............... -- -- 100 100
Net loss ............................................ -- (4,318) -- (4,318)
-------- ---------- --------- ---------
Balances as of December 31, 1995 .................... 11,412 (6,124) (1,036) 4,254
Issuance of Series C convertible preferred stock
at $2.00 per share ................................. 6 -- -- 6
Issuance of Series E convertible preferred stock
at $8.00 per share.................................. 5,055 -- -- 5,055
Conversion of preferred Series A, B, C and E to
common stock ....................................... -- -- -- --
Issuance of common stock through initial public
offering ........................................... 20,755 -- -- 20,755
Issuance of stock under employee stock
purchase plan ...................................... 394 -- -- 394
Issuance of common stock from exercise
of options ......................................... 205 -- -- 205
Common stock repurchased ............................ (21) -- -- (21)
Deferred compensation related to grant of stock
options ............................................ 1,510 -- (1,510) --
Amortization of deferred compensation ............... -- -- 513 513
Net loss ............................................ -- (10,145) -- (10,145)
-------- ---------- --------- ---------
Balances as of December 31, 1996 .................... 39,316 (16,269) (2,033) 21,016
Issuance of stock under employee stock
purchase plan ...................................... 979 -- -- 979
Issuance of common stock from exercise
of options ......................................... 81 -- -- 81
Common stock repurchased ............................ (10) -- -- (10)
Amortization of deferred compensation ............... -- -- 428 428
Net loss ............................................ -- (7,373) -- (7,373)
-------- ---------- --------- ---------
Balances as of December 31, 1997 .................... $ 40,366 $ (23,642) $ (1,605) $ 15,121
======== ========== ========= =========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Years Ended December 31,
----------------------------------------------
1997 1996 1995
------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................................... $ (7,373) $ (10,145) $ (4,318)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ........................................ 1,613 753 120
Amortization of deferred compensation ................................ 428 513 100
Allowance for doubtful accounts and returns .......................... 515 196 --
Changes in operating assets and liabilities:
Accounts receivable .................................................. (4,553) (5,349) (395)
Prepaid expenses and other assets .................................... (178) (551) (53)
Accounts payable and accrued expenses ................................ 547 2,996 374
Unearned revenue and deferred maintenance ............................ 338 3,194 355
Other liabilities .................................................... (16) 15 77
--------- ---------- ---------
Net cash used in operating activities ............................... (8,679) (8,378) (3,740)
--------- ---------- ---------
Cash flows from investing activities:
Purchase of property and equipment ..................................... (4,878) (2,529) (679)
Purchase of short-term investments ..................................... (796) (2,112) (196)
Maturity of short-term investments ..................................... 2,112 196 1,489
--------- ---------- ---------
Net cash provided by (used in) investing activities ................. (3,562) (4,445) 614
--------- ---------- ---------
Cash flows from financing activities:
Proceeds from sale/leaseback ........................................... 987 -- 748
Net change in restricted cash .......................................... (1,400) -- --
Proceeds from borrowings ............................................... 2,651 -- --
Payments on capital lease .............................................. (378) (274) (65)
Proceeds from issuance of common stock ................................. 1,060 21,354 31
Proceeds from issuance of preferred stock .............................. -- 5,061 5,952
Repurchase of common stock ............................................. (10) (21) (37)
--------- ---------- ---------
Net cash provided by financing activities ............................... 2,910 26,120 6,629
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents .................... (9,331) 13,297 3,503
Cash and cash equivalents, beginning of year ............................ 17,608 4,311 808
--------- ---------- ---------
Cash and cash equivalents, end of year .................................. $ 8,277 $ 17,608 $ 4,311
========= ========== =========
Supplemental cash flow disclosures:
Cash paid for interest ................................................. $ 108 $ 86 $ 32
========= ========== =========
Noncash investing and financing activities:
Acquisition of equipment under capital lease ........................... $ 1,165 $ 380 $ --
========= ========== =========
Deferred compensation relating to stock options granted at less than
fair market value .................................................... $ -- $ 1,510 $ 1,136
========= ========== =========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-6
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
BroadVision, Inc. ("the Company") develops, markets and supports
application software solutions for one-to-one relationship management for the
extended enterprise. These solutions enable businesses to use the Internet as a
platform to conduct commerce, provide self-service, and deliver targeted
information to their customers, suppliers, distributors, employees, and other
constituents of their extended enterprises. The BroadVision One-To-One product
family allows businesses to tailor Web site content to the needs and interests
of individual users by personalizing each visit on a real-time basis.
BroadVision One-To-One applications achieve this result by interactively
capturing Web site visitor profile information, organizing the enterprise's
content, targeting that content to each visitor based on easily constructed
business rules, and executing transactions.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make certain assumptions and estimates that affect the amounts reported. Actual
results could differ from those estimates. Such estimates include established
reserves for potentially uncollectible accounts receivable and a valuation
allowance for deferred tax assets.
Revenue Recognition
The Company's revenue recognition policies are in accordance with
Statement of Position (SOP) 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.
* Professional services revenues are recognized as such services are
performed.
* Maintenance revenues, including revenues bundled with software agreements
which entitle the customers to technical support and future enhancements,
are deferred and recognized over the related contract period, generally
twelve months.
In October 1997, the American Institute of Certified Public Accountants
issued SOP 97-2, Software Revenue Recognition. The statement provides specific
industry guidance and stipulates that revenue recognized from software
arrangements is to be allocated to each element of the arrangement based on the
relative fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installation, or training. Under
SOP 97-2, the determination of fair value is based on objective evidence which
is specific to the vendor. If such evidence of fair value for each element of
the arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements of
the arrangement are delivered. Revenue allocated to software products,
specified upgrades and enhancements is generally recognized upon delivery of
the related products, upgrades and enhancements. Revenue allocated to post
contract customer support is generally recognized ratably over the term of the
support, and revenue allocated to service elements is generally recognized as
the services are performed. SOP 97-2 will be adopted by the Company effective
January 1, 1998 and is not expected to have any material effect on revenue
recognition.
F-7
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
Research and Development and Software Development Costs
Development costs incurred in research and development of new software
products are expensed as incurred until technological feasibility in the form
of a working model has been established at which time such costs are
capitalized, subject to recoverability. Products are typically made available
for general release, concurrent with achievement of technological feasibility.
Accordingly, no software development costs have been capitalized through
December 31, 1997.
Cash and Cash Equivalents
The Company considers all debt securities purchased with remaining
maturities of three months or less to be cash equivalents which consisted of
approximately $7,708,000 in money market funds as of December 31, 1997 and
$16,729,000 in commercial paper as of December 31, 1996.
Short-term Investments
As of December 31, 1997, short-term investments of $796,000 consisted of a
one year certificate of deposit maintained with the Company's commercial bank
as a guarantee for a standby letter of credit issued by the bank in favor of
the Company's landlord. As of December 31, 1996, short-term investments
consisted principally of commercial paper. All short-term investments are
classified as available-for-sale, have maturities of one year or less and are
carried at amortized cost which approximates fair value. Realized gains and
losses are computed using the specific identification method. Realized and
unrealized gains or losses have not been significant.
Concentrations of Credit Risk
Financial assets that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents,
short-term investments, and trade accounts receivable. The Company's cash, cash
equivalents and short term investments are held with a commercial bank. The
Company markets and sells its product throughout the world and performs ongoing
credit evaluations of its customers. The Company generally does not require
collateral on accounts receivable as the majority of the its customers are
large, well-established companies. The Company maintains reserves for potential
credit losses but historically has not experienced any significant losses
related to individual customers or groups of customers in any particular
industry or geographic area.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash equivalents,
short-term investments, accounts receivable, accounts payable and debt. The
Company does not have any derivative financial instruments. The Company
believes the reported carrying amounts of its financial instruments
approximated fair value, based upon the short maturity of cash equivalents,
short-term investments, accounts receivable and payable, and based on the
current rates available to the Company on similar debt issues.
Property and Equipment
Property and equipment are stated at cost and depreciated on a
straight-line basis over their estimated useful lives (two to five years).
Leasehold improvements are amortized over the corresponding lease term or their
estimated useful lives, whichever is shorter.
In accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, the Company evaluates long-lived
assets and certain identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Under SFAS No. 121, an impairment loss would be recognized when
estimated future cash flows expected to result from the
F-8
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
use of the asset and its eventual disposition is less than the carrying amount.
The Company adopted SFAS No. 121 on January 1, 1996. The adoption of SFAS No.
121 had no effect on the Company's consolidated results of operations.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are established to recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
in the years in which temporary differences are expected to be recovered or
settled. The effects on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Employee Stock Option and Purchase Plans
The Company accounts for employee stock-based awards in accordance with
the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. Effective
January 1, 1996, the Company adopted the disclosure requirements of SFAS No.
123, Accounting for Stock-Based Compensation. Under SFAS No. 123, the Company
must disclose pro forma net loss and pro forma loss per share for employee
stock option grants and employee stock purchases occurring subsequent to
December 31, 1994 as if the SFAS No. 123 fair value-based method had been
applied.
Net Loss Per Share
The Financial Accounting Standards Board (FASB) recently issued SFAS No.
128, Earnings Per Share. SFAS No. 128 requires the presentation of basic net
income per share, and for companies with complex capital structures, diluted
net income per share. In conjunction with the Company's adoption of SFAS No.
128, the Company also adopted the provisions of Staff Accounting Bulletin (SAB)
No. 98, issued in February 1998. Accordingly, shares previously included
pursuant to SAB No. 83 have been omitted from both pro forma basic and diluted
net income per share amounts. Prior periods have been restated to conform to
SFAS No. 128, however, as the Company had a net loss in the prior periods,
basic and diluted loss per share are the same as the previously presented
primary loss per share.
Excluded from the computation of diluted earnings per share for 1997 are
options to acquire 3,702,000 shares of Common Stock with a weighted-average
exercise price of $4.41 and warrants to acquire 93,750 shares of Common Stock
with a weighted-average exercise price of $6.16 because their effects would be
anti-dilutive.
Foreign Currency Translations
The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Resulting foreign exchange gains and losses are included in the
consolidated results of operations and, to date, have not been significant.
Recently Issued Accounting Standards
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income; and SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which are effective for the Company beginning with its
year ended December 31, 1998.
SFAS No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components which will be presented in association
with a company's financial statements. Comprehensive income is defined as the
change in a business enterprise's equity during a period arising from
transactions, events or circumstances relating to nonowner sources, such as
foreign currency translation adjustments and unrealized gains or losses on
available-for-sale securities. It includes all changes in equity during a
period except those resulting from investments by or distributions to owners.
F-9
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
SFAS No. 131 establishes annual and interim reporting standards relating
to the disclosure of an enterprise's business segments, products, services,
geographic areas, and major customers.
Adoption of these standards is not expected to have a material effect on
the Company's consolidated financial position or results of operations.
<TABLE>
NOTE 2--PROPERTY AND EQUIPMENT (in thousands):
<CAPTION>
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Furniture and fixtures ................................. $ 636 $ 539
Computer and software .................................. 5,458 3,210
Leasehold improvements ................................. 2,780 138
------- -------
8,874 3,887
Less accumulated depreciation and amortization ......... 2,407 863
------- -------
$ 6,467 $ 3,024
======= =======
</TABLE>
Leased equipment totaled approximately $2,256 and $1,105 as of December
31, 1997 and 1996, respectively. Accumulated depreciation for leased equipment
totaled approximately $927 and $355 as of December 31, 1997 and 1996,
respectively.
<TABLE>
NOTE 3--ACCRUED EXPENSES (in thousands):
<CAPTION>
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Employee benefits ................................. $ 420 $ 254
Commissions and bonuses ........................... 833 696
Directors and officers insurance premiums ......... 57 283
Taxes payable ..................................... 366 129
Contractor fees ................................... 162 489
Other ............................................. 330 675
------- -------
$ 2,168 $ 2,526
======= =======
</TABLE>
NOTE 4--UNEARNED REVENUE (in thousands):
December 31,
-----------------------
1997 1996
---------- ----------
Software licenses ......... $ 803 $ 2,217
Services .................. 532 408
------- -------
$ 1,335 $ 2,625
======= =======
NOTE 5--DEBT
As of December 31, 1997, the Company had $2,651,000 outstanding under a
commercial credit facility. Borrowings bear interest at the bank's prime rate
(8.5% as of December 31, 1997). Principal and interest is due in consecutive
monthly payments through maturity based on the term of the facility. Principal
payments of $449,000 annually are due from 1998 through 2000 and $326,000
annually from 2001 through 2004. The credit
F-10
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
facility includes covenants which impose certain restrictions on the payment of
dividends and other distributions and requires the Company to maintain monthly
financial covenants, including a minimum quick ratio, tangible net worth ratio
and minimum cash reserves. The minimum cash reserves covenant is replaced with
a minimum debt service coverage ratio upon six consecutive quarters of
profitability. Borrowings are collateralized by a security interest in
substantially all of the Company's owned assets. The Company was in compliance
with all of its financial covenants as of December 31, 1997.
NOTE 6--INCOME TAXES
The individual components of the Company's deferred tax assets as of
December 31, 1997 and 1996 were as follows (in thousands):
December 31,
-------------------
1997 1996
-------- --------
Depreciation and amortization ................ $ 401 $ 175
Accrued liabilities .......................... 887 403
Capitalized research and development ......... 1,024 531
Net operating losses ......................... 6,408 5,093
Tax credits .................................. 1,258 431
------ ------
Total deferred tax assets ................. 9,978 6,633
Less valuation allowance ..................... 9,978 6,633
------ ------
$ -- $ --
====== ======
The Company has provided a valuation allowance for all of its deferred tax
assets as it is presently unable to conclude that it is more likely than not
that the deferred tax assets will be realized. Some of the factors that were
taken into consideration include the Company's stage of development and related
history of operating losses, the competitive market in which it operates, the
nature of the deferred tax assets, and the lack of carryback capacity to
realize these assets. Although management's operating plans indicate the
Company will be profitable in future periods, management's evaluation of all
available evidence in assessing the realizability of the deferred tax assets
indicates that such plans are not considered sufficient to overcome the weight
of existing negative factors.
As of December 31, 1997, the Company had federal and state net operating
loss carryforwards of approximately $17,100,000 and $6,400,000, 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 $585,000 and $451,000, respectively, available
to offset future tax liabilities. The Company's net operating loss and tax
credit carryforwards expire in the years 1999 through 2013, 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 believes such an
ownership change, as defined, may have occurred and, accordingly, certain of
the Company's federal and state net operating loss carryforwards may be limited
in their annual usage.
NOTE 7-- COMMITMENTS
Leases
During 1997, the Company entered into a lease for a new headquarters
facility. The Company leases this and its other facilities under noncancelable
operating lease agreements expiring through the year 2007. Under the terms of
the agreements, the Company is required to pay property taxes, insurance and
normal maintenance costs. As of December 31, 1997, the Company is committed to
spend approximately $523,000 for tenant
F-11
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
improvements for its new headquarters facility. The Company also leases certain
equipment under capital leases expiring through the year 2000. A summary of
future minimum lease payments is as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Year Ended December 31, leases leases
- ------------------------------------------------------------- --------- ----------
<S> <C> <C>
1998 ....................................................... $ 903 $ 1,938
1999 ....................................................... 684 1,621
2000 ....................................................... 224 1,362
2001 ....................................................... -- 1,269
2002 ....................................................... -- 1,346
Thereafter ................................................. -- 7,445
------ --------
Total minimum lease payments ................................ 1,811 $ 14,981
========
Less amount representing imputed interest ................... 235
------
Present value of net minimum capital lease payments ......... 1,576
Less current portion ........................................ 773
------
Capital leases, excluding current portion ................... $ 803
======
</TABLE>
Rental expense relating to operating leases was approximately $1,161,000,
$571,000, and $264,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Total minimum sublease payments to be received in the future under
noncancelable subleases total $2,298,000 through May, 2000.
Standby Letter of Credit Commitments
As of December 31, 1997, the Company had outstanding commitments in the
form of two standby letters of credit. A letter for $1,400,000 was issued in
favor of the Company's equipment leasing financier expiring November 12, 1998;
with provisions for automatic annual renewals not to extend beyond April 10,
2000. A letter for $794,000 was issued in favor of the Company's corporate
facility landlord which expired February 14, 1998. The standby letter of credit
commitments are secured by compensating cash balances of equal value with the
issuing bank. These compensating balances are shown as restricted in the
accompanying consolidated balance sheet.
NOTE 8--STOCKHOLDERS' EQUITY
Convertible Preferred Stock
All outstanding convertible preferred stock and warrants to purchase
convertible preferred stock were converted to common stock and warrants to
purchase common stock at the time of the Company's initial public offering in
June 1996.
Warrants
As of December 31, 1997, there were warrants outstanding to acquire 33,750
and 60,000 shares of common stock at $2.00 and $8.50 per share and relate to
equipment lease financing and a facilities lease, respectively. The fair value
of these warrants was not significant.
Common Stock
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option and stock purchase plans. Accordingly, the
Company has recorded deferred compensation of $1,510,000 and
F-12
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
$1,136,000 in 1996 and 1995, respectively, for the difference between the
exercise price and the deemed fair value of the common stock underlying options
granted in 1996. This amount is being amortized to expense over the vesting
period of the individual options, generally five years.
The Company has reserved 5,000,000 shares of common stock for issuance
under its Equity Incentive 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. These options
generally expire ten years after grant date.
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. As of
December 31, 1997, 426,293 shares were subject to repurchase at a
weighted-average price of $0.18.
The Company's President and Chief Executive Officer holds an option to
purchase 500,000 shares of common stock at an exercise price of $4.00 per
share. The shares subject to option vest ratably on a monthly basis over a
60-month period commencing April 1, 1995. As of December 31, 1997, 275,000
shares were vested.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in 1997 and 1996: no dividend yield;
expected volatility of 67% in 1997 and 60% in 1996; risk-free interest rate of
5.91% in 1997 and 6.5% in 1996; and expected life of 2.8 years in 1997 and 5
years in 1996.
<TABLE>
Activity in the Company's stock option plan is as follows:
<CAPTION>
1997 1996 1995
---------------------------- ------------------------------ -------------------------
Weighted- Weighted- Weighted-
Shares Average Shares Average Shares Average
Fixed Options (000's) Exercise Price (000's) Exercise Price (000's) Exercise Price
- ------------------------------------ --------- ---------------- ----------- ---------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,393 $ 2.75 1,924 $ 0.13 1,004 $ 0.06
Granted ............................ 1,346 6.69 1,849 3.98 1,916 .14
Exercised .......................... (255) 0.31 (1,092) 0.18 (334) .09
Forfeited .......................... (577) 4.19 (288) 2.83 (662) .06
----- ------ -----
Outstanding at end of year ......... 2,907 4.50 2,393 2.75 1,924 .13
===== ====== =====
Options vested at year-end ......... 641 2.64 309 0.22 200 .06
===== ====== ===== =======
Weighted-average fair value of
options granted during the year $ 6.70 $ 2.29 .08
======== ======== =======
</TABLE>
F-13
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
<TABLE>
The following table summarizes stock options outstanding as of December 31,
1997:
<CAPTION>
Options Outstanding Options Vested
----------------------------------------------------- -------------------------------
Number Weighted-Avg. Number
Outstanding Remaining Exercisable
Range of at 12/31/97 Contractual Life Weighted-Avg. at 12/31/97 Weighted-Avg.
Exercise Prices (000's) In Years Exercise Price (000's) Exercise Price
- ----------------- ------------- ------------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.06 - $0.20 695 7.47 $ 0.16 281 $ 0.16
0.40 - 5.31 406 8.42 2.51 141 1.54
5.50 - 5.75 644 8.19 5.52 80 5.53
6.00 - 7.00 620 8.94 6.82 108 6.92
7.13 - 8.50 542 9.14 7.72 31 7.58
--- ---
$0.06 - $8.50 2,907 8.39 $ 4.50 641 $ 2.64
===== ===
</TABLE>
<TABLE>
The Company grants options outside of the Company's stock option plan. A
summary of options outside of the plan is presented below:
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- -------------------------
Weighted- Weighted- Weighted-
Shares Average Shares Average Shares Average
Performance Options (000's) Exercise Price (000's) Exercise Price (000's) Exercise Price
- ------------------------------------ --------- ---------------- --------- ---------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 711 $ 3.52 20 $ 0.20 -- --
Granted ............................ 154 5.50 727 3.46 20 .20
Exercised .......................... -- -- (20) 0.20 -- --
Forfeited .......................... (70) 0.80 (16) 0.80 -- --
--- --- --
Outstanding at end of year ......... 795 4.07 711 3.52 20 .20
=== === ==
Options vested at year-end ......... 395 3.60 197 4.35 -- --
=== ===
Weighted-average fair value of
options granted during the year $ 5.50 $ 2.03 .12
======== ======== ===
</TABLE>
The 795,000 options outstanding have exercise prices between $0.80 and
$7.00 and a weighted-average contractual life of 7.25 years. As of December 31,
1997, 12,000 shares were subject to repurchase at $0.20.
Employee Stock Purchase Plan
The Board of Directors has reserved 600,000 shares for issuance under the
Company's Employee Stock Purchase Plan ("The Purchase Plan"). 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.
Under SFAS No. 123, compensation cost is recognized for the fair value of
the employees' purchase rights, which was estimated using the Black-Scholes
model with the following assumptions in 1997 and 1996: an expected life of
seven months; expected volatility of 67% and 60%, respectively; risk-free
interest rate of 5.05% and 6.5%, respectively; and no dividend yield. The
weighted-average fair value of the purchase rights granted in 1997 and 1996 was
$2.16 and $2.61, respectively.
F-14
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements -- (Continued)
December 31, 1997, 1996 and 1995
Pro Forma Disclosure
Had compensation cost for the Company's stock option plan and stock
purchase plan been determined consistent with SFAS No. 123, the Company's
reported net loss of $7,373,000 and net loss per share of $0.36 for the year
ended December 31, 1997, would have been increased to $9,551,000 and $0.47,
respectively, on a pro forma basis. The Company's reported net loss of
$10,145,000 and net loss per share of $0.54 for the year ended December 31,
1996, would have been increased to $11,270,000 and $0.60, respectively, on a
pro forma basis. The effects of these pro forma disclosures are not
representative of the pro forma effects on future periods because they only
include options granted in 1995 and subsequent years.
NOTE 9--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 a limitation of $9,500 in 1997. Employees vest
immediately in their contributions and earnings thereon. The plan allows for,
but does not require, Company matching contributions. As of December 31, 1997,
the Company has not made any such matching contributions.
NOTE 10--GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
The Company's export sales to Europe represented 40.0% and 30.1% of total
revenues in 1997 and 1996, respectively, and export sales to Asia Pacific
represented 12.4% and 29.4% of total revenues in 1997 and 1996, respectively.
During 1995, the Company was in its development stage and had no significant
export revenues.
In 1997, approximately 11% of the Company's revenues were attributable to
one customer. In 1996 and 1995, approximately 10% and 93% of the Company's
revenues were attributable to two different customers, respectively. As of
December 31, 1997, two customers accounted for 19.4% and 11.8% of total trade
accounts receivable, respectively.
NOTE 11--SUBSEQUENT EVENTS
On March 1, 1998, the Company finalized an arrangement dated February 5,
1998 with its commercial bank to approve an increase in its existing term debt
credit facility to provide for up to $4,250,000 in total borrowings (total
outstanding as of December 31, 1997 of $2,651,000). In addition, the bank
approved a $2,250,000 accounts receivable line of credit to facilitate working
capital financing.
F-15
<PAGE>
[BROADVISION LOGO GOES HERE
FOR THE BACK COVER]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. 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 Common Stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD filing fee.
SEC Registration fee ........................................ $ 13,575
NASD filing fee ............................................. 5,102
Nasdaq National Market Additional Listing Fee ............... 17,500
Accounting fees and expenses ................................ 100,000
Legal fees and expenses ..................................... 100,000
Blue Sky fees and expenses (including counsel fees) ......... 5,000
Printing and engraving expenses ............................. 100,000
Transfer Agent and Registrar fees and expenses .............. 5,000
Miscellaneous ............................................... 3,823
--------
Total ................................................... $350,000
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
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 DGCL. The
Registrant has entered into indemnification agreements with its directors. The
indemnification agreements provide the Registrant's directors with further
indemnification to the maximum extent permitted by the DGCL. The Company also
has obtained directors and officers insurance to insure its directors and
officers against certain liabilities, including liabilities under the
securities laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------ --------------------------------------------------------------
1.1 Form of Underwriting Agreement
5.1 Opinion of Cooley Godward LLP
10.1 First Amendment to Loan and Security Agreement, dated as of
February 5, 1998 between the Company and Silicon Valley Bank.
11.1 Statement Regarding Computation of Per Share Loss
23.1 Report on Financial Statement Schedule and Consent of KPMG
Peat Marwick LLP (included on page II-4)
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
(b) Schedules
Schedule II--Valuation and Qualifying Accounts
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 197(h) under the Securities Act shall
be deemed to be a part of this Registration Statement as of the
time it was declared effective.
(2) for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Redwood City, State of California, on March 4,
1998.
BroadVision, Inc.
By: /s/ Pehong Chen
-------------------------------------
Pehong Chen
Chairman of the Board, President and
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Pehong Chen and Randall C. Bolten and
each or any one of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments and registration statements filed pursuant to Rule
462) to this Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------- --------------------------------------- --------------
<S> <C> <C>
/s/ Pehong Chen Chairman of the Board, President and March 4, 1998
- --------------------------- Chief Executive Officer (Principal
Pehong Chen Executive Officer)
/s/ Randall C. Bolten Vice President, Operations and Chief March 4, 1998
- --------------------------- Financial Officer (Principal Financial
Randall C. Bolten and Accounting Officer)
/s/ David L. Anderson Director March 4, 1998
- ---------------------------
David L. Anderson
/s/ Yogen K. Dalal Director March 4, 1998
- ---------------------------
Yogen K. Dalal
/s/ Koh Boon Hwee Director March 4, 1998
- ---------------------------
Koh Boon Hwee
/s/ Carl Pascarella Director March 4, 1998
- ---------------------------
Carl Pascarella
</TABLE>
II-3
<PAGE>
REPORT ON FINANCIAL STATEMENT SCHEDULE AND
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
BroadVision, Inc.
The audits referred to in our report dated January 28, 1998, except as to note
11, which is as of March 1, 1998, included the related financial statement
schedule as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
schedule based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Mountain View, California
March 3, 1998
II-4
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<CAPTION>
Balance at Charged to
Beginning Costs and Balance at
Description of Period Expenses Deductions(1) End of Period
- --------------------------------------- ------------ ----------- --------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year Ended December 31, 1995 ......... $ -- $ -- $-- $ --
==== ==== === ====
Year Ended December 31, 1996 ......... $ -- $196 $ 5 $191
==== ==== === ====
Year Ended December 31, 1997 ......... $191 $515 $35 $671
==== ==== === ====
<FN>
(1) Represents net charge-offs of specific receivables.
</FN>
</TABLE>
S-1
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
- ------------ ------------------------------------------------------------------------ --------------
<S> <C> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Cooley Godward LLP
10.1 First Amendment to Loan and Security Agreement, dated as of
February 5, 1998, between the Company and Silicon Valley Bank
11.1 Statement Regarding Computation of Per Share Loss
23.1 Report on Financial Statement Schedule and Consent of KPMG Peat Marwick
LLP (included on page II-4)
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
EXHIBIT 1.1
____________ Shares(1)
BROADVISION, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
___________, 1998
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST LLC
WESSELS, ARNOLD & HENDERSON, L.L.C.
As Representatives of the several Underwriters
c/o BancAmerica Robertson Stephens
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Broad Vision, Inc. a Delaware corporation (the "Company"), and certain
stockholders of the Company named in Schedule B hereto (hereafter called the
"Selling Stockholders") address 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
_________ shares of its authorized and unissued Common Stock, $0.0001 par value
per share to the several Underwriters. The Selling Stockholders, acting
severally and not jointly, propose to sell an aggregate of ________ shares of
the Company's authorized and outstanding Common Stock, $0.0001 par value per
share to the several Underwriters. The _________ shares of Common Stock, $0.0001
par value per share of the Company to be sold by the Company are hereinafter
called the "Company Shares" and the _________ shares of Common Stock, $0.0001
par value per share to be sold by the Selling Stockholders are hereinafter
called the "Selling Stockholder Shares." The Company Shares and the Selling
Stockholder Shares are hereinafter collectively referred to as the "Firm
Shares." The Company also proposes to grant to the Underwriters an option to
purchase up to ________ 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."
- --------
1 Plus an option to purchase up to _________ additional shares from the Company
to cover over-allotments.
<PAGE>
2. Representations, Warranties and Agreements of the Company.
I. The Company represents and warrants to and agrees with each
Underwriter and each Selling Stockholder that:
(a) A registration statement on Form S-3 (File No.
333-_____) 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") 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"), including all documents
incorporated by reference therein, and of any abbreviated registration statement
pursuant to Rule 462(b) of the Rules and Regulations have been delivered to you.
The Company and the transactions contemplated by this Agreement meet the
requirements for using Form S-3 under the Act.
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 BancAmerica Robertson
Stephens, 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 BancAmerica Robertson Stephens, 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 BancAmerica Robertson Stephens, 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
-2-
<PAGE>
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
BancAmerica Robertson Stephens, 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 Prospectus and the term
sheet, together, will not be materially different from the prospectus in the
Registration Statement. Any reference to the Registration Statement or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date
of the Registration Statement or the Prospectus, as the case may be, and any
reference to any amendment or supplement to the Registration Statement or the
Prospectus shall be deemed to refer to and include any documents filed after
such date under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which, upon filing, are incorporated by reference therein, as required by
paragraph (b) of Item 12 of Form S-3. As used in this Agreement, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference in the Registration Statement, the Prospectus or any amendment or
supplement thereto.
(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.
The Incorporated Documents heretofore filed, when they
were filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder; any further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder; no such document
when it was filed (or, if an amendment with respect to any such document was
filed, when such amendment was filed), contained any untrue statement of a
material fact or
-3-
<PAGE>
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and no such further amendment will
contain 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.
(c) Each of the Company and its subsidiaries 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 power and authority
(corporate and other) 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 subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction 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 subsidiaries
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
subsidiaries 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 any of its subsidiaries 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 any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries 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 any of its subsidiaries 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 those subsidiaries listed in Exhibit 21.1 to the Company's Annual
Report on Form 10-K filed with the Commission and incorporated by reference into
the Registration Statement.
(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, 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 any of its subsidiaries is a party or by which it or any of
its subsidiaries or their respective properties may be bound, (ii) a default
under the charter or bylaws of the Company or any of its subsidiaries, 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 any of its
subsidiaries 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 any of its subsidiaries or over their respective
-4-
<PAGE>
properties is required for the execution and delivery of this Agreement and the
consummation by the Company or any of its subsidiaries of the transactions
herein contemplated, except such as may be required under the Act, the Exchange
Act (if applicable), or under state or other securities or Blue Sky laws, all of
which requirements have been satisfied in all material respects.
(e) Except as set forth in the Prospectus, there is not
any pending or, to the best of the Company's knowledge, threatened action, suit,
claim or proceeding against the Company, any of its subsidiaries 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 any of its subsidiaries 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 subsidiaries 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 any of its subsidiaries of a character required to be described or
referred to in the Registration Statement or Prospectus or any Incorporated
Document or to be filed as an exhibit to the Registration Statement or any
Incorporated Document by the Act or the Rules and Regulations or by the Exchange
Act or the rules and regulations of the Commission thereunder which have not
been accurately described in all material respects in the Registration Statement
or Prospectus or any Incorporated Document or filed as exhibits to the
Registration Statement or any Incorporated Document.
(f) All outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares) 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, Prospectus and any
Incorporated Document (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Company 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 Company 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 automatically expire upon and will not apply to 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, the Exchange 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 related notes thereto, included or
incorporated by reference in the Prospectus, neither the Company nor any
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
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rights granted and exercised thereunder, set forth or incorporated by reference
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 audited the
consolidated financial statements of the Company, together with the related
schedules and notes, as of December 31, 1997 and 1996 and for each of the years
in the three years ended December 31, 1997 filed with the Commission as a part
of or incorporated by reference into the Registration Statement, which are
included or incorporated by reference in the Prospectus, are 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 subsidiaries 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 or incorporated by
reference into 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 or incorporated by reference 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 or incorporated by reference 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
subsidiaries considered as one enterprise, (ii) any transaction that is material
to the Company and its subsidiaries 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
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained or
will have 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 subsidiaries considered as one enterprise.
(i) Except as set forth in the Registration Statement and
Prospectus and any Incorporated Document, (i) each of the Company and its
subsidiaries has good and marketable title to all properties and assets
described in the Registration Statement and Prospectus and any Incorporated
Document as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, 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 subsidiaries
considered as one enterprise, (ii) the agreements to which the Company or any of
its subsidiaries is a party described in the Registration Statement and
Prospectus and any Incorporated Document are valid agreements, enforceable by
the Company and its subsidiaries (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 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
subsidiaries has valid and enforceable leases for all properties described in
the
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Registration Statement and Prospectus and any Incorporated Document 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
limitation on availability of equitable remedies. Except as set forth in the
Registration Statement and Prospectus and any Incorporated Document, the Company
owns or leases all such properties as are necessary to its operations as now
conducted or as proposed to be conducted.
(j) The Company and its subsidiaries 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 any of its subsidiaries that would have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; and all tax liabilities are adequately provided
for on the books of the Company and its subsidiaries.
(k) The Company and its subsidiaries maintain insurance
with insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective 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 subsidiaries 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 subsidiaries considered as
one enterprise.
(l) To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its 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
subsidiaries 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 subsidiaries 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 businesses as described in the Registration
Statement and Prospectus and any Incorporated Document; the expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to 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 has 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
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subsidiaries considered as one enterprise.
(n) The Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is listed on The Nasdaq National Market, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from The Nasdaq National Market, nor has the Company
received any notification that the Commission or the National Association of
Securities Dealers, Inc. ("NASD") is contemplating terminating such registration
or listing.
(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 any of its subsidiaries 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, each Selling
Stockholder and each beneficial owner of __________ or more shares of Common
Stock has agreed in writing that such person will not, for a period of 90 days
from the date that the Registration Statement 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 BancAmerica Robertson Stephens, provided that the
foregoing does not apply to any of the Firm Shares or the Option Shares. The
foregoing restriction has been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, such
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<PAGE>
person has 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. 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 stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of BancAmerica
Robertson Stephens.
(t) Except as set forth in the Registration Statement and
Prospectus and any Incorporated Document, (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 and any
Incorporated Document, (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. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(u) The Company and each of its subsidiaries 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 and any Incorporated Document.
(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.
II. Each Selling Stockholder, severally and not jointly,
represents and warrants to and agrees with each Underwriter and the Company
that:
(a) Such Selling Stockholder now has and on the Closing
Date will have valid marketable title to the Shares to be sold by such Selling
Stockholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest other than pursuant to this Agreement; and upon
delivery of such Shares hereunder and payment of the purchase price as herein
contemplated, each of the Underwriters will obtain valid marketable title to the
Shares purchased by it from such Selling Stockholder, free and clear of any
pledge, lien, security interest pertaining to such Selling Stockholder or such
Selling Stockholder's property, encumbrance, claim or equitable interest,
including any liability for estate or inheritance taxes, or any liability to or
claims of any creditor, devisee, legatee or beneficiary of such
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Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "Power of Attorney")
appointing ___________ and ___________ as attorneys-in-fact (collectively, the
"Attorneys" and individually, an "Attorney") and a Letter of Transmittal and
Custody Agreement (the "Custody Agreement") with ______________________________,
as custodian (the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such Selling
Stockholder, enforceable in accordance with its terms, 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; and each of such Selling
Stockholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(h) hereof on behalf of
such Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in Section 3
hereof, to authorize the delivery of the Selling Stockholder Shares under this
Agreement and to duly endorse (in blank or otherwise) the certificate or
certificates representing such Shares or a stock power or powers with respect
thereto, to accept payment therefor, and otherwise to act on behalf of such
Selling Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders
required for the execution and delivery by such Selling Stockholder of the Power
of Attorney and the Custody Agreement, the execution and delivery by or on
behalf of such Selling Stockholder of this Agreement and the sale and delivery
of the Selling Stockholder Shares under this Agreement (other than, at the time
of the execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities or
Blue Sky laws) have been obtained and are in full force and effect; such Selling
Stockholder, if other than a natural person, has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Selling
Stockholder has full legal right, power and authority to enter into and perform
its obligations under this Agreement and such Power of Attorney and Custody
Agreement, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up
Period, effect the
Disposition of any Securities now owned or hereafter acquired directly by such
Selling Stockholder or with respect to which such Selling Stockholder 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 partners or stockholders of such
Selling Stockholder, 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 BancAmerica Robertson Stephens. The foregoing restriction is
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the Selling
Stockholder. Such prohibited hedging or other transactions would including,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Such Selling
Stockholder also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the securities held by
such Selling Stockholder except in compliance with this restriction.
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(e) Certificates in negotiable form for all Shares to be
sold by such Selling Stockholder under this Agreement, together with a stock
power or powers duly endorsed in blank by such Selling Stockholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
(f) This Agreement has been duly authorized by each
Selling Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of or constitute a 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 to
which such Selling Stockholder is a party or by which such Selling Stockholder,
or any Selling Stockholder Shares hereunder, may be bound or, to the best of
such Selling Stockholders' knowledge, result in any 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
such Selling Stockholder or over the properties of such Selling Stockholder, or,
if such Selling Stockholder is other than a natural person, result in any
violation of any provisions of the charter, bylaws or other organizational
documents of such Selling Stockholder.
(g) Such Selling Stockholder 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.
(h) Such Selling Stockholder has not distributed and will
not distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such
Selling Stockholder relating to such Selling Stockholder and the Selling
Stockholder Shares that is contained in the representations and warranties of
such Selling Stockholder in such Selling Stockholder's Power of Attorney or set
forth in the Registration Statement or the Prospectus is, 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, was or will be,
true, correct and complete, and does not, 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) will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make such information not
misleading.
(j) Such Selling Stockholder will review the Prospectus
and will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date and will advise one of its Attorneys and BancAmerica Robertson Stephens
prior to the Closing Date if any statement to be made on behalf of such Selling
Stockholder in the certificate contemplated by Section 6(h) would be inaccurate
if made as of the Closing Date.
(k) Such Selling Stockholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company or any of the other Selling Stockholders to the Underwriters
pursuant to this Agreement; such Selling Stockholder does not have, or has
waived prior to the date hereof, any registration right or other similar right
to participate in the offering made by the Prospectus, other than such rights of
participation as have been satisfied by the participation of such Selling
Stockholder in the
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transactions to which this Agreement relates in accordance with the terms of
this Agreement; and such Selling Stockholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus and any Incorporated Document.
(l) Such Selling Stockholder is not aware (without having
conducted any investigation or inquiry) that any of the representations and
warranties of the Company set forth in Section 2.I. above is untrue or
inaccurate in any material respect.
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 and the Selling Stockholders
agree, severally and not jointly, to sell to the Underwriters, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Stockholders, respectively, at a purchase price of $_____ per share,
the respective number of Company Shares as hereinafter set forth and Selling
Stockholder Shares set forth opposite the names of the Company and the Selling
Stockholders in Schedule B hereto. The obligation of each Underwriter to the
Company and to each Selling Stockholder shall be to purchase from the Company or
such Selling Stockholder that number of Company Shares or Selling Stockholder
Shares, as the case may be, which (as nearly as practicable, as determined by
you) is in the same proportion to the number of Company Shares or Selling
Stockholder Shares, as the case may be, set forth opposite the name of the
Company or such Selling Stockholder in Schedule B hereto as the 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) is to the total number
of Firm Shares to be purchased by all the Underwriters under this Agreement.
The certificates in negotiable form for the Selling Stockholder
Shares have been placed in custody (for delivery under this Agreement) under the
Custody Agreement. Each Selling Stockholder agrees that the certificates for the
Selling Stockholder Shares of such Selling Stockholder so held in custody are
subject to the interests of the Underwriters hereunder, that the arrangements
made by such Selling Stockholder for such custody, including the Power of
Attorney is to that extent irrevocable and that the obligations of such Selling
Stockholder hereunder shall not be terminated by the act of such Selling
Stockholder or by operation of law, whether by the death or incapacity of such
Selling Stockholder or the occurrence of any other event, except as specifically
provided herein or in the Custody Agreement. If any Selling Stockholder should
die or be incapacitated, or if any other such event should occur, before the
delivery of the certificates for the Selling Stockholder Shares hereunder, the
Selling Stockholder Shares to be sold by such Selling Stockholder shall, except
as specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
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 or certified or official bank check or checks drawn in same-day funds,
at the option of the Company, payable to the order of the Company with regard to
the Shares being purchased from the Company, and to the order of the Custodian
for the respective accounts of the Selling Stockholders with regard to the
Shares being purchased from such Selling Stockholders (and the Company and such
Selling Stockholders agree not to deposit and to cause the Custodian not to
deposit any such check in the bank on which it is drawn, and not to take any
other action with the purpose or effect of receiving immediately available
funds, until the business day following the date of its delivery to the Company
or the Custodian, as the case may be, and, in the event of any breach of the
foregoing, the Company or the Selling Stockholders, as the case may be, shall
reimburse the Underwriters for the interest lost and any
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other expenses borne by them by reason of such breach), at the offices of Cooley
Godward LLP, One Maritime Plaza, 30th 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;" 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), on the
inside front cover 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 Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement or any Incorporated
Document, and you, on behalf of the respective Underwriters, represent and
warrant to the Company and the Selling Stockholders 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
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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, 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 or the Incorporated Documents, or, prior to
the end of the period of time in which a prospectus relating to the Shares is
required to be delivered under the Act, file any document which upon filing
becomes an Incorporated Document, 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, the Exchange Act and the rules and regulations of
the Commission thereunder 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
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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, and the Incorporated Documents (three of which will include all
exhibits,) all in such quantities as you may from time to time reasonably
request. Notwithstanding the foregoing, if BancAmerica Robertson Stephens, on
behalf of the several Underwriters, Brobeck, Phleger & Harrison LLP 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.
(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 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 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 any of its subsidiaries,
and (vi) any additional information of a public nature concerning the Company or
its subsidiaries, or its business which you may reasonably request. During such
five (5) year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries 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) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a
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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.
(j) During the Lock-up Period, the Company will not, without the
prior written consent of BancAmerica Robertson Stephens, effect the Disposition
of, directly or indirectly, any Securities other than (i) the sale of the
Company Shares and the Option Shares hereunder, (ii) 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"), (iii) pursuant to the exercise of options or warrants
otherwise outstanding at the date hereof, (iv) the issuance of options (or
Common Stock upon exercise thereof) to employees, consultants or directors or
otherwise for compensatory purposes outside the Plans (provided that upon
exercise of such options, the optionee agrees to be bound by a LockUp Agreement
for the days remaining in the Lock-Up Period), or (v) 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, directly or
indirectly, any Securities and are bound to the Lock-Up Agreement for the days
remaining in the Lock-Up Period.
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 the Incorporated Documents 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 the Incorporated Documents, 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 disbursements of Underwriters'
Counsel in connection with such NASD filings and Blue Sky qualifications); and
all other expenses directly incurred by the Company and the Selling Stockholders
in connection with the performance of their obligations hereunder. Any
additional expenses incurred as a result of the sale of the Shares by the
Selling Stockholders will be borne collectively by the Company and the Selling
Stockholders. The provisions of this Section 5(a)(i) are intended to relieve the
Underwriters from the payment of the expenses and costs which the Selling
Stockholders and the Company hereby agree to pay, but shall not affect any
agreement which the Selling Stockholders and the Company may make, or may have
made, for the sharing of any of such expenses and costs. Such agreements shall
not impair the obligations of the Company and the Selling Stockholders hereunder
to the several Underwriters.
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(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.
(iii) In addition to their other obligations under Section
8(b) hereof, each Selling Stockholder agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(b) hereof relating to such Selling Stockholder, it will
reimburse the Underwriters on a monthly basis for all reasonable legal or other
expenses 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 such
Selling Stockholder's obligation to reimburse the Underwriters 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 Underwriters shall
promptly return such payment to the Selling Stockholders, together with
interest, compounded daily, determined on the basis of 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.
(b) In addition to their other obligations under Section 8(c)
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(c) hereof, they will reimburse the
Company and each Selling Stockholder 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 and each
such Selling Stockholder 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 and each such Selling Stockholder 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 and each such Selling
Stockholder 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), 5(a)(iii) 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
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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), 5(a)(iii) 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), 8(b) and 8(c) hereof or the obligation to
contribute to expenses which is created by the provisions of Section 8(e)
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 and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders 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, any Selling Stockholder 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 any Incorporated
Document 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, or any later date on which Option Shares are to
be purchased, as the case may be there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries 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.
(d) 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, the
following opinion of counsel for the Company and the Selling Stockholders, dated
the Closing Date or such later date on which Option Shares are to be 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;
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(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, 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 subsidiaries 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 BroadVision Switzerland, A.G.,
BroadVision France, S.A., BroadVision German GmBH, BroadVision
U.K., Ltd. and BroadVision Nipon Japan;
(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus under the
caption "Capitalization" as of the dates stated therein, the
issued and outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares) have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have 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, or, to such counsel's knowledge, 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, 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;
and each of the Incorporated Documents (other than the financial
statements (including supporting schedules) and the financial
data derived therefrom as to which such counsel need express no
opinion) complied when filed pursuant to the Exchange Act as to
form in all material respects with the requirements of the Act
and the Rules and Regulations and the
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Exchange Act and the applicable rules and regulations of the
Commission thereunder;
(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;
(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 any Incorporated
Document or to be filed as an exhibit to the Registration
Statement or any Incorporated Document 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, 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 any of its subsidiaries, or over any of their properties or
operations, except such as may be required 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
or body in the United States having jurisdiction over the Company
or any of its subsidiaries, or over any of their 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 any of its subsidiaries of a character required to be
disclosed in the Registration Statement or the Prospectus or any
Incorporated Document by the Act or the Rules and Regulations or
by the Exchange Act or the applicable rules and
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regulations of the Commission thereunder, other than those
described therein;
(xvi) To such counsel's knowledge, neither the Company nor
any of its subsidiaries is presently (a) in material violation of
its respective charter or bylaws, or (b) in material breach of
any applicable statute, rule or regulation known to such counsel
or, to such counsel's knowledge, any order, writ or decree of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries, or over any of their
properties or operations; and
(xvii) To such counsel's knowledge, except as set forth in
the Registration Statement and Prospectus and any Incorporated
Document, 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, all holders of securities of the
Company having rights known to such counsel to registration of
such 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, waived such rights
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;
(xviii) Each Selling Stockholder which is not a natural
person has full right, power and authority to enter into and to
perform its obligations under the Power of Attorney and Custody
Agreement to be executed and delivered by it in connection with
the transactions contemplated herein; the Power of Attorney and
Custody Agreement of each Selling Stockholder that is not a
natural person has been duly authorized by such Selling
Stockholder; the Power of Attorney and Custody Agreement of each
Selling Stockholder has been duly executed and delivered by or on
behalf of such Selling Stockholder; and the Power of Attorney and
Custody Agreement of each Selling Stockholder constitutes the
valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles;
(xix) Each of the Selling Stockholders has full right,
power and authority to enter into and to perform its obligations
under this Agreement and to sell, transfer, assign and deliver
the Shares to be sold by such Selling Stockholder hereunder;
(xx) This Agreement has been duly authorized by each
Selling Stockholder that is not a natural person and has been
duly executed and delivered by or on behalf of each Selling
Stockholder; and
(xxi) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will
receive valid marketable title to the Shares purchased by it from
such Selling Stockholder, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest. In
rendering such opinion, such counsel may assume that the
Underwriters are without notice of any defect in the title of the
Shares being purchased from the Selling Stockholders.
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
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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 and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement thereto
and any Incorporated Document, when such documents became effective or were
filed with the Commission (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 and any Incorporated Document (except as
aforesaid) 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. Such counsel shall
also state that the conditions for the use of Form S-3 set forth in the General
Instructions thereto have been satisfied.
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, the Selling Stockholders or officers of the Selling Stockholders
(when the Selling Stockholder is not a natural person), 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.
(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
subsidiaries 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
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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 audit of the consolidated balance
sheet of the Company as of December 31, 1996 and 1997 and related consolidated
statements of operations, stockholders' equity, and cash flows for the
three-year period ended December 31, 1997, (iii) state that KPMG Peat Marwick
LLP has performed the procedures 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 in the presented in the Prospectus (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, and (v) 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, 1997, 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
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, any amendments or supplements thereto and the
Incorporated Documents, when such Incorporated Documents became
effective or were filed with the Commission, contained all
material information required to be included therein by the Act
and the Rules and Regulations or the Exchange Act and the
applicable rules and regulations of the Commission thereunder, as
the case may be, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations or the
Exchange Act and the applicable rules and regulations of the
Commission thereunder, as the case may be, 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
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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
subsidiaries considered as one enterprise, (b) any transaction
that is material to the Company and its subsidiaries 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
subsidiaries considered as one enterprise, incurred by the
Company or its subsidiaries, except obligations incurred in the
ordinary course of business, (d) any change in the capital stock
or outstanding indebtedness of the Company or any of its
subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of
any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of
its subsidiaries which has been sustained or will have 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 subsidiaries considered
as one enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such
Selling Stockholder herein are not true or correct in any
material respect on the Closing Date or on any later date on
which Option Shares are to be purchased, as the case may be; or
(ii) Such Selling Stockholder has not complied with
any obligation or satisfied any condition which is required to be
performed or satisfied on the part of such Selling Stockholder at
or prior to the Closing Date.
(i) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each Selling
Stockholder and each beneficial owner of ________ or more shares of Common Stock
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 BancAmerica Robertson Stephens. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would including, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Furthermore, such person will
have also agreed and consented to the entry of stop transfer instructions with
the Company's transfer
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<PAGE>
agent against the transfer of the Securities held by such person except in
compliance with this restriction.
(j) The Company and the Selling Stockholders shall have furnished
to you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholders or
officers of the Selling Stockholders (when the Selling Stockholder is not a
natural person) as to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of their respective 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 and the Selling Stockholders 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 wire transfer or certified or official
bank check or checks drawn in same-day funds, payable to the order of the
Company (and the Company agrees not to deposit any such check in the bank on
which it is drawn, and not to take any other action with the purpose or effect
of receiving immediately available funds, until the business day following the
date of its delivery to 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 LLP, 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
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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
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 and the Selling
Stockholders herein, to the accuracy of the statements of the Company, the
Selling Stockholders and officers of the Company made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholder of their
respective obligations hereunder, to the conditions set forth in Section 6
hereof, 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 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 and the Selling Stockholders 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 (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or 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, including any Incorporated
Document, 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
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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.
(b) Each Selling Stockholder, severally and not jointly, 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 (including, without limitation, in its capacity as an Underwriter or as
a "qualified independent underwriter" within the meaning of Schedule E or the
Bylaws of the NASD) under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
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, including any Incorporated Document, 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 or such Underwriter by such Selling Stockholder, directly or through
such Selling Stockholder's representatives, specifically for use in the
preparation thereof, 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 indemnity agreement provided in this Section 8(b)
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 a 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(b) 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 such Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the Company
or such Selling Stockholder may become subject under the Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities, in so far 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
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amendment or supplement thereto, including any Incorporated Document, 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(c) 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 and each such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company and each such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) 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, each Selling Stockholder and each person, if any, who controls
the Company or any Selling Stockholder 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.
(d) 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), 8(b) or 8(c) 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 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
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all liability on all claims that are the subject matter of such proceeding.
(e) 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, except as set forth
in Section 8(f) hereof, 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 and the Selling Stockholders are responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise 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(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
any Selling Stockholder 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.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Selling
Stockholder Shares sold by such Selling Stockholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by such
Selling Stockholder. The Company and such Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) 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, the Selling Stockholders 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 person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of their 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
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<PAGE>
respective commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
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, supplements to the Prospectus
or other such documents 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 nor any Selling
Stockholder 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, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (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.
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<PAGE>
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.
(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 on 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 or any Selling Stockholder 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 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 subsidiaries 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. In the event of
termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 4(j), 5 and 8 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in Sections
5 and 8 hereof.
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 BancAmerica Robertson Stephens, 555 California
Street, Suite 2600, San Francisco, California 94104, telecopier number (415)
781-0278, Attention: General
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<PAGE>
Counsel; if sent to the Company, such notice shall be mailed, delivered,
telegraphed (and confirmed by letter) or telecopied (and confirmed by letter) to
585 Broadway, Redwood City, California 94063, telecopier number (650) 261-5900
Attention: Pehong Chen, Chief Executive Officer; if sent to one or more of the
Selling Stockholders, such notice shall be sent mailed, delivered, telegraphed
(and confirmed by letter) or telecopied (and confirmed by letter) to
___________________________, as Attorney-in-Fact for the Selling Stockholders,
at 585 Broadway, Redwood City, California 94063, telecopier number (650)
261-5900.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Stockholders 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 entity, 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 entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders
under this Agreement, you shall act on behalf of each of the several
Underwriters, and the Company and the Selling Stockholders shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you jointly or by BancAmerica Robertson Stephens 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.
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If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders 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, the Selling Stockholders
and the several Underwriters.
Very truly yours,
BROADVISION, INC.
By
--------------------------------
SELLING STOCKHOLDERS
By
--------------------------------
Attorney-in-Fact for the Selling
Stockholders named in Schedule
B hereto
Accepted as of the date first above written:
BANCAMERICA ROBERTSON STEPHENS
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
By BANCAMERICA ROBERTSON STEPHENS
By
--------------------------------------
Authorized Signatory
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SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
- ----------------------------------- -------------
BancAmerica Robertson Stephens ................................
Hambrecht & Quist LLC..........................................
Wessels, Arnold & Henderson, L.L.C. ...........................
-------------
Total.....................................................
=============
<PAGE>
SCHEDULE B
Number of
Company
Shares To
Company Be Sold
- ----------------------------------- ---------
----------
Total.........................................................
==========
Number of
Stockholder
Shares
Name of Selling Stockholder To Be Sold
- ---------------------------------------------- -----------
---------
Total...........................................................
=========
Cooley Godward LLP ATTORNEYS AT LAW Palo Alto, CA
- ------------------ 650 843-5000
One Maritime Plaza Menlo Park, CA
20th Floor 650 843-5000
San Francisco, CA
94111-3580 San Diego, CA
Main 415 693-2000 619 550-6000
Fax 415 951-3699
Boulder, CO
303 546-4000
www.cooley.com Denver, CO
303 546-4000
KENNETH L. GUERNSEY
415 693-2091
[email protected]
March 4, 1998
BroadVision, Inc.
585 Broadway
Redwood City, CA 94063
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-3 (the "Registration Statement"), with the Securities and Exchange
Commission (the "Commission"), including a related prospectus to be filed with
the Commission pursuant to Rule 424(b) of Regulation C (the "Prospectus")
promulgated under the Securities Act of 1933, as amended, and the underwritten
public offering of up to 3,795,000 shares of common stock, including 3,495,000
shares to be sold by the Company (the "Company Shares"), including 495,000
shares for which the Underwriters have been granted an over-allotment option and
300,000 shares to be sold by certain selling stockholders (the "Selling
Stockholder Shares") (collectively, the "Common Stock").
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and By-laws 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, and (ii) assumed that the shares of the
Common Stock will be sold by the Underwriters at a price established by the
Pricing Committee of the Company's Board of Directors.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Selling Stockholder Shares are, and the Company Shares, when sold and
issued in accordance with the Registration Statement and related Prospectus,
will be, validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ Kenneth L. Guernsey
- -----------------------
Kenneth L. Guernsey
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (this "Amendment")
is entered into as of February 5, 1998, by and between SILICON VALLEY BANK
("Bank") and BROADVISION, INC. ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of July 2, 1997 (the "Original Agreement"), as amended from
time to time (collectively, the "Agreement"). Borrower has failed to comply with
Sections 6.8 and 6.10 of the Agreement. Borrower has asked Bank to waive Bank's
remedies regarding Borrower's default under those sections. The parties desire
to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Certain defined terms in Section 1.1 of the Agreement are
hereby added or amended as follows:
"Advance" or "Advances" means a cash advance or cash advances
under the Equipment Facility, Leasehold Facility or the Revolving Facility.
"Borrowing Base" has the meaning set forth in Section 2.1(c)
hereof.
"Committed Line" means Four Million Two Hundred Fifty Thousand
Dollars ($4,250,000).
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon thirty (30) days prior written notification
thereof to Borrower in accordance with the provisions hereof. Unless otherwise
agreed to by Bank, Eligible Accounts shall not include the following:
(1) Accounts that the account debtor has failed to
pay within ninety (90) days of invoice date;
(2) Accounts with respect to an account debtor, fifty
percent (50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(3) Accounts with respect to which the account debtor
is an officer, employee, or agent of Borrower;
(4) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, bill and
hold, or other terms by reason of which the payment by the account debtor may be
conditional;
(5) Accounts with respect to which the account debtor
is an Affiliate of Borrower;
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<PAGE>
(6) Accounts with respect to which the account debtor
does not have its principal place of business in the United States, except for
Eligible Foreign Accounts, and Accounts arising from products shipped to or
services provided to branches or offices located in the United States of any
account debtor that does not have its principal place of business in the United
States;
(7) Accounts with respect to which the account debtor
is the United States or any department, agency, or instrumentality of the United
States;
(8) Accounts with respect to which Borrower is liable
to the account debtor for goods sold or services rendered by the account debtor
to Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(9) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage, and as approved in writing by Bank;
(10) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(11) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States, that Bank approves on a case-by-case basis, and that are: (1)
covered by credit insurance in form and amount, and by an insurer satisfactory
to Bank less the amount of any deductible(s) which may be or become owing
thereon; or (2) supported by one or more letters of credit in favor of Bank as
beneficiary, in an amount and of a tenor, and issued by a financial institution,
acceptable to Bank.
"Equipment Committed Line" means One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000).
"Equipment Facility Availability Date" means July 31, 1998.
"Equipment Maturity Date" means July 31, 2001.
"Final Leasehold Improvement Budget" means a final budget
prepared by Borrower and approved by Bank for the Leasehold Improvements to be
financed under Section 2.1(b).
"Foreign Exchange Reserve" has the meaning set forth in
Section 2.1(c)(ii) herein.
"Intellectual Property Security Agreement" means the
Intellectual Property Security Agreement dated as of July 2, 1997, by and
between Borrower and Bank.
"Leasehold Committed Line" means Two Million Five Hundred
Thousand Dollars ($2,500,000).
"Leasehold Facility Availability Date" means March 31, 1998.
"Leasehold Maturity Date" means March 31, 2005.
2
<PAGE>
"Letter of Credit" or "Letters of Credit" has the meaning set
forth in Section 2.1(c)(i) herein.
"Preliminary Leasehold Improvement Budget" means a preliminary
budge prepared by Borrower and approved by Bank for the Leasehold Improvements
to be financed under Section 2.1(b).
"Revolving Advance" or "Revolving Advances" means a cash
advance or cash advances under the Revolving Facility.
"Revolving Committed Line" means Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000).
"Revolving Facility" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.1(c) hereof.
"Revolving Maturity Date" means the date immediately preceding
the first anniversary of the date of this Agreement.
2. Section 2.1 is hereby amended and replaced in its entirety as
follows:
2.1 Advances
(a) Equipment Advances. Subject to and upon the terms
and conditions of this Agreement, Bank agrees, at any time from the date hereof
through the Equipment Facility Availability Date, to make Equipment Advances to
Borrower in an aggregate principal amount of up to the Equipment Committed Line.
Prior to or on the date of each Equipment Advance, Borrower shall provide
invoices and other documents as requested by Bank, in form and content
reasonably satisfactory to Bank, demonstrating that the Equipment Advance (i)
shall be used to finance or refinance, as the case may be, Eligible Equipment,
and (ii) shall not exceed one hundred percent (100%) of the cost of such
Eligible Equipment, including any and all installation, freight or warranty
expenses or sales taxes, and (iii) that no more than twenty-five percent (25%)
of the value of any such Eligible Equipment for each Equipment Advance is
comprised of software licenses, taxes, freight, installation, or other soft
costs. Amounts borrowed pursuant to this Section 2.1(a) may not be reborrowed
once repaid.
(b) Leasehold Advances. Subject to and upon the terms
and conditions of this Agreement, Bank agrees, at any time from the date hereof
through the Leasehold Facility Availability Date, to make Leasehold Advances to
Borrower in an aggregate principal amount not to exceed the lesser of (i) the
Leasehold Committed Line or (ii) the total of the Preliminary Leasehold
Improvement Budget plus Two Hundred Fifty Thousand Dollars ($250,000), provided
such costs shall be supported by the final Leasehold Improvement Budget provided
to Bank prior to the Leasehold Facility Availability Date. Prior to or on the
date of the initial Leasehold Advances, Borrower shall provide Bank a copy of
the Preliminary Leasehold Improvement Budget. Each Leasehold Advance (i) shall
be used to finance Leasehold Improvements in accordance with the Preliminary
Leasehold Improvement Budget, and (ii) shall not exceed one hundred percent
(100%) of the cost of such Leasehold Improvements. Amounts borrowed pursuant to
this Section 2.1(b) may not be reborrowed once repaid.
(c) Revolving Facility. Subject to and upon the terms
and conditions of this Agreement, Bank agrees to make Revolving Advances to
Borrower in an aggregate amount not to exceed the lesser of the Revolving
Committed Line or the Borrowing Base, minus the sum of (i) the face amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), and (ii) the Foreign Exchange Reserve. For purposes of this Agreement,
"Borrowing Base" shall mean an amount equal to eighty percent (80%) of Eligible
Accounts. Subject to the terms and conditions of
3
<PAGE>
this Agreement, amounts borrowed pursuant to this Section 2.1(c) may be repaid
and reborrowed at any time prior to the Revolving Maturity Date.
(i) Letters of Credit.
(a) Subject to the terms and conditions of
this Agreement, Bank agrees to issue or cause to be issued letters of credit
(each a "Letter of Credit," collectively, the "Letters of Credit") for the
account of Borrower in an aggregate outstanding face amount not to exceed (i)
the lesser of the Revolving Committed Line or the Borrowing Base, minus (ii) the
then outstanding principal balance of the Revolving Advances (including drawn
but unreimbursed Letters of Credit), minus (iii) the Foreign Exchange Reserve;
provided that the aggregate face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) shall not in any case exceed the Revolving Committed Line. Each Letter
of Credit shall have an expiry date no later than the Revolving Maturity Date.
All Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's form
of standard application and letter of credit agreement.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. Borrower shall indemnify, defend, protect, and
hold Bank harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as a Revolving Advance to Borrower of the equivalent of the amount
thereof (plus cable charges) in United States currency at the then prevailing
rate of exchange in San Francisco, California, for sales of that other currency
for cable transfer to the country of which it is the currency.
(d) Upon the issuance of any letter of
credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Revolving Committed Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such letter of credit. The amount of such reserve may be
amended by Bank from time to time account for fluctuations in the exchange rate.
The availability of funds under the Revolving Committed Line shall be reduced by
the amount of such reserve for so long as such letter of credit remains
outstanding.
(ii) Foreign Exchange Contract; Foreign
Exchange Settlements.
(a) Subject to the terms of this Agreement,
Borrower may enter into foreign exchange contracts (the "Exchange Contracts")
not to exceed an aggregate amount of (i) the lesser of the Revolving Committed
Line or the Borrowing Base, minus (ii) the then outstanding principal balance of
the Revolving Advances (including drawn but unreimbursed Letters of Credit),
minus (iii) the face amount of the outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) (the "Contract Limit"), pursuant to
which Bank shall sell to or purchase from Borrower foreign currency on a spot or
future basis. Borrower shall not request any Exchange Contracts at any time it
is out of compliance with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before the Revolving
Maturity Date. The amount available under the Revolving Committed Line at any
time shall be reduced by the following amounts (the "Foreign Exchange Reserve")
on any given day (the "Determination Date"): (i) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed more than
two business days after the Determination Date, ten percent (10%) of the gross
amount of
4
<PAGE>
the Exchange Contracts; plus (ii) on all outstanding Exchange Contracts on which
delivery is to be effected or settlement allowed within two (2) business days
after the Determination Date, one hundred percent (100%) of the gross amount of
the Exchange Contracts.
(b) Bank may, in its discretion, terminate
the Exchange Contracts at any time (i) that an Event of Default occurs or (ii)
that there is no sufficient availability under the Revolving Committed Line and
Borrower does not have available funds in its bank account to satisfy the
Foreign Exchange Reserve. If Bank terminates the Exchange Contracts, and without
limitation of any applicable indemnities, Borrower agrees to reimburse Bank for
any and all fees, costs and expenses relating thereto to arising in connection
therewith.
(c) Borrower shall not permit the total
gross amount of all Exchange Contracts on which delivery is to be effected and
settlement allowed in any two (2) business day periods to be more than the
Revolving Committed Line (the "Settlement Limit"), nor shall Borrower permit the
total gross amount of all Exchange Contracts to which Borrower is a party,
outstanding at any one time, to exceed the Contract Limit. Notwithstanding the
above, however, the amount which may be settled in any two (2) business day
period may be increased above the Settlement Limit up to, but in no event to
exceed, the amount of the Contract Limit under either of the following
circumstances:
(i) if there is sufficient
availability under the Revolving Committed Line in the amount of the
Foreign Exchange Reserve as of each Determination Date, provided that
Bank in advance shall reserve the full amount of the Foreign Exchange
Foreign Reserve against the Revolving Committed Line; or
(ii) if there is insufficient
availability under the Revolving Committed Line, as to settlements
within any two (2) business day period, provided that Bank, in its sole
discretion, may: (A) verify good funds overseas prior to crediting
Borrower's deposit account with Bank (in the case of Borrower's sale of
foreign currency); or (B) debit Borrower's deposit account with Bank
prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of
foreign currency, Borrower in advance shall instruct Bank upon settlement either
to treat the ]settlement amount as an advance under the Revolving Committed
Line, or to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms
of this Agreement or any such standard form applications and agreement of Bank,
Borrower agrees to indemnify Bank and hold it harmless, from and against any and
all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorneys' fees of counsel of Bank's
choice), of every nature and description which it may sustain or incur, based
upon, arising out of, or in any way relating to any of the Exchange Contracts or
any transactions relating thereto or contemplated thereby.
(d) Procedures. Whenever Borrower desires an Advance,
Borrower shall notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, one (1) Business Day before the day on which the
Advance is requested to be made. Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B
hereto. The notice shall be signed by a Responsible Officer and, as to an
Equipment Advance, include
5
<PAGE>
a copy of the invoice for the Eligible Equipment to be financed. Bank is
authorized to make Advances under this Agreement, based upon instructions
received from a Responsible Officer, or without instructions if in Bank's
discretion such Advances are necessary to meet Obligations which have become due
and remain unpaid. Bank shall be entitled to rely on any telephonic notice given
by a person who Bank reasonably believes to be a Responsible Officer, and
Borrower shall indemnify and hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance. Bank will credit the amount of Advances
made under this Section 2.1 to Borrower's deposit account.
(e) Interest and Principal. Interest shall accrue
from the date of each Advance at the rate specified in Section 2.3(a), and shall
be payable monthly on the Payment Date of each month through the term of this
Agreement. Bank shall, at its option, charge such interest, all Bank Expenses,
and all Periodic Payments against any of Borrower's deposit accounts, against
the Revolving Committed Line, or against the Committed Line, in which case those
amounts shall thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder. All Equipment Advances that are outstanding on the
Equipment Facility Availability Date will be payable in thirty-six (36) equal
monthly installments of principal, plus accrued interest, on the Payment Date
for each month through the Equipment Maturity Date. All Leasehold Advances that
are outstanding on the Leasehold Facility Availability Date will be payable in
eighty-four (84) equal monthly installments of principal, plus accrued interest,
on the Payment Date for each month through the Leasehold Maturity Date.
(f) Maturity. The Revolving Facility shall terminate
on the Revolving Maturity Date, at which time all Obligations owing under the
Revolving Facility shall be immediately due and payable. The Equipment Facility
shall terminate on the Equipment Maturity Date, at which time all Obligations
owing under the Equipment Facility shall be immediately due and payable. The
Leasehold Facility shall terminate on the Leasehold Maturity Date, at which time
all Obligations owing under this Section 2.1 and all other amounts under this
Agreement shall be immediately due and payable.
(g) Overadvances. If, at any time or for any reason,
the amount of Obligations owed by Borrower to Bank pursuant to Section 2.1(c) of
this Agreement is greater than (i) the lesser of the Revolving Committed Line or
the Borrowing Base, minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit), minus (iii) the
Foreign Exchange Reserve, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
3. The reference in Section 2.2 to "Section 2.3(a)" is hereby replaced
with "Section 2.3(a)(i) and Section 2.3(a)(ii)".
4. Section 2.3(a) is hereby amended and replaced in its entirety as
follows:
a. Interest Rate.
(i) Equipment Advances under Equipment Facility.
Except as set forth in Section 2.3(b) and subject to the following sentence, all
outstanding Equipment Advances shall bear interest at a floating rate equal to
the Prime Rate. Except as set forth in Section 2.3(b), Borrower shall have a
one-time option as to the Equipment Advances outstanding on the Equipment
Facility Availability Date, to elect that all outstanding Equipment Advances
shall bear interest at a rate equal to three and one-tenth (3.10) percentage
points above the thirty-six (36) month, and eighty-four (84) month, Treasury
Note Yield to maturity, for the Equipment Facility, as such rate is quoted by
Bank. Such fixed rate option, once elected, shall continue for the term of the
Equipment Facility.
6
<PAGE>
(ii) Leasehold Advances under Leasehold Facility.
Except as set forth in Section 2.3(b) and subject to the following sentence, all
outstanding Leasehold Advances shall bear interest at a floating rate equal to
the Prime Rate. Except as set forth in Section 2.3(b), Borrower shall have a
one-time option as to the Leasehold Advances outstanding on the Leasehold
Facility Availability Date, to elect that all outstanding Leasehold Advances
shall bear interest at a rate equal to three and one-tenth (3.10) percentage
points above the thirty-six (36) month, and eighty-four (84) month, Treasury
Note Yield to maturity, for the Leasehold Facility, as such rate is quoted by
Bank. Such fixed rate option, once elected, shall continue for the term of the
Leasehold Facility.
(iii) Revolving Advances. Except as set forth in
Section 2.3(b), all Revolving Advances shall bear interest, on the average Daily
Balance thereof, at a rate equal to the Prime Rate.
5. The following paragraph is hereby added at the end of Section
6.3 as follows:
Within twenty (20) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit D hereto, together with
aged listings of accounts receivable and accounts payable.
Bank shall have a right from time to time to audit Borrower's
Accounts and Inventory at Borrower's reasonable expense; provided that, such
audits shall not occur more often than every six (6) months unless an Event of
Default has occurred and is continuing.
6. Bank waives Bank's remedies under the Agreement regarding
Borrowers' failure to:
a. comply with the Cash Position/Debt Service Coverage
covenant (Section 6.8 of the Original Agreement) for the months ending October
31, 1997 and November 31, 1997; and
b. comply with the Tangible Net Worth covenant (Section 6.10
of the Original Agreement) for the months ending August 31, 1997, October 31,
1997 and November 30, 1997.
Such waiver does not constitute a waiver (i) of Bank's remedies regarding
compliance with those sections for any other month, (ii) of any other failure by
Borrower to comply with the Agreement or any other Events of Default, now
existing or hereafter arising, or (iii) Bank's right to require compliance at
all times with the terms and conditions of the Agreement. Bank reserves all its
rights under the Agreement and under applicable law.
7. Section 6.7 is hereby amended and replaced in its entirety as
follows:
6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank. Borrower shall maintain
average outstanding deposit balances held at Bank of no less than Five Million
Dollars ($5,000,000) (the "Minimum Balance"). In the event that Borrower's
average outstanding deposits are less than the Minimum Balance, Borrower shall
pay to Bank an amount equal to one (1) percent per annum of the difference
between the Minimum Balance and the actual daily average outstanding deposit
balance held at Bank, which fee shall be fully earned and non-refundable on the
last day of each fiscal quarter, payable in arrears.
8. Section 6.8 is hereby amended and replaced in its entirety as
follows:
6.8 Liquidity Coverage/Debt Service Coverage. Subject to the
following sentence, Borrower shall maintain, as of the last day of each calendar
month, (a) the sum of (i) unrestricted cash and cash equivalents plus (ii) the
amount of Revolving Advances able to be borrowed but not borrowed under Section
2.1(c) divided by the outstanding balance of all Equipment Advances and
Leasehold Advances Borrower owes to Bank, of at least (a) two (2) times the
outstanding amount of
7
<PAGE>
Equipment Advances and Leasehold Advances. Notwithstanding the foregoing, from
and after the time Borrower achieves for three (3) consecutive fiscal quarters a
Debt Service Coverage of at least 1.50 to 1.00, Borrower shall not be subject to
the minimum liquidity requirement set forth above, but instead shall maintain,
as of the last day of each fiscal quarter, a Debt Service Coverage of at least
1.50 to 1.00.
9. Section 6.9 is hereby amended and replaced in its entirety as
follows:
6.9 Adjusted Quick Ratio. Borrower shall maintain, as of the
last day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities
(excluding deferred revenue) of at least 2.0 to 1.0; provided, however, for each
calendar month within each fiscal quarter, Borrower shall maintain, as of the
last day of each calendar month, a ratio of Quick Assets to Current Liabilities
(excluding deferred revenue) of at least 1.5 to 1.0.
10. Section 6.10 is hereby amended and replaced in its entirety as
follows:
6.10 Tangible Net Worth. Borrower shall maintain, on a
consolidated basis, a Tangible Net Worth plus Subordinated Debt in the following
amounts: (i) as of the last day of each fiscal quarter, at least Fourteen
Million Dollars ($14,000,000); and (ii) as of the last day of each calendar
month during the term of the Agreement, at least Ten Million Dollars
($10,000,000).
11. Exhibits B, C and the Disbursement Request and Authorization
are hereby replaced in their entirety with the attached Exhibits B, C and the
Disbursement Request and Authorization.
12. Exhibit D attached hereto is hereby added.
13. Borrower hereby reaffirms all of its obligations under the
Intellectual Property Security Agreement.
14. As a condition to the effectiveness of this Amendment,
Borrower shall pay Bank all Bank Expenses (including reasonable attorneys' fees)
incurred through the date of this Amendment, which fee and expenses become
nonrefundable and fully earned on the date hereof.
15. The obligation of Bank to make any further Advance pursuant to
the terms of the Agreement, as amended hereby, is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
a. this Amendment, duly executed by the Borrower;
b. updated Exhibits A, B and C to the Intellectual Property
Security Agreement;
c. Bank shall have received, in form and substance
satisfactory to Bank, results of an audit of Borrower's Accounts;
d. a certificate of secretary of the Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Amendment;
e. payment of Bank Expenses then due as specified in Section
14 hereof; and
f. such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
16. Unless otherwise defined, all capitalized terms in this
Amendment shall be as defined in the Agreement. Except as amended, the Agreement
remains in full force and effect.
8
<PAGE>
17. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
18. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.
BROADVISION, INC.
By: /s/ Randall Bolten
--------------------------------------
Title: CFO
-----------------------------------
SILICON VALLEY BANK
By: /s/ John D. China
--------------------------------------
Title: VICE PRESIDENT
-----------------------------------
9
<PAGE>
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-----------------------------
FAX#: (408) 496-2426 TIME:
-----------------------------
- --------------------------------------------------------------------------------
FROM: BROADVISION, INC.
--------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: RANDALL BOUTEN
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: /s/ Randall Bolten
-----------------------------------------------------------
PHONE NUMBER:650.261.5959
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
--------------------------------------- --------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (EQUIPMENT ADVANCE) $
-----------------
PRINCIPAL INCREASE (LEASEHOLD ADVANCE) $
-----------------
PRINCIPAL INCREASE (REVOLVING ADVANCE) $
-----------------
PRINCIPAL PAYMENT (ONLY) $
-----------------
INTEREST PAYMENT (ONLY) $
-----------------
PRINCIPAL AND INTEREST (PAYMENT) $
-----------------
OTHER INSTRUCTIONS:
-------------------------------------------------------------
- --------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- --------------------------------------- -------------------------
Authorized Requester
Phone #
- --------------------------------------- -------------------------
Received By (Bank)
Phone #
- --------------------------------------------------------------------------------
10
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: BROADVISION, INC.
The undersigned authorized officer of BroadVision, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement, as amended, between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending ______ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
<TABLE>
<CAPTION>
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Quarterly 10-Q Within 5 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis
(Inter-Quarter Only):
Liquidity(1) (2) $________ Yes No
Adjusted Quick Ratio 1.5:1.0 $________
Minimum Tangible Net Worth $10,000,000 $________
Maintain on a Quarterly Basis:
Adjusted Quick Ratio(3) 2.0:1.0(4) _____:1.0 Yes No
Minimum Tangible Net Worth(5) $14,000,000(6) $________ Yes No
Debt Service Coverage 1.5:1.0 _____:1.0 Yes No
<FN>
(1) see Section 6.8 for definition; converts to Debt Service Coverage on
profitability for 3 consecutive quarters
(2) two (2) times the outstanding Equipment Advances and Leasehold Advances
(3) Current Liabilities to exclude deferred revenue
(4) 1.5 to 1.0 for each calendar month within each fiscal quarter
(5) see Section 6.10 for definition
(6) $10,000,000 for each calendar month
</FN>
</TABLE>
Comments Regarding Exceptions: See Attached. -----------------------------
BANK USE ONLY
Sincerely, Received by:
-----------------
- ---------------------------------- AUTHORIZED SIGNER
SIGNATURE Date:
------------------------
- ---------------------------------- Verified:
--------------------
TITLE AUTHORIZED SIGNER
- ---------------------------------- -----------------------------
DATE
C-1
<PAGE>
EXHIBIT D
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower: BroadVision, Inc. Lender: Silicon Valley Bank
Revolving Commitment Amount:$2,250,000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of
-------
$
-----------------
2. Additions (please explain on reverse) $
------------------------
3. TOTAL ACCOUNTS RECEIVABLE $
------------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
-------------------
5. Balance of 50% over 90 day accounts $
-------------------
6. Concentration Limits $
-------------------
7. Foreign Accounts $
-------------------
8. Governmental Accounts $
-------------------
9. Contra Accounts $
-------------------
10. Promotion or Demo Accounts $
-------------------
11. Intercompany/Employee Accounts $
-------------------
12. Other (please explain on reverse) $
-------------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
------------------------
14. Eligible Accounts (#3 minus #13) $
------------------------
15. LOAN VALUE OF ACCOUNTS (80% of #14) $
------------------------
BALANCES
16. Maximum Loan Amount $
------------------------
17. Total Funds Available [Lesser of #16 or #15] $
------------------------
18. Present balance owing on Line of Credit $
------------------------
19. Outstanding under Sublimits ( ) $
------------------------
20. Outstanding under Sublimits (Letters of Credit) $
------------------------
21. Outstanding under Sublimits (Foreign Exchange) $
------------------------
22. RESERVE POSITION (#17 minus #18, #19, #20, and #21) $
------------------------
The undersigned represents and warrants that the foregoing is true, complete and correct, and that the
information reflected in this Borrowing Base Certificate complies with the representations and warranties set
forth in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
</TABLE>
COMMENTS:
BROADVISION, INC. ---------------------------
BANK USE ONLY
By: /s/ Randall Bolten Rec'd By:
------------------------- ----------------
Auth. Signer
Authorized Signer Date:
---------------------
Verified:
-----------------
Auth. Signer
Date:
---------------------
---------------------------
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: BroadVision, Inc. Bank: Silicon Valley Bank
- --------------------------------------------------------------------------------
LOAN TYPE. This is a variable rate, convertible to a fixed rate, equipment and
leasehold line of credit of an aggregate principal amount up to $4,250,000 and a
variable rate, revolving line of credit of an aggregate principal amount up to
$2,250,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: equipment and leasehold
improvements financing.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Advance Equipment/Leasehold
----------------- -------------------
Amount paid to Borrower directly:
Undisbursed Funds
Principal
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash: $
----
$TBD UCC Search Fees
$TBD UCC Filing Fees
$TBD Patent Filing Fees
$TBD Trademark Filing Fees
$TBD Copyright Filing Fees
$TBD Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $
----
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ______ the amount of any loan payment. If the funds
in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF JULY 2, 1997.
BORROWER:
- ------------------------------
/s/ Randall Bolten
- ------------------------------
Authorized Officer
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
- --------------------------------------------------------------------------------
Borrower: BroadVision, Inc.
- --------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of BroadVision,
Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
-----------------------------------------------------------------------
- -------------------- ----------------------- ----------------------
- -------------------- ----------------------- ----------------------
- -------------------- ----------------------- ----------------------
- -------------------- ----------------------- ----------------------
- -------------------- ----------------------- ----------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of July 2, 1997, as amended,
including, without limitation, by the First Amendment to Loan and Security
Agreement dated as of February 5, 1998 (the "Loan Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
<PAGE>
Negotiate Items. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
Further Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on July 2, 1997, and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X
---------------------------------
- --------------------------------------------------------------------------------
Attachment 1 - Certificate of Incorporation
Attachment 2 - Bylaws
Exhibit 11.1
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE LOSS
(In thousands, except per share data)
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------------ ------------- ------------
<S> <C> <C> <C>
Statement of operations data:
Net Loss .............................. $ (7,373) $ (10,145) $ (4,318)
======== ========= ========
Weighted average number of common shares
used in computations .................. 20,208 18,815 11,976
Net loss per share ..................... $ (0.36) $ (0.54) $ (0.36)
======== ========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE YEAR
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM S-3 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,677
<SECURITIES> 796
<RECEIVABLES> 10,257
<ALLOWANCES> (671)
<INVENTORY> 0
<CURRENT-ASSETS> 20,625
<PP&E> 8,874
<DEPRECIATION> (2,407)
<TOTAL-ASSETS> 27,342
<CURRENT-LIABILITIES> 9,070
<BONDS> 0
0
0
<COMMON> 40,368
<OTHER-SE> (25,247)
<TOTAL-LIABILITY-AND-EQUITY> 27,342
<SALES> 18,973
<TOTAL-REVENUES> 27,105
<CGS> 1,664
<TOTAL-COSTS> 5,948
<OTHER-EXPENSES> 28,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 351
<INCOME-PRETAX> (7,373)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,373)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,373)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
