<PAGE>


As filed with the Securities and Exchange Commission on February 26, 2002


                                           Registration Statement No. 333-45950

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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                              ------------------

                             AMENDMENT NO. 5

                                      To
                                   Form S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933

                              ------------------

                            Plumtree Software, Inc.
            (Exact name of Registrant as specified in its charter)

<TABLE>
 <C>                                <S>                              <C>
            California
    (prior to reincorporation)
             Delaware                              7372                         94-3249110
      (after reincorporation)          (Primary Standard Industrial          (I.R.S. Employer
  (State or Other Jurisdiction of       Classification Code Number)        Identification Number)
  Incorporation or Organization)
</TABLE>
                              ------------------

                              500 Sansome Street
                            San Francisco, CA 94111
                                (415) 263-8900
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)

                              ------------------

                                  John Kunze
                     President and Chief Executive Officer
                            Plumtree Software, Inc.
                              500 Sansome Street
                            San Francisco, CA 94111
                                (415) 263-8900
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent for Service)

                              ------------------

                                  Copies to:
<TABLE>
<S>                                <C>
      Kurt J. Berney, Esq.                       Stanton D. Wong, Esq.
       Caine T. Moss, Esq.                        Paul C. McCoy, Esq.
      Daniel W. Cohen, Esq.                     Jennifer M. Lurie, Esq.
      Mark E. Farrell, Esq.                      Pillsbury Winthrop LLP
Wilson Sonsini Goodrich & Rosati,                    P.O. Box 7880
              P.C.                        San Francisco, California 94120-7880
       650 Page Mill Road                            (415) 983-1000
   Palo Alto, California 94304
         (650) 493-9300
</TABLE>

                              ------------------

   Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

   If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

   If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

   If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

   If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

   If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

                              ------------------

   The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file an amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this 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>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be     +
+changed. These securities may not be sold until the registration statement    +
+filed with the Securities and ExchangeCommission is effective. This           +
+preliminary prospectus is not an offer to sell nor does it seek an offer to   +
+buy these securities in any jurisdiction where the offer or sale is not       +
+permitted.                                                                    +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

              Subject to Completion. Dated February 26, 2002.


                                5,000,000 Shares

    [LOGO]                  Plumtree Software, Inc.

                                  Common Stock

                                  ----------

  This is an initial public offering of shares of common stock of Plumtree
Software, Inc. All of the 5,000,000 shares of common stock are being sold by
Plumtree.

  Prior to this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $13.00 and $15.00. Plumtree has applied for quotation of its common
stock on the Nasdaq National Market under the symbol "PLUM."

  See "Risk Factors" beginning on page 7 to read about certain factors you
should consider before buying shares of the common stock.

                                  ----------

  Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

                                  ----------

<TABLE>
<CAPTION>
                                                     Per Share        Total
                                                     ---------        -----
<S>                                                <C>            <C>
Initial public offering price.....................    $            $
Underwriting discount.............................    $            $
Proceeds, before expenses, to Plumtree............    $            $
</TABLE>

  To the extent that the underwriters sell more than 5,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 750,000
shares from Plumtree at the initial public offering price less the underwriting
discount.

                                  ----------

  The underwriters expect to deliver the shares against payment in New York,
New York on      , 2002.

Goldman, Sachs & Co.

                                    JPMorgan

                                                             RBC Capital Markets

                                  ----------

                         Prospectus dated      , 2002.
<PAGE>

   [Near the center of the inside cover page is a view of version 4.5 of the
Plumtree Corporate Portal computer screen snapshot. At the bottom of the inside
cover page is the text "The Plumtree Corporate Portal integrates Gadget Web
Services to give users personalized destination for information and services."
Near the center of the inside back cover page is a graphic demonstrating how
the Plumtree Internet Architecture integrates applications, content and
services from different applications and systems. At the top of the page is a
large, blue rectangle labeled "Main Portal Server." Below this label, within
the large rectangle, is the sublabel "Parallel Engine" which is enclosed by a
dotted rectangle. Below the large rectangle are three smaller, light blue boxes
connected to the rectangle by dotted lines; these three boxes are labeled,
respectively, "Gadget Web Services," "Search Web Services" and "Authentication
Web Services." To the left of the dotted lines connecting each of the three
boxes to the large rectangle are the acronyms "HTTP/SOAP." At the left of the
graphic is an orange cylinder labeled "Web Services Directory," above which is
a symbolic illustration of a person labeled "Administrator," and below which is
a symbolic illustration of a person labeled "Developer;" each of these symbolic
illustrations of persons has dotted lines connected to the cylinder. To the
right of the cylinder is a dotted-line arrow pointing to the box labeled
"Gadget Web Services." Below the box labeled "Gadget Web Services" is a pair of
orange cylinders labeled "Application;" below the box labeled "Search Web
Services" is a pair of orange cylinders labeled "Index;" and below the box
titled "Authentication Web Services" is a pair of orange cylinders labeled
"User Directory." Below the pair of orange cylinders labeled "Index" is a box
titled "Crawlers" connected thereto by a line, and below the pair of orange
cylinders labeled "User Directory" is a box titled "Authentication" connected
thereto by a line. Below the "Crawlers" and "Authentication" boxes is a large,
blue rectangle labeled "Job Server." Below this label, within the large
rectangle, is the sublabel "Parallel Engine" which is enclosed by a dotted
rectangle. The large rectangle labeled "Job Server" is connected by dotted
lines to the "Crawlers" and "Authentication" boxes.]
<PAGE>

                               PROSPECTUS SUMMARY

   You should read the following summary together with the more detailed
information regarding our company and the securities being sold in this
offering, together with the consolidated financial statements and related notes
appearing elsewhere in this prospectus.

                            Plumtree Software, Inc.

   We develop, market and sell corporate portal software and related services
for enterprises. The Plumtree Corporate Portal allows an enterprise's
employees, customers and partners to interact with different types of
information and applications in one Web site and empowers users to create new
information and services on the Web. Our software also supports a wide range of
online business processes, so users can complete tasks more efficiently. For
example, using our portal, a company's employees can use their e-mail, read
competitive news or update a sales database, accessing multiple systems in one
experience. Supervisors can also use our portal to assign projects and approve
expenses. Similarly, a company's customers can use our portal to search for
support articles, participate in an online discussion or access billing
information. As a result, a company can consolidate its investments in Web-
enabling critical systems, increase its return from those systems by broadening
their audiences, and empower its employees, customers and partners to access
these systems on their own, increasing productivity and improving service.

   We believe that the range of resources that our software can integrate and
our proprietary Internet technology for performing this integration for
hundreds of thousands of users, differentiate our solution and create
significant value for our customers. We also provide professional services and
training, maintenance and support services to our customers. Since 1997, we
have licensed our portal to more than 300 customers from a broad range of
industries and government, including AMR (American Airlines), Boeing, Bristol-
Myers Squibb, Cadbury Schweppes plc, Duke Energy, Eli Lilly, Ford Motor
Company, Ketchum, Merrill Lynch, National Institutes of Health, Pfizer,
Pharmacia, Procter & Gamble, United Technologies Corporation, United States Air
Force and United States Naval Air Systems Command.

   Over the past several years, the Internet has transformed business by
introducing broader audiences to computing and opening enterprises to new
interactions with employees, customers and partners. The Internet has also
transformed software by allowing previously incompatible electronic resources
from formerly isolated systems to be integrated by private and public networks.
As a result, the volume of information and the number of software applications
available through the Internet has increased dramatically, prompting many
organizations to invest in portal software that can combine an organization's
most important information and applications into a single, personalized Web
experience. However, there have been few solutions for integrating in one Web
experience a wide range of resources from other systems. Attempts to develop
in-house solutions often are costly, require significant resources and time,
and provide limited functionality. Established software vendors are Web-
enabling their own software applications, but often face architectural
limitations when attempting to integrate data and services from other software
applications. These vendors are unlikely to support access to data or services
provided by an application from a competing vendor. For these reasons we
believe there is a significant market opportunity for an independent supplier
of commercial portal software.

   Our solution consists of the Plumtree Corporate Portal and Plumtree Gadget
Web Services. The Plumtree Corporate Portal's document directory integrates
content from a wide range of repositories such as file systems, Web sites and
document databases. Gadget Web Services integrate into the

                                       3
<PAGE>

portal interactive components from a wide range of enterprise applications from
vendors such as Siebel, SAP and IBM. The portal combines these resources in
personalized pages and in group pages known as communities. Plumtree also plans
to release two new products in the first quarter of 2002: the Plumtree
Collaboration Server, which is designed to allow portal users to collaborate on
projects within the portal, and the Plumtree Studio Server, which is designed
to allow portal administrators to build new Gadget Web Services for the portal
without coding. Our solution is based on infrastructure for integrating
information and applications on an enterprise scale using Internet protocols.

   Our objective is to lead the corporate portal market with the most
innovative technology and the most satisfied customers. Key elements of our
strategy include:

  . Establish the Plumtree Corporate Portal as an enterprise platform;

  . Expand alliances with technology vendors and systems integrators; and

  . Increase our market share among industry-leading customers.

   For the year ended December 31, 2001, we had total revenue of $80.2 million
and incurred net losses of $7.8 million. As of December 31, 2001, we had an
accumulated deficit of $41.9 million. Our most recent quarter ending December
31, 2001, we had total revenue of $22.4 million and had net income of $295,000,
excluding amortization of stock-based compensation and acquired technology.

                             Corporate Information

   We will be incorporated in Delaware upon the execution of this offering. Our
principal executive offices are located at 500 Sansome Street, San Francisco,
California 94111, and our telephone number at this location is (415) 263-8900.
Our Web site is www.plumtree.com. The information on our Web site does not
constitute part of this prospectus.

                                       4
<PAGE>

                                  The Offering

<TABLE>
 <C>                                          <S>
 Common stock offered.......................  5,000,000 shares

 Common stock to be outstanding after the
  offering..................................  29,213,954 shares

 Use of proceeds............................  For working capital and other
                                              general corporate purposes. In
                                              addition, we may use a portion of
                                              the net proceeds to acquire
                                              complementary products,
                                              technologies or businesses.

 Proposed Nasdaq National Market symbol.....  PLUM
</TABLE>

   The number of shares of common stock to be outstanding after this offering
is based on the number of securities outstanding as of December 31, 2001 and
excludes:


  . 8,299,748 shares issuable upon exercise of options outstanding at a
    weighted average exercise price of $4.09 per share;

  . 8,911,300 additional shares available for future issuance under our 2002
    and 1997 stock option plans;

  . 2,000,000 shares available for future issuance under our 2002 employee
    stock purchase plan;

  . 400,000 shares available for future issuance under our 2002 director
    option plan; and

  . 264,448 shares issuable upon exercise of warrants outstanding at a
    weighted average exercise price of $2.23 per share.

                                ----------------

   Unless otherwise indicated, information in this prospectus assumes:

  . our reincorporation into the State of Delaware;

  . the conversion of all outstanding shares of preferred stock into shares
    of common stock upon completion of this offering; and

  . no exercise of the underwriters' over-allotment option.

                                       5
<PAGE>

                      Summary Consolidated Financial Data
                     (in thousands, except per share data)


<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                          -----------------------------------
                                           1998     1999      2000     2001
                                          -------  -------  --------  -------
<S>                                       <C>      <C>      <C>       <C>
Consolidated Statements of Operations
 Data:
Revenue.................................. $   181  $ 3,354  $ 34,143  $80,174
Gross margin.............................     162    2,107    20,758   62,350
Loss from operations.....................  (3,810)  (6,879)  (22,046)  (7,132)
Net loss.................................  (3,782)  (7,030)  (21,683)  (7,805)
Net loss per common share, basic and
 diluted................................. $ (1.08) $ (1.78) $  (3.97) $ (1.21)
Pro forma net loss per common share,
 basic and diluted (unaudited)...........                             $ (0.34)
Weighted average common shares
 outstanding, basic and diluted..........   3,509    3,944     5,461    6,458
Pro forma weighted average shares
 outstanding, basic and diluted
 (unaudited).............................                              23,038
</TABLE>


<TABLE>
<CAPTION>
                                                       December 31, 2001
                                                 -----------------------------
                                                                    Pro Forma
                                                 Actual  Pro Forma As Adjusted
                                                 ------- --------- -----------
                                                              (unaudited)
<S>                                              <C>     <C>       <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents....................... $24,040  $24,040   $ 88,390
Working capital.................................   3,769    3,769     68,119
Total assets....................................  51,260   51,260    115,610
Long-term capital lease obligations, net of
 current portion................................     103      103        103
Total stockholders' equity .....................  11,443   11,443     75,793
</TABLE>

                                ----------------

   The balance sheet data is shown on a pro forma basis to give effect to:

  . the conversion of all outstanding shares of preferred stock into shares
    of common stock upon completion of this offering.

   The balance sheet data is shown on a pro forma as adjusted basis to give
effect to:

  . the sale of the 5,000,000 shares of common stock that we are offering
    under this prospectus at an assumed initial public offering price of
    $14.00 per share and after deducting the estimated underwriting discount
    and estimated offering expenses.


                                       6
<PAGE>

                                  RISK FACTORS

   You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in shares of our
common stock. If any of the following risks actually occur, our business could
be harmed, the trading price of our common stock could decline, and you may
lose all or part of your investment.

                         Risks Relating to Our Business

We have a short operating history, which limits your ability to evaluate our
business and operating results and may increase the risk of your investment.

   Our short operating history makes the evaluation of our business operations
and our prospects difficult. We were founded in 1996 and began offering version
1.0 of our corporate portal product in March 1998. Version 4.5 of our portal
was released in September 2001. We cannot predict whether this version of our
portal will be successful. We have derived all of our revenue from licensing
our Plumtree Corporate Portal and related products and services. Before buying
our common stock, you should consider the risks and difficulties frequently
encountered by early stage companies such as ours in new and rapidly evolving
markets, particularly those companies whose businesses depend on the Internet.
These risks and difficulties include:

  . potential fluctuations in operating results and uncertain growth rates;

  . limited market acceptance of our products;

  . concentration of our revenue in a single product;

  . our need to expand our direct sales forces and indirect sales channels,
    particularly for international markets;

  . our need to manage rapidly expanding operations; and

  . our need to attract, train and retain qualified personnel.

We have a history of losses, and we may never achieve or sustain profitability,
which would have a harmful effect on our business and the value of our common
stock.

   We have incurred substantial net losses in each year since our inception in
July 1996. For the years ended December 31, 2000 and 2001, we incurred net
losses of approximately $21.7 million and $7.8 million, respectively. As of
December 31, 2001, we had an accumulated deficit of approximately
$41.9 million.

   Given the level of our planned operating and capital expenditures, we may
incur losses and negative cash flows for the foreseeable future. If our revenue
does not continue to increase or if our expenses increase at a greater pace
than our revenue, we will never become profitable on an annual basis. Our
ability to increase revenue and achieve and sustain profitability also will be
affected by other risks and uncertainties described in this section and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Our failure to become profitable on an annual basis or to remain
profitable would have a harmful effect on our business and the value of our
common stock.

Because our quarterly operating results are volatile and difficult to predict,
our operating results in one or more future periods are likely to fluctuate
significantly, and if we fail to meet the expectations of securities analysts
or investors, our stock price could decline significantly.

   As a result of our limited operating history and the emerging nature of the
market in which we compete, our quarterly operating results have varied
significantly in the past and are likely to vary significantly in the future.
Our success depends upon our ability to continue to increase sales of our

                                       7
<PAGE>

products and services to our new and existing customers. Our license revenue is
comprised substantially of one-time license fees. As a result, we will be
required to regularly and increasingly sign additional customers with
substantial license fees on a timely basis to realize comparable or increased
license revenue.

   Our services and maintenance revenue historically has been comprised almost
entirely of installation, modification and consulting fees and support and
maintenance fees. Our services revenue has lower gross margin than our license
revenue. If the percentage of our services revenue increases compared to the
percentage of license revenue, our profitability would be impaired. Our
maintenance contracts are generally renewable for 12-month periods. If our
customers elect not to renew their maintenance contracts, our revenue could
decline.

   We expect to continue to experience significant fluctuations in our results
of operations due to a variety of factors, some of which are outside of our
control, including:

  . introduction of products and services and enhancements by us and our
    competitors;

  . competitive factors that affect our pricing;

  . the timing and magnitude of our capital expenditures, including costs
    relating to the expansion of our operations within the United States and
    internationally; and

  . the size and timing of customer orders and deployments, particularly
    large orders and deployments, some of which may represent more than 10%
    of total revenue during a particular quarter.

   As a result of these factors and other factors described in this prospectus,
we believe that quarter-to-quarter comparisons of our revenue and operating
results are not necessarily meaningful, and that these comparisons may not be
accurate indicators of future performance. Because our staffing and operating
expenses are based on anticipated revenue levels, and because a high percentage
of our costs are fixed, small variations in the timing of the recognition of
specific revenue could cause significant variations in operating results from
quarter to quarter. If we are unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall, any significant revenue
shortfall would likely have an immediate negative effect on our operating
results. If our operating results in one or more future quarters fail to meet
the expectations of securities analysts or investors, we would expect to
experience an immediate and significant decline in the trading price of our
stock.

Because our quarterly results often depend on a small number of large orders,
if we were unable to complete one or more of these orders during any future
period, our quarterly operating results and the trading price of our stock
could be harmed.

   We derive a significant portion of our software license revenue in each
quarter from a small number of relatively large orders. For example, in the
quarter ended December 31, 2001, our top 10 customers accounted for
approximately 60% of our license revenue. Similarly, in each quarter over the
last two years, generally a different customer has represented at least 10% of
our total quarterly revenue. Our operating results and stock price could be
harmed if we were unable to complete one or more substantial license sales
during any future quarterly period.

                                       8
<PAGE>

Our business currently depends on revenue related to our flagship product, the
Plumtree Corporate Portal, and if the market does not increasingly accept this
product and related products and services, our revenue may decline.

   We generate our revenue from licenses of the Plumtree Corporate Portal and
related products and services, including Plumtree Gadget Web Services, the
building blocks from which users assemble a personalized Web page. We expect
that our portal product, and future upgraded versions of this product, will
continue to account for a large portion of our revenue in the foreseeable
future. Our future financial performance will depend on increasing acceptance
of our current product and on the successful development, introduction and
customer acceptance of new and enhanced versions of our product. For example,
our future success depends in part on the widespread market acceptance of
version 4.51 of our portal product, planned for commercial release in the first
half of 2002. If future versions of our products and services, including
version 4.51 of the Plumtree Corporate Portal, do not gain market acceptance
when released commercially, or if we fail to deliver the product enhancements
that customers want, demand for our products and services, and our revenue, may
decline.

Our efforts to establish and maintain the Plumtree Corporate Portal as an
enterprise-wide platform may fail and, as a result, our revenue may not
increase and our ability to compete successfully may be impaired.

   We have expended, and plan to continue to expend, significant resources to
establish our portal as an enterprise-wide platform for integrating an
organization's diverse systems and applications. To succeed, we must develop
and market both enhancements to our Plumtree Corporate Portal and new products
and services that expand its functionality. The Plumtree Collaboration Server
and the Plumtree Studio Server, each planned for commercial release in the
first quarter of 2002, are our most significant new product developments since
the introduction of the Plumtree Corporate Portal. These and other new products
may not achieve widespread market acceptance.

   Even if we are successful in establishing our portal as an enterprise-wide
platform, we face, among others, the following risks:

  .  We will likely face new and in many cases larger competitors, and some
     of our current system integrators and technology partners with whom we
     work closely may come to view our new products and services as
     competitive.

  .  In order to remain competitive, we must increase the number of systems
     and applications that can be integrated into our portal platform as Web
     services, which will increasingly strain our development and support
     infrastructure and may require us to add significant additional
     personnel.

Our sales and implementation cycles are long, unpredictable and subject to
seasonal fluctuations, making it difficult to accurately forecast our revenue
and causing it to fluctuate, which could harm our operating results.

   As a result of our limited operating history and the emerging nature of the
market in which we compete, the typical sales cycle of our portal product is
long and unpredictable. A successful sales cycle may last six months or longer,
and typically includes presentations to both business and technical decision
makers, often requiring us to expend substantial resources educating
prospective customers about the benefits of our software to their business. The
implementation of our product can be time-consuming and often involves a
significant commitment of resources by prospective customers. Our sales cycle
is also affected by a number of other factors, over some of which we have
little or no control, including the business conditions of each prospective
customer, seasonal fluctuations as a result of customers' fiscal year budgeting
and purchasing cycles and the selection and performance of our technology and
of our technology partners, systems integrators and resellers, any of which
could harm our operating results.

                                       9
<PAGE>

We depend on technology licensed from third-party software developers and our
ability to develop and sell our products and services could be delayed or
impaired if we fail to maintain these license arrangements.

   We incorporate into our products third-party software that enables their
functionality. This third-party software may not continue to be available on
commercially reasonable terms or with acceptable levels of support, or at all.
Some of these third-party software developers offer products that compete with
the Plumtree Corporate Portal and our other products. Our loss of or inability
to maintain these software licenses could delay or impair the sale of our
products and services until equivalent software, if available, is identified,
licensed or developed, and integrated, which could adversely affect our
business and impair our future growth.

We depend on our direct sales force to sell our products, and if we fail to
hire and train new sales personnel, our future growth will be impaired.

   We sell our products primarily through our direct sales force and we expect
to continue to do so in the future. Our ability to achieve revenue growth in
the future will depend on our ability to recruit, train and retain qualified
direct sales personnel. We have in the past and may in the future experience
difficulty in recruiting qualified sales personnel. Our inability to rapidly
and effectively expand our direct sales force could impair our growth and cause
our stock price to fall.

If we are unable to establish and maintain relationships with systems
integrators and resellers, our ability to market, sell and deploy our products
and services will harmed.

   We have relationships with a large number of systems integrators and
resellers, such as Accenture, Cap Gemini Ernst & Young and Computer Sciences
Corporation. We rely significantly on these parties to market and sell our
products and to provide rapid and comprehensive deployment of our products.
These relationships are a key factor in our overall business strategy and
involve a number of risks, including:

  . Systems integrators and resellers may not view their relationships with
    us as valuable or significant to their own businesses. The related
    arrangements typically may be terminated by either party with limited
    notice and in some cases are not covered by a formal agreement.

  . Systems integrators may attempt to market their own products and services
    rather than ours.

  . Our competitors may have stronger relationships with these parties and,
    as a result, these system integrators and resellers may recommend a
    competitor's products and services over ours.

  . Under our co-deployment model, we rely on our system integrators' and
    resellers' employees to perform standard implementations. If we fail to
    work together effectively, or if these parties perform poorly, our
    reputation may be harmed and deployment of our products may be delayed or
    performed inadequately.

  . If we lose our relationships with our systems integrators and resellers,
    we will not have the personnel necessary to deploy our products
    effectively, and we will need to commit significant additional sales and
    marketing resources in an effort to reach the markets and customers
    served by these parties.

                                       10
<PAGE>

If our alliances with technology providers are discontinued, our future growth
will be impaired.

   We have relationships with technology providers, such as Microsoft and
Documentum, to provide our customers with support of many applications and
services. Although these relationships are a key factor in our overall business
strategy, our alliance members may not view their relationships with us as
significant to their own businesses. A number of our competitors may have
stronger relationships with these technology and content vendors and, as a
result, these alliance members may be more likely to support our competitors'
products and services over ours. In addition, our technology providers may
offer products and services that are competitive to ours. Our arrangements
generally do not establish minimum performance requirements but instead rely on
voluntary efforts. In addition, most of our agreements with these entities may
be terminated by either party with limited notice. In some cases these
arrangements are not covered by a formal agreement. We currently invest
significant resources to develop these alliances and plan to continue to do so.
If we are unable to maintain our existing relationships or fail to enter into
additional relationships, our ability to increase our sales could be harmed,
and we could also lose anticipated customer introductions and co-marketing
benefits. Even if we succeed in establishing and maintaining these
relationships, they may not result in additional customers or revenue.

If our software contains errors, we may lose customers or experience reduced
market acceptance of our products.

   Our software products are inherently complex and may contain defects and
errors that are detected only when the product is in use. The latest version of
our portal product, version 4.5, has only recently been released, which
increases the risk of undetected defects or errors. It is also possible that
our products scheduled for commercial release in the first quarter of 2002, the
Plumtree Collaboration Server and the Plumtree Studio Server, as well as
version 4.51 of our corporate portal product scheduled for commercial release
in the first half of 2002, may contain undetected defects or errors that are
discovered after release. In addition, third-party software that we incorporate
into our portal product, or with which we integrate to deploy our solution, has
contained, and may in the future contain, defects or errors. Some of our
Plumtree Corporate Portal customers require, or may require, enhanced
modifications of our software for their specific needs. Modifications may
increase the likelihood of undetected defects or errors. Further, we often
render implementation, consulting and other technical services, the performance
of which typically involves working with sophisticated software, computing and
networking systems. As a result of product defects or our failure to meet
project milestones for services, we may lose customers, customers may not
implement our products more broadly within their organization, we may
experience reduced market acceptance of our products, and we may be subject to
product liability claims by our customers.

If we are unable to develop products that are compatible and can be integrated
with a large variety of hardware, software, database and networking systems,
our ability to attract and retain customers will be harmed.

   The Plumtree Corporate Portal is designed to support a broad set of software
applications and online services through Plumtree Gadget Web Services. To gain
broad market acceptance, we believe that we must support an increased number of
applications and services in the future. If the underlying applications and
services are upgraded or changed, maintaining this support may be difficult or
impossible. If we are unable to support an increased number of applications and
services in the future or if we are unable to maintain compatibility with these
systems, our ability to attract and retain customers will be harmed.

                                       11
<PAGE>

If we do not expand our customer base, we may be unable to increase our revenue
and our stock price will likely decline.

   The market for corporate portal software is newly emerging and there can be
no assurance that additional customers will adopt our products. Accordingly, we
cannot accurately estimate the potential demand for our products and services.
We believe that market acceptance of our products and services depends
principally on our ability to:

  . enhance our portal solution to meet changing customer demand;

  . effectively market the Plumtree Corporate Portal and related products and
    services;

  . hire, train and retain a sufficient number of qualified sales and
    marketing personnel;

  . provide high-quality and reliable customer support for our products;

  . distribute and price our products and services to be more appealing to
    customers than those of our competitors or of our customers' internally-
    developed solutions;

  . develop a favorable reputation among our customers, potential customers
    and participants in the software industry who can serve as reference
    accounts for our products and services; and

  . withstand downturns in general economic conditions or conditions that
    slow corporate spending on software products.

   Some of these factors are beyond our control. If our customer base does not
expand, we may never become profitable on an annual basis.

Some of our customers are in the preliminary phase of implementing our portal
product and this implementation may not proceed on a timely basis or at all.

   Some of our customers, including Amgen, Airbus, Merrill Lynch and Solectron,
are currently in a pre-deployment or preliminary stage of implementing our
portal product and may encounter delays or other problems in introducing it.
These delays or other problems may result from matters specific to the customer
and unrelated to us or our product. A customer's decision not to implement our
product, or a delay in implementation, could result in a delay or loss in
related revenue or otherwise harm our business and prospects. We cannot predict
when any customer currently in a pilot or preliminary phase will implement
broader use of our product.

Security breaches with our software may lead to unexpected capital expenditures
and cause a loss in revenue and reputation.

   Our portal product is designed to facilitate the secure transmission of
sensitive business information to specified parties outside the business over
the Internet. This includes product information, competitive intelligence,
sales and inventory data, sales reports and corporate e-mail. As a result, the
reputation of our software for providing security is vital to its acceptance by
customers. Problems caused by security breaches could result in loss of or
delay in revenue, loss of market share, failure to achieve market acceptance,
diversion of research and development resources, harm to our reputation,
customer claims against us, increased insurance costs or increased service and
warranty costs. Because the techniques used by computer hackers to access or
sabotage networks change frequently and generally are not recognized until
launched against a target, we may be unable to anticipate these techniques.
Moreover, our products may be even more susceptible to security breaches, since
portals require the aggregation of many different Web applications on many
different servers, with different security standards and protocols.

                                       12
<PAGE>

Capacity restrictions of our software could reduce the demand for and use of
our products, which may limit our ability to generate license revenue.

   Our products are designed to support enterprise-wide deployments with
hundreds of thousands of users. However, the maximum amount of information and
the maximum number of concurrent users that our products can support in any
particular deployment is uncertain. If the capacity boundaries of our products
are reached, our customers may be dissatisfied, and we may lose customers or
fail to gain new customers.

If we are unable to retain key personnel, our growth will be limited.

   We are highly dependent on certain members of our management staff,
including, without limitation, our chief executive officer, John Kunze, our
vice president of engineering, John Hogan, and our vice president of worldwide
field operations, Jim Flatley. Our ability to continue to deliver products and
services that are responsive to customer needs, which is critical to our
success, also depends on our ability to retain several members of our
engineering team. The loss of one or more of these officers or engineers may
impede the achievement of our business objectives. None of our officers or key
employees is bound by an employment agreement for any specific term, and no one
is constrained from terminating his or her employment relationship with us at
any time. In addition, since a number of our long-standing employees have most
of their stock options or restricted stock vested, their economic incentive to
remain in our employ may be diminished.

If we are unable to recruit and train new personnel, our operations will be
disrupted and our growth impaired.

   Recruiting and retaining qualified technical personnel is critical to our
success. If our business grows, we will also need to recruit a significant
number of management, technical and other personnel for our business.
Competition for employees in our industry is intense, particularly in Northern
California where our principal offices are located. If we are not able to
continue to attract and retain skilled and experienced personnel on acceptable
terms, our growth may be limited due to our limited capacity to develop and
market our product. We are currently recruiting personnel for technical,
marketing, sales and administrative functions. Once hired, these people will
need time to familiarize themselves with Plumtree and our business practices.
We expect to continue to hire additional employees in order to grow our
business. The integration of new personnel has resulted and will continue to
result in some disruption to our ongoing operations. Our failure to complete
this integration in an efficient manner could harm our business and prospects.

Managing the growth of our operations will continue to strain managerial,
operational and financial resources, and if we are unable to do so our business
and operating results could be harmed.

   The planned expansion of our operations will place a significant strain on
our management, financial controls, operations systems, personnel and other
resources. Our ability to manage our future growth, should it occur, will
depend in large part upon a number of factors, including our ability to
rapidly:

  . build and train our sales and marketing staff to create an expanding
    presence in the evolving corporate portal market, and keep them fully
    informed over time regarding the technical features, issues and key
    selling points of our product;

  . attract and retain qualified technical personnel in order to continue to
    develop reliable and scalable products and services that address evolving
    customer needs;

                                       13
<PAGE>

  . develop our customer support capacity as sales of our products increase,
    so that we can provide customer support without diverting resources from
    product development efforts; and

  . expand our internal management and financial controls significantly, so
    that we can maintain control over our operations and provide support to
    other functional areas within Plumtree as the number of our personnel and
    size of our organization increases.

   Our inability to achieve any of these objectives could harm our business and
operating results.

We may be unable to grow our international operations, which could impair our
overall growth.

   We have expanded our international operations, and we are seeking to
increase the portion of our revenue that is derived from sources outside the
United States. Our revenue from sales outside the United States constituted
approximately 7.4% of our total revenue during 2000 and approximately 7.7% of
our total revenue during 2001. If we are unable to grow our international
operations, we may not generate sufficient revenue to offset the expenditures
required to establish and maintain the international sales and marketing
operations, which could slow or undermine our overall growth.

   We have committed substantial resources to modify our products for selected
international markets, including the United Kingdom, France, Germany, Australia
and Japan. We expect to continue to commit additional resources to modify our
products for other select international markets and to develop our
international sales and support organization. However, even if we successfully
expand our international operations and successfully modify our products, there
can be no assurance that we will be able to maintain or increase international
market demand for our products.

   Our international operations are subject to a number of risks, including:

  . costs of modifying our products for foreign countries;

  . compliance with multiple, conflicting and changing foreign governmental
    laws and regulations, including intellectual property, securities and
    employment laws;

  . increased reliance on systems integrators and resellers abroad;

  . longer sales cycles;

  . import and export restrictions and tariffs;

  . fluctuations in foreign currency exchange rates;

  . difficulties in staffing and managing international operations;

  . greater difficulty in enforcing our intellectual property rights; and

  . greater difficulty or delay in accounts receivable collection.

Product liability claims could divert management's attention and be costly to
defend.

   Our license agreements with customers and arrangements with our systems
integrators and technology vendors typically contain provisions designed to
limit our exposure to potential product liability claims. Not all domestic and
international jurisdictions may enforce these limitations. Although we have not
experienced any product liability claims to date, we may encounter this type of
claim in the future. Product liability claims brought against us, whether or
not successful, could divert the attention and resources of our management and
key personnel, could be costly to defend and could require us to pay
significant monetary damages.

                                       14
<PAGE>

If we are unable to effectively protect our proprietary rights, our competitors
may be able to copy important aspects of our products or product presentations,
which would undermine the relative appeal of our products to customers and
reduce our sales.

   We believe that proprietary rights are important to our business. We have
filed one provisional patent application and five non-provisional patent
applications with the U.S. Patent and Trademark Office. However, our current or
future patent applications may not be granted, and it is possible that any
patents issued to us may be circumvented by our competitors or otherwise may
not provide significant protection or commercial advantage to us. Similarly,
our trademark, service mark and copyright rights may not provide significant
protection or commercial advantage to us, and the measures we take to maintain
the confidentiality of our trade secrets may not be effective.


   On November 13, 2001, we commenced an action in the District Court in The
Hague against an individual, Werner Linssen, to cancel the Benelux trademark
registration for "Plumtree" held by Mr. Linssen. That action is pending. In
addition, we and Mr. Linssen have each commenced proceedings before the E.U.'s
Office of Harmonisation of the Internal Market in opposition to each other's
Community Trade Mark applications. Those proceedings have been suspended
pending disposition of the Benelux action in The Hague. On November 25, 2001,
we also commenced a proceeding before the Swiss Federal Institute of
Intellectual Property in opposition to Mr. Linssen's trademark application for
"Plumtree". This dispute could cost us significant amounts to resolve and, if
we are unsuccessful, we may need to market and sell our products in these
jurisdictions using a different name.


   Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our software product or
technology without authorization. Policing unauthorized use of our products is
difficult, and we cannot be certain that the steps we have taken will prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as those in the United
States.

   We generally enter into confidentiality or license agreements with our
employees, consultants and alliance members, control access to our source code
and other proprietary technology and limit distribution of our software,
documentation and other proprietary information. These measures afford only
limited protection and may be inadequate. Others may develop noninfringing
technologies that are similar or superior to our own.

If our products employ technology that infringes the proprietary rights of
others, we may be subject to infringement claims, forced to pay high prices to
license technology or required to stop selling our products.

   We expect that software products, including ours, may be increasingly
subject to third-party infringement claims as the number of competitors in our
industry segment grows and the functionality of products in different industry
segments expands and overlaps. Third parties may claim our products infringe
their intellectual property rights. Regardless of whether these claims have any
merit, they could:

  . be time-consuming to defend;

  . result in costly litigation;

  . divert our management's attention and resources;

  . require us to indemnify alliance members or customers;

  . require us to refund license fees;

  . cause product shipment delays; or

  . require us to enter into royalty or licensing agreements, which may not
    be available on terms acceptable to us, if at all.

                                       15
<PAGE>

   A successful claim of infringement against us or our failure or inability to
license the infringed or similar technology could damage our business to the
extent that we are required to pay substantial monetary damages or if, as
result of a successful claim, we became unable to sell our products without
redeveloping them or otherwise were forced to incur significant additional
expenses.

We may be subject to misappropriation claims by former employers of our
personnel, which could be costly and disruptive to our business.

   From time to time, we hire or retain employees or consultants who have
worked for independent software vendors or other companies developing products
similar to those offered by us. Those prior employers may claim that our
products are based on their products and that we have misappropriated their
intellectual property. Any claims of that variety, with or without merit, could
cause a significant diversion of management attention, result in costly and
protracted litigation, cause product shipment delays, require us to indemnify
our alliance members and customers, require us to refund license fees or
require us to enter into royalty or licensing agreements. Those royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all, which could harm our business.

Acquisitions of companies or technologies may result in disruptions to our
business and management due to difficulties in assimilating personnel, acquired
products and technology and operations.

   We have made and in the future may make acquisitions or investments in other
companies or technologies. We may not realize the anticipated benefits of any
acquisitions or investments we undertake. For instance, we made three small
acquisitions in 2001. Acquisitions such as these require us to assimilate the
operations, products, technology and personnel of the acquired businesses and
train, retain and motivate key personnel from the acquired businesses. We may
be unable to maintain uniform standards, controls, procedures and policies if
we fail in these efforts. Similarly, acquisitions may cause disruptions in our
operations and divert management's attention from day-to-day operations, which
could impair our relationships with our current employees, customers and
strategic partners. In addition, our profitability may suffer because of
acquisition-related costs or impairment costs for acquired goodwill and other
intangible assets, or undisclosed liabilities of the acquired business. The
terms of our existing Silicon Valley Bank loan and security agreement restrict
our ability to acquire other companies or their assets.

If we are required to raise additional funds, we may be unable to obtain these
funds on terms acceptable to us or at all.

   The expansion and development of our business will require significant
capital to fund our operating expenses, working capital needs and capital
expenditures. During the next 18 months, we expect to meet our cash
requirements with existing cash and cash equivalents and short-term
investments, the net proceeds from this offering, cash flow from sales of our
product and services and proceeds from existing and future working capital
lines of credit and other borrowings. Our failure to generate sufficient cash
flows from sales of products and services or to raise sufficient funds may
require us to delay or abandon some or all of our development and expansion
plans or otherwise forego market opportunities.

   Future equity or debt financing may not be available to us on favorable
terms or at all. The terms of our existing loan agreement with Silicon Valley
Bank limit our ability to incur additional indebtedness. Future borrowing
instruments, such as credit facilities and lease agreements, are also likely to
contain restrictive covenants and will likely require us to pledge assets as
security for borrowings under those future arrangements. If we raise additional
funds through the issuance of

                                       16
<PAGE>

equity securities, the issuance could result in substantial dilution to
existing stockholders. Our inability to obtain additional capital on
satisfactory terms may result in a delay or failure to develop and enhance our
products, acquire new technologies or businesses, expand operations and hire
and train employees.

                         Risks Relating to Our Industry

Intense competition and consolidation in our industry could limit our ability
to attract and retain customers.

   The market for our products is intensely competitive and highly fragmented,
characterized by rapid technological change, evolving industry standards,
changes in customer needs, and new product introductions and improvements. Our
current competitors include established software vendors that are Web-enabling
their applications or are building infrastructure software, emerging companies
offering competitive products and companies choosing to build their own
solutions. Some of our large competitors may expand their competitive product
offerings through acquisitions. For example, SAP expanded its competitive
offerings through its acquisition of TopTier in March 2001. Many of our
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition, a broader
range of products and a larger installed customer base, any of which could
provide them with a significant competitive advantage. In addition, new
competitors, or alliances among existing and future competitors, may emerge and
rapidly gain significant market share. Some of our competitors, particularly
established software vendors, may also be able to provide customers with
products and services comparable to ours at lower overall prices, at
aggressively reduced prices in an effort to increase market share or as part of
a broader software package they are selling to a customer. We may be unable to
match competitors' prices or price reductions, and we may fail to win customers
that choose to purchase a portal solution as part of a broader software and
services package. If we cannot compete successfully against current and future
competitors, we may be unable to attract and retain customers. Increased
competition could also result in price reductions for our products and lower
profit margins and reduced market share, any of which could harm our business,
results of operations and financial condition.

Downturns in the software market may decrease our revenue and margins.

   The market for our products depends on economic conditions affecting the
broader software market. Downturns in the economy may cause businesses and
governments to delay or cancel corporate portal projects, reduce their overall
information technology budgets or reduce or cancel orders for our products. In
this environment, customers may experience financial difficulty, fail to or
defer the budget for the purchase of our products or cease operations. This, in
turn, may lead to longer sales cycles, delays in payment and collection, and
price pressures, causing us to realize lower revenues and margins. In
particular, capital spending in the information technology sector generally has
decreased in the past 18 months, and many of our customers and potential
customers have experienced declines in their revenues and operations. In
addition, the terrorist acts of September 11, 2001 have created an uncertain
economic environment and we cannot predict the impact of these events, any
future terrorist acts or any related military action, on our customers or
business. We believe that, in light of these events, some businesses and
governments may curtail or eliminate capital spending on information
technology. If capital spending in our markets declines, it may be necessary
for us to gain significant market share from our competitors in order to
achieve our financial goals and achieve and maintain profitability.

                                       17
<PAGE>

Our failure to introduce new products and enhancements in a timely manner will
make market acceptance of our products less likely.

   New products, platforms and language support can require long development
and testing periods. Any delays in developing and releasing new products could
harm our business. New products or enhancements may not be released according
to schedule or may contain defects when released. For example, version 4.5 of
the Plumtree Corporate Portal has been released only very recently, which
increases the risk of undetected defects or errors. Product release delays or
product defects, including release delays or defects in the Plumtree
Collaboration Server or the Plumtree Studio Server, which are scheduled for
commercial release in the first quarter of 2002, or in version 4.51 of the
Plumtree Corporate Portal, which is scheduled for commercial release in the
first half of 2002, could result in adverse publicity, loss of sales, delay in
market acceptance of our products or customer claims against us, any of which
could harm our business. We may be unable to successfully develop and market
product enhancements or new products that respond to these technological
changes, shifting customer tastes or evolving industry standards, and may
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products. If we are unable to develop and
introduce new products or enhancements of existing products in a timely manner
or if we experience delays in the commencement of commercial shipments of new
products and enhancements, our ability to attract and retain customers will be
harmed.

If we fail to manage technological change, demand for our products and services
will drop and our revenue will decline.

   The market for corporate portals is still in an early stage of development
and is characterized by rapidly changing technology, evolving industry
standards, frequent new service and product introductions and changes in
customer demands. Our future success will depend to a substantial degree on our
ability to offer products and services that incorporate leading technologies
and respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis. You should be aware that:

  . our technology or systems may become obsolete upon the introduction of
    alternative technologies;

  . the technological life cycles of our products may end abruptly and, in
    any event, are difficult to estimate;

  . we may not have sufficient resources to develop or acquire new
    technologies or to introduce new services capable of competing with
    future technologies or service offerings; and

  . the price of the products and services we provide may decline as rapidly
    as, or more rapidly than, the price of any competitive alternatives,
    particularly if the unique features of our products become widely adopted
    through new technologies.

   We may not be able to effectively respond to the technological requirements
of the changing market for corporate portals. To the extent we determine that
new technologies and equipment are required to remain competitive, the
development, acquisition and implementation of those technologies and equipment
are likely to continue to require significant capital investment by us. We may
not have sufficient capital for these purposes in the future. Even if we
successfully raise capital to develop new technologies, investments in these
technologies may not result in commercially viable technological processes, or
there may not be commercial applications for those technologies. If we do not
develop and introduce new products and services, and achieve market acceptance
in a timely manner, demand for our products and services will drop and our
revenue will decline.

                                       18
<PAGE>

If we fail to adequately address our customer support demands, our ability to
attract and retain customers will suffer.

   We expect that our customers increasingly will demand additional information
and reports with respect to the services we provide. To meet these demands, we
must develop and implement expanded customer support services to enable future
sales growth. In addition, if we are successful in implementing our marketing
strategy, we expect the demands on our technical support resources to grow
rapidly, and we may experience difficulties in responding to customer demand
for our services and providing technical support in accordance with our
customers' expectations. We expect that these demands will require not only the
addition of new management personnel, but also the development of additional
expertise by existing management personnel and the establishment of long-term
relationships with third-party service vendors. If we are unable to address
these customer demands, our ability to attract and retain customers will
suffer.

                         Risk Relating to this Offering

Future sales of common stock could depress our stock price.

   We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will depress the market price for our common
stock or adversely affect our ability to raise capital by offering equity
securities. Sales of substantial amounts of common stock, or the perception
that these sales could occur, may depress prevailing market prices for the
common stock.

   After this offering, approximately 29,213,954 shares of common stock will be
outstanding. All of the shares sold in this offering will be freely tradeable
except for any shares purchased by affiliates of Plumtree. The remaining shares
of common stock outstanding after this offering will be restricted as a result
of securities laws or lock-up agreements. These remaining shares will be
available for sale in the public market as follows:


<TABLE>
<CAPTION>
   Date of Availability for Sale                              Number of Shares
   -----------------------------                              ----------------
   <S>                                                        <C>
   As of the date of this prospectus.........................       123,600
          , 2002 (90 days after the date of this
    prospectus)..............................................        30,964
          , 2002 (180 days after the date of this
    prospectus)..............................................    23,701,796
   At various times thereafter upon expiration of applicable
    holding periods..........................................       357,594
</TABLE>


   Goldman, Sachs & Co. may release all or a portion of the shares subject to
lock-up agreements at any time without notice.

Stock prices of software companies are especially volatile, and this volatility
may depress our stock price.

   We cannot predict the extent to which investor interest in Plumtree will
lead to the development of a trading market or how liquid that market might
become. Before this offering, there has been no public market for our common
stock. We intend to list the common stock on the Nasdaq National Market. The
initial public offering price for the shares of our common stock will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. The stock market has experienced significant price and volume
fluctuations and the market prices of securities of software companies have
been highly volatile. You may not be able to resell your shares at or above the
initial public offering price or at all.

   In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against the company. The institution of this type of litigation
against us could result in substantial costs and a diversion of our
management's attention and resources, which could harm our business and
prospects.

                                       19
<PAGE>

Our stock ownership will continue to be concentrated in the hands of management
and existing stockholders, which could adversely affect our business and
depress our stock price.

   Upon completion of this offering, our present directors, executive officers
and principal stockholders as a group will beneficially own approximately 54%
of the outstanding common stock (52% if the underwriters' over-allotment option
is exercised in full). Accordingly, if all or particular stockholders were to
act together, they would be able to exercise significant influence over or
control the election of our board of directors, the management and policies of
our company and the outcome of particular corporate transactions or other
matters submitted to our stockholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets.

Anti-takeover provisions in our certificate of incorporation and bylaws could
discourage or prevent an acquisition of our company, and could affect the price
of our common stock.

   Provisions of the certificate of incorporation and bylaws that we intend to
adopt before the closing of this offering may inhibit changes of control that
are not approved by our board of directors. These include provisions
classifying our board of directors, prohibiting stockholder action by written
consent and requiring advance notice for nomination of directors and
stockholders' proposals. In addition, as a Delaware corporation, we will be
subject to Section 203 of the Delaware General Corporation Law which, in
general, prevents an interested stockholder, defined generally as a person
owning 15% or more of the corporation's outstanding voting stock, from engaging
in a business combination, as defined, for three years following the date that
person became an interested stockholder unless specified conditions are
satisfied. Our certificate of incorporation and bylaw provisions and Delaware
law could diminish the opportunities for a stockholder to participate in tender
offers, including tender offers at prices above the then-current fair market
value of our common stock, that could result from takeover attempts. In
addition, our certificate of incorporation will allow our board of directors to
issue, without further stockholder approval, preferred stock that could have
the effect of delaying, deferring or preventing a change in control. The
issuance of preferred stock also could adversely affect the voting power of the
holders of our common stock, including the loss of voting control to others.
The provisions of our certificate of incorporation and bylaws, as well as
provisions of Delaware law, may have the effect of discouraging or preventing
an acquisition, or disposition of, our business. These provisions could limit
the price that investors might be willing to pay in the future for shares of
our common stock.

Our management has broad discretion over the use of proceeds from this
offering, and the failure of management to apply these funds effectively could
seriously harm our business and results of operations.

   We have not determined and cannot predict in which, if any, of our existing
or future opportunities we will ultimately invest. Therefore, we have broad
discretion as to how we spend the proceeds from this offering, and stockholders
may not agree with how we use the proceeds. We may not be successful in using
the proceeds from this offering in ways that will yield favorable results.

                                       20
<PAGE>

                 SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

   Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events, including, among
other things:

  . implementing our business strategy;

  . attracting and retaining customers and employees;

  . obtaining and expanding market acceptance of the products and services we
    offer;

  . forecasts of Internet usage and the size and growth of relevant markets;

  . rapid technological changes in our industry and relevant markets; and

  . competition in our market.

   In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar expressions. These statements are based on our current beliefs,
expectations and assumptions and are subject to a number of risks and
uncertainties. Actual results, levels of activity, performance, achievements
and events may vary significantly from those implied by the forward-looking
statements. A description of risks that could cause our results to vary appears
under the caption "Risk Factors" and elsewhere in this prospectus.

                                       21
<PAGE>

                                USE OF PROCEEDS

   We estimate that we will receive net proceeds of approximately $64.4 million
from the sale of shares of our common stock in this offering. If the
underwriters exercise their over-allotment option in full, we estimate that we
will receive total net proceeds of approximately $74.1 million. These net
proceeds amounts are based upon an assumed initial public offering price of
$14.00 per share and after deducting the estimated underwriting discount and
estimated offering expenses payable by us.

   The principal purposes of this offering are to obtain additional capital to
facilitate future access by us to public equity markets and to provide
increased visibility and credibility in the marketplace. We intend to use the
net proceeds of this offering for working capital and other general corporate
purposes. We may also use a portion of the net proceeds to acquire
complementary products, technologies or businesses. We currently, however, have
no commitments or agreements relating to any such acquisition transactions.

   Our management retains broad discretion in the use of the net proceeds of
this offering. Investors will be relying on the judgment of our management
regarding the application of the proceeds of this offering. Pending use of the
net proceeds as discussed above, we intend to invest these funds in short-term,
interest-bearing, investment-grade obligations.

                                DIVIDEND POLICY

   We have never declared or paid dividends on our capital stock. We presently
anticipate that we will retain all of our future earnings to finance the
development and expansion of our business and provide working capital.
Therefore, we do not anticipate paying any cash dividends on our common stock
for the foreseeable future. The terms of our existing Silicon Valley Bank loan
and security agreement prohibit the payment of dividends, except in specified
circumstances.

                                       22
<PAGE>

                                 CAPITALIZATION

   The table below lists our capitalization as of December 31, 2001:

  .  on an actual basis;

  .  on a pro forma basis assuming the conversion of all outstanding shares
     of preferred stock into shares of common stock and changes to our
     authorized capital stock upon completion of this offering; and

  .  on a pro forma as adjusted basis assuming the sale of the 5,000,000
     shares of common stock in this offering at an assumed initial public
     offering price of $14.00 per share and after deducting the estimated
     underwriting discount and estimated offering expenses.

   This information should be read in conjunction with our consolidated
financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.

<TABLE>
<CAPTION>
                                                    As of December 31, 2001
                                                 ------------------------------
                                                                     Pro Forma
                                                 Actual   Pro Forma As Adjusted
                                                 -------  --------- -----------
                                                  (in thousands, except share
                                                             data)
                                                               (unaudited)
<S>                                              <C>      <C>       <C>
Current portion of long-term obligations........ $   254   $   254    $   254
                                                 -------   -------    -------
Long-term capital lease obligations, net of
 current portion................................ $   103   $   103    $   103

Stockholders' equity:
Convertible preferred stock, 16,981,528 shares
 authorized, 16,580,830 shares issued and
 outstanding, actual; 10,000,000 shares
 authorized, pro forma and pro forma as
 adjusted; no shares issued and outstanding, pro
 forma and pro forma as adjusted................      17       --         --
  Common stock, 24,055,865 shares authorized,
   7,633,124 shares issued and outstanding,
   actual; 41,037,393 shares authorized,
   24,213,954 shares issued and outstanding, pro
   forma; 41,037,393 shares authorized,
   29,213,954 shares issued and outstanding, pro
   forma as adjusted............................       8        25         30
Additional paid in capital......................  61,916    61,916    126,261
Warrants........................................     361       361        361
Notes receivable from stockholder...............    (674)     (674)      (674)
Stock-based compensation........................  (8,301)   (8,301)    (8,301)
Accumulated other comprehensive loss............     (34)      (34)       (34)
Accumulated deficit............................. (41,850)  (41,850)   (41,850)
                                                 -------   -------    -------
    Total stockholders' equity .................  11,443    11,443     75,793
                                                 -------   -------    -------
      Total capitalization...................... $11,546   $11,546    $75,896
                                                 =======   =======    =======
</TABLE>

   This table excludes, as of December 31, 2001:

  .  8,299,748 shares of common stock issuable upon exercise of options
     outstanding, at a weighted average exercise price of $4.09 per share;

  .  8,911,300 additional shares of common stock available for future
     issuance under our 2002 and 1997 stock option plans;

  .  2,000,000 shares of common stock available for issuance under our 2002
     employee stock purchase plan;

  .  400,000 shares of common stock available for issuance under our 2002
     director stock option plan; and

  .  264,448 shares of common stock issuable upon exercise of warrants
     outstanding, at a weighted average exercise price of $2.23 per share.

                                       23
<PAGE>

                                    DILUTION

Pro Forma Net Tangible Book Value

   The pro forma net tangible book value of our common stock was approximately
$6.6 million, or approximately $0.27 per share, on December 31, 2001. We
calculated pro forma net tangible book value assuming all outstanding shares of
preferred stock will convert into common stock when the offering is completed.
Pro forma net tangible book value per share represents the amount of our total
tangible assets less total liabilities divided by the number of shares of
common stock outstanding.

Dilution After this Offering

   Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share of our common stock
immediately after this offering.

   Assuming our sale of 5,000,000 shares of common stock offered by this
prospectus at an assumed initial public offering price of $14.00 per share, and
after deducting the estimated underwriting discount and estimated offering
expenses, our pro forma net tangible book value at December 31, 2001 would have
been approximately $71.0 million or $2.43 per share. This represents an
immediate increase in net tangible book value of $2.16 per share to the
existing stockholders and an immediate dilution of $11.57 per share to new
investors purchasing common stock in this offering.

   The table below illustrates this per share dilution:

<TABLE>
<S>                                                                <C>   <C>
Assumed initial public offering price per share...................       $14.00
  Pro forma net tangible book value per share at December 31,
   2001........................................................... $0.27
  Increase per share attributable to new investors................  2.16
                                                                   -----
Pro forma net tangible book value per share after this offering...         2.43
                                                                         ------
Pro forma dilution per share to new investors.....................       $11.57
                                                                         ======
</TABLE>

Differences Between New and Existing Stockholders in Number of Shares and
Amount Paid

   The table below summarizes, on a pro forma basis, as of December 31, 2001,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by the new investors purchasing shares in this offering. We
used an assumed initial public offering price of $14.00 per share, and we have
not deducted the estimated underwriting discount and estimated offering
expenses in our calculations.

<TABLE>
<CAPTION>
                                Shares Purchased  Total Consideration   Average
                               ------------------ --------------------   Price
                                 Number   Percent    Amount    Percent Per Share
                               ---------- ------- ------------ ------- ---------
<S>                            <C>        <C>     <C>          <C>     <C>
Existing stockholders......... 24,213,954   82.9% $ 39,155,000   35.9%  $ 1.62
New investors.................  5,000,000   17.1%   70,000,000   64.1%   14.00
                               ----------  -----  ------------  -----   ------
  Total....................... 29,213,954  100.0% $109,155,000  100.0%  $ 3.74
                               ==========  =====  ============  =====   ======
</TABLE>

   If the underwriters exercise the over-allotment option in full:

  . the number of shares of common stock held by existing stockholders will
    decrease to approximately 80.8% of the total number of shares of our
    outstanding common stock; and

                                       24
<PAGE>

  . the number of shares held by new investors will increase to 5,750,000, or
    approximately 19.2% of the total number of shares of our common stock
    outstanding after completion of this offering.

   Except as indicated, the foregoing discussion and tables assume no exercise
of any stock options or warrants outstanding. The foregoing excludes:

  . 8,299,748 shares of common stock issuable upon exercise of options
    outstanding, at a weighted average exercise price of $4.09 per share;

  . 8,911,300 additional shares of common stock available for issuance under
    our 2002 and 1997 stock option plans;

  . 2,000,000 shares of common stock available for issuance under our 2002
    employee stock purchase plan;

  . 400,000 shares of common stock available for issuance under our 2002
    director stock option plan; and

  . 264,448 shares of common stock issuable upon exercise of warrants
    outstanding, at a weighted average exercise price of $2.23 per share.

The exercise of options or warrants outstanding having an exercise price less
than the initial public offering price would increase dilution to new
investors.

                                       25
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

   The consolidated statements of operations data for the years ended December
31, 1997, 1998, 1999, 2000 and 2001, and the consolidated balance sheet data at
December 31, 1997, 1998, 1999, 2000 and 2001, are derived from our audited
consolidated financial statements that have been prepared in accordance with
United States generally accepted accounting principles. The following data
should be read in conjunction with our consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus.


<TABLE>
<CAPTION>
                                          Year Ended December 31,
                                  --------------------------------------------
                                   1997     1998     1999      2000     2001
                                  -------  -------  -------  --------  -------
                                   (in thousands, except per share data)
Consolidated Statements of
Operations Data:
<S>                               <C>      <C>      <C>      <C>       <C>
Revenue:
 Licenses.......................  $   --   $   166  $ 2,701  $ 24,017  $54,055
 Services and maintenance.......      --        15      653    10,126   26,119
                                  -------  -------  -------  --------  -------
   Total revenue................      --       181    3,354    34,143   80,174
Cost of revenue:
 Cost of licenses...............      --       --        90     2,585    5,063
 Cost of services and
  maintenance...................      --        19    1,118    10,046   12,134
 Amortization of stock-based
  compensation(1)...............      --       --        39       754      627
                                  -------  -------  -------  --------  -------
   Total cost of revenue........      --        19    1,247    13,385   17,824
Gross margin....................      --       162    2,107    20,758   62,350
Operating expenses:
 Research and development(3) ...      635    1,109    1,677     7,626   14,136
 Sales and marketing............      575    2,418    5,616    23,769   40,524
 General and administrative.....      386      445    1,407     7,243    8,519
 Restructuring charge...........      --       --       --        --       760
 Aborted offering costs.........      --       --       --        --     1,643
 Amortization of stock-based
  compensation(2)...............      --       --       286     4,166    3,900
                                  -------  -------  -------  --------  -------
   Total operating expenses.....    1,596    3,972    8,986    42,804   69,482
Operating loss..................   (1,596)  (3,810)  (6,879)  (22,046)  (7,132)
Other income (expense):
 Interest expense...............      --       --      (181)     (122)    (247)
 Other income...................       22       28       30       485      257
                                  -------  -------  -------  --------  -------
Other income (expense), net.....       22       28     (151)      363       10
                                  -------  -------  -------  --------  -------
Loss before taxes...............   (1,574)  (3,782)  (7,030)  (21,683)  (7,122)
Provision for income taxes......      --       --       --        --      (683)
                                  -------  -------  -------  --------  -------
Net loss........................  $(1,574) $(3,782) $(7,030) $(21,683) $(7,805)
                                  =======  =======  =======  ========  =======
Net loss per common share, basic
 and diluted....................  $ (0.46) $ (1.08) $ (1.78) $  (3.97) $ (1.21)
                                  =======  =======  =======  ========  =======
Pro forma net loss per common
 share, basic and diluted
 (unaudited)....................                                       $ (0.34)
                                                                       =======
Weighted average common shares
 outstanding, basic and
 diluted........................    3,398    3,509    3,944     5,461    6,458
                                  =======  =======  =======  ========  =======
Pro forma weighted average
 common shares outstanding,
 basic and diluted (unaudited)..                                        23,038
                                                                       =======
-------------
(1)Amortization of stock-based compensation
 included in cost of revenue....................    $    39  $    754  $   627
                                                    -------  --------  -------
(2) Amortization of stock-based compensation
    included in operating expenses:
   Research and development.....................        105     1,519      908
   Sales and marketing..........................        171     1,423    1,695
   General and administrative...................         10     1,224    1,297
                                                    -------  --------  -------
   Total stock-based compensation included in
 operating expenses.............................        286     4,166    3,900
                                                    -------  --------  -------
                                                    $   325  $  4,920  $ 4,527
                                                    =======  ========  =======
</TABLE>


(3) During the year ended December 31, 2000, we recorded a
    non-cash research and development charge of $824,000.
    See Note 9 to the consolidated financial statements.
<TABLE>
<CAPTION>
                                                      December 31,
                                          ------------------------------------
                                           1997   1998   1999   2000    2001
                                          ------ ------ ------ ------- -------
                                                     (in thousands)
Consolidated Balance Sheet Data:
<S>                                       <C>    <C>    <C>    <C>     <C>
Cash and cash equivalents................ $1,124 $1,574 $2,344 $13,098 $24,040
Working capital..........................    --   1,366  2,406   5,102   3,769
Total assets.............................  1,351  2,100  5,600  38,001  51,260
Long-term obligations, net of current
 portion.................................    107    403    328     368     437
Total stockholders' equity...............  1,076  1,296  2,717  10,362  11,443
</TABLE>

                                       26
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   The following discussion should be read in conjunction with the Financial
Statements and related notes that appear elsewhere in this prospectus. The
following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those
discussed below and elsewhere in this prospectus, particularly in "Risk
Factors."

Overview

 General

   We develop, market and sell corporate portal software and related services
for enterprises. Corporate portal software allows an enterprise's employees,
customers and partners to interact with different types of information and
applications in one Web site and empowers users to create new information and
services on the Web. From our inception in 1996 through the beginning of 1998,
we were engaged primarily in developing and marketing our corporate portal
product. As part of our strategy, we seek to continually enhance the
functionality of our software. In March 1998, we released version 1.0 of our
flagship product, the Plumtree Corporate Portal, and subsequently released
version 4.0 in October 2000 and version 4.5 in September 2001. As of December
31, 2001, we had an accumulated deficit of $41.9 million. We may continue to
incur operating losses for the foreseeable future.

 Sources of Revenue

   We derive our revenue from software licenses, services and maintenance. To
generate revenue, we utilize both a direct sales force and an indirect sales
channel consisting primarily of systems integrators and independent software
vendors. Our services include installation, consulting and training. We
typically work in tandem with third-party consulting organizations to deliver
these services. Maintenance services include technical support and software
updates. Maintenance contracts are typically one year in duration and can be
renewed annually.

 Revenue Recognition

   License revenue consists principally of revenue from the licensing of our
software and is generally recognized when a contract is executed, all delivery
obligations have been met, the fee is fixed or determinable, and collectibility
is probable. When licenses are sold together with services, in accordance with
the provisions of the American Institute of Certified Public Accountants'
Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2), license
fees are recognized upon delivery, provided that (1) the above criteria have
been met, (2) payment of the license fees is not dependent upon the performance
of the services, and (3) the services do not include significant modifications
to the features and functionality of the software.

   We have not established vendor specific objective evidence of fair value
(VSOE) for license sales and recognize revenue from arrangements with multiple
elements involving software licenses under the residual method as outlined in
SOP 97-2. To the extent that a discount exists on any of the elements, we
follow the residual method and attribute that discount entirely to the
delivered elements.

   Service revenue consists of consulting, training and installation services
that we provide to our customers. Revenue from such services is generally
recognized as the service is performed. If services are included with a license
agreement, amounts related to services are unbundled from the license fee based
on VSOE as established by transactions where services have been sold

                                       27
<PAGE>

separately. Prior to December 1999, we had not yet established VSOE for service
revenue. Accordingly, prior to December 1999 we recognized license revenue sold
together with services as the services were performed. In December 1999, we
formed a separate professional services department and established VSOE for
these services.

   For a majority of our arrangements, the services provided are not essential
to the functionality of the software and typically can include:

  . developing a project scope;

  . installing and configuring our product; and

  . developing portal content, including defining and setting up the initial
    taxonomy of the document directory.

   In some arrangements, the services that we provide are essential to the
functionality of the software and can include:

  . modifying the user interface to fit a specific environment;

  . integrating our products into environments with legacy systems and custom
    applications; and

  . changing functionality of the product or its architecture, such as unique
    search requirements or elaborate document management capabilities.

   For the arrangements in which the services provided are essential to the
functionality of the software, both the license revenue and services revenue
are recognized in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position 81-1, "Accounting for
Performance of Construction Type and Certain Production Type Contracts"
(SOP 81-1). We account for these arrangements under the percentage of
completion contract method pursuant to SOP 81-1.

   We have entered into license arrangements where our services are essential
to the functionality of the software but the scope of the implementation has
not yet been completed. We defer recognition of all revenue from these
arrangements until the scope of the implementation has been determined and a
scope document is prepared. Upon finalization of the scope document, revenue is
recognized using the percentage of completion contract method.

   Maintenance revenue relates to the technical support and software updates we
provide to customers. Revenue on maintenance contracts is recognized ratably
over the term of the contract. If maintenance is bundled with a license
agreement, amounts related to maintenance are unbundled from the license fee
based on VSOE as established by the renewal rates we charge in accordance with
our contracts and established pricing.

   For arrangements which require delivery of unspecified future products over
a period, we use the subscription method and recognize revenue ratably over the
period.

   For arrangements that involve extended payment terms, we recognize revenue
to the extent of the lesser of the amount determined under the methodology we
are using or the amount due.

 Amortization of Stock-Based Compensation

   In connection with stock option grants to our employees and directors, we
have recorded stock-based compensation totaling $20.3 million as of December
31, 2001. These amounts represent the

                                       28
<PAGE>

difference between the exercise price and the deemed fair market value of our
common stock for accounting purposes on the date we granted these stock
options. This amount is included as a component of stockholders' equity and is
being amortized on an accelerated basis by charges to earnings from operations
over the vesting period of the options, generally four years. For 1999, 2000
and 2001, we recorded amortization of stock-based compensation expense of
$325,000, $4.9 million and $4.5 million, respectively. The amortization of the
remaining stock-based compensation will result in additional charges to
earnings from operations in 2002 and thereafter.

 Warrants

   In May 2000, we entered into a research and development agreement with
Procter & Gamble, a customer and stockholder. A warrant was issued to this
customer to purchase up to 100,000 shares of common stock at $2.00 per share.
Procter & Gamble earned 20,000 shares covered by the warrant per month for five
consecutive months in return for providing engineering services. The estimated
fair value of the warrant was $824,000 based upon the estimated fair value of
the warrant shares on the vesting dates. All of the warrant shares were fully
vested and the estimated fair value was recognized as a research
and development expense for the year ended December 31, 2000. The warrant was
exercisable for a period of four months, and was exercised in September 2000.

Critical Accounting Policies

   Our critical accounting policies are as follows:

  .  revenue recognized utilizing the percentage of completion contract
     method;

  .  valuation allowance against deferred tax assets;


  .  determination of the fair value of options granted to employees;


  .  allowance for doubtful accounts; and


  .  assessing the realizability of capitalized acquired technology.


   As described above, we recognize revenue on license arrangements involving
services that are essential to the functionality of our software utilizing the
percentage of completion contract method of accounting in accordance with SOP
81-1. Completion is measured based on hours incurred and total estimated hours
to complete the implementation. Total estimated hours are based upon scope
documents prepared by the customer and us prior to commencement of the
implementation. During the year ended December 31, 2000 and 2001, we entered
into 10 and 14 of these arrangements accounting for 27% and 33% of our license
revenue 2000 and 2001. We do not begin to recognize revenue on license
arrangements with services that are essential to the functionality of the
software until a scope document is completed. Included in deferred revenue at
December 31, 2000 was $6.2 million related to six arrangements for which scope
documents were not yet finalized. Included in accounts receivable at December
31, 2000 was $2.5 million related to these arrangements. Included in deferred
revenue at December 31, 2001 was $7.1 million related to five arrangements for
which scope documents were not yet finalized. Included in accounts receivable
at December 31, 2001 was $4.9 million related to these arrangements. We believe
that the development of the scope documents provides a reasonable basis for
measuring completion, and we do not believe that we would report materially
different amounts if we used different completion measures.

   We provided a valuation allowance of $12.3 million and $14.8 million against
the entire net deferred tax asset as of December 31, 2000 and 2001. The
valuation allowance was recorded given the losses we incurred through December
31, 2001 and our uncertainties regarding future operating profitability and
taxable income. Had we assumed the net deferred tax asset was fully realizable,
a deferred tax benefit of $8.4 million and $2.5 million would have been
reflected in the consolidated statements of operations in 2000 and 2001.

                                       29
<PAGE>

   As described above, in connection with the granting of certain stock
options, we recorded stock-based compensation charges representing the
difference between the deemed fair value of our common stock for accounting
purposes and the option exercise price. We determined the deemed fair value
based upon several factors including our operating performance, issuances of
our convertible preferred stock and valuations of comparable publicly traded
software companies. We recorded stock-based compensation of $1.4 million, $14.5
million and $4.4 million for 1999, 2000 and 2001 and compensation expense of
$325,000, $4.9 million and $4.5 million. Had different assumptions or criteria
been used to determine the deemed fair value of the stock options, materially
different amounts of stock-based compensation could have been reported.

   We have provided an allowance for doubtful accounts of $1,606,000 and
$1,184,000 as of December 31, 2001 and 2000, for estimated losses resulting
from the inability of our customers to make their required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required, which would result in an additional expense in the period such
determination was made.


   In addition, we have capitalized the costs of certain purchased software. We
periodically review these costs to ensure they are being recorded at the lower
of unamortized cost or net realizable value. Net realizable value is determined
using assumed future cash flows related to sales of the underlying technology.
Had different assumed cash flows been used, materially different amounts of the
carrying amount of these costs could have been reported.


                                       30
<PAGE>

Results of Operations

   The following table sets forth the statements of operations data for each of
the periods indicated as a percentage of total revenue.


<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                                 -----------------------------
                                                   1999       2000      2001
                                                 --------   --------   -------
<S>                                              <C>        <C>        <C>
Revenue:
  Licenses......................................     80.5 %     70.3 %    67.4%
  Services and maintenance......................     19.5       29.7      32.6
                                                 --------   --------   -------
    Total revenue...............................    100.0      100.0     100.0

Cost of revenue:
  Cost of licenses..............................      2.7        7.6       6.3
  Cost of services and maintenance..............     33.3       29.4      15.1
  Amortization of stock-based compensation......      1.2        2.2       0.8
                                                 --------   --------   -------
    Total cost of revenue.......................     37.2       39.2      22.2
Gross margin....................................     62.8       60.8      77.8

Operating expenses:
  Research and development......................     50.0       22.3      17.6
  Sales and marketing...........................    167.4       69.6      50.6
  General and administrative....................     41.9       21.2      10.6
  Aborted offering costs........................      --         --        2.0
  Restructuring charge..........................      --         --        0.9
  Amortization of stock-based compensation......      8.5       12.3       4.9
                                                 --------   --------   -------
    Total operating expenses....................    267.8      125.4      86.6

Operating loss..................................   (205.0)     (64.6)     (8.8)

Other income (expense):
Interest expense................................     (5.4)      (0.4)     (0.3)
Other income....................................      0.9        1.4       0.3
                                                 --------   --------   -------
    Other income (expense), net.................     (4.5)       1.0       0.0
                                                 --------   --------   -------

Loss before taxes...............................   (209.5)     (63.6)     (8.8)
Provision for income taxes......................      --         --       (0.9)
                                                 --------   --------   -------
Net loss........................................   (209.5)%    (63.6)%    (9.7)%
                                                 ========   ========   =======
</TABLE>


Years Ended December 31, 2000 and 2001

 Revenue

   Revenue increased from $34.1 million in 2000 to $80.2 million in 2001.
Between these periods, license revenue grew at a rate of 125% and services and
maintenance revenue grew at a rate of 158%.

   Licenses. Licenses revenue increased from $24.0 million in 2000 to $54.1
million in 2001. The increase in license revenue was primarily due to the
addition of over 120 new license customers in 2001. No customer accounted for
more than 10% of our revenue in this period.

   Services and Maintenance. Services and maintenance revenue increased from
$10.1 million in 2000 to $26.1 million in 2001. This increase was due primarily
to an increase in services and maintenance provided in connection with
increased license sales and, to a lesser extent, to renewals of maintenance
contracts by our installed base of customers. This increase is comprised of
$8.6 million in additional maintenance revenue and $7.4 million in additional
professional services, training and other revenue. The number of professional
services consultants increased from 52 to 60 between these periods to
accommodate increased services demand.

                                       31
<PAGE>

 Cost of Revenue

   Licenses. Our cost of licenses consists primarily of royalty expenses paid
to third-party technology vendors. Cost of licenses increased from $2.6 million
in 2000 to $5.1 million in 2001. Our cost of license revenue increased in 2001
due primarily to increased license sales.

   Services and Maintenance. Our cost of services and maintenance includes
salaries and related expenses for our professional services and technical
support organization and third-party consultants. Cost of services and
maintenance increased from $10.0 million in 2000 to $12.1 million in 2001. This
increase was primarily due to an increase in the number of professional
services staff in conjunction with increased demand for our products, offset in
part by a reduction in our use of third-party consultants to deploy our
products.

   Amortization of Stock-Based Compensation. In connection with options granted
to employees in 2000 and 2001, we recorded stock-based compensation related to
our cost of services and maintenance representing the difference between the
exercise price of options granted and the deemed fair market value of our
common stock at the date of grant. Compensation expense is decreased in the
period of forfeiture for any accrued but unvested compensation arising from the
surrender of unvested options upon the termination of an option holder.
Amortization of this stock-based compensation related to cost of services was
$754,000 in 2000 and $627,000 in 2001.

 Operating Expenses

   Research and Development. Research and development expenses consist of the
costs associated with new software development, including our in-house
development staff and contract software developers. The costs associated with
our in-house development staff consist primarily of salaries, as well as other
related expenses. From time to time, our in-house development staff is
supported by outside developers on a contractual basis. The costs for the
development of new software products and substantial enhancements to existing
software products that are eligible for capitalization have not been
significant to date and, as such, are expensed as research and development
costs in the period in which they are incurred. Research and development
expenses increased from $7.6 million in 2000 to $14.1 million in 2001. This
increase was due to an increase in the number of our in-house development staff
primarily as a result of our acquisition activity during this period, the
development of our product into a multi-platform solution and the expansion of
our product line. As of December 31, 2000, we had 66 employees in research and
development, as compared to 98 employees as of December 31, 2001. We expect our
research and development expenses to increase in future periods as we continue
to develop new and enhanced software products. Research and development expense
in 2000 included $824,000 in non-cash charges related to a warrant issued to
Procter & Gamble for research performed in connection with version 4.0 of our
product.

   Sales and Marketing. Sales and marketing expenses consist of payroll
expense, including salaries and commissions and related costs for sales and
marketing personnel, and promotion expenditures, including public relations,
advertising and trade shows. Sales and marketing expenses increased from $23.8
million in 2000 to $40.5 million in 2001. This increase was due to expanded
sales and marketing efforts internationally, and an increase in sales
commissions paid to sales personnel due to a significant increase in new
customers. As of December 31, 2000, we had 116 employees in sales and marketing
as compared to 111 as of December 31, 2001. We expect our sales and marketing
expenses to increase as we continue to increase our marketing efforts and
expand our direct and indirect sales forces.

                                       32
<PAGE>


   General and Administrative. General and administrative expenses consist
primarily of salaries for administrative, executive and finance personnel,
recruiting costs and information services costs. General and administrative
expenses increased from $7.2 million in 2000 to $8.5 million in 2001. This
increase was primarily due to increased costs associated with expanding our
administrative infrastructure, our increased use of third-party contractors and
increases in accounting and legal fees to support our global operations. As of
December 31, 2000 and 2001, we had 23 and 20 general and administrative
personnel. We expect that our general and administrative expenses will continue
to increase as we expand our operations and incur additional costs related to
being a public company.


   Restructuring Charge. In connection with a workforce reduction and
abandonment of a leased facility we undertook in March 2001 in an effort to
conserve our capital, we recorded a restructuring charge of $760,000 in 2001.


   Aborted Offering Costs. Aborted offering costs represent a charge of
approximately $1.6 million that we recorded in connection with the suspension
of our efforts in early 2001 to complete our initial public offering.


   Amortization of Stock-Based Compensation. In connection with options granted
to employees, directors and consultants in 2000 and 2001, we recorded stock-
based compensation related to our operating expenses representing the
difference between the exercise price of options granted and the deemed fair
market value of our common stock at the date of grant. Compensation expense is
decreased in the period of forfeiture for any accrued but unvested compensation
arising from the surrender of unvested options upon the termination of an
option holder. Amortization of this stock-based compensation related to
operating expenses was $4.2 million in 2000 and $3.9 million in 2001.

Other Income (Expense), Net

   The increase in other expenses in 2001 includes interest expense on higher
short term debt balances and foreign currency losses incurred on transactions
denominated in foreign currencies. Other income (expense), net, includes
interest income from our cash and cash equivalents. Interest expense relates to
our financing obligations, including bank borrowings. Other income included
$488,000 and $421,000 of interest income in 2000 and 2001.


Provision for Income Taxes

   We recorded an income tax provision of $683,000 for the year ended December
31, 2001 primarily related to income taxes currently payable on income
generated in non-U.S. tax jurisdictions for which no U.S. benefit is currently
recognizable. Given our losses incurred through December 31, 2001 and the
difficulty in accurately forecasting our future results, management does not
believe that the realization of the related deferred income tax asset meets the
criteria required by generally accepted accounting principles. Therefore, we
have recorded a 100% valuation allowance against the deferred income tax asset.
See Note 12 of Notes to our consolidated financial statements for the
components of the deferred income tax asset.

Years Ended December 31, 1999 and 2000

Revenue

   Revenue was $3.4 million in 1999 and $34.1 million in 2000. Between these
periods license revenue increased at a rate of 789% and services and
maintenance revenue increased at a rate of 1,451% as a result of increased
market acceptance of our product and the resultant increase in sales of our
product and services.

   Licenses. Licenses revenue was $2.7 million in 1999 and $24.0 million in
2000. The increase was primarily due to the release of versions 3.5 and 4.0 of
our product, the addition of over 150 new customers, increased market
acceptance of the Plumtree Corporate Portal and a larger and more experienced
sales force.

                                       33
<PAGE>

   Services and Maintenance. Services and maintenance revenue was $653,000 in
1999 and $10.1 million in 2000. The increase was attributable primarily to an
increase in services and maintenance provided in connection with increased
license sales and growth of our customer base, and an increase in the number of
professional services consultants from 18 to 52 to accommodate increased demand
for our services. This increase included $7.6 million in additional
professional services, training and other revenue and $1.9 million in
additional maintenance revenue.

Cost of Revenue

   Licenses. Cost of licenses revenue was $90,000 in 1999 and $2.6 million in
2000. Our cost of license revenue increased in 2000 from 3% to 11% of total
license revenue due to an increase in the royalties paid to our third-party
technology vendors.

   Services and Maintenance. Cost of services and maintenance revenue was $1.1
million in 1999 and $10.0 million in 2000. The increase in costs was primarily
due to increased salary and bonuses of the professional services consultants in
conjunction with increased demand for our product.

   Amortization of Stock-Based Compensation. Amortization of stock-based
compensation related to our cost of services was $39,000 in 1999 and $754,000
in 2000.

Operating Expenses

   Research and Development. Research and development expenses increased from
$1.7 million in 1999 to $7.6 million in 2000. This increase was primarily due
to the addition of 37 personnel in our research and development department over
these periods. Research and development expense in 2000 included $824,000 in
non-cash charges related to the Procter & Gamble warrant described above.

   Sales and Marketing. Sales and marketing expenses increased from $5.6
million in 1999 to $23.8 million in 2000. This increase was attributable
primarily to increases in the number of sales and marketing personnel from 23
to 116, in the sales commission paid to sales personnel due to a significant
increase in new customers and in the rate at which commissions are paid.

   General and Administrative. General and administrative expenses increased
from $1.4 million in 1999 to $7.2 million in 2000. This increase was due
primarily to increases in facilities expenses of 377%, in the number of
personnel from four to 23, and in professional service fees.

   Amortization of Stock-Based Compensation. Amortization of stock-based
compensation related to our operating expenses in 1999 was $286,000 and $4.2
million in 2000.

Other Income (Expense), Net

   Other income (expense), net, was $(151,000) of interest expense in 1999 and
$363,000 of interest income in 2000. This increase was due primarily to a
higher average cash balance as a result of the proceeds we incurred from the
issuance of shares of our preferred stock in August 1999 and May 2000.

                                       34
<PAGE>

Quarterly Results of Operations

   The following table sets forth selected unaudited consolidated statements of
operations data for the eight quarters ended December 31, 2001. This data has
been derived from the unaudited interim consolidated financial statements
prepared on the same basis as the audited financial statements prepared in
accordance with generally accepted accounting principles contained herein and,
in the opinion of management, include all adjustments consisting only of normal
recurring adjustments that we consider necessary for a fair presentation of
such information when read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this prospectus. The
operating results for any quarter should not be considered indicative of
results of any future period.



<TABLE>
<CAPTION>
                                                        Quarter Ended
                         ------------------------------------------------------------------------------
                         March 31, June 30,  Sept. 30, Dec. 31,  March 31, June 30,  Sept. 30, Dec. 31,
                           2000      2000      2000      2000      2001      2001      2001      2001
                         --------- --------  --------- --------  --------- --------  --------- --------
                                                         (unaudited)
                                                       (in thousands)
<S>                      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Revenue:
 Licenses...............  $ 2,674  $ 3,247    $ 5,926  $12,170    $12,726  $12,996    $13,536  $14,797
 Services and
  maintenance...........    1,225    1,697      2,762    4,442      5,748    6,004      6,775    7,592
                          -------  -------    -------  -------    -------  -------    -------  -------
  Total revenue.........    3,899    4,944      8,688   16,612     18,474   19,000     20,311   22,389
                          -------  -------    -------  -------    -------  -------    -------  -------
Cost of Revenue:
 Cost of licenses.......       52      398        929    1,206      1,004    1,101      1,535    1,423
 Cost of services and
  maintenance...........    1,401    1,864      2,870    3,911      3,457    2,699      2,674    3,304
 Amortization of stock-
  based compensation....       55      156        264      279        216      146        124      141
                          -------  -------    -------  -------    -------  -------    -------  -------
  Total cost of
   revenue..............    1,508    2,418      4,063    5,396      4,677    3,946      4,333    4,868
                          -------  -------    -------  -------    -------  -------    -------  -------
Gross margin............    2,391    2,526      4,625   11,216     13,797   15,054     15,978   17,521
                          -------  -------    -------  -------    -------  -------    -------  -------
Operating expenses:
 Research and
  development...........      859    1,284      2,667    2,816      3,295    3,033      3,511    4,297
 Sales and marketing....    2,232    4,275      6,656   10,606     10,818    9,471     10,315    9,920
 General and
  administrative........      995    1,086      1,888    3,274      1,992    2,597      1,571    2,359
 Restructuring charge...      --       --         --       --         760      --         --       --
 Aborted offering
  costs.................      --       --         --       --       1,643      --         --       --
 Amortization of stock-
  based compensation....      170      684      1,602    1,710      1,383      978        736      803
                          -------  -------    -------  -------    -------  -------    -------  -------
  Total operating
   expenses.............    4,256    7,329     12,813   18,406     19,891   16,079     16,133   17,379
                          -------  -------    -------  -------    -------  -------    -------  -------
Income (loss) from
 operations.............   (1,865)  (4,803)    (8,188)  (7,190)    (6,094)  (1,025)      (155)     142
Other income (expense),
 net....................      (16)      76        182      121         31       19        206     (246)
                          -------  -------    -------  -------    -------  -------    -------  -------
Income (loss) before
 taxes..................   (1,881)  (4,727)    (8,006)  (7,069)    (6,063)  (1,006)        51     (104)
Provision for income
 taxes..................      --       --         --       --         --       --         --      (683)
                          -------  -------    -------  -------    -------  -------    -------  -------
Net income (loss).......  $(1,881) $(4,727)   $(8,006) $(7,069)   $(6,063) $(1,006)   $    51  $  (787)
                          =======  =======    =======  =======    =======  =======    =======  =======
</TABLE>


   Our quarterly revenue increased throughout the periods presented primarily
as a result of the introduction of new versions of the Plumtree Corporate
Portal and the substantial growth of our direct sales force. In the third and
fourth quarters of 2000, we entered into license arrangements with some of our
largest customers to date, with a significant portion of the related revenue
being deferred at

                                       35
<PAGE>

the end of each quarter under the percentage of completion contract method of
accounting. The large quarter over quarter revenue increases in the third and
fourth quarters of 2000 reflect the introduction of version 4.0 of the Plumtree
Corporate Portal and the favorable impact of these contracts. In addition,
during the fourth quarter of 2000, we entered into a large number of license
agreements in which the software was delivered in that quarter, the related
services were non-essential to the functionality of our software and the
related revenue was recognized in that quarter.

   There is not necessarily a proportional relationship between cost of revenue
and total revenue. Through 2000, cost of revenue generally increased in each
quarter primarily as a result of hiring new professional services employees.
Cost of revenue peaked in the fourth quarter of 2000 primarily due to our
addition of a significant number of service personnel and our increased use of
third-party consultants to assist in product deployments. In the first quarter
of 2001, we began to reduce our use of third-party consultants and implemented
a workforce reduction. Cost of licenses typically increases with sales volume;
however, royalty rates vary based on the number and size of deals in a
particular quarter.

   Total operating expense has generally increased in each quarter primarily
due to increased expenses associated with building a sales and marketing
infrastructure, including the development of a direct sales force, and
increased spending on research and development to support new product
introductions and an increase in general and administrative expenses to manage
our expanding operations. Total operating expenses in the fourth quarter of
2000 included a significant stock-based compensation amortization charge, sales
tax accrual and bad debt reserve. Our bad debt reserve increased by $450,000 in
the fourth quarter of 2000 as compared to the prior quarter. Total operating
expenses in the first quarter of 2001 included a $760,000 charge related to our
restructuring and related workforce reduction as well as aborted offering costs
of $1.6 million that we recorded in connection with the suspension of our
efforts in early 2001 to complete our initial public offering. For the fourth
quarter of 2001, total operating expenses reflect our increased use of third-
party consultants, the completion of two small acquisitions and increased
research and development headcount due to related hiring efforts commenced in
the third quarter of 2001.


   Research and development expenses for the quarters ended June 30, 2000 and
September 30, 2000 include non-cash research and development charges of
$115,000 and $709,000, respectively.


   Net income (loss) excluding our amortization of stock-based compensation
related to our cost of services and maintenance and our operating expenses was
$(1.7) million for the quarter ended March 31, 2000, $(3.9) million for the
quarter ended June 30, 2000, $(6.1) million for the quarter ended September 30,
2000, $(5.1) million for the quarter ended December 31, 2000, $(4.5) million
for the quarter ended March 31, 2001, $118,000 for the quarter ended June 30,
2001, $911,000 for the quarter ended September 30, 2001 and $157,000 for the
quarter ended December 31, 2001.

   As a result of our limited operating history and the emerging nature of the
market in which we compete, we are unable to accurately forecast our revenue or
expenses. Our success is dependent upon our ability to enter into and maintain
strategic relationships with customers and to develop and maintain volume usage
of our products by our customers. Our license revenue is comprised
substantially of one-time license fees. As a result, we will be required to
regularly and increasingly sign additional customers with substantial license
fees on a timely basis to realize comparable or increased license revenue.

   Our services and maintenance revenue historically has been comprised almost
entirely of installation, modification and consulting fees and support and
maintenance fees. Our services

                                       36
<PAGE>

revenue has lower gross margin than our license revenue. If the percentage of
our services revenue increases compared to the percentage of license revenue,
our profitability would be impaired. Our maintenance contracts are generally
renewable for 12-month periods. If our customers elect not to renew their
maintenance contracts, our revenue could decline.

   We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, some of which are outside of our
control, including:

  . introduction of products and services and enhancements by us and our
    competitors;

  . competitive factors that affect our pricing;

  . the timing and magnitude of our capital expenditures, including costs
    relating to the expansion of our operations within the United States and
    internationally; and

  . the size and timing of customer orders and deployments, particularly
    large orders and deployments, some of which may represent more than 10%
    of total revenue during a particular quarter.

   As a result of these factors, we believe that quarter-to-quarter comparisons
of our revenue and operating results are not necessarily meaningful, and that
these comparisons may not be accurate indicators of future performance. Because
our staffing and operating expenses are based on anticipated revenue levels,
and because a high percentage of our costs are fixed, small variations in the
timing of the recognition of specific revenue could cause significant
variations in operating results from quarter to quarter. If we are unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall, any significant revenue shortfall would likely have an immediate
negative effect on our operating results. Moreover, our operating results in
one or more future quarters may fail to meet the expectations of securities
analysts or investors. If this occurs, we would expect to experience an
immediate and significant decline in the trading price of our stock.

Liquidity and Capital Resources

   Since inception through 2000, we primarily financed our operations and
capital expenditures through the private sales of convertible preferred stock,
with net proceeds of $36.5 million, as well as through bank loans and equipment
leases. In 2001, we primarily financed our operations and capital expenditures
through cash flow from our operations as well as through bank borrowings. We
had $24.0 million of cash and cash equivalents and $3.8 million in working
capital as of December 31, 2001.

   Our net cash provided by (used in) operating activities was $(6.9) million
in 1999, $(7.1) million in 2000 and $9.6 million for the year ended December
31, 2001. The increase in cash provided by operating activities was due
primarily to our exclusion of non-cash charges (consisting principally of
depreciation and amortization of stock-based compensation) and our working
capital investments. Our working capital investments consist principally of
cash and cash equivalents, accounts receivable and prepaid expenses. Our
accounts receivable fluctuations are principally due to the significant size of
some individual software licensing agreements and the applicable method of
revenue recognition. The uncollected portion of deferred revenue may have a
material effect on days sales outstanding. The days sales outstanding for the
quarter ended December 31, 2000 and 2001 was 85 and 72 days, including
approximately $8.1 million and $8.0 million of deferred revenue billed, but not
yet collected, and was 41 and 40 days excluding these amounts. Prepaid expenses
are primarily related to advance payments made to technology vendors and
deposits on future trade shows.

   Capital expenditures were $136,000 in 1999, $2.4 million in 2000 and $2.0
million in 2001. Our capital expenditures consisted of purchases of items to
manage our operations, including computer hardware and software, office
furniture and equipment and leasehold improvements. We expect that our capital
expenditures will increase in the future as we expand our operations and build
our infrastructure.

                                       37
<PAGE>

   Our net cash provided by convertible preferred stock financing activities
was $8.0 million in 1999 and $22.0 million in 2000. We did not raise proceeds
from the sale of our preferred stock in 2001. Upon completion of this offering,
our outstanding convertible preferred stock will automatically convert into
common stock. During 2001, we also generated $168,000 of cash from the exercise
of stock options.

   We have a $7.5 million revolving line of credit with Silicon Valley Bank
which matures in March 2002, and which we currently intend to renew. To secure
any outstanding loans, we have granted Silicon Valley Bank a security interest
in our assets, including our accounts receivable. Interest on the loans are
payable monthly and accrue at one percentage point above the prime rate as
announced by Silicon Valley Bank. As of December 31, 2001, we had $1.6 million
outstanding under the loan and security agreement. In January 2002, we repaid
all outstanding indebtedness under this facility. In addition, we have issued a
letter of credit for $2.5 million which is enforceable against the facility. We
are prohibited from declaring and paying dividends, incurring any non-permitted
indebtedness and acquiring the capital stock of any other company under our
loan agreements with Silicon Valley Bank.

   In addition, in September 1999 we entered into a master equipment lease
agreement with Lighthouse Capital Partners III, L.P. whereby Lighthouse Capital
will provide funds to us under two lease line schedules in an aggregate
principal amount of up to $1.0 million. The lease line schedules are to be used
only to finance or refinance purchases of equipment.

   We expect to experience significant growth in our operating expenses,
particularly research and development and sales and marketing expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that these operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In
addition, we may utilize cash resources to fund acquisitions of complementary
businesses, technologies or product lines. We believe that our net proceeds
from this offering, together with cash and cash equivalents on hand, will be
sufficient to meet our cash requirements for at least the next 18 months,
including working capital requirements and planned capital expenditures. We may
require additional funds for other purposes, and these additional financing
sources may not be available or, if available, the financing may not be
attainable on terms favorable to us.

Recent Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to record derivative financial instruments on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133," which amends SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (or January 1, 2001
for us). In June 2000, the FASB issued Statement No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
FASB Statement No. 133." SFAS 138 amends SFAS 133 to (a) exclude from the scope
of SFAS No. 133 nonfinancial assets that will be delivered in quantities
expected to be used or sold by a company over a reasonable period in the normal
course of business and for which physical delivery is probable, (b) permit
hedging of a benchmark interest rate, (c) allow hedging of foreign-currency-
denominated assets and liabilities and (d) allow for limited hedging of net
foreign currency exposures. We have no derivative financial and commodity
instruments, forward contracts or hedging arrangements in cash and cash
equivalents. These statements should not have a material impact on our
financial condition or results of operations.

                                       38
<PAGE>

   In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combination" (SFAS 141). SFAS 141 establishes new standards
for accounting and reporting for business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. We will adopt
this statement during the first quarter of fiscal 2002 and we do not believe
that SFAS 141 will have a material effect on our financial position or results
of operations.

   In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which superseded
APB Opinion No. 17, "Intangible Assets." SFAS 142 establishes new standards for
goodwill, including the elimination of goodwill amortization, which is to be
replaced with methods of periodically evaluating goodwill for impairment. We
will adopt this statement during the first quarter of fiscal 2002 and we do not
believe that SFAS 142 will have a material effect on our financial position or
results of operations.

   In June and August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Nos. 143, Accounting for Asset
Retirement Obligations, and 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Under FASB Statement No. 143, the fair value of a liability
for an asset retirement obligation must be recognized in the period in which it
is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. FASB Statement No. 144 retains FASB Statement No. 121's,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, fundamental provisions for the: (1) recognition and measurement
of impairment of long-lived assets to be held and used; and (2) measurement of
long-lived assets to be disposed of by sale. We do not believe that either FASB
Statement No. 143 or No. 144 will have a material impact on our financial
position or results of operations. FASB Statement No. 143 is effective for
fiscal years beginning after June 15, 2002, and FASB Statement No. 144 is
effective for fiscal years beginning after December 15, 2001.

   In November 2001, the staff of the Financial Accounting Standards Board
issued an announcement on the topic of "Income Statement Characterization of
Reimbursements Received for Out of Pocket Expenses Incurred." This announcement
requires companies to characterize reimbursements received for out-of-pocket
expenses incurred as revenue in the income statement. This announcement should
be applied in financial reporting periods beginning after December 15, 2001 and
comparative financial statements for prior periods should be reclassified to
comply with the guidance in this announcement. We will adopt the policies
outlined in the announcement beginning in 2002. We have netted reimbursements
received for out-of-pocket expenses against the related expenses in the
accompanying consolidated statements of operations. The announcement will have
no impact on our gross margin or net income but will increase our services
revenue and cost of services revenue.

Quantitative and Qualitative Disclosures About Market Risk

   As of December 31, 2001, we had cash and cash equivalents of $24.0 million,
which consist of cash and highly liquid short-term investments with original
maturities of three months or less at the date of purchase. These investments
may be subject to interest rate risk and will decrease in value if market
interest rates increase. A hypothetical increase or decrease in market interest
rates by 10% from the market interest rates at December 31, 2001 would cause
the fair value of these short-term investments to change by an immaterial
amount. Declines in interest rates over time will, however, reduce our interest
income.

                                       39
<PAGE>

                                    BUSINESS

Overview

   We develop, market and sell corporate portal software and related services
for enterprises. Corporate portal software allows an enterprise's employees,
customers and partners to interact with different types of information and
applications in one Web site and empowers users to create new information and
services on the Web. Our software also supports a wide range of online business
processes, so users can complete tasks more efficiently. For example, using our
portal, a company's employees can send e-mail, read competitive news or update
a sales database, accessing multiple systems in one experience. Supervisors can
also use our product to assign projects and approve expenses. Similarly, a
company's customers can use our portal to search for support articles,
participate in online discussions or access billing information. We believe
that the range of resources that our software can integrate and our proprietary
Internet technology for performing this integration for hundreds of thousands
of users differentiate our solution and create significant value for our
customers. We also provide professional services and training, maintenance and
support services to our customers. Since 1997, we have licensed our portal to
more than 300 customers from a broad range of industries and government,
including AMR (American Airlines), Boeing, Bristol-Myers Squibb, Cadbury
Schweppes plc, Duke Energy, Eli Lilly, Ford Motor Company, Ketchum, Merrill
Lynch, National Institutes of Health, Pfizer, Pharmacia, Procter & Gamble,
United Technologies Corporation, United States Air Force and United States
Naval Air Systems Command.

Industry Background

   The Internet has transformed business by introducing broader audiences to
computing and opening enterprises to new interactions with employees, customers
and partners. The Internet has also transformed software by allowing previously
incompatible electronic resources from formerly isolated systems to be
integrated by private and public networks. As a result, the volume of
information and the number of software applications available through the
Internet have increased dramatically. There is a significant market for portal
software that can combine an organization's most important information and
online services in a single Web experience. International Data Corporation or
IDC, expects that software license and maintenance revenue for the enterprise
information portal software market will grow at a compounded annual growth rate
of 44.9%, from $454.9 million in 2001 to $2.0 billion in 2005.

   Many organizations are seeking to combine their most important information
and applications into a simple Web experience for those within the organization
and those doing business with the organization. However, significant challenges
hinder these efforts to provide a unified experience. The first challenge is to
integrate enterprise applications, such as sales databases and financial
systems purchased at different times for different purposes, whose audiences
have been limited to technical or functional specialists. The second challenge
is to create an enterprise-wide framework for organizing the enormous volume of
documents, e-mail messages, and Web pages now being created with desktop
publishing tools and personal computers. The third challenge is to understand
which applications and documents users have permission to access, and which of
those resources users want to see.

   There have been few solutions for integrating in one Web experience a wide
range of resources from other systems. Attempts to develop in-house solutions
often are costly, require significant resources and time, and provide limited
functionality. Established software vendors are Web-enabling their own software
applications, but often face architectural limitations when attempting to
integrate data and services from other software applications. These vendors are
unlikely to support access to data or services provided by an application from
a competing vendor. Web-enabling a large number of systems separately can be
very costly and may confuse employees, customers and partners forced to access
different, often complex systems or perform different tasks.

                                       40
<PAGE>

Our Solution

   We provide software and services that enable an enterprise to deploy a
corporate portal to information and applications. Our flagship product, the
Plumtree Corporate Portal, gives a broad audience of employees, customers and
partners a single, personalized destination for the key information and
services they need to conduct business with an organization.

   This platform, powered by an engine that communicates with a large number of
Web services simultaneously, is complemented by a wide range of components for
integrating content and applications, as well as collaboration and application
development products planned for commercial release in the first quarter of
2002.

   Our solution offers the following benefits to our customers:

 Simplifies Access to Information, Increases Employee Productivity and Lowers
 Employee Costs

   Rather than having to negotiate access separately to all of the applications
and services required to be productive, portal users can see everything
relevant to their work in a personalized page. The portal also features group
pages known as communities, which act as resource centers for workgroups and
business units to collaborate with each other and to share information. A
salesperson may, for example, begin each day with a personalized page that
includes sales leads from a database, e-mail and calendar from a communication
system, competitive updates from the Internet, and an electronic form for
sending marketing materials to prospects. Through the portal, the salesperson
can also visit communities hosted by different engineering or marketing groups
to learn about specific products or sales programs. This experience is designed
to help employees be more effective at driving revenue, and to lower the cost
of training and supporting those employees.

 Improves Customer and Partner Service, Lowers Support Costs

   Our solution is designed to provide a secure environment for offering an
organization's customers and partners self-service access to its key
information and applications. For example, a manufacturer could visit a
supplier's portal to check billing information, search for support articles or
give product feedback. Similarly, a sales partner could visit the same portal,
personalized for that partner, to check inventory, query market demographics or
track joint sales opportunities. As a result, customers and partners are not
required to visit multiple sites to do business with an organization, and
benefit from having a single point of access for relevant information and
services available from that organization. Also, the organization is able to
support its customers and partners at a lower cost than maintaining multiple
support Web sites.

 Consolidates Web Investments, Lowers Information Technology Costs

   Many organizations have invested heavily in converting applications and
document repositories for Web access, and in integrating these systems using
the Internet. In addition to these Web-enabled systems, intranets and extranets
have proliferated, and the costs of separately maintaining a large number of
systems on the Web are unacceptable for many organizations. Each system often
requires its own administration, security, scalability, infrastructure, user
interface and user training. The Plumtree Corporate Portal offers a common
infrastructure for providing these capabilities, which can lower the cost of
deploying existing and new resources to large audiences of employees, customers
and partners. In place of expensive and time-consuming roll-outs of new
systems, our customers can embed applications and services from those systems
in a portal that a large number of users already visits daily, increasing the
likelihood of a successful deployment.


                                       41
<PAGE>

Strategy

   Our objective is to lead the corporate portal industry with the most
innovative technology and most satisfied customers. Key elements of our
strategy include:

 Establishing the Plumtree Corporate Portal as an Enterprise Platform

   We intend to establish the Plumtree Corporate Portal as the primary platform
for aggregating an organization's existing information and services, and for
creating new Web-based information and services. To drive this strategy, we
seek to maximize the range of software applications integrated into our
platform using open technologies. As our solution is adopted by our customers
as an enterprise-wide Web platform, businesses can use our platform to author
new documents, build new applications and create new Web-based business
processes. We believe that our customers will realize greater value from our
solution by using our platform to go beyond presenting data and applications to
support workgroup interaction. The extensive adoption of our platform will
provide us greater revenue opportunities.

 Developing New Products To Address Customer Needs

   We believe our portal provides a cost-effective platform for delivering new
Web applications to broad audiences. Accordingly, we intend to build additional
software products related to our portal platform. These products include both
applications for different lines of business, such as human resources or
sales and marketing, and new servers that extend the core functionality of the
portal, offering collaboration, expert location or online training. We believe
that new product releases will increase our revenue opportunities with each
customer and allow us to compete even more effectively.

 Expanding Alliances with Technology Vendors and Systems Integrators

   We intend to continue to develop a broad base of systems integrator and
technology vendor alliances. Expanding our alliances allows our customers to
integrate a greater range of information and services and provides additional
support for portal deployments spanning a wide variety of technologies and
disciplines. Our alliances with systems integrators can create demand for our
product at integrators' clients around the world, and provide deployment
expertise that allows us to focus on generating software license revenue. Our
alliances with technology vendors strengthen our brand and assure prospective
customers that our product can work with a wide range of best-of-breed
technologies. Many of these alliances have resulted in the development of
product extensions, which can enhance our value proposition to customers.

 Increasing Our Market Share Among Industry-Leading Customers

   Our customers include 11 of the Fortune 50, including Boeing, ExxonMobil,
Ford Motor Company and Procter & Gamble. We intend to leverage our reputation
for working on large and complex assignments to assist us in attracting new
customers and alliance members, and in increasing our market share. We have
licensed our portal for deployment to more than 100,000 users at each of these
customers: AMR (American Airlines), Boeing, Bristol-Myers Squibb, Ford Motor
Company, Merrill Lynch, Pharmacia, Procter & Gamble and United Technologies
Corporation. We believe that the scalability of our technology provides us with
a significant competitive advantage by enabling us to meet the demands of large
customers. Third-party testing has established that our portal can support more
than one million users.

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<PAGE>

Products

   Our solution consists of the Plumtree Corporate Portal and Plumtree Gadget
Web Services, and also includes the Plumtree Collaboration Server and the
Plumtree Studio Server. The Plumtree Collaboration Server and the Plumtree
Studio Server are planned for commercial release in the first quarter of 2002.
Our solution also includes infrastructure, which we call the Plumtree Internet
Architecture, for assembling information and applications using Internet
protocols.

 Plumtree Corporate Portal

   The Plumtree Corporate Portal is an enterprise software solution that offers
a portal user experience and related administration tools. The portal user
experience consists of Personalized Portal Pages, Plumtree Portal Communities
and the Plumtree Document Directory. The administration tools manage and secure
all the resources integrated in the portal.

   Personalized Portal Pages. The personalized portal page is a Web page that
can be easily assembled by each portal user, combining categories drawn from
the portal's document directory with information and services integrated as
Plumtree Gadget Web Services from different systems.

   Plumtree Portal Communities. Communities are similar to personalized portal
pages, but are assembled by a manager or project leader to communicate a group
view of the business or project, and to promote collaboration. Communities
consist of Gadget Web Services and categories drawn from the document
directory, and can also feature collaboration services for document sharing,
threaded conversation and assigning tasks to group members. A typical portal
deployment offers a wide variety of communities. Organizations can use
communities as business-to-employee resource centers, projecting a company-
wide, regional or departmental view of the business. Organizations can also use
communities as a business-to-business forum for collaborating with partners and
customers, or as an employee-to-employee working site for completing projects.

   Plumtree Document Directory. The document directory organizes links to a
wide variety of documents from different sources in a hierarchy of categories
defined by each Plumtree customer. This hierarchy is known as a taxonomy, and
acts as a way to visualize and administer an index of content on the Internet
and within an enterprise. Users search or browse this taxonomy, and can also
select categories from the taxonomy to embed in a personalized or community
portal page, which highlights the most recent documents available for that
category.

   The directory indexes more than 15 types of documents, as well as Web pages,
database reports and electronic mail messages from Lotus Notes and Microsoft
Exchange. The portal stores only an index of the documents, with links in the
directory to their original location, avoiding content replication. To identify
new documents to index, the portal automatically scans a wide variety of
document databases, file systems, Web sites and messaging databases. The portal
can be extended to scan new types of repositories using modular components
called Plumtree Crawlers, and to index documents in new formats using modular
components called Plumtree Accessors. These components operate on a server
separate from the Web server hosting the portal application, improving
reliability and performance.

   The document directory can be overseen by a large number of content experts
in different parts of an organization. These experts review the recommendations
of the portal's categorization engine to determine if documents have been
appropriately indexed in the section of the taxonomy that they administer.

                                       43
<PAGE>

 Gadget Web Services

   The Plumtree Corporate Portal integrates application resources from many
systems through our Gadget Web Services. Gadget Web Services are portal
components operating on separate computers that integrate into the portal
dynamic information such as e-mail inboxes or sales reports, as well as
interactive services such as threaded conversations, online procurement or an
employee directory. Portal users can build a portal page easily by choosing the
Gadget Web Services to be included in their page.

   Gadget Web Services can draw on resources from existing applications or
provide a new capability hosted entirely by the Gadget Web Service. Plumtree
offers Gadget Web Services for a broad variety of systems from such vendors as
Cognos, Documentum, IBM, Microsoft, PeopleSoft, SAP and Siebel.

   Portal users can assemble Gadget Web Services in personalized portal pages
to simplify access to the resources they use most, and in community pages to
share information and services with others. By integrating the most useful
electronic resources in a simple, personalized experience that people visit
every day, Gadget Web Services can offer information technology departments the
flexibility to deliver information from a wide range of systems more quickly,
at lower cost, and to broader audiences than they could by Web-enabling the
entire application.

   To ensure the quality of Gadget Web Services based on applications from
other vendors, Plumtree has developed an extensive customer-aided design and
testing program for certifying Gadget Web Services. Gadget Web Services that
meet this program's criteria are released as Plumtree Enterprise Class Gadget
Web Services. Enterprise Class Gadget Web Services are sold and supported by
Plumtree as separate products. We believe that the reliability and scalability
of our Gadget Web Services differentiate our solution and increase our per-
customer revenue opportunities. The Gadget Web Services now available with the
Plumtree Corporate Portal are designed to allow customers to deploy a portal
that will provide access to their most important systems rapidly, requiring
little or no custom development.

    Collaboration Server. Plumtree plans to release commercially in the first
quarter of 2002 the Plumtree Collaboration Server. Designed to allow Plumtree
Corporate Portal users to collaborate on projects and manage documents and
schedules, the Collaboration Server offers a new experience within the portal
exclusively dedicated to collaboration. This product also embeds in the portal
Gadget Web Services that summarize the status of a project or highlight a
user's deadlines from all of the projects to which he or she belongs. The
Collaboration Server relies on the portal's security scheme, recognizing the
portal's users and groups, and offers an integrated administrative environment.
As a result, the portal can combine collaboration tasks with a portal
experience that many users already visit every day, without requiring the
organization to suffer the expense of deploying and launching a separate system
with separate security. The Collaboration Server will be the first major
example of our strategy to build products that not only integrate existing
applications and information into the portal, but also provide new services to
our customers.

    Studio Server. Plumtree plans to release commercially in the first quarter
of 2002 the Plumtree Studio Server, a graphical environment designed to allow
portal administrators and workgroup leaders to create Web services without any
coding. The Plumtree Studio Server also features templates for creating Web
services that automate business processes for such tasks as approving travel
requests or procuring office equipment.

                                       44
<PAGE>

 Plumtree Internet Architecture

   The Plumtree Internet architecture is based on our use of Internet standards
such as Hypertext Transfer Protocol (HTTP), Simple Object Access Protocol
(SOAP), Universal Description Discovery and Intergration (UDDI) and Extensible
Mark-up Language (XML). Through the use of these protocols, we can integrate
applications, content, security and search services. Plumtree offers a parallel
engine for high-performance, enterprise-scale communications using these
standards. We believe we offer the first enterprise solution in which all
integration is based on Internet standards, and that this architecture offers
customers greater flexibility, reduced development costs and maximum
reliability. Because it can broker resources across different platforms and
networks, the Plumtree Corporate Portal can integrate a wide range of resources
from other systems.

 Plumtree Corporate Portal Version 4.51

   We currently plan to introduce the next version of the Plumtree Corporate
Portal in the first half of 2002. Version 4.51 will expand our Internet
architecture to:

      Index and categorize content from different repositories: Crawler Web
  Services, a more robust version of our current crawler technology, will
  scan other repositories for content to index in the portal's document
  directory.

      Authenticate users: Authentication Web Services will authenticate users
  against different user directories, such as Lightweight Directory Access
  Protocol (LDAP), Windows NT, and Active Directory directories.

Services

   In addition to offering infrastructure software, we offer customers, systems
integrators and technology vendors deployment and support services.

 Professional Services

   We offer professional services to deploy the Plumtree Corporate Portal at
customer sites, and to train alliance members, including technology vendors and
systems integrators. Our consultants participate in joint deployments with
systems integrators, increasing our capacity to deploy at a large number of
customer sites.

 Customer Care Services

   We provide customer care through technical support and assigned account
managers. Technical support is offered for customers and alliance members
worldwide via e-mail and telephone through our support centers in San Francisco
and London 24 hours per day, seven days per week. Customers, systems
integrators and technology vendors may also receive technical support through
Plumtree's support portal, which is a deployment of our own portal software. In
addition, local account managers act as advocates within Plumtree to assist
customers in defining their business requirements and obtaining the needed
resources for a successful deployment. Plumtree also offers premium support,
which includes developer support, dedicated account management and on-site
support.

 Training Services

   We offer a series of training classes designed to provide our customers and
alliance members with the knowledge and tools necessary to deploy, administer
and expand the portal within the enterprise. Offered both at customer sites and
at training centers in various cities, these classes train individuals from
customer and alliance member organizations.

                                       45
<PAGE>

Alliances

   We have developed relationships with a wide range of technology and systems
integrator alliance members. These relationships generate new sales
opportunities, increase our deployment capacity and enhance our product's
features.

 Technology Vendors

   Because a portal exists to integrate access to a wide range of technologies,
we seek to further establish our platform by cultivating extensive technology
vendor support. Several alliance members have participated in development of
Gadget Web Services, augmenting our ability to develop new portal extensions.
We also market our product through technology alliance members, participating
in joint events and engaging alliance member sales people to promote joint
solutions. We have relationships with over 50 technology alliance members. We
have established our most significant relationships with technology vendors
such as Documentum, IBM, Interwoven and Microsoft.

 Systems Integrators

   We have established relationships with over 65 systems integrators, and have
trained their technicians on methodologies for deploying our technology. By
offering our customers deployment services, systems integrator alliance members
increase our ability to meet customers' needs and allow us to focus on
developing and licensing our software. Systems integrators also collaborate
with our engineers and customers on the development of Web services, and
identify and pursue sales opportunities on our behalf. Systems integrators that
help deploy and re-sell our products include Accenture, Cap Gemini Ernst &
Young, Computer Sciences Corporation, Electronic Data Systems, IBM, Microsoft
Consulting Services and Project Performance Corporation.

                                       46
<PAGE>

Customers

   We have licensed our products to over 300 customers. Our clients represent a
broad spectrum of enterprises. For 2000 and 2001, no single customer accounted
for 10% or more of our net revenue. Customers that we have invoiced $500,000 or
more in license and maintenance fees during the years 1999, 2000 and 2001
include the following:


<TABLE>
<CAPTION>
Aerospace and             Insurance and Financial
Manufacturing             Services                      Pharmaceutical and Healthcare
-------------             -----------------------       -----------------------------
<S>                       <C>                           <C>
Airbus                    FM Global                     Amgen
AMR (American
Airlines)                 Merrill Lynch                 Bristol-Myers Squibb
American Standard         Robertson Stephens            Eli Lilly
Boeing                    State Street Corporation      GlaxoSmithKline
Ford Motor Company        Swiss Reinsurance Company     Pfizer
Motorola                  Unicredito Italiano SPA       Pharmacia
Solectron                                               Zimmer Holdings
United Technologies Corporation
<CAPTION>
Petrochemical and Energy  Retail and Consumer           Government and Education
------------------------  -------------------           ------------------------
<S>                       <C>                           <C>
BP                        BestBuy                       City of Calgary
Centrica                  BIC                           Highways Agency (United Kingdom)
ChevronTexaco             Cadbury Schweppes plc         Inter-American Development Bank
Cinergy                   Electronic Arts               United States Air Force
Duke Energy               Heineken                      United States Naval Air Systems Command
ExxonMobil                Kmart                         University of Chicago
First Energy
 Capital                  Procter & Gamble              University of Pittsburgh
Sun Chemical              Starbucks                     Workers Safety Insurance Board (Canada)
Transneft
<CAPTION>
                          Other
                          -----
<S>                       <C>                           <C>
                          ADC Telecommunications
                          Cargill
                          Computer Sciences Corporation
                          Electronic Data Systems
                          General Growth Properties
                          Paxonix
                          Safeguard Scientifics
                          Telus
                          United Messaging
</TABLE>

Customer Profiles

   The selected customer examples below are intended to illustrate how our
customers are using, or planning to use, the Plumtree Corporate Portal to solve
their business needs.

 Ford Motor Company

   Ford Motor Company, the world's second largest automaker, has deployed our
enterprise-wide portal for its 200,000 employees. Our Plumtree Corporate Portal
is the platform for Ford's global intranet, my.ford.com. my.ford.com brings
together key business applications and over one million documents across
hundreds of network sites. my.ford.com now has nearly 175,000 active users
across 950 Ford facilities worldwide. Activity on Ford's intranet has increased
from 400,000 hits per day to more than 2 million since deploying our portal in
June 2001. Performance tracking shows that my.ford.com regularly supports peak
loads of up to 1,800 hits per minute.


                                       47
<PAGE>

   Ford employees can save time and become more efficient by assembling their
business tools in personalized portal pages. Users can choose Web Services for
collaboration, travel booking, pay and benefits, and training, and draw on a
knowledge base of best practices, industry news, sales reports, product
specifications and performance metrics. Ford employees have increased
productivity through portal communities, or group pages of Gadget Web Services.
Employees may be members of division-wide communities, such as Manufacturing,
Marketing or Finance, or of smaller communities created to facilitate global
collaboration on projects such as the development or launch of a particular
product.

 Ketchum

   Ketchum, one of the world's largest public relations firms, chose the
Plumtree Corporate Portal to power a global intranet and extranet platform.
Launched in November 2000, the portal, myKGN, is now deployed to all 1,200
Ketchum employees and to select clients worldwide. With myKGN, Ketchum
professionals and their clients can access hundreds of public relations Web
sites, subscription media services, billing and media research applications,
and thousands of documents in the portal's Web-based directory. Ketchum
employees can also choose from available Gadget Web Services for daily tasks
such as time entry, package tracking, media monitoring and expertise location.

   A recent internal Ketchum survey showed that 92 percent of employees rate
the portal as a valuable tool. Ketchum's portal also offers Ketchum employees
and clients the convenience of project collaboration via Web-based workplaces
integrated as Gadget Web Services. In myKGN's secure extranets, Ketchum
employees and their clients can collaborate on documents, share account
information, and track key dates and tasks, helping to improve customer service
and reduce the need for in-person meetings and travel. Ketchum attributed $10
million in new business in 2001 to better client service using the portal. A
study measuring return on investment showed that Ketchum could realize a four-
year return of $12.1 million in positive cash flow and productivity on its
investment in the portal. The study identified several key areas in which our
product is creating value for Ketchum, including increased sales, improved
productivity, reduced training costs and reduced travel costs.

 Eli Lilly


   Eli Lilly, a leader in the global pharmaceutical industry, deployed our
product for over 16,000 employees in just 90 days. Eli Lilly's portal, myELVIS
(Eli Lilly Virtual Information Service), aggregates content from thousands of
Lotus Notes and Documentum databases in a Web knowledge base, and integrates
data from chemical and genomic databases as Gadget Web Services. Salespeople,
marketing staff, physicians and scientists now share a common interface for
healthcare industry news feeds, patent services, reference works, regulatory
data and clinical trial results. Portal communities connect Eli Lilly employees
with specific skills or product knowledge, facilitating collaboration with
Gadget Web Services for document sharing, threaded discussion and group
calendars.


Sales and Marketing

   We pursue accounts using our direct sales force and through systems
integrators and independent software vendors. We focus our sales activities on
large businesses and government organizations.

   As of December 31, 2001, our sales organization consisted of 95 managers,
account executives, channel managers and product consultants, divided into six
teams. We have sales representatives throughout the United States, Europe and
Asia Pacific, located in major metro areas such as Amsterdam, Atlanta, Boston,
Chicago, Dallas, Denver, London, Los Angeles, Minneapolis, Munich,

                                       48
<PAGE>

New York, Paris, San Francisco, Seattle, Seoul, Singapore, Stockholm, Sydney,
Tokyo and Washington D.C.

   Our marketing and technology alliances efforts are conducted by a team that,
as of December 31, 2001, consisted of 16 professionals. The marketing
organization is generally responsible for product positioning, product
direction, communications, field events and sales tools. The product management
team drives product direction, technical marketing and competitive analysis. We
generate sales leads from communications programs that include our Web site,
public relations, online and local seminars, tradeshows and events. The
technology alliances team is responsible for forming new technology alliances
and marketing existing alliances. The alliance marketing efforts are designed
to support co-marketing programs with our alliance members.

Technology

   The Plumtree Corporate Portal is based on Web services technologies and a
parallel engine designed to assemble those services in an enterprise solution.

 Portal Web Services

   Web services are software components that other software programs can access
using the Internet protocol HTTP. The HTTP protocol connects software
components written in different languages on different platforms and different
networks. This flexibility to integrate software components from previously
incompatible systems allows the Plumtree Corporate Portal to be extended in
four principal ways:

  .  Applications: Web services called Plumtree Gadget Web Services integrate
     into the portal's personalized and community pages application and
     Internet services from software for customer relationship management,
     enterprise resource planning, business intelligence, document management
     and other purposes.

  .  Search: Web services called Plumtree Search Web Services open different
     search indexes to the portal's search capability, empowering users to
     search simultaneously the repositories indexed in the Plumtree portal as
     well as other indexes maintained by other search engines on the Internet
     and the corporate network.

   With the release of the Plumtree Corporate Portal 4.51 currently scheduled
for the first half of 2002, we plan to offer the following additional plug-in
Web services:

  .  Content: Web services called Plumtree Crawler Web Services are being
     designed to integrate in Plumtree's document directory different types
     of content from different types of repositories, such as Lotus Notes,
     Microsoft Exchange, file systems and Documentum.

  .  Security: Web services called Plumtree Authentication Web Services are
     being designed to synchronize users' security profiles from other
     systems, allowing the portal to negotiate access to the wide range of
     secure resources available to each user through different profiles.

 Parallel Portal Engine

   To scale to meet the needs of a large number of users who each require the
integration of many Web services in a personalized, secure way, we have
developed the parallel portal engine, which sends requests to multiple Web
services in parallel through HTTP. Our engine can retrieve content from a large
number of Web services, optimizing the number of network sockets and computing
threads required for these requests. If, for example, a portal page embeds a
Gadget Web Service for listing e-mail messages that takes one second to
prepare, an inventory report Gadget Web Service that takes one second to
prepare and an industry news Gadget Web Service that takes one second to

                                       49
<PAGE>

prepare, the parallel portal engine assembles the page in approximately one
second, instead of three, even if each Web service is hosted on an entirely
different platform. This approach is also designed to be fault-tolerant, as
Gadget Web Services operating on separate computers cannot interfere with one
another or with the portal's main Web server. Features of our parallel engine
include:

  .  Request chaining: the parallel engine combines multiple HTTP requests
     into a single virtual request, reducing the number of network sockets
     opened and closed, and improving performance.

  .  Thread conservation: traditional HTTP libraries use a separate computing
     thread for each HTTP request, which quickly exhausts the memory of a
     system that may have to open thousands of HTTP requests per second. The
     parallel engine opens multiple HTTP requests using one thread,
     increasing performance.

  .  Address caching: the parallel engine stores in memory the addresses of
     computers hosting portal Web services, avoiding time-consuming address
     requests from a domain name server.

  .  Time-outs: because our Internet architecture isolates faults on separate
     computers, the engine can bypass Web services that fail to return a
     result within an administrator-configured time-frame. The portal
     displays a cached result or an error message where that Web service
     would have surfaced to the user, without causing the entire portal to
     fail or wait indefinitely, increasing the portal's overall quality-of-
     service.

  .  Load-balancing: the parallel engine balances loads against multiple
     instances of the same Web service, re-directing requests when one
     instance is overtaxed or fails. The portal recognizes when a portal
     function requires an extended connection with a particular Web service
     that stores information in memory while responding to the function. The
     portal'sload-balancing is designed to eliminate the need to purchase
     separate load-balancing equipment for communications between the portal
     and its component Web services.

  .  Secure Sockets Layer: the parallel engine is designed to support
     optimized communications through the Secure Sockets Layer, for secure
     connections to thousands of Web services.

Research and Development

   Since inception, we have devoted significant resources to develop our
products and technology. We believe our future success depends in large part on
continuing innovation and rapid development. Our engineering organization is
responsible for product architecture and technology, engineering and quality
assurance. As of December 31, 2001, our engineering organization consisted of
98 employees. For the years ended December 31, 1999, 2000 and 2001, our
research and development expenses totaled approximately $1.7 million, $7.6
million and $14.1 million. We expect to continue to devote substantial
resources to our research and development activities.

Intellectual Property and Licensing

   Our success and ability to compete is dependent in part on our ability to
develop and maintain the proprietary aspects of our technology and operate
without infringing the proprietary rights of others. We rely primarily on a
combination of copyright, trade secret and trademark laws, confidentiality
procedures, contractual provisions and other similar measures to protect our
proprietary information. For example, we license rather than sell our software
to customers and require licensees to enter into license agreements that impose
certain restrictions on their ability to utilize the software. We have filed
one provisional and five non-provisional patent applications with the U.S.
Patent and Trademark Office. There can be no assurance that any of our
intellectual property rights will not be challenged or invalidated.

                                       50
<PAGE>

   We also enter into license agreements with respect to our technology,
documentation and other proprietary information. Those licenses are generally
non-transferable and typically have a perpetual term. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy,
reverse engineer or otherwise obtain and use our products or technology that we
consider proprietary, and third parties may attempt to develop similar
technology independently. Policing unauthorized use of our products is
difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination and security of software and
other data transmitted.

   We integrate third-party software into our products. This third-party
software may not continue to be available on commercially reasonable terms. If
we fail to maintain licenses to third-party software, shipments of our products
could be delayed until equivalent software could be developed or licensed and
integrated into our products, which could seriously harm our business,
operating results and financial condition.

   We do not believe that any of our products infringe the proprietary rights
of third parties. However, third parties may assert infringement claims against
us in the future with respect to current or future products. Further, we expect
that software product developers will increasingly be subject to infringement
claims as the number of products and competitors in our industry segment grows
and the functionality of products in different industry segments overlaps. Any
claims of that variety, with or without merit, could cause a significant
diversion of management attention, result in costly and protracted litigation,
cause product shipment delays, refund license fees, indemnify our customers and
alliance members or require us to enter into royalty or licensing agreements.
Those royalty or licensing agreements, if required, may not be available on
terms acceptable to us or at all, which could seriously harm our business.

   Our policy is to require all of our employees to sign nondisclosure and
confidentiality agreements. From time to time, we hire or retain employees or
consultants who have worked for independent software vendors or other companies
developing products similar to those offered by us. Those prior employers may
claim that our products are based on their products and that we have
misappropriated their intellectual property. Any claims of that variety, with
or without merit, could cause a significant diversion of management attention,
result in costly and protracted litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Those royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all, which could harm our business.

Competition

   The market for our product is intensely competitive and highly fragmented,
characterized by rapid technological change, evolving industry standards,
changes in customer needs and new product introductions.

   We compete principally on the basis of:

  .  product features, quality and performance;

  .  the scalability of our Internet architecture;

  .  interoperability of the product with existing applications, content
     repositories and security systems;

  .  number, size and satisfaction of customers;

  .  number and significance of alliances; and

  .  strength of sales and services channels.

                                       51
<PAGE>

We believe we compete favorably with our competitors on the basis of these
factors.

   Some established software vendors, such as PeopleSoft, SAP and Siebel, are
Web-enabling traditional client-server applications, which in some cases are
being labeled as portal applications. Prospective customers who require only a
Web view of their applications may not need a corporate portal product and may
be satisfied with this category of products. Some established software vendors,
such as BEA, IBM and Microsoft, are offering portal-building infrastructure.
These companies support a build-your-own alternative to our product. Since many
prospects already license other software from these vendors, a customer-vendor
relationship already exists. We also face competition from information
technology departments of potential customers that have developed or may
develop in-house technologies that may substitute for those offered by us. We
expect these internal development initiatives will continue to be a source of
competition. We also face competition from emerging software companies. These
companies generally offer products that could substitute for those offered by
us.

   We expect to face increased competition in the future from our current
competitors. In addition, new competitors, or alliances among existing and
future competitors, may emerge and rapidly gain significant market share. Many
of our competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition,
a broader range of products to offer and a larger installed customer base, any
of which could provide them with a significant competitive advantage. We expect
that the rapid evolution of Internet-based software applications and standards
will require us to adapt our software products to remain competitive. If we are
unable to compete successfully, we may be unable to attract and retain
customers. Increased competition could also result in price reductions for our
products and lower profit margins, either of which could harm our business,
results of operations and financial condition.

   We may be unable to successfully compete against current and future
competitors, and competitive pressures we face may harm our business,
prospects, operating results and financial condition.

Employees

   As of December 31, 2001 we had 301 full-time employees, of whom 263 were
based in North America and 38 were based in Europe and Asia Pacific. Of those
employees, 111 were in sales and marketing, 98 were in product development, 72
were in professional services, technical support and training, and 20 were in
finance, human resources, information systems and administrative functions. Our
employees are not represented by any collective bargaining agreements and we
have never experienced a work stoppage, and we consider our relations with our
employees to be good.

Facilities

   Our principal headquarters facility is located in approximately 41,000
square feet of office space in San Francisco, California under a lease that
expires in 2006. We believe our current facilities are adequate for our needs
for the foreseeable future.

                                       52
<PAGE>

                                   MANAGEMENT

Executive Officers and Directors

   The following table sets forth information regarding the executive officers,
directors, and key employees of Plumtree as of December 31, 2001:

<TABLE>
<CAPTION>
           Name                                 Position                     Age
           ----                                 --------                     ---
<S>                         <C>                                              <C>
John Kunze................. President, Chief Executive Officer and Director   38
Eric Borrmann.............. Vice President and Chief Financial Officer        40
Glenn Kelman............... Co-Founder, Vice President of Product Management  30
                             and Marketing
John Hogan................. Vice President of Engineering                     36
Jim Flatley................ Vice President of Worldwide Field Operations      41
John Dillon................ Director                                          52
Rupen Dolasia.............. Director                                          39
Pierre Lamond.............. Director                                          71
Bernard Whitney............ Director                                          45
</TABLE>

   John Kunze has been President, Chief Executive Officer and member of the
board of directors since August 1998. Before joining Plumtree, Mr. Kunze spent
his entire professional career from 1985 to 1998 at Adobe Systems. Mr. Kunze
led development for the first releases of Adobe Illustrator and PhotoShop.
Mr. Kunze became Director and then Vice President of Product and Marketing at
Adobe Systems, with responsibility for all product marketing and strategic
acquisitions. Mr. Kunze was later promoted to Vice President of Adobe Systems
Internet Products Division, which defined Adobe Systems' Internet strategy.

   Eric Borrmann has been Vice President and Chief Financial Officer since July
2000. Before joining Plumtree, Mr. Borrmann served as Corporate Treasurer at
Network Associates since 1999, where he was responsible for all financial
planning and investor relations at the global security and network management
company. Previously, he served as Network Associates' Vice President of Finance
and Operations for Europe, the Middle East and Africa. Mr. Borrmann's
experience also includes senior management and systems engineering positions at
Network General from 1995 to 1997, Conner Peripherals from 1990 to 1995 and
Electronic Data Systems from 1985 to 1988.

   Glenn Kelman, Co-Founder and Vice President of Product Management and
Marketing since March 1998, is responsible for corporate and product marketing
as well as business development and collaborates with our engineering
department to set the features and design of our products. Mr. Kelman managed
the design and development of the first release of the Plumtree Corporate
Portal. Before founding Plumtree, Mr. Kelman was a senior product manager at
Informix Software, a company he joined via the acquisition of Stanford
Technology Group, from 1995 to 1997. As a product manager for On-Line
Analytical Processing software following Informix Software's acquisition of
Stanford Technology Group, Mr. Kelman was involved in designing and launching a
major release of Informix Software's On-Line Analytical Processing product
line.

   John Hogan has been Vice President of Engineering since March 1998. Before
joining Plumtree, Mr. Hogan was the Director of Engineering for Informix
Software's On-Line Analytical Processing products from 1997 to 1998. Mr. Hogan
also worked at Informix Software as a business development manager from 1996 to
1997. Before joining Informix Software, Mr. Hogan was a senior developer for
Stanford Technology Group from 1994 to 1995. Mr. Hogan also worked as a manager
in various development and consulting organizations at Oracle Corporation from
1989 to 1994.

                                       53
<PAGE>

   Jim Flatley, Vice President of Worldwide Field Operations since July 1999,
has responsibility for sales, professional services, channel development, and
customer care. Before joining Plumtree, Mr. Flatley was Vice President from
March 1999 to June 1999 at Siebel Systems. Prior to working at Siebel, Mr.
Flatley managed a division of 700 sales operations employees across the U.S.,
Latin America and Canada for Network Associates from 1990 to 1999. At Network
Associates, Mr. Flatley held sales and management positions responsible for
both channel and corporate sales. Mr. Flatley worked at AT&T from 1988 to 1990
as head of sales and marketing for a custom software solution to the airline
industry, and IBM from 1982 to 1988, in sales and marketing.

   John Dillon has been a director of Plumtree since September 1997. Since
November 2001, Mr. Dillon has served as the President and Chief Executive
Officer of diCarta, Inc., a provider of enterprise contract management
solutions. Prior to working at diCarta, Mr. Dillon served as the President and
Chief Executive Officer of Salesforce.com from September 1999 to November 2001.
Before joining Salesforce.com, Mr. Dillon was interim President and Chief
Executive Officer for Sanctum. Mr. Dillon spent five years with Arbor Software
from December 1993 to May 1999 as Vice President of Sales and then as President
and Chief Executive Officer. He also served as President and Chief Executive
Officer for Hyperion, the global enterprise software company formed through the
merger of Arbor Software and Hyperion Software. Earlier in his career, he was
employed at Oracle Corporation and GRiD Systems in various sales management
capacities, and at EDS as a systems engineer. Mr. Dillon serves on the board of
directors for Sanctum, Raplix and diCarta.

   Rupen Dolasia has been a director of Plumtree since June 1998. Mr. Dolasia
is a founding member of Granite Ventures LLC (formerly H&Q Venture Associates,
LLC), a venture capital firm formed in July 1998. Prior to founding H&Q Venture
Associates, Mr. Dolasia was a Vice President in Hambrecht & Quist's Venture
Capital Department, which he joined in 1994. Prior to joining H&Q, Mr. Dolasia
was the Manager of Information Systems consulting at PEI Consultants. Prior to
joining PEI Consultants, Mr. Dolasia co-founded Grata Systems, Inc., a vendor
of PC-based control and monitoring software. Mr. Dolasia focuses on information
technology investments. Mr. Dolasia currently serves on the board of directors
of Apogee Networks and Covalent Technologies.

   Pierre Lamond has been a director and Chairman of the Plumtree board since
February 1997, and is a partner at Sequoia Capital, a Silicon Valley based
venture capital firm. Mr. Lamond focuses on semiconductor, communications and
software investments. Prior to joining Sequoia Capital in 1981, Mr. Lamond was
a General Manager and Technical Director of National Semiconductor, a company
he co-founded. He serves as Chairman of Vitesse Semiconductor and Redback
Networks and is a director of Verisity.

   Bernard Whitney has been a director of Plumtree since November 2000.
Mr. Whitney has served as Chief Financial Officer of Handspring, Inc. since
June 1999. From August 1997 to June 1999, he served as Executive Vice President
and Chief Financial Officer of Sanmina, Inc., an electronics manufacturing
company. From June 1995 to August 1997, Mr. Whitney served as Vice President of
Finance for Network General Corporation, a network fault tolerance and
performance management solutions company. From 1987 to June 1995, Mr. Whitney
held a variety of corporate finance positions at Conner Peripherals, a storage
device manufacturer.

Classified Board of Directors

   Upon the closing of this offering, our certificate of incorporation will
provide for a classified board of directors consisting of three classes of
directors, each serving staggered three-year terms. As a result, a portion of
our board of directors will be elected each year. To implement the classified
structure, before the closing of the offering, three of the nominees to the
board will be elected to one-year terms, two will be elected to two-year terms
and two will be elected to three-year terms. Thereafter, directors will be
elected for three-year terms. Mr. Lamond has been designated a Class I director
whose term expires at the 2002 annual meeting of stockholders. Messrs. Dillon
and Dolasia

                                       54
<PAGE>

have been designated Class II directors whose term expires at the 2003 annual
meeting of stockholders. Mr. Kunze and Mr. Whitney have been designated Class
III directors whose terms expire at the 2004 annual meeting of stockholders.

   Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of our directors, officers or key
employees.

Board Committees

   We have established an audit committee and a compensation committee. The
audit committee reviews our internal accounting procedures and considers and
reports to the board of directors with respect to other auditing and accounting
matters, including the selection of our independent auditors, the scope of
annual audits, fees to be paid to our independent auditors and the performance
of our independent auditors. The audit committee currently consists of Messrs.
Dillion, Dolasia and Whitney. The compensation committee reviews and recommends
to the board of directors the salaries, benefits and stock option grants for
all employees, consultants, directors and other individuals compensated by us.
The compensation committee also administers our stock option and other employee
benefit plans. The compensation committee currently consists of Messrs. Dillon,
Dolasia and Lamond.

Director Compensation

   We reimburse our non-employee directors for all out-of-pocket expenses
incurred in the performance of their duties as directors of Plumtree. We
currently do not pay fees to our directors for attendance at meetings or for
their services as members of the board of directors.

   Under our 1997 Equity Incentive Plan, directors are eligible to receive
stock option grants. On September 2, 1997, the board of directors granted
options to purchase an aggregate of 75,000 shares of common stock to Mr. Dillon
at an exercise price per share of $0.06. The board of directors granted Mr.
Kunze options to purchase an aggregate of 1,727,557 shares of common stock at
an exercise price per share of $0.09 on August 13, 1998, options to purchase an
aggregate of 200,000 shares of common stock at an exercise price per share of
$2.20 on May 18, 2000, and options to purchase an aggregate of 100,000 shares
of common stock at an exercise price of $5.00 on October 11, 2001. On September
7, 2000, the board of directors granted each of Messrs. Dolasia and Lamond
options to purchase 20,000 shares of common stock at an exercise price per
share of $9.00. On February 28, 2001, the board of directors granted Mr.
Whitney options to purchase an aggregate of 50,000 shares of common stock at an
exercise price per share of $9.00. On December 6, 2001, the board of directors
granted each of Messrs. Dillon, Dolasia, Lamond and Whitney options to purchase
20,000 shares of common stock at an exercise price per share of $5.00.

Compensation Committee Interlocks and Insider Participation

   No member of the compensation committee of Plumtree serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our board of directors or
compensation committee.

                                       55
<PAGE>

Executive Compensation

                           Summary Compensation Table

   The following table indicates information concerning compensation of our
chief executive officer and our four most highly compensated executive officers
other than the chief executive officer whose salary and bonus exceeded $100,000
for the year ended December 31, 2001. These executives are referred to as the
named executive officers elsewhere in this prospectus.

   The other compensation amounts paid to Mr. Flatley represent sales
commissions.

<TABLE>
<CAPTION>
                                                    Long-Term
                                                   Compensation
                              Annual Compensation     Awards
                              -------------------- ------------
                                                    Securities
                                                    Underlying     All Other
Name and Principal Position   Salary ($) Bonus ($) Options (#)  Compensation ($)
---------------------------   ---------- --------- ------------ ----------------
<S>                           <C>        <C>       <C>          <C>
John Kunze..................   250,000        --     100,000            --
 President and Chief
 Executive Officer


Eric Borrmann ..............   192,500     43,500     50,000            --
 Vice President and Chief
 Financial Officer


Glenn Kelman................   155,000     12,000     75,000            --
 Co-Founder, Vice President
 of Product Management and
 Marketing


John Hogan..................   170,000     14,250     75,000            --
 Vice President of
 Engineering


Jim Flatley ................   200,000    120,227    200,000        560,722
 Vice President of Worldwide
 Field Operations
</TABLE>


                                       56
<PAGE>

                       Option Grants In Last Fiscal Year

   The following table provides information concerning grants of options to
purchase our common stock made during the fiscal year ended December 31, 2001
to the named executive officers.

   In the fiscal year ended December 31, 2001, we granted options to purchase
up to an aggregate of 4,152,750 shares to employees, directors and consultants.
All options were granted under our 1997 equity incentive plan at exercise
prices at the fair market value of our common stock on the date of grant, as
determined in good faith by the board of directors. All options have a term of
ten years. Generally, option shares vest over four years, with 25% of the
option shares vesting one year after the option grant date, and the remaining
option shares vesting ratably each month for the next 36 months.


   The potential realizable values are based on an assumption that the price of
our common stock will appreciate at the compounded annual rate shown from the
date of grant until the end of the option term. These values do not take into
account amounts required to be paid as income taxes under the Internal Revenue
Code and any applicable state laws or option provisions providing for
termination of an option following termination of employment, non-
transferability or vesting. These amounts are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do not
reflect our estimate of future stock price growth of the shares of our common
stock. The potential realizable values at the assumed initial public offering
price have been calculated at an assumed initial public offering price of
$14.00 per share, the midpoint of the filing range of the offering.


<TABLE>
<CAPTION>
                                       Individual Grants
                         ---------------------------------------------
                                                                       Potential Realizable Value     Potential
                         Number of   Percent of                          at Assumed Annual Rates   Realizable Value
                         Securities Total Options                      of Stock Price Appreciation  at the Assumed
                         Underlying  Granted to   Exercise                   for Option Term        Initial Public
                          Options   Employees in    Price   Expiration ---------------------------  Offering Price
Name                      Granted    Fiscal Year  Per Share    Date         5%            10%         Per Share
----                     ---------- ------------- --------- ---------- --------------------------- ----------------
<S>                      <C>        <C>           <C>       <C>        <C>          <C>            <C>
John Kunze..............  100,000       3.3%        $5.00    10/11/11  $    314,447 $      796,871    $  900,000
Eric Borrmann ..........   50,000       1.6%        $5.00    10/11/11  $    157,224 $      398,436    $  450,000
Glenn Kelman............   75,000       2.5%        $5.00    10/11/11  $    235,835 $      597,653    $  675,000
John Hogan..............   75,000       2.5%        $5.00    10/11/11  $    235,835 $      597,653    $  675,000
Jim Flatley.............  200,000       6.6%        $5.00    10/11/11  $    628,895 $    1,593,842    $1,800,000
</TABLE>

                    Aggregate Fiscal Year-End Option Values

   The following table describes for the named executive officers the
exercisable and unexercisable options held by them as of December 31, 2001.

<TABLE>
<CAPTION>
                  Number of Securities Underlying       Value of Unexercised
                    Unexercised Options Held at        In-The-Money Options at
                        Fiscal Year-End (#)              Fiscal Year-End ($)
                  ----------------------------------  -------------------------
Name               Exercisable       Unexercisable    Exercisable Unexercisable
----              ----------------  ----------------  ----------- -------------
<S>               <C>               <C>               <C>         <C>
John Kunze.......         1,927,557           100,000 $23,691,738   $760,000
Eric Borrmann....           200,000            50,000 $ 2,000,000   $380,000
Glenn Kelman.....            75,000            75,000 $   765,000   $570,000
John Hogan.......           325,000            75,000 $ 3,859,250   $570,000
Jim Flatley......           442,702           200,000 $ 6,087,202   $760,000
</TABLE>

                                       57
<PAGE>

   The "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
on a value of $12.60 per share, the fair market value of our common stock as of
December 31, 2001, as determined by the board of directors, less the per share
exercise price, multiplied by the number of shares issued upon exercise of the
option. All options were granted under our 1997 Equity Incentive Plan.

Employee Benefit Plans

1997 Equity Incentive Plan

   The 1997 equity incentive plan was adopted by our board of directors on June
30, 1997 and approved by our stockholders on the same date for the benefit of
our officers, directors and consultants. This plan has been amended from time
to time to approve, among other things, additional shares of common stock for
issuance and these amendments were approved by our stockholders. This plan
provides for the grant of incentive stock options and nonstatutory stock
options. An aggregate of 12.7 million shares of common stock is reserved for
issuance under this plan. As of December 31, 2001, options for an aggregate of
8,299,748 shares of common stock were outstanding under this plan. We will not
be granting options under this plan following the offering.

   In the event of certain mergers or consolidations of Plumtree, outstanding
options will be assumed or similar options substituted. In the event
outstanding options are not assumed or substituted for, these options will
terminate if not exercised before the event. In the event of a dissolution or
liquidation of Plumtree, outstanding options will terminate if not exercised
before these events.

2002 Stock Plan

   In connection with this offering, our board of directors adopted the 2002
Stock Plan in           2002 and the stockholders will approve our 2002 Stock
Plan prior to the completion of this offering. Our 2002 Stock Plan provides for
the grant of incentive stock options, within the meaning of Section 422 Code,
to our employees, and for the grant of nonstatutory stock options and stock
purchase rights to our employees, directors and consultants.

   Number of Shares of Common Stock Available under the 2002 Stock Plan. We
have reserved a total of 7,700,000 shares of our common stock for issuance
pursuant to the 2002 Stock Plan plus (i) any shares which have been reserved
but not issued under our 1997 Equity Incentive Plan as of the date of
stockholder approval of the 2002 Stock Plan and (ii) any shares returned to our
1997 Equity Incentive Plan as a result of termination of options as of the date
of stockholder approval of the 2002 Stock Plan. In addition, our 2002 Stock
Plan provides for annual increases in the number of shares available for
issuance under our 2002 Stock Plan on the first day of each fiscal year,
beginning with our fiscal year 2003, equal to the lesser of 5% of the
outstanding shares of common stock on the first day of our fiscal year,
3,000,000 shares or a lesser amount as our board may determine.

   Administration of the 2002 Stock Plan. Our board of directors or a committee
of our board administers the 2002 Stock Plan. In the case of options intended
to qualify as "performance-based compensation" within the meaning of Section
162(m) of the Code, the committee will consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The administrator
has the power to determine the terms of the options or stock purchase rights
granted, including the exercise price, the number of shares subject to each
option or stock purchase right, the exercisability of the options and the form
of consideration payable upon exercise.

   Options. The administrator determines the exercise price of options granted
under the 2002 Stock Plan, but with respect to nonstatutory stock options
intended to qualify as "performance-based

                                       58
<PAGE>

compensation" within the meaning of Section 162(m) of the Code and all
incentive stock options, the exercise price must at least be equal to the fair
market value of our common stock on the date of grant. The term of an incentive
stock option generally may not exceed ten years and the administrator
determines the term of all other options.

   No optionee may be granted an option to purchase more than 3,000,000 shares
in any fiscal year. In connection with his or her initial service, an optionee
may be granted an additional option to purchase up to 1,500,000 shares.

   After termination of one of our employees, directors or consultants, he or
she may exercise his or her option for the period of time stated in the option
agreement. Generally, if termination is due to death or disability, the option
will remain exercisable for 12 months. In all other cases, the option will
generally remain exercisable for 3 months. However, an option may never be
exercised later than the expiration of its term.

   Stock Purchase Rights. The administrator determines the exercise price of
stock purchase rights granted under our 2002 Stock Plan. Unless the
administrator determines otherwise, the restricted stock purchase agreement
will grant us a repurchase option that we may exercise upon the voluntary or
involuntary termination of the purchaser's service with us for any reason
(including death or disability). The purchase price for shares we repurchase
will generally be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to us. The administrator
determines the rate at which our repurchase option will lapse.

   Transferability of Options and Stock Purchase Rights. Our 2002 Stock Plan
generally does not allow for the transfer of options or stock purchase rights
and only the optionee may exercise an option and stock purchase right during
his or her lifetime.

   Adjustments upon Merger or Change of Control. Our 2002 Stock Plan provides
that in the event of our merger with or into another corporation or our change
of control, the successor corporation will assume or substitute an equivalent
option or right for each outstanding option or stock purchase right. If there
is no assumption or substitution of outstanding options or stock purchase
rights, the administrator will provide notice to the optionee that he or she
has the right to exercise the option or stock purchase right as to all of the
shares subject to the option or stock purchase right, including shares which
would not otherwise be exercisable, for a period of 15 days from the date of
the notice. The option or stock purchase right will terminate upon the
expiration of the 15-day period.

   Amendment and Termination of our 2002 Stock Plan. Our 2002 Stock Plan will
automatically terminate in 2012, unless we terminate it sooner. In addition,
our board of directors has the authority to amend, suspend or terminate the
2002 Stock Plan provided it does not adversely affect any option previously
granted under it.

2002 Employee Stock Purchase Plan

   Concurrently with this offering, we intend to establish an Employee Stock
Purchase Plan.

   Number of Shares of Common Stock Available under the Purchase Plan. A total
of 2,000,000 shares of our common stock will be made available for sale. In
addition, our Employee Stock Purchase Plan provides for annual increases in the
number of shares available for issuance under the Employee Stock Purchase Plan
on the first day of each fiscal year, beginning with our fiscal year 2002,
equal to the lesser of 2% of the outstanding shares of our common stock on the
first day of the fiscal year, 1,500,000 shares, or such lesser amount as may be
determined by our board of directors.


                                       59
<PAGE>

   Administration of the Purchase Plan. Our board of directors or a committee
of our board administers the Purchase Plan. Our board of directors or its
committee has full and exclusive authority to interpret the terms of the
Employee Stock Purchase Plan and determine eligibility.

   Eligibility to Participate. All of our employees are eligible to participate
if they are customarily employed by us or any participating subsidiary for at
least 20 hours per week and more than five months in any calendar year.
However, an employee may not be granted an option to purchase stock if such
employee:

  .  immediately after grant owns stock possessing 5% or more of the total
     combined voting power or value of all classes of our capital stock, or

  .  whose rights to purchase stock under all of our employee stock purchase
     plans accrues at a rate that exceeds $25,000 worth of stock for each
     calendar year.

   Offering Periods and Contributions. Our Employee Stock Purchase Plan is
intended to qualify under Section 423 of the Code and contains consecutive,
overlapping 24-month offering periods. Each offering period includes four 6-
month purchase periods. The offering periods generally start on the first
trading day on or after February 1 and August 1 of each year, except for the
first such offering period which will commence on the first trading day on or
after the effective date of this offering and will end on the last trading day
on or before August 1, 2004.

   Our Employee Stock Purchase Plan permits participants to purchase common
stock through payroll deductions of up to 15% of their eligible compensation
which includes only a participant's base salary, wages, bonuses and overtime. A
participant may purchase a maximum of 10,000 shares during a 6-month purchase
period.

   Purchase of Shares. Amounts deducted and accumulated by the participant are
used to purchase shares of our common stock at the end of each six-month
purchase period. The price is 85% of the lower of the fair market value of our
common stock at the beginning of an offering period or after a purchase period
end. If the fair market value at the end of a purchase period is less than the
fair market value at the beginning of the offering period, participants will be
withdrawn from the current offering period following their purchase of shares
on the purchase date and will be automatically re-enrolled in a new offering
period. Participants may end their participation at any time during an offering
period, and will be paid their payroll deductions to date. Participation ends
after termination of employment with us.

   Transferability of Rights. A participant may not transfer rights granted
under the Employee Stock Purchase Plan other than by will, the laws of descent
and distribution or as otherwise provided under the Purchase Plan.

   Adjustments upon Merger or Change in Control. In the event of our merger
with or into another corporation or change in control, a successor corporation
may assume or substitute each outstanding
option. If the successor corporation refuses to assume or substitute for the
outstanding options, the offering period then in progress will be shortened,
and a new exercise date will be set.

   Amendment and Termination of the Purchase Plan. Our Employee Stock Purchase
Plan will terminate in 2012. However, our board of directors has the authority
to amend or terminate our Purchase Plan, except that, subject to certain
exceptions described in the Purchase Plan, no such action may adversely affect
any outstanding rights to purchase stock under our Purchase Plan.

                                       60
<PAGE>

2002 Director Option Plan

   In connection with this offering, our board of directors adopted the 2002
Director Option Plan, referred to as the "Director Plan", in 2002 and our
stockholders will approve the Director Plan prior to the completion of this
Offering. Our Director Plan provides for the periodic grant of nonstatutory
stock options to our non-employee directors.

   Number of Shares of Common Stock Available Under the Director Plan. We have
reserved a total of 400,000 shares of our common stock for issuance pursuant to
the Director Plan, plus an annual increase equal to the lesser of (i) the
number of shares needed to restore the maximum number of shares of the
Company's common stock which may be available for grant under the Plan to
400,000 Shares or (ii) an amount determined by the Board.

   Administration and Grants of Options under the Director Plan. All grants of
options to our non-employee directors under the Director Plan are automatic and
nondiscretionary.

   We will grant each non-employee director an option to purchase 50,000 shares
when such person first becomes a non-employee director (except for those
directors who became non-employee directors by ceasing to be employee
directors). This option will vest as to one-third of the shares subject to the
option on each anniversary of the date of grant, provided the non-employee
director remains a director on such dates. The exercise price for the option
will be equal to the fair market value of the shares on the date of grant.

   Each non-employee director who has been a director for at least 6 months
will also receive an option to purchase 20,000 shares following each annual
meeting of our stockholders, unless the next annual meeting is held within 6
months of the effective date of this offering. This option will vest as to 1/12
of the shares subject to the option each month following the date of grant,
provided the non-employee director remains a director on such dates.

   After termination as a non-employee director with us, an optionee must
exercise an option at the time set forth in his or her option agreement. If
termination is due to death or disability, the option will remain exercisable
for 12 months. In all other cases, the option will remain exercisable for a
period of 3 months. However, an option may never be exercised later than the
expiration of its term.

   Transferability of Options. A non-employee director may not transfer options
granted under our Director Plan other than by will or the laws of descent and
distribution. Only the non-employee director may exercise the option during his
or her lifetime.

   Adjustments upon Merger or Change of Control. In the event of our merger
with or into another corporation or change of control, the successor
corporation will assume or substitute each option. If such assumption or
substitution occurs, the options will continue to be exercisable according to
the same terms as before the merger or change of control. Following such
assumption or substitution, if a non-employee director is terminated other than
by voluntary resignation, the option will become fully exercisable and
generally will remain exercisable for a period of 3 months. If the outstanding
options are not assumed or substituted for, our board of directors will notify
each non-employee director that he or she has the right to exercise the option
as to all shares subject to the option for a period of 15 days following the
date of the notice. The option will terminate upon the expiration of the 15-day
period.

   Amendment and Termination of our 2002 Plan. Unless terminated sooner, our
Director Plan will automatically terminate in 2012. Our board of directors has
the authority to amend, alter, suspend, or discontinue the Director Plan, but
no such action may adversely affect any grant made under the Director Plan.

                                       61
<PAGE>

Employment Agreements

   We have offer letters with Mr. Kunze, Mr. Hogan, Mr. Flatley, and Mr.
Borrmann. Each of these officers may leave or be terminated at any time. In the
event of an acquisition of Plumtree or the sale of all or substantially all of
the assets of Plumtree, 50% of the executive's then unvested shares subject to
stock options vest immediately, except that, in the case of Mr. Hogan, all such
unvested shares vest.

   Each of these individuals are eligible for bonuses payable upon attainment
of objectives established by our board of directors.

Loans to Executive Officers

   In August 2000, we loaned $520,000 to Eric Borrmann, our chief financial
officer, in conjunction with the exercise of an option. The note evidencing
this indebtedness is a full recourse promissory note and is secured by a pledge
agreement. The note accrues interest at the rate of 6% per year and is payable
upon demand.

Limitation of Liability and Indemnification

   Upon the closing of this offering, our certificate of incorporation will
include a provision that eliminates the personal liability of our directors for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from or limitation of liability is not permitted under
the Delaware General Corporation Law.

   Our bylaws will further provide for the indemnification of our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Plumtree
under the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission this indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

   We intend to enter into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, will provide for indemnification of these
persons for expenses, judgments, fines and settlement amounts incurred by any
such person in any action or proceeding arising out of the person's services as
a director, or executive officer, as applicable, or at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors, executive officers and board advisors.

                                       62
<PAGE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Since January 1, 1999, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock, or an
immediate family member of any of the foregoing, had or will have a direct or
indirect interest other than:

  . compensation arrangements, which are described where required under
    "Management"; and

  . the transactions described below.

   All of the shares of our preferred stock will automatically convert into
shares of our common stock at a one-to-one ratio upon completion of this
offering. The holders of our preferred stock are entitled to registration
rights with respect to the shares of common stock issued or issuable upon
conversion of the preferred stock. Each of the shares of preferred stock and
common stock described below were issued at a price equal to the fair market
value of such share on the date of purchase.

   Series E Preferred Stock Financing Round. In May 2000, we sold shares of
Series E preferred stock, at a purchase price of $9.60 per share, to the
following investors, among others:

  . 348,200 shares of Series E preferred stock to Sequoia Capital VII, or to
    entities affiliated with it.

  . 99,653 shares of Series E preferred stock to H&Q Plumtree Investors,
    L.P., or to entities affiliated with it.

  . 43,829 shares of Series E preferred stock to Red Rock Ventures L.P.

  . 47,780 shares of Series E preferred stock to Intel Corporation.

   Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series E preferred stock and the
assumed initial public offering price per share of our common stock is $4.40.

   Series D Preferred Stock Financing Round. In August and December 1999, we
sold shares of Series D preferred stock, at a purchase price of $1.59 per
share, to the following investors, among others:

  . 1,257,861 shares of Series D preferred stock to Intel Corporation.

  . 902,514 shares of Series D preferred stock to H&Q Plumtree Investors,
    L.P., or to entities affiliated with it.

  . 628,931 shares of Series D preferred stock to Sequoia Capital VII, or to
    entities affiliated with it.

   Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series D preferred stock and the
assumed initial public offering price per share of our common stock is $12.41.

   Series C Preferred Stock Financing Round. In June 1998, we sold shares of
Series C preferred stock, at a purchase price of $0.87 per share, to the
following investors, among others:

  . 1,730,769 shares of Series C preferred stock to H&Q Plumtree Investors,
    L.P.

  . 1,730,770 shares of Series C preferred stock to Sequoia Capital VII, or
    to entities affiliated with it.

  . 1,153,847 shares of Series C preferred stock to Red Rock Ventures L.P.

   Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series C preferred stock and the
assumed initial public offering price per share of our common stock is $13.13.

                                       63
<PAGE>

   Indemnity Agreements. We intend to enter into indemnity agreements with each
of our officers and directors.

   Promissory Note. In March 2000, we issued a promissory note to Red Rock
Ventures L.P. for $421,000, which amount reflected Red Rock Ventures L.P.'s
advance payment of the purchase price of $421,000 for 43,829 shares of Series E
preferred stock. The reason for the note was to provide us with cash needed for
our business operations. This note did not accrue interest and was payable on
demand. This note was converted into 43,829 shares of Series E preferred stock
in May 2000.

   License Transaction. In February and November 2000, we entered into
agreements with Intel Corporation, a Series D and Series E preferred
stockholder, for the sale of license, services and maintenance. Under these
agreements, in exchange for a fee, Plumtree has granted Intel a software
license and provided related support and maintenance services. These agreements
were entered into in the ordinary course of business and were entered into on
terms as fair as would be obtainable from third parties. As of December 31,
2001, we have recognized approximately $277,000 of revenue from Intel
Corporation. We do not expect to recognize any future revenue under these
agreements.


                                       64
<PAGE>

                             PRINCIPAL STOCKHOLDERS

   The following table indicates information as of December 31, 2001 regarding
the beneficial ownership of our common stock by:

  . each person known to the board of directors to own beneficially 5% or
    more of our common stock;

  . each of our directors;

  . the named executive officers; and

  . all of our directors and executive officers as a group.

   Information with respect to beneficial ownership has been furnished by each
director, officer or 5% or more stockholder, as the case may be. Except as
otherwise noted below, the address for each person listed on the table is c/o
Plumtree Software, Inc., 500 Sansome Street, San Francisco, California 94111.

   Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or
investment power with respect to those securities and includes shares of common
stock issuable pursuant to the exercise of stock options or warrants that are
immediately exercisable or exercisable within 60 days. Unless otherwise
indicated, the persons or entities identified in this table have sole voting
and investment power with respect to all shares shown as beneficially owned by
them, subject to applicable community property laws.

   Percentage ownership calculations are based on 24,213,954 shares of common
stock outstanding as of December 31, 2001, which number includes shares of
common stock that will be outstanding upon the conversion of outstanding shares
of preferred stock upon the closing of the offering. To the extent that any
shares are issued upon exercise of options, warrants or other rights to acquire
our capital stock that are presently outstanding or granted in the future or
reserved for future issuance under our stock plans, there will be further
dilution to new public investors.

<TABLE>
<CAPTION>
                                                                                  Percent of Shares
                                                                 Number of           Outstanding
                                                                  Shares         --------------------
                                                               Beneficially      Before the After the
 Name                                                            Owned(1)         Offering  Offering
 ----                                                          ------------      ---------- ---------
 <C>                                                           <S>               <C>        <C>
 Entities affiliated with Sequoia Capital....................    6,772,689(2)       28.0%     23.2%
  3000 Sand Hill Road
  Building 4, Suite 280
  Menlo Park, CA 94025
 Entities affiliated with Granite Ventures LLC...............    2,732,936(3)       11.3       9.4
  One Bush Street
  San Francisco, CA 94104
 Intel Corporation...........................................    1,305,641           5.4       4.5
  2200 Mission College Boulevard
  Santa Clara, CA 95052
 John Kunze..................................................    1,927,557(4)        7.4       6.2
 Glenn Kelman................................................    1,275,000(5)        5.5       4.4
 John Hogan..................................................      625,000(6)        2.6       2.1
 Jim Flatley.................................................      442,702(7)        1.9       1.5
 Eric Borrmann...............................................      400,000(8)        1.7       1.4
 John Dillon.................................................       93,333(9)          *         *
 Pierre Lamond...............................................    6,811,022(10)      28.1      23.3
 Rupen Dolasia...............................................    2,756,269(11)      11.4       9.4
 Bernard Whitney.............................................       18,958(12)         *         *
 Executive officers and directors as a group (9 persons).....   14,349,841(13)      54.5      44.4
</TABLE>

                                       65
<PAGE>

--------
  *  Less than 1% of the outstanding shares of common stock.
 (1) This table is based upon information supplied by officers, directors and
     principal stockholders. Unless otherwise indicated in the footnotes to
     this table and subject to community property laws where applicable, we
     believe that each of the stockholders named in this table has sole voting
     and investment power with respect to the shares indicated as beneficially
     owned.
 (2) Includes, on an as converted basis, 6,216,757 shares of common stock held
     by Sequoia Capital VII, 31,035 shares of common stock held by Sequoia 1995
     LLC, 56,272 shares of common stock held by Sequoia 1997 LLC, 91,985 shares
     of common stock held by Sequoia International Partners, 276,601 shares of
     common stock held by Sequoia Technology Partners VII and 100,039 shares of
     common stock held by SQP 1997. The General Partners of Sequoia Capital
     VII, Sequoia Technology Partners, Sequoia 1995 LLC, Sequoia 1997 LLC and
     SQP 1997, including Pierre Lamond, who is on the board of directors of
     Plumtree, have shared voting and dispositive power over the shares owned
     by Sequoia Capital VII, Sequoia Technology Partners, Sequoia 1995 LLC,
     Sequoia 1997 LLC and SQP 1997.
 (3) Includes 2,593,264 shares of common stock held by H&Q Plumtree Investors,
     L.P. and 139,672 shares of common stock held by TODD U.S. Ventures LLC.
     The general partnership of Granite Ventures LLC, including Rupen Dolasia,
     who is on the board of directors of Plumtree, has voting and dispositive
     power over the shares owned by entities affiliated with Granite Ventures
     LLC.

 (4) Includes 1,927,557 shares of common stock issuable pursuant to stock
     options exercisable within 60 days of December 31, 2001, which includes
     471,140 shares of common stock subject to a repurchase right in favor of
     Plumtree which will lapse as to 80,315 of such shares within 60 days of
     December 31, 2001. Also includes 653,008 shares of which Mr. Kunze's ex-
     wife has beneficial ownership pursuant to the terms of a divorce
     settlement arrangement.

 (5) Includes 75,000 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001, which includes 43,748
     shares of common stock subject to a repurchase right in favor of Plumtree,
     which will lapse as to 3,125 of such shares within 60 days of December 31,
     2001.
 (6) Includes 325,000 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001, which includes 111,633
     shares of common stock subject to a repurchase right in favor of Plumtree,
     which will lapse as to 26,042 of such shares within 60 days of December
     31, 2001.
 (7) Includes 442,702 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001, which includes 190,819
     shares of common stock subject to a repurchase right in favor of Plumtree,
     which will lapse as to 18,446 of such shares within 60 days of December
     31, 2001.
 (8) Includes 200,000 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001. Also includes 42,591
     shares subject to a repurchase right in favor of Plumtree, which will
     lapse as to 16,667 of such shares within 60 days of December 31, 2001.
 (9) Includes 3,333 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001.
(10) Includes 23,333 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001, 15,000 shares
     beneficially owned by Mr. Lamond, and 6,772,689 shares owned by the
     entities affiliated with Sequoia Capital. Mr. Lamond, a General Partner of
     these entities, disclaims beneficial ownership of the shares held by such
     entities except to the extent of his pro rata interest in these entities.
(11) Includes 23,333 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001, 2,732,936 shares owned by
     the entities affiliated with Granite Ventures LLC. Mr. Dolasia, a member
     of these entities, disclaims beneficial ownership of the shares held by
     such entities except to the extent of his pro rata interest in these
     entities.
(12) Includes 18,958 shares of common stock issuable pursuant to stock options
     exercisable within 60 days of December 31, 2001.
(13) Includes 6,772,689 owned by the entities affiliated with Sequoia Capital
     and 2,732,936 shares owned by the entities affiliated with Granite
     Ventures LLC. See Notes (10) and (11) above.

                                       66
<PAGE>

                          DESCRIPTION OF CAPITAL STOCK

   Upon the closing of this offering, we will be authorized to issue
100,000,000 shares of common stock, $0.001 par value per share, and 10,000,000
shares of preferred stock, $0.001 par value per share. All currently
outstanding shares of our preferred stock will automatically convert into
shares of our common stock at a one-to-one ratio upon completion of this
offering. The following description summarizes information regarding our
capital stock and assumes our reincorporation in Delaware before the closing of
this offering. This information does not purport to be complete and is subject
in all respects to the applicable provisions of the Delaware General
Corporation Law, our certificate of incorporation and our bylaws.

Common Stock

   Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors.
Holders of common stock are entitled to receive ratably the dividends, if any,
declared from time to time by the board of directors out of legally available
funds. Holders of common stock have no conversion, redemption or preemptive
rights to subscribe to any of Plumtree's securities. In the event of any
liquidation, dissolution or winding-up of our affairs, holders of common stock
will be entitled to share ratably in our assets remaining after provision for
payment of liabilities to creditors and holders of outstanding preferred stock.
The rights, preferences and privileges of holders of common stock are subject
to the rights of the holders of any shares of preferred stock which we may
issue in the future.

Preferred Stock

   The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may
be greater than the rights of the common stock. We cannot predict the effect of
the issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of the preferred stock. However, the effects could include one or more
of the following:

  . restricting dividends on the common stock;

  . diluting the voting power of the common stock;

  . impairing the liquidation rights of the common stock; or

  . delaying or preventing a change in control of us without further action
    by the stockholders.

   Upon the consummation of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.

Warrants

   As of December 31, 2001, we had the following warrants to purchase shares of
common stock outstanding:

  . Lighthouse Capital Partners III, L.P. holds a warrant to purchase 11,250
    shares at an exercise price of $2.00 per share; and

  . WXI/SAN Realty, L.L.C. holds warrants to purchase an aggregate of 41,030
    shares at an exercise price of $9.60 per share.

   As of December 31, 2001, we had the following warrants to purchase shares of
preferred stock outstanding:

  . Lighthouse Capital Partners II, L.P. holds a warrant to purchase 36,206
    shares of Series A preferred stock at an exercise price of $0.39 per
    share;

  . Silicon Valley Bank holds a warrant to purchase 28,125 shares of Series C
    preferred stock at an exercise price of $0.87 per share;

                                       67
<PAGE>

  . Silicon Valley Bank holds a warrant to purchase 138,462 shares of Series
    D preferred stock at an exercise price of $0.87; and

  . Lighthouse Capital Partners III, L.P. holds a warrant to purchase 9,375
    shares of Series D preferred stock at an exercise price of $1.59.

   All of the warrants listed above are currently exercisable and contain
standard anti-dilution provisions.

Registration Rights

   Upon completion of this offering, the holders of an aggregate of 16,817,156
shares of common stock issuable upon conversion of preferred stock and upon the
exercise of warrants will be entitled to rights with respect to the
registration of these shares under the Securities Act of 1933, as amended, or
the Securities Act. Under the terms of the registration rights agreements, if
we propose to register any of our securities under the Securities Act, either
for our own account or for the account of security holders exercising
registration rights, these holders are entitled to notice of this registration
and are entitled to include shares of common stock in the registration. The
rights are subject to conditions and limitations, among them the right of the
underwriters of an offering subject to the registration to limit the number of
shares included in the registration. These registration rights have been waived
with respect to this offering. Holders of these rights may also require us to
file a registration statement under the Securities Act at our expense with
respect to their shares of common stock, and we are required to use our best
efforts to effect this registration, subject to conditions and limitations.
Furthermore, stockholders with registration rights may require us to file
additional registration statements on Form S-3, subject to conditions and
limitations.

Delaware Anti-Takeover Law

   Upon the closing of this offering, we will be subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. Generally, Section 203
of the Delaware General Corporation Law 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:

  . before the date of the business combination, the transaction is approved
    by the board of directors of the corporation,

  . upon consummation of the transaction which resulted in the stockholder
    becoming an interested stockholder, the interested stockholder owns at
    least 85% of the outstanding stock, or

  . on or after the date the business combination is approved by the board
    and by the affirmative vote of at least 66 2/3% of the outstanding voting
    stock which is not owned by the interested stockholder.

   A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. The existence of this provision would be expected
to have an anti-takeover effect with respect to transactions not approved in
advance by our board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.

Transfer Agent and Registrar

   EquiServe, L.P. will serve as Transfer Agent and Registrar for our common
stock.

Listing

   We have applied to have our common stock approved for listing on the Nasdaq
National Market under the symbol "PLUM."

                                       68
<PAGE>

                        SHARES ELIGIBLE FOR FUTURE SALE

   We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will depress the market price for our common
stock or our ability to raise capital by offering equity securities. Sales of
substantial amounts of common stock, or the perception that these sales could
occur, may depress prevailing market prices for the common stock.

   After this offering, approximately 29,213,954 shares of common stock will be
outstanding. All of the shares sold in this offering will be freely tradable
except for any shares purchased by affiliates of Plumtree. The remaining shares
of common stock outstanding after this offering will be restricted as a result
of securities laws or lock-up agreements. These remaining shares will be
available for sale in the public market as follows:


<TABLE>
<CAPTION>
   Date of Availability for Sale                               Number of Shares
   -----------------------------                               ----------------
   <S>                                                         <C>
   As of the date of this prospectus.........................        123,600
        , 2002 (90 days after the date of this prospectus)...         30,964
        , 2002 (180 days after the date of this prospectus)..     23,701,796
   At various times thereafter upon expiration of applicable
    holding periods..........................................        357,594
</TABLE>


   Goldman, Sachs & Co. may release all or a portion of the shares subject to
this lockup agreement at any time without notice.

   In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:

  . 1% of the number of shares of common stock then outstanding, which will
    equal approximately 292,134 shares immediately after this offering; or

  . the average weekly trading volume of the common stock on the Nasdaq
    National Market during the four calendar weeks preceding the filing of a
    notice on Form 144 with respect to the sale.

   Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.

   Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell the shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

   Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any of our employees, officers,
directors or consultants who purchased shares under a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell their shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
their shares. However, substantially all

                                       69
<PAGE>

Rule 701 shares are subject to lock-up agreements and will only become eligible
for sale at the earlier of the expiration of the 180-day lock-up agreements or
no sooner than 90 days after the offering upon obtaining the prior written
consent of Goldman, Sachs & Co.

   We intend to file a Registration Statement on Form S-8 registering shares of
common stock subject to outstanding options or reserved for future issuance
under our stock plans. As of December 31, 2001, options to purchase a total
8,299,748 shares were outstanding under our stock plans. Common stock issued
upon exercise of outstanding vested options, other than common stock issued to
our affiliates, is available for immediate resale in the open market.

                                       70
<PAGE>

                                  UNDERWRITING

   Plumtree and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., J.P. Morgan
Securities Inc., and RBC Dain Rauscher Inc. are the representatives of the
underwriters.

<TABLE>
<CAPTION>
                            Underwriters                        Number of Shares
                            ------------                        ----------------
      <S>                                                       <C>
      Goldman, Sachs & Co. ....................................
      J.P. Morgan Securities Inc. .............................
      RBC Dain Rauscher Inc. ..................................
                                                                   ---------
          Total................................................    5,000,000
                                                                   =========
</TABLE>

   The underwriters are committed to take and pay for all of the shares being
offered, if any are taken, other than the shares covered by the option
described below unless and until this option is exercised.

   If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 750,000
shares from Plumtree to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.

   The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Plumtree. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 750,000 additional shares.

<TABLE>
<CAPTION>
                      Paid by Plumtree                 No Exercise Full Exercise
                      ----------------                 ----------- -------------
      <S>                                              <C>         <C>
      Per Share.......................................  $           $
      Total...........................................  $           $
</TABLE>

   Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $      per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $      per share
from the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.

   Plumtree, its officers, directors and principal stockholders have agreed
with the underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date
180 days after the date of this prospectus, except with the prior written
consent of the representatives. This agreement does not apply to any existing
employee benefit plans. See "Shares Eligible for Future Sale" for a discussion
of certain transfer restrictions.

   Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Plumtree and the
representatives of the underwriters. Among the factors to be considered in
determining the initial public offering price of the shares, in addition to
prevailing market conditions, will be Plumtree's historical performance,
estimates of the business potential and earnings prospects of Plumtree, an
assessment of Plumtree's management and the consideration of the above factors
in relation to market valuation of companies in related businesses.

                                       71
<PAGE>

   Plumtree has applied for quotation of its common stock on the Nasdaq
National Market under the symbol "PLUM".

   In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from Plumtree in the offering. The
underwriters may close out any covered short position by either exercising
their option to purchase additional shares or purchasing shares in the open
market. In determining the source of shares to close out the covered short
position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at
which they may purchase shares through the overallotment option. "Naked" short
sales are any sales in excess of such option. The underwriters must close out
any naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the common stock in the open
market after pricing that could adversely affect investors who purchase in the
offering. Stabilizing transactions consist of various bids for or purchases of
common stock made by the underwriters in the open market prior to the
completion of the offering.

   The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

   Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of
Plumtree's common stock, and together with the imposition of the penalty bid,
may stabilize, maintain or otherwise affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued at any time. These transactions may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.


   At the request of Plumtree, the underwriters have reserved for sale, at the
initial public offering price, up to 450,000 shares of common stock offered in
this offering for individuals designated by Plumtree who have expressed an
interest in purchasing the shares of common stock in the offering. The number
of shares available for sale to the general public will be reduced to the
extent these persons purchase the reserved shares. Any reserved shares that are
not purchased by these persons will be offered by the underwriters to the
general public on the same terms as the other shares offered hereby.

   A prospectus in electronic format will be made available on the Web sites
maintained by one or more of the lead managers of this offering and may also be
made available on Web sites maintained by other underwriters. The underwriters
may agree to allocate a number of shares to underwriters for sale to their
online brokerage account holders. Internet distributions will be allocated by
the lead managers to underwriters that may make Internet distributions on the
same basis as other allocations.


   The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

   Plumtree estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$         .

   Plumtree has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

                                       72
<PAGE>

                                 LEGAL MATTERS

   The validity of the shares of common stock being offered will be passed upon
for us by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California.
Pillsbury Winthrop LLP, San Francisco, California, is acting as counsel to the
underwriters in connection with selected legal matters relating to the shares
of common stock offered by this prospectus.

                                    EXPERTS

   The audited financial statements included in this prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.

                             AVAILABLE INFORMATION

   We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock being offered. This prospectus does not contain all of the
information described in the registration statement and the related exhibits
and schedules. For further information with respect to Plumtree and the common
stock being offered, reference is made to the registration statement and the
related exhibits and schedule. Statements contained in this prospectus
regarding the contents of any contract or any other document to which reference
is made describe the material terms thereof. In each instance, reference is
made to the copy of the contract or other document filed as an exhibit to the
registration statement, each statement being qualified in all respects by the
reference. A copy of the registration statement and the related exhibits and
schedule may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and copies of all or any part of the registration statement may be
obtained from this office upon the payment of the fees prescribed by the
Commission. Information on the operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. The Commission maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.

   Plumtree intends to provide its stockholders with annual reports containing
financial statements audited by an independent accounting firm and quarterly
reports containing unaudited financial data for the first three quarters of
each year.

                                       73
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Report of Independent Public 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

Notes to Consolidated Financial Statements................................. F-7
</TABLE>

                                      F-1
<PAGE>

   After the reincorporation discussed in Note 15 to Plumtree Software, Inc.'s
consolidated financial statements is effected, we expect to be in a position to
render the following audit report.

                                          Arthur Andersen LLP

January 17, 2002
San Francisco, California

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Plumtree Software, Inc.:

   We have audited the accompanying consolidated balance sheets of Plumtree
Software, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2000 and 2001, and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years in the period ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Plumtree Software, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.

                                      F-2
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                     Pro Forma
                                                     As of         Stockholders'
                                                  December 31,       Equity at
                                                -----------------  December 31,
                                                  2000     2001        2001
                                                --------  -------  -------------
                                                                    (unaudited)
<S>                                             <C>       <C>      <C>
Assets
Current assets:
 Cash and cash equivalents....................  $ 13,098  $24,040
 Accounts receivable (net of allowance for
  doubtful accounts of $1,606 and $1,184,
  respectively)...............................    15,626   17,857
 Prepaids and other current assets............     3,649    1,252
                                                --------  -------
   Total current assets.......................    32,373   43,149

Property and equipment, net...................     2,752    2,934

Other assets..................................     2,876    5,177
                                                --------  -------
   Total assets...............................  $ 38,001  $51,260
                                                ========  =======

Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable.............................  $    891   $1,463
 Notes payable, current portion...............       116      --
 Accrued liabilities..........................     9,495   15,464
 Deferred revenue.............................    16,515   20,599
 Current portion of capital lease
  obligations.................................       254      254
 Line of credit...............................       --     1,600
                                                --------  -------
   Total current liabilities..................    27,271   39,380

Long-term capital lease obligations...........       368      103
Other long-term liabilities...................       --       334
                                                --------  -------
   Total liabilities..........................    27,639   39,817
                                                --------  -------
Commitments and contingencies (Note 7)

Stockholders' equity:
 Convertible preferred stock, $0.001 par
  value, aggregate liquidation preference of
  $37,937 as of December 31, 2001:
  Authorized--16,981,528 shares;
  Outstanding--16,580,830 shares, 16,580,830
   shares and 0 shares, respectively..........        17       17    $    --
 Common stock, $0.001 par value:
  Authorized--24,055,865 shares, 24,055,865
   and 41,037,393  shares;
  Outstanding--7,437,266 shares, 7,633,124
   shares and 24,213,954 shares,
   respectively...............................         7        8          25
 Additional paid in capital...................    55,194   61,916      61,916
 Warrants.....................................       361      361         361
 Notes receivable from stockholders...........      (520)    (674)       (674)
 Stock-based compensation.....................   (10,635)  (8,301)     (8,301)
 Accumulated other comprehensive loss.........       (17)     (34)        (34)
 Accumulated deficit..........................   (34,045) (41,850)    (41,850)
                                                --------  -------    --------
   Total stockholders' equity.................    10,362   11,443    $ 11,443
                                                --------  -------    ========
   Total liabilities and stockholders'
    equity....................................  $ 38,001  $51,260
                                                ========  =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-3
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                           For the Year Ended December 31,
                                          -----------------------------------
                                             1999        2000        2001
                                          ----------  ----------  -----------
<S>                                       <C>         <C>         <C>
Revenue:
 Licenses................................ $    2,701  $   24,017      $54,055
 Services and maintenance................        653      10,126       26,119
                                          ----------  ----------  -----------
  Total revenue..........................      3,354      34,143       80,174
                                          ----------  ----------  -----------
Cost of revenue:
 Licenses................................         90       2,585        5,063
 Services and maintenance ...............      1,118      10,046       12,134
 Amortization of stock-based
  compensation(1)........................         39         754          627
                                          ----------  ----------  -----------
  Total cost of revenue..................      1,247      13,385       17,824
                                          ----------  ----------  -----------
  Gross margin...........................      2,107      20,758       62,350
                                          ----------  ----------  -----------
Operating expenses:
 Research and development(3).............      1,677       7,626       14,136
 Sales and marketing ....................      5,616      23,769       40,524
 General and administrative .............      1,407       7,243        8,519
 Restructuring charges...................        --          --           760
 Aborted offering costs..................        --          --         1,643
 Amortization of stock-based
  compensation(2)........................        286       4,166        3,900
                                          ----------  ----------  -----------
  Total operating expenses...............      8,986      42,804       69,482
                                          ----------  ----------  -----------
  Loss from operations...................     (6,879)    (22,046)      (7,132)


Other income (expense):
 Interest expense........................       (181)       (122)        (247)
 Other income............................         30         485          257
                                          ----------  ----------  -----------
  Other income (expense), net............       (151)        363           10
                                          ----------  ----------  -----------
  Net loss before taxes..................     (7,030)    (21,683)      (7,122)
  Provision for income taxes.............        --          --          (683)
                                          ----------  ----------  -----------
Net loss................................. $   (7,030) $  (21,683)     $(7,805)
                                          ==========  ==========  ===========


Net loss per common share:
 Basic and diluted....................... $    (1.78) $    (3.97)      $(1.21)
                                          ==========  ==========  ===========
 Pro forma basic and diluted
  (unaudited)............................                              $(0.34)
                                                                  ===========
Weighted average common shares
 outstanding:
 Basic and diluted.......................  3,943,730   5,461,454    6,457,553
                                          ==========  ==========  ===========
 Pro forma basic and diluted
  (unaudited)............................                          23,038,383
                                                                  ===========
(1)Amortization of stock-based
 compensation included in cost of
 revenue................................. $       39  $      754  $       627
                                          ----------  ----------  -----------

 Research and development ...............        105       1,519          908
 Sales and marketing ....................        171       1,423        1,695
 General and administrative .............         10       1,224        1,297
                                          ----------  ----------  -----------
 Total stock-based compensation included
  in operating expenses..................        286       4,166        3,900
                                          ----------  ----------  -----------
                                          $      325  $    4,920       $4,527
                                          ==========  ==========  ===========
</TABLE>

(2)Amortization of stock-based
 compensation included in operating
 expenses:


(3) During the year ended December 31, 2000, the Company recorded a non-cash
    research and development charge of $824,000 (see Note 9).

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-4
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                Accumulated
                     Convertible                                             Notes     Stock-      Other                 Total
                   Preferred Stock    Common Stock    Additional           Receivable   based     Compre-                Stock-
                  ----------------- -----------------  Paid in                from     Compen-    hensive   Accumulated holders'
                    Shares   Amount  Shares    Amount  Capital   Warrants Stockholders sation      Loss       Deficit    Equity
                  ---------- ------ ---------  ------ ---------- -------- ------------ -------  ----------- ----------- --------
<S>               <C>        <C>    <C>        <C>    <C>        <C>      <C>          <C>      <C>         <C>         <C>
Balance at
December 31,
1998.............  9,108,602    9   4,057,430      4     6,615       --        --          --        --        (5,332)     1,296
 Issuance of
 Series D
 convertible
 preferred stock,
 net of issuance
 costs of $41....  5,041,445    5         --     --      7,970       --        --          --        --           --       7,975
 Issuance of
 warrants........        --   --          --     --        --         61       --          --        --           --          61
 Exercise of
 stock options...        --   --    1,342,498      1        89       --        --          --        --           --          90
 Stock-based
 compensation....        --   --          --     --      1,400       --        --       (1,400)      --           --         --
 Amortization of
 stock-based
 compensation....        --   --          --     --        --        --        --          325       --           --         325
 Net loss........        --   --          --     --        --        --        --          --        --        (7,030)    (7,030)
                  ----------  ---   ---------   ----   -------    ------     -----     -------     -----     --------   --------
Balance at
December 31,
1999............. 14,150,047   14   5,399,928      5    16,074        61       --       (1,075)      --       (12,362)     2,717
 Issuance of
 Series E
 convertible
 preferred stock,
 net of issuance
 costs of
 $1,235..........  2,430,783    3         --     --     21,996       --        --          --        --           --      21,999
 Issuance of
 warrants........        --   --          --     --        --      1,124       --          --        --           --       1,124
 Exercise of
 warrants........        --   --      100,000    --      1,024      (824)      --          --        --           --         200
 Exercise of
 stock options...        --   --    1,968,816      2     1,525       --       (520)        --        --           --       1,007
 Repurchase of
 stock...........        --   --      (51,096)   --         (5)      --        --          --        --           --          (5)
 Stock-based
 compensation....        --   --          --     --     14,480       --        --      (14,480)      --           --         --
 Issuance of
 common stock for
 services........        --   --       19,618    --        100       --        --          --        --           --         100
 Amortization of
 stock-based
 compensation....        --   --          --     --        --        --        --        4,920       --           --       4,920
 Translation
 adjustment......        --   --          --     --        --        --        --          --        (17)         --         (17)
 Net loss........        --   --          --     --        --        --        --          --        --       (21,683)   (21,683)
                  ----------  ---   ---------   ----   -------    ------     -----     -------     -----     --------   --------
Balance at
December 31,
2000............. 16,580,830   17   7,437,266      7    55,194       361      (520)    (10,635)      (17)     (34,045)    10,362
 Exercise of
 stock options...        --   --       74,467    --        168       --        --          --        --           --         168
 Acquisition of
 technology......        --   --      357,594      1     4,497       --        --          --        --           --       4,498
 Repurchase of
 stock...........        --   --     (236,203)   --       (167)      --        --          --        --           --        (167)
 Notes receivable
 from
 stockholders....        --   --          --     --        --        --       (154)        --        --           --        (154)
 Acceleration of
 employee stock
 options.........        --   --          --     --         31       --        --          --        --           --          31
 Stock-based
 compensation....        --   --          --     --      4,410       --        --       (4,410)      --           --         --
 Amortization of
 stock-based
 compensation....        --   --          --     --        --        --        --        4,527       --           --       4,527
 Cancellation of
 unvested
 options.........        --   --          --     --     (2,217)      --        --        2,217       --           --         --
 Translation
 adjustment......        --   --          --     --        --        --        --          --        (17)         --        (17)
 Net loss........        --   --          --     --        --        --        --          --        --        (7,805)    (7,805)
                  ----------  ---   ---------   ----   -------    ------     -----     -------     -----     --------   --------
<CAPTION>
                  Compre-
                  hensive
                    Loss
                  ---------
<S>               <C>
Balance at
December 31,
1998.............
 Issuance of
 Series D
 convertible
 preferred stock,
 net of issuance
 costs of $41....
 Issuance of
 warrants........
 Exercise of
 stock options...
 Stock-based
 compensation....
 Amortization of
 stock-based
 compensation....
 Net loss........ $ (7,030)
                  ---------
Balance at
December 31,
1999............. $ (7,030)
                  =========
 Issuance of
 Series E
 convertible
 preferred stock,
 net of issuance
 costs of
 $1,235..........
 Issuance of
 warrants........
 Exercise of
 warrants........
 Exercise of
 stock options...
 Repurchase of
 stock...........
 Stock-based
 compensation....
 Issuance of
 common stock for
 services........
 Amortization of
 stock-based
 compensation....
 Translation
 adjustment...... $    (17)
 Net loss........  (21,683)
                  ---------
Balance at
December 31,
2000............. $(21,700)
                  =========
 Exercise of
 stock options...      --
 Acquisition of
 technology......
 Repurchase of
 stock...........      --
 Notes receivable
 from
 stockholders....
 Acceleration of
 employee stock
 options.........
 Stock-based
 compensation....      --
 Amortization of
 stock-based
 compensation....      --
 Cancellation of
 unvested
 options.........
 Translation
 adjustment...... $    (17)
 Net loss........   (7,805)
                  ---------

Balance at
December 31,
2001............. 16,580,830  $17   7,633,124   $  8   $61,916    $  361     $(674)    $(8,301)    $ (34)    $(41,850)  $ 11,443
                  ==========  ===   =========   ====   =======    ======     =====     =======     =====     ========   ========
Balance at
December 31,
2001............. $ (7,822)
                  =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements

                                      F-5
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                             For the Year Ended
                                                                December 31,
                                                          --------------------------
                                                           1999      2000     2001
                                                          -------  --------  -------
<S>                                                       <C>      <C>       <C>
Cash flows from operating activities:
 Net loss...............................................  $(7,030) $(21,683) $(7,805)
 Adjustments to reconcile net loss to net cash provided
  by (used in) operating activities:
  Provision for doubtful accounts.......................       78     1,528    1,089
  Depreciation and amortization.........................      222       658    1,771
  Amortization of stock-based compensation..............      325     4,920    4,527
  Acceleration of employee stock options................      --        --        31
  Amortization of acquired technology...................      --        --       138
  Common stock issued for services......................      --        100      --
  Amortization of warrants issued for services..........       61       838       86
  Changes in assets and liabilities:
   Accounts receivable..................................   (2,329)  (14,837)  (3,326)
   Prepaids and other current assets....................     (173)   (3,349)   2,397
   Other long term assets...............................     (108)       66      (82)
   Accounts payable.....................................      281       558      574
   Accrued liabilities..................................    1,197     8,212    5,749
   Deferred revenue.....................................      587    15,914    4,092
   Other long-term liabilities..........................      --        --       334
                                                          -------  --------  -------
     Net cash provided by (used in) operating
      activities........................................   (6,889)   (7,075)   9,575
                                                          -------  --------  -------
Cash flows from investing activities:
 Acquisition of technology..............................      --        --      (250)
 Return of (investment in) deposit......................      --     (2,533)   2,533
 Purchases of property and equipment....................     (136)   (2,401)  (1,953)
                                                          -------  --------  -------
     Net cash provided by (used in) investing
      activities........................................     (136)   (4,934)     330
                                                          -------  --------  -------
Cash flows from financing activities:
 Payments on capital lease obligations..................      (70)     (227)    (265)
 Proceeds from short-term debt..........................    1,500       --     4,667
 Repayments on short-term debt..........................   (1,700)     (200)  (3,183)
 Issuance of employee notes receivable..................      --        --      (154)
 Net proceeds from issuance of convertible preferred
  stock.................................................    7,975    21,999      --
 Proceeds from issuance of common stock.................       90     1,213      168
 Repurchase of common stock.............................      --         (5)    (167)
                                                          -------  --------  -------
     Net cash provided by financing activities..........    7,795    22,780    1,066
                                                          -------  --------  -------
Effect of change in exchange rates on cash..............      --        (17)     (29)
                                                          -------  --------  -------
Net increase in cash and cash equivalents...............      770    10,754   10,942
Cash and cash equivalents at beginning of year..........    1,574     2,344   13,098
                                                          -------  --------  -------
Cash and cash equivalents at end of year................  $ 2,344  $ 13,098  $24,040
                                                          =======  ========  =======
Supplemental disclosure of cash flow information:
  Cash paid for interest................................  $   181  $     92  $   232
                                                          =======  ========  =======
Non-cash financing activity:
  Purchases of equipment subject to capital leases......  $   284  $    500  $   --
                                                          =======  ========  =======
  Note receivable from officer to purchase stock........  $   --   $    520  $   --
                                                          =======  ========  =======
  Issuance of common stock for acquisitions of a company
   and certain technology...............................  $   --   $    --   $ 4,498
                                                          =======  ========  =======
  Liabilities assumed on acquisition....................  $   --   $    --   $   228
                                                          =======  ========  =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-6
<PAGE>

                            PLUMTREE SOFTWARE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION OF THE COMPANY

   Plumtree Software, Inc. (the "Company") is a California company incorporated
on July 18, 1996 to develop and market infrastructure software and services
that enable a business to deploy a corporate portal to information applications
and Internet-based services. The Company is planning to reincorporate in the
State of Delaware (see Note 15).

   The Company is subject to a number of risks associated with companies at a
similar stage of development including competition from larger, more
established companies, dependence on new product introductions, volatility of
the industry, ability to obtain adequate funding to support growth, dependence
on key individuals and the ability to attract and retain additional qualified
personnel to manage the anticipated growth of the Company.

2. SIGNIFICANT ACCOUNTING POLICIES

 Principles of Consolidation

   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.

 Foreign Currency Translation

   The functional currency of the Company's subsidiaries is the local currency.
Accordingly, all assets and liabilities are translated into U.S. dollars at the
current exchange rate as of the applicable balance sheet date. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation of the financial
statements are reported as a separate component of stockholders' equity.
Foreign currency transaction gains and losses are included in other income
(expense) and for the years ended December 31, 2000 and 2001 these amounts have
not been material.

 Unaudited Pro Forma Stockholders' Equity

   The Company's Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed initial public offering (the "IPO").
If the IPO is consummated under the terms presently anticipated, all of the
currently outstanding shares of convertible preferred stock will be converted
into 16,580,830 shares of common stock upon the closing of the IPO. The effect
of the convertible preferred stock conversion has been reflected as unaudited
pro forma stockholders' equity in the accompanying consolidated balance sheet
as of December 31, 2001.

 Cash and Cash Equivalents

   For purposes of the consolidated statement of cash flows, the Company
considers highly liquid investments with an original maturity of three months
or less from the date of purchase to be cash and cash equivalents.

 Concentration of Credit Risk

   Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places all of its cash

                                      F-7
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

and cash equivalents with high credit issuers. Carrying amounts of financial
instruments held by the Company, which include cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses, approximate fair
value due to their short duration. The Company performs ongoing credit
evaluations of its customers, generally requires customers to prepay for
maintenance and maintains reserves for potential losses. The Company's customer
base is primarily composed of businesses throughout the United States, Europe
and Asia.

   No customer accounted for greater than 10% of total revenue for the years
ended December 31, 2000 and 2001. Two customers accounted for 16% and 13% of
accounts receivable at December 31, 2000. One customer accounted for 28% of
accounts receivable at December 31, 2001.

 Valuation Accounts

   Below is a summary of the changes in the Company's allowance for doubtful
accounts for the years ended December 31, 1999, 2000 and 2001 (in thousands):

<TABLE>
<CAPTION>
                                          Beginning                      Ending
                                           Balance  Additions Deductions Balance
                                          --------- --------- ---------- -------
   <S>                                    <C>       <C>       <C>        <C>
   Year ended December 31:
       1999..............................  $  --     $   78     $  --    $   78
       2000..............................  $   78    $1,528     $  --    $1,606
       2001..............................  $1,606    $1,089     $1,511   $1,184
</TABLE>

   Deductions include all charges against reserves. These deductions were made
in the normal course of business and only for the specific use for which the
reserve was identified and intended.

 Property and Equipment

   Property and equipment are stated at cost. Depreciation and amortization is
provided using the straight-line method over the shorter of the lease term or
the estimated useful life of two to four years.

 Commissions

   The Company records commissions as a result of sales commissions due to
employees relating to contracts that have been signed. The Company recognizes
the commission expense in the period in which the commission is earned, which
may or may not coincide with the recognition of revenue for the respective
contract.

 Stock-Based Compensation

   The Company accounts for stock-based compensation in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," in October 1995. This accounting standard permits
the use of either a fair value based method of accounting or the method defined
in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") to account for stock-based compensation arrangements.
Companies that follow APB 25 are required to disclose the pro forma net income
(loss) that would have resulted from the use of the fair value based method.
The Company has elected to continue to account for its stock-based compensation
arrangements under the provisions of APB 25, and, accordingly, it has included
in Note 10 the pro forma disclosures required under SFAS No. 123.

                                      F-8
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation (an Interpretation of APB Opinion No. 25)" ("FIN 44"). FIN 44
provides guidance on the application of APB 25, particularly as it relates to
options. The effective date of FIN 44 is July 1, 2000 and the Company has
adopted FIN 44 as of that date.

 Restructuring Charges

   In March 2001, the Company undertook a workforce reduction and abandonment
of a leased facility and incurred a charge of $760,000. The Company had paid
for all of the costs incurred with the restructuring as of December 31, 2001.

 Software Development Costs

   The Company accounts for internally generated software development costs in
accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed." Capitalization of software development
costs begins upon the establishment of technological feasibility of the
product, which the Company defines as the development of a working model and
further defines as the completion of beta testing of the software. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenue, estimated economic life and changes in
technology. Such costs are reported at the lower of unamortized cost or net
realizable value. To date, internal software development costs that were
eligible for capitalization have been insignificant and the Company has charged
all software development costs to research and development expense as incurred.

   The Company has capitalized technology costs associated with the
acquisitions discussed in Note 5, as the technology acquired had reached
technological feasibility prior to acquisition. The Company periodically
reviews these costs to ensure they are being recorded at the lower of
unamortized cost or net realizable value. Net realizable value is determined
using assumed future cash flows related to sales of the underlying technology.

 Use of Estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates and assumptions made by management include utilizing the
percentage of completion contract accounting method, determination of the fair
value of stock options and the valuation allowance related to net deferred tax
assets.

 Revenue Recognition

   License revenue consists principally of revenue from the licensing of the
Company's software and is generally recognized when a contract is executed, all
delivery obligations have been met, the fee is fixed or determinable, and
collectibility is probable. When licenses are sold together with

                                      F-9
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

services, in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), license fees are recognized upon delivery, provided
that (1) the above criteria have been met, (2) payment of the license fees is
not dependent upon the performance of the services, and (3) the services do not
include significant modifications to the features and functionality of the
software.

   The Company has not established vendor specific objective evidence of fair
value ("VSOE") for license sales and recognizes revenue from arrangements with
multiple elements involving software licenses under the residual method as
outlined in SOP 97-2. To the extent that a discount exists on any of the
elements, the Company follows the residual method and attributes that discount
entirely to the delivered elements.

   Service revenue consists of consulting, training and installation services
that the Company provides to its customers. Revenue from such services is
generally recognized as the service is performed. If services are included with
a license agreement, amounts related to services are unbundled from the license
fee based on VSOE as established by transactions where such services have been
sold separately. Prior to December 1999, the Company had not yet established
VSOE for service revenue. Accordingly, the Company recognized license revenue
sold together with services as the services were performed. In December 1999,
the Company formed a separate professional services department and senior
management set standard pricing establishing VSOE for these services.

   For a majority of the Company's arrangements, the services provided are not
essential to the functionality of the software and typically can include:

  . developing a project scope;

  . installing and configuring the product; and

  . developing portal content including defining and setting up the initial
    taxonomy of the directory.

   In some arrangements, the services that the Company provides are essential
to the functionality of the software and can include:

  . modifying the user interface to fit a specific environment;

  . integrating its products into environments with legacy systems and custom
    applications; and

  . changing functionality of the product or its architecture, such as unique
    search requirements or elaborate document management capabilities.

   For the arrangements in which the services provided are essential to the
functionality of the software, both the license revenue and service revenue are
recognized in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position 81-1, "Accounting for
Performance of Construction Type and Certain Production Type Contracts" ("SOP
81-1"). The Company accounts for these arrangements under the percentage of
completion contract accounting method pursuant to SOP 81-1. Completion is
measured based upon hours incurred utilizing scope documents prepared by the
customer and the Company.

   The Company has entered into license arrangements where its services are
essential to the functionality of the software but the scope of the
implementation has not yet been completed. The Company defers recognition of
all revenue from such arrangements until the scope of the implementation has
been determined and a scope document is prepared. Upon finalization of the

                                      F-10
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

implementation scope, revenue is recognized using the percentage of completion
contract method. Included in deferred revenue at December 31, 2000 was $6.2
million related to six arrangements for which the implementation scope was not
yet completed. Included in accounts receivable at December 31, 2000 was $2.5
million related to these arrangements. Included in deferred revenue at December
31, 2001 was $7.1 million related to five arrangements for which the
implementation scope was not yet completed. Included in accounts receivable at
December 31, 2001 was $4.9 million of accounts receivable related to these
arrangements.

   Maintenance revenue relates to the technical support and software updates
the Company provides to its customers. Revenue on maintenance contracts is
recognized ratably over the term of the contract. If maintenance is bundled
with a license agreement, amounts related to maintenance are unbundled from the
license fee based on VSOE as established by the renewal rates the Company
charges in accordance with its contracts and its established pricing.

   For arrangements which require delivery of unspecified future products over
a period, the Company uses the subscription method and recognizes revenue
ratably over the period.

 Net Loss Per Share

   Basic and diluted net loss per common share are presented in conformity with
SFAS No. 128, "Earnings Per Share," for all periods presented. In accordance
with SFAS No. 128, basic net loss per share is calculated by dividing net loss
by the weighted average common shares outstanding during the period, less
shares subject to repurchase. Diluted income per share is calculated by
dividing net income by the weighted average common shares outstanding adjusted
for all potential common shares, which includes shares issuable upon the
exercise of outstanding common stock options, convertible preferred stock,
warrants, and other contingent issuances of common stock.

<TABLE>
<CAPTION>
                                               Years Ended December 31,
                                            ---------------------------------
                                              1999        2000        2001
                                            ---------  ----------  ----------
<S>                                         <C>        <C>         <C>
Net loss (in thousands).................... $  (7,030) $  (21,683) $   (7,805)
                                            =========  ==========  ==========
Basic and diluted:
 Weighted average shares of common stock
  outstanding.............................. 4,233,913   6,827,003   7,376,596
 Less: Weighted average shares subject to
  repurchase...............................  (290,183) (1,365,549)   (919,043)
                                            ---------  ----------  ----------
Weighted average shares used in computing
 basic and diluted net loss per common
 share..................................... 3,943,730   5,461,454   6,457,553
                                            =========  ==========  ==========
 Basic and diluted net loss per common
  share.................................... $   (1.78) $    (3.97) $    (1.21)
                                            =========  ==========  ==========
Shares used above..........................                         6,457,553
Pro forma adjustment to reflect weighted
 effect of assumed conversion of
 convertible preferred stock (unaudited)...                        16,580,830
                                                                   ----------
Shares used in computing pro forma basic
 and diluted net loss per common share
 (unaudited)...............................                        23,038,383
                                                                   ==========
Pro forma basic and diluted net loss per
 common share (unaudited)..................                        $    (0.34)
                                                                   ==========
</TABLE>

                                      F-11
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company has excluded all convertible preferred stock, warrants for
convertible preferred stock and outstanding stock options from the calculation
of diluted net loss per common share because all such securities are
antidilutive for all periods presented.

   Potentially dilutive securities included the following:

<TABLE>
<CAPTION>
                                                       As of December 31,
                                                --------------------------------
                                                   1999       2000       2001
                                                ---------- ---------- ----------
   <S>                                          <C>        <C>        <C>
   Common stock subject to repurchase..........    661,821  1,441,890    469,517
   Options to purchase common stock............  3,806,657  5,228,634  8,299,748
   Warrants....................................    212,168    264,448    264,448
   Series A preferred stock....................  1,422,413  1,422,413  1,422,413
   Series B preferred stock....................  3,030,303  3,030,303  3,030,303
   Series C preferred stock....................  4,655,886  4,655,886  4,655,886
   Series D preferred stock....................  5,041,445  5,041,445  5,041,445
   Series E preferred stock....................        --   2,430,783  2,430,783
                                                ---------- ---------- ----------
     Total..................................... 18,830,693 23,515,802 25,614,543
                                                ========== ========== ==========
</TABLE>

   Common stock subject to repurchase includes founders' stock and common stock
issued pursuant to unvested option exercises (see Notes 10 and 11).

   Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin
No. 98, convertible preferred stock and common stock issued or granted for
nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods
presented. To date, the Company has not had any issuances or grants for nominal
consideration.

 Pro Forma Net Loss Per Share (unaudited)

   The calculation of pro forma net loss per share assumes that all series of
convertible shares have been converted into common stock as of the original
issuence date.

 Stock Split

   In July 1999, the Company amended and restated its Articles of Incorporation
to complete a three for two stock split of the Company's common and preferred
shares which became effective immediately. All share and per share information
in these financial statements have been retroactively adjusted to reflect this
stock split.

 Segment Reporting

   Management has concluded that the Company only operates in one business
segment.

                                      F-12
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Revenues by geographic regions were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                Year Ended
                                                               December 31,
                                                          ----------------------
                                                           1999   2000    2001
                                                          ------ ------- -------
     <S>                                                  <C>    <C>     <C>
     Revenues:
       Americas.......................................... $3,354 $31,625 $74,006
       Non-Americas......................................    --    2,518   6,168
                                                          ------ ------- -------
         Total........................................... $3,354 $34,143 $80,174
                                                          ====== ======= =======
</TABLE>

 Comprehensive Income (Loss)

   SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The objective of SFAS No. 130 is to
report a measure of all changes in equity of an enterprise that results from
transactions and other economic events of the period other than transactions
with stockholders ("comprehensive income"). Comprehensive income is the total
of net income (loss) and all other non-owner changes in stockholders' equity.

 Recent Accounting Pronouncements

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires companies to record
derivative financial instruments on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133," which
amends SFAS No. 133 to be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000 (or January 1, 2001 for the Company). In June
2000, the FASB issued Statement No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities--an Amendment of FASB Statement No.
133." SFAS 138 amends SFAS 133 to (a) exclude from the scope of SFAS No. 133
nonfinancial assets that will be delivered in quantities expected to be used or
sold by a company over a reasonable period in the normal course of business and
for which physical delivery is probable, (b) permit hedging of a benchmark
interest rate, (c) allow hedging of foreign-currency-denominated assets and
liabilities and (d) allow for limited hedging of net foreign currency
exposures. The Company has no derivative financial and commodity instruments,
forward contracts or hedging arrangements in cash and cash equivalents. These
statements did not have a material impact on the current financial condition or
results of the Company's operations.

   In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combination" ("SFAS 141"). SFAS 141 establishes new
standards for accounting and reporting for business combinations initiated
after June 30, 2001. Use of the pooling-of-interests method will be prohibited.
The Company does not believe that SFAS 141 will have a material effect on its
operating results or financial position.

   In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which superceded
APB Opinion No. 17, "Intangible

                                      F-13
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Assets." SFAS 142 establishes new standards for goodwill, including the
elimination of goodwill amortization, which is to be replaced with methods of
periodically evaluating goodwill for impairment. The Company will adopt this
statement during the first quarter of fiscal 2002 and does not believe that
SFAS 142 will have a material effect on its operating results or financial
position because the Company has no goodwill as of December 31, 2001.

   In June and August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Nos. 143, Accounting for Asset
Retirement Obligations, and 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. Under FASB Statement No. 143, the fair value of a liability
for an asset retirement obligation must be recognized in the period in which it
is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. FASB Statement No. 144 retains FASB Statement No. 121's,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, fundamental provisions for the: (1) recognition and measurement
of impairment of long-lived assets to be held and used; and (2) measurement of
long-lived assets to be disposed of by sale. The Company does not believe that
either FASB Statement No. 143 or No. 144 will have a material impact on its
financial position or results of operations. FASB Statement No. 143 is
effective for fiscal years beginning after June 15, 2002, and FASB Statement
No. 144 is effective for fiscal years beginning after December 15, 2001.

   In November 2001, the staff of the Financial Accounting Standards Board
issued an announcement on the topic of "Income Statement Characterization of
Reimbursements Received for Out of Pocket Expenses Incurred" (the
"Announcement"). The Announcement requires companies to characterize
reimbursements received for out of pocket expenses incurred as revenue in the
income statement. The Announcement should be applied in financial reporting
periods beginning after December 15, 2001 and comparative financial statements
for prior periods should be reclassified to comply with the guidance in this
announcement. The Company will adopt the Announcement beginning in 2002. The
Company has netted reimbursements received for out of pocket expenses against
the related expenses in the accompanying consolidated statements of operations.
The Announcement will have no impact on gross margin or net income but will
increase services revenue and cost of services revenue.

3. PREPAIDS AND OTHER CURRENT ASSETS

   Prepaids and other current assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                       As of
                                                                   December 31,
                                                                   -------------
                                                                    2000   2001
                                                                   ------ ------
     <S>                                                           <C>    <C>
     Prepaid royalties............................................ $2,005 $  633
     Prepaid other................................................  1,644    619
                                                                   ------ ------
                                                                   $3,649 $1,252
                                                                   ====== ======
</TABLE>

                                      F-14
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4. PROPERTY AND EQUIPMENT

   Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                    As of
                                                                 December 31,
                                                                ---------------
                                                                 2000     2001
                                                                -------  ------
     <S>                                                        <C>      <C>
     Software and computer equipment........................... $ 2,954  $4,262
     Furniture and fixtures....................................     299     578
     Leasehold improvements and other..........................     540     906
                                                                -------  ------
                                                                  3,793   5,746
     Accumulated depreciation and amortization.................  (1,041) (2,812)
                                                                -------  ------
                                                                $ 2,752  $2,934
                                                                =======  ======

5. OTHER ASSETS

   Other assets consist of the following (in thousands):

<CAPTION>
                                                                    As of
                                                                 December 31,
                                                                ---------------
                                                                 2000     2001
                                                                -------  ------
     <S>                                                        <C>      <C>
     Deposits.................................................. $ 2,599  $   66
     Acquired technology, net of amortization of $138..........     --    4,838
     Other.....................................................     277     273
                                                                -------  ------
                                                                $ 2,876  $5,177
                                                                =======  ======
</TABLE>

   In July 2001, the Company acquired certain technology for $95,000. In
November 2001, the Company acquired certain technology for $85,000 and 60,000
shares of common stock. In November 2001, the Company also acquired a company
(the "Acquired Company") for 297,594 shares of common stock. The acquisition of
the Acquired Company was accounted for under the purchase method with the
results of the Acquired Company included in the consolidated statements of
operations for the year ended December 31, 2001 subsequent to the November 2001
acquisition date. In connection with these acquisitions, the Company incurred
approximately $70,000 of transaction related costs. The common stock issued in
connection with these transactions was recorded at its estimated fair value for
accounting purposes of $12.60 per share on the date of issuance. Acquired
technology is being amortized over its estimated useful life of three years.
The amortization expense is being recorded as cost of revenue and was $125,000
for the year ended December 31, 2001.


                                      F-15
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The following unaudited pro forma summary financial information (in
thousands, except for per share information) combines the consolidated results
of operations of the Company as if the acquisition of the Acquired Company had
occurred on January 1, 2000 and was carried forward through December 31, 2001.
Preparation of the pro forma summary information was based on assumptions
deemed appropriate by the Company. The pro forma summary information is not
necessarily indicative of the results that actually would have occurred if the
acquisition had been consummated on January 1, 2000 nor does it purport to
represent the future financial position and results of operations for future
periods.



<TABLE>
<CAPTION>
                                                      Year ended December 31
                                                      ------------------------
                                                         2000         2001
                                                      -----------  -----------
     <S>                                              <C>          <C>
     Revenue.........................................      34,285      80,381
     Loss from operations............................     (24,361)     (9,171)
     Net loss........................................     (23,981)     (9,842)
     Net loss per share (basic and diluted)..........       (4.16)      (1.46)
     Weighted average common shares outstanding
      (basic and diluted)............................       5,759       6,755
</TABLE>


6. ACCRUED LIABILITIES

   Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                     As of
                                                                  December 31,
                                                                 --------------
                                                                  2000   2001
                                                                 ------ -------
     <S>                                                         <C>    <C>
     Accrued commissions and bonus.............................. $3,636 $ 4,471
     Accrued sales taxes........................................  1,347   1,551
     Accrued vacation...........................................    597   1,101
     Accrued royalties..........................................    327   1,058
     Accrued other..............................................  3,588   7,283
                                                                 ------ -------
                                                                 $9,495 $15,464
                                                                 ====== =======
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

 Operating Lease Commitments

   The Company leases its facilities under operating lease agreements. The
leases expire at various dates through 2006. As of December 31, 2001 future
minimum lease payments under these agreements are as follows (in thousands):

<TABLE>
<CAPTION>
     Year Ended December 31,
     -----------------------
     <S>                                                                 <C>
       2002............................................................. $ 2,447
       2003.............................................................   2,573
       2004.............................................................   2,655
       2005.............................................................   2,737
       2006.............................................................   2,328
                                                                         -------
                                                                         $12,740
                                                                         =======
</TABLE>

   Rent expense under operating leases was approximately $420,000, $1.5 million
and $2.3 million for the years ended December 31, 1999, 2000, and 2001,
respectively.

                                      F-16
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During 2000, the Company provided a deposit of approximately $2.5 million to
a lessor to secure new facilities under operating leases. The deposit was
released in 2001 in connection with the issuance of a $2.5 million letter of
credit.

 Capital Lease Commitments

   In 1997, the Company entered into an equipment lease line which resulted in
capital lease obligations expiring at various dates through the year 2002,
dependent upon the date equipment was received. These obligations are secured
by the underlying equipment which consists of software, computer equipment, and
office and furniture equipment. In connection with this lease line, the Company
issued warrants to purchase 36,206 shares of Series A at $0.39 per share (see
Note 9). In July 1999, the Company entered into an agreement to extend the
equipment lease line from $200,000 to $500,000. In connection with the
extension, the Company issued warrants to purchase 9,375 shares of Series D at
$1.59 per share (see Note 9). In April 2000, the Company entered into an
agreement for an additional equipment lease line of $500,000. In connection
with the extension, the Company issued warrants to purchase 11,250 shares of
common stock at $2.00 per share (see Note 9). As of December 31, 2001, the
Company had borrowed approximately $1,000,000 under the lease lines.

   Minimum future lease payments under all noncancellable capital leases as of
December 31, 2001 are as follows (in thousands):

<TABLE>
     <S>                                                                   <C>
     2002................................................................. $332
     2003.................................................................   59
                                                                           ----
     Total................................................................  391
     Less: Amount representing interest at 8%.............................   34
                                                                           ----
     Present value of minimum lease payments..............................  357
     Less: Current portion................................................  254
                                                                           ----
     Long-term portion.................................................... $103
                                                                           ====
</TABLE>

 Notes Payable and Line of Credit

   In April 1998, the Company entered into a loan agreement with a bank to
borrow $750,000 at an interest rate of one percent above the bank's prime rate.
The loan matured in July 2001. The loan was collateralized by substantially all
of the Company's assets. In connection with this loan, the Company issued
warrants to purchase 28,125 shares of Series C at $0.87 per share (see Note 9).

   In March 2000, the Company issued a promissory note to an investor for
$421,000. This note did not accrue interest and was payable on demand. The note
was converted into 43,829 shares of Series E preferred stock in May 2000.

   In March 2001, the Company entered into a revolving line of credit with a
bank to borrow up to $7.5 million at an interest rate of one percent above the
bank's prime rate (6.0% at December 31, 2001). The line is collateralized by
substantially all of the Company's assets. As of December 31, 2001, the Company
had outstanding borrowings of $1.6 million under the line. In addition, the
Company has issued a letter of credit for $2.5 million which is enforceable
against the facility. The facility includes certain covenants, including
liquidity requirements, all of which the Company was in compliance with as of
December 31, 2001. In January 2002, the Company re-paid the total outstanding
borrowings of $1.6 million under the revolving line of credit.

                                      F-17
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Royalties

   The Company entered into an arrangement in 1998 with a software provider to
license that company's software and include it in the Company's software. This
arrangement was amended in May 2000. The Company is required to pay a royalty
fee computed as a percentage of net revenue, as defined in the agreement,
generated from sales of its product. This agreement expires on May 18, 2003.
For the years ended December 31, 2000 and 2001 the Company incurred royalty
expense of approximately $1.1 million and $4.5 million, respectively, related
to this arrangement.

   In 2000 and 2001, the Company has entered into various license arrangements
with other software providers to license that software provider's software in
the Company's product. In return for these licenses, the Company is required to
pay certain fees upon signing of the arrangements plus a certain percentage of
the Company's net revenue, as defined in these agreements, generated from the
sales of its product. Beginning in 2001, the Company incurred royalty expense
of approximately $400,000, related to these arrangements.

8. CONVERTIBLE PREFERRED STOCK

   Convertible preferred stock, par value $0.001, consists of the following,
net of issuance costs (in thousands, except share information):
<TABLE>
<CAPTION>
                                                                As of December
                                                                      31,
                                                                ---------------
                                                                 2000    2001
                                                                ------- -------
<S>                                                             <C>     <C>
Series A:
 Authorized--1,458,621 shares
 Outstanding--1,422,413 shares;
  liquidation preference of $550............................... $   538 $   538
Series B:
 Authorized--3,030,303 shares
 Outstanding--3,030,303 shares;
  liquidation preference of $2,000.............................   1,993   1,993
Series C:
 Authorized--4,699,155 shares
 Outstanding--4,655,886 shares;
  liquidation preference of $4,035.............................   4,002   4,002
Series D:
 Authorized--5,189,282 shares;
 Outstanding--5,041,445 shares;
  liquidation preference of $8,016.............................   7,975   7,975
Series E:
 Authorized--2,604,167 shares;
 Outstanding--2,430,783 shares;
  liquidation preference of $23,336............................  21,999  21,999
                                                                ------- -------
                                                                $36,507 $36,507
                                                                ======= =======
</TABLE>

   Significant rights, restrictions and preferences of Series A, B, C, D and E
are as follows:

  . The holders of each outstanding share of Series A, B, C, D and E are
    entitled to receive annual, non-cumulative, dividends of $0.03, $0.05,
    $0.07, $0.13 and $0.77 per share, respectively, when and as declared by
    the board of directors, in preference to any distribution to the holders
    of the common stock.

                                      F-18
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  . In the event of a liquidation, dissolution or winding-up of the affairs
    of the Company, the holders of each Series A, B, C, D and E shall be
    entitled to receive $0.39, $0.66, $0.87, $1.59 and $9.60 per share,
    respectively, plus all declared and unpaid dividends in preference to any
    distribution to the holders of the common stock. In addition, holders of
    Series A,B,C,D and E shall be entitled to limited participation with the
    holders of common stock in the distribution of all residual assets, if
    any.

  . The preferred shares have full voting rights equivalent to the number of
    common stock shares into which they are convertible.

  . Each share of preferred stock is convertible, at the option of the
    shareholder, into one share of common stock, subject to adjustments for
    certain dilutive events. Each share shall automatically convert prior to
    the closing of an underwritten public offering of the Company's common
    stock with an aggregate offering price to the public of at least
    $15,000,000 and a public offering price per share of at least $12.00.

9. WARRANTS

   In connection with the original equipment lease line discussed in Note 7, a
warrant was issued to the leasing company for the purchase of 36,206 shares of
Series A preferred stock at an exercise price of $0.39 per share. The right to
purchase the Series A shares was immediately effective on signing and
exercisable (i) for a period of six years or (ii) upon the closing of an
initial public offering, whichever is earlier. The estimated fair value of the
warrant at the date of issuance was immaterial.

   In April 1998, in connection with the loan agreement discussed in Note 7, a
warrant was issued to the bank for the purchase of 28,125 shares of Series C
preferred stock at an exercise price of $0.87 per share. The right to purchase
the Series C shares was immediately effective upon signing and exercisable (i)
for a period of five years or (ii) upon the closing of an initial public
offering, whichever is earlier. The estimated fair value of the warrant at the
date of issuance was immaterial.

   In March 1999, in connection with a loan agreement, a warrant was issued to
the bank for the purchase of 138,462 shares of Series D preferred stock at an
exercise price of $0.87 per share. The right to purchase the Series D shares
was immediately effective upon signing and exercisable (i) for a period of five
years or (ii) upon the closing of an initial public offering, whichever is
earlier. The estimated fair value of the warrant at the date of issuance was
approximately $61,000. This amount was recognized as additional interest
expense over the term of the arrangement with the bank.

   In connection with the extension of the lease line discussed in Note 7, a
warrant was issued to purchase 9,375 shares of Series D preferred stock at an
exercise price of $1.59 per share. The rights to purchase the Series D shares
was immediately effective on signing and exercisable (i) for a period of seven
years or (ii) upon the closing of an initial public offering, whichever is
earlier. The estimated fair value of the warrant at the date of issuance was
immaterial.

   In April 2000, in connection with the extension of the equipment lease line
discussed in Note 7, a warrant was issued to the leasing company to purchase
11,250 shares of common stock at $2.00 per share. The right to purchase the
common stock was immediately effective upon signing and exercisable for a
period of seven years. The estimated fair value of the warrant at the date of
issuance was approximately $45,000. This amount will be recognized as
additional interest expense over the term of the lease line which expires in
2003.

                                      F-19
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In May 2000, in connection with the extension of a facilities lease, a
warrant was issued to the landlord to purchase 32,391 shares of common stock at
$9.60 per share. The right to purchase the common stock was immediately
effective upon signing and exercisable for a period of six years. The estimated
fair value of the warrant at the date of issuance was approximately $155,000.
This amount will be recognized as additional rent expense over the term of the
facilities lease which expires in 2006.

   In May 2000, the Company entered into a research and development agreement
with a customer and stockholder. A warrant was issued to this customer to
purchase up to 100,000 shares of common stock at $2.00 per share. The customer
earned 20,000 shares under the warrant per month for five consecutive months in
return for providing certain engineering services. The estimated fair value of
the warrant was approximately $824,000 based upon the estimated fair value of
the warrant shares on the vesting dates. The warrant was fully vested and the
estimated fair value was recognized as a research and development expense in
the accompanying consolidated statement of operations for the year ended
December 31, 2000. As of December 31, 2000, this warrant was exercised.

   In September 2000, in connection with the extension of the operating lease
discussed in Note 7, a warrant was issued to the lessor to purchase 8,639
shares of common stock at $9.60 per share. The right to purchase the common
stock was immediately effective upon signing and exercisable for a period of
six years. The estimated fair value of the warrant at the date of issuance was
approximately $79,000. This amount will be recognized as additional rent
expense over the term of the operating lease which expires in 2006.

   The fair market value of warrants on the date of grant was computed using
the Black-Scholes pricing model with the following assumptions: risk-free
interest rates ranging from 5.6 percent to 6.8 percent, expected dividend yield
of 0 percent, contractual lives of 0.1 to 7 years, and expected volatility of
70 percent.

                                      F-20
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


10. EQUITY INCENTIVE PLANS

   In June 1997, the Company adopted the 1997 Equity Incentive Plan (the
"Plan") and has reserved 12,700,000 shares of common stock for issuance
thereunder. Under the Plan, the board of directors may grant incentive and
nonqualified stock options to purchase shares of the Company's common stock to
employees, directors and consultants of the Company. The exercise price per
share for an incentive stock option cannot be less than 100% of the fair market
value as determined by the board of directors on the date of grant. The
exercise price per share for nonqualified stock options cannot be less than 85%
of the fair market value, as determined by the board of directors, on the date
of grant. Options generally expire ten years after the date of grant and
generally vest over one to four year period. In addition, certain option
holder's are entitled to exercise prior to the option's vesting as long as they
are employees. Should the employee subsequently leave, the Company has the
right to repurchase unvested shares at the original exercise price. Option
activity under the Plan through December 31, 2001 was as follows:

<TABLE>
<CAPTION>
                                                                     Weighted
                               Shares                    Weighted    Average
                             Available     Options       Average       Fair
                             for Grant   Outstanding  Exercise Price  Value
                             ----------  -----------  -------------- --------
   <S>                       <C>         <C>          <C>            <C>
   Balance at December 31,
    1998....................    345,254   3,764,276       $0.06
     Authorized.............  1,500,000         --          --
     Granted................ (1,894,566)  1,894,566        0.12       $0.76
                                                                      =====
     Exercised..............        --   (1,342,498)       0.07
     Cancelled..............    509,687    (509,687)       0.07
                             ----------  ----------       -----
   Balance at December 31,
    1999....................    460,375   3,806,657       $0.09
     Authorized.............  5,000,000         --          --
     Granted................ (3,660,450)  3,660,450        3.81       $4.96
                                                                      =====
     Exercised..............        --   (1,968,816)       0.77
     Repurchased............     51,096         --         0.08
     Cancelled..............    269,657    (269,657)       2.10
                             ----------  ----------       -----
   Balance at December 31,
    2000....................  2,120,678   5,228,634       $2.33
     Authorized.............  2,000,000         --          --
     Granted................ (4,152,750)  4,152,750        6.68       $2.40
                                                                      =====
     Exercised..............        --      (74,467)       2.24
     Repurchased............    236,203         --         0.71
     Cancelled..............  1,007,169  (1,007,169)       5.80
                             ----------  ----------       -----
   Balance at December 31,
    2001....................  1,211,300   8,299,748       $4.09
                             ==========  ==========       =====
</TABLE>

                                      F-21
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table summarizes the options outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                                           Weighted Average
        Range of       Number of Options Remaining Contractual Weighted Average   Number of
     Exercise Prices      Outstanding        Life (Years)       Exercise Price  Options Vested
     ---------------   ----------------- --------------------- ---------------- --------------
     <S>               <C>               <C>                   <C>              <C>
     $0.06-$0.11           2,357,292             6.78               $0.09         1,821,007
        $0.16                 22,750             7.88                0.16             9,115
        $0.32                 50,000             8.00                0.32            25,001
        $1.25                 11,797             8.07                1.25             2,423
     $2.00-$2.60           1,478,017             8.42                2.32           400,608
     $5.00-$9.00           4,157,246             9.49                6.60           376,489
        $12.60               222,646             8.80               12.60            64,250
     ------------          ---------             ----               -----         ---------
     $0.06-$12.60          8,299,748             8.50               $4.09         2,698,893
     ============          =========             ====               =====         =========
</TABLE>

   At December 31, 2001, 469,517 shares of common stock were subject to
repurchase by the Company. As a result of the early exercise provision,
4,360,595 were exercisable at December 31, 2001.

   In January 2002, the board of directors approved the Company's 2002 Stock
Plan, 2002 Employee Stock Purchase Plan, and 2002 Director Option Plan. Under
these plans the Company has reserved 7,700,000, 2,000,000, and 400,000 shares
of common stock, respectively, for future issuance.

   The Company accounts for its stock option plans pursuant to APB 25 whereby
the difference between the exercise price and the fair value at the date of
grant is recognized as compensation expense. Had compensation expense for stock
option plans been determined consistent with SFAS No. 123, net losses would
have increased to the following pro forma amounts (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                                    --------------------------
                                                     1999      2000     2001
                                                    -------  --------  -------
   <S>                                              <C>      <C>       <C>
   Net loss as reported............................ $(7,030) $(21,683) $(7,805)
   Net loss pro forma (reflecting adjustment for
    compensation expense consistent with SFAS
    No. 123)....................................... $(7,063) $(22,330) $(9,896)
   Net loss per share as reported.................. $ (1.78) $  (3.97) $ (1.21)
   Net loss per share pro forma (reflecting
    adjustment for compensation expense consistent
    with SFAS No. 123)............................. $ (1.79) $  (4.09) $ (1.53)
</TABLE>

   The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                                --------------------------------
                                                   1999       2000       2001
                                                ---------- ---------- ----------
   <S>                                          <C>        <C>        <C>
   Risk-free interest rate..................... 4.7 - 6.1% 5.8 - 6.6% 4.0 - 4.8%
   Expected life of the option.................    4 years    4 years    4 years
   Dividend yield..............................         0%         0%         0%
   Volatility..................................         0%         0%         0%
</TABLE>

   In connection with the grant of certain stock options to employees during
the year ended December 31, 1999, the Company recorded stock-based compensation
of approximately $1.4 million, representing the difference between the deemed
value of the common stock for accounting purposes and the option exercise price
or stock sale price at the date of the option grant or stock sale. Such

                                      F-22
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

amount is presented as a reduction of stockholders' equity and amortized on an
accelerated basis over the vesting period of the applicable options, generally
four years. Approximately $325,000 was expensed during the year ended December
31, 1999. In connection with the grant of certain stock options to employees
during the year ended December 31, 2000, the Company recorded stock-based
compensation of approximately $14.5 million. Approximately $4.9 million was
expensed during the year ended December 31, 2000. In connection with the grant
of certain stock options to employees during the year ended December 31, 2001,
the Company recorded stock based compensation of approximately $4.4 million.
Approximately $4.5 million was expensed during the year ended December 31,
2001. Compensation expense is decreased in the period of forfeiture for any
accrued but unvested compensation arising from the termination of an option
holder.

   During the year ended December 31, 1999, the Company issued options to
acquire approximately 14,000 shares of common stock to non-employees. The
options were immediately exercisable on the date of grant. The fair value of
the options on the date of grant was computed using the Black-Scholes pricing
model with the following assumptions: risk-free interest rates ranging from
6.0 percent to 6.2 percent, expected dividend yield of 0 percent, contractual
lives of 4 years and expected volatility of 70 percent. The estimated fair
value of the options was immaterial.

   In April 2000, the Company issued 19,618 shares of common stock in exchange
for services. The common stock was issued without restrictions. The estimated
fair value of the stock was approximately $100,000 and was recognized as
general and administrative expense in the accompanying statement of operations
for the year ended December 31, 2000.

11. COMMON STOCK

   Through December 31, 2001, the Company has issued an aggregate of 4,890,470
shares of common stock to founders of the Company, all of which were subject
to repurchase rights in the event of termination of employment, at the option
of the Company, at $0.01 per share. These rights of repurchase expired in
January 2000.

12. INCOME TAXES

   The Company accounts for income taxes pursuant to the provisions of SFAS
No. 109, "Accounting for Income Taxes." SFAS 109 requires recognition of
deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined using
the current applicable enacted tax rate and provisions of the enacted tax law.
The components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                   As of
                                                               December 31,
                                                             ------------------
                                                               2000      2001
                                                             --------  --------
   <S>                                                       <C>       <C>
   Cumulative net operating loss carryforwards.............. $  9,339  $  9,024
   Research and development tax credits.....................      686     1,882
   Alternative minimum tax credit...........................      --        168
   Cumulative temporary differences.........................    2,313     3,762
                                                             --------  --------
   Total deferred tax assets................................   12,338    14,836
   Valuation allowance......................................  (12,338)  (14,836)
                                                             --------  --------
   Net deferred tax assets.................................. $    --   $    --
                                                             ========  ========
</TABLE>

   The Company has net operating loss carryforwards as of December 31, 2001 of
approximately
$17.3 million and $5.2 million, respectively, to offset future federal and
state taxable income. In

                                     F-23
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

addition, the Company has net operating loss carryforwards as of December 31,
2001 of approximately $8.1 million in various foreign jurisdictions. The net
operating loss carryforwards expire at various dates through the year 2021. The
state loss carryforward will expire commencing in 2006. A valuation allowance
has been recorded for the entire net deferred tax asset as a result of
management's uncertainties regarding realization of the asset including limited
operating history of the Company, the lack of profitability and uncertainty
over future operating profitability and taxable income.

   The Tax Reform Act of 1986 contains provisions which may limit the net
operating loss and credit carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership
interest.

   The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory Federal income tax rate of 35% to net loss
as follows:

<TABLE>
<CAPTION>
                                   As of
                               December 31,
                             ---------------------
                             1999    2000    2001
                             -----   -----   -----
   <S>                       <C>     <C>     <C>
   Federal statutory rate..  (35.0)% (35.0)% (35.0)%
   State taxes net of
    federal benefit........   (5.8)   (5.8)   (5.8)
   Alternative minimum
    taxes..................    --      --      2.3
   Non-deductible
    compensation...........    2.3     9.3    25.5
   Federal and state
    credits................   (3.7)   (2.0)  (16.1)
   Other...................   (5.8)   (2.9)    1.3
   Foreign taxes...........    --      --      6.9
   Change in valuation
    allowance..............   48.0    36.4    30.5
                             -----   -----   -----
                               --  %   --  %   9.6 %
                             =====   =====   =====
</TABLE>

13. 401(k) PLAN

   The Company maintains a 401(k) retirement plan for full-time employees and
may make discretionary contributions. No employer contributions have been made
to date.

14. RELATED PARTY TRANSACTIONS

   In November 1999, the Company entered into an agreement with a customer for
the sale of license, services and maintenance. In December 1999, this customer
became a Series D preferred stockholder on terms identical to the other third-
party Series D investors. Through December 31, 1999, the Company had recognized
approximately $165,000 in revenue from this customer. For the years ended
December 31, 2000 and 2001, revenue from this customer was not significant.

   In December 1999, the Company entered into an agreement with a customer for
the sale of license, services and maintenance. In May 2000, this customer
became a Series E preferred shareholder on terms identical to the other third-
party Series E investors. For the years ended December 31, 2000, and 2001 the
Company recognized revenue of approximately $876,000 and $471,000 from this
customer. As of December 31, 2000, the Company had $136,000 in accounts
receivable from this customer.

   In February 2000, the Company entered into an agreement with a Series D
preferred shareholder for the sale of license and services. For the year ended
December 31, 2000, the

                                      F-24
<PAGE>

                            PLUMTREE SOFTWARE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company recognized revenue of $277,000 and had $182,000 in accounts receivable
as of December 31, 2000. For the year ended December 31, 2001, revenue from
this customer was not significant.

   In May 2000, the Company entered into an agreement with a customer for the
sale of license, services and maintenance. In May 2000, this customer became a
Series E preferred shareholder on terms identical to the other third-party
Series E investors. For the years ended December 31, 2000 and 2001, the Company
recognized revenue of approximately $1.7 million and $638,000, respectively. As
of December 31, 2000 and 2001, the Company had an accounts receivable balance
from this customer of $202,000 and $3,000, respectively.

   In August 2000, the Company entered into a note with an officer of the
Company in the amount of $520,000 to exercise options. This note is full
recourse at 6.0 percent per annum and is payable upon demand.

   In October 2001, the Company entered into notes with two employees for a
total of $154,000. These notes are full recourse at 6.0 percent per annum and
mature in October 2003.

15. REINCORPORATION

   In connection with the planned IPO, the Board of Directors and stockholders
approved the reincorporation of the Company into the State of Delaware. The
Company plans to effect the reincorporation prior to the effectiveness of the
IPO.

                                      F-25
<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

   No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.

                               ----------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Prospectus Summary.......................................................   3
Risk Factors.............................................................   7
Special Note About Forward-Looking Statements............................  21
Use of Proceeds..........................................................  22
Dividend Policy..........................................................  22
Capitalization...........................................................  23
Dilution.................................................................  24
Selected Consolidated Financial Data.....................................  26
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  27
Business.................................................................  40
Management...............................................................  53
Certain Relationships and Related Transactions...........................  63
Principal Stockholders...................................................  65
Description of Capital Stock.............................................  67
Shares Eligible for Future Sale..........................................  69
Underwriting.............................................................  71
Legal Matters............................................................  73
Experts..................................................................  73
Additional Information...................................................  73
Index to Financial Statements............................................ F-1
</TABLE>


                               ----------------

   Through and including    , 2002 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

                               5,000,000 Shares

                            Plumtree Software, Inc.

                                 Common Stock

                               ----------------

                                    [LOGO]

                               ----------------


                             Goldman, Sachs & Co.

                                   JPMorgan

                              RBC Capital Markets

                      Representatives of the Underwriters


-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

   The following table indicates the expenses to be incurred in connection with
the offering described in this Registration Statement, all of which will be
paid by Plumtree. All amounts are estimates, other than the Nasdaq listing fee.

<TABLE>
   <S>                                                                   <C>
   Nasdaq National Market listing fee...................................  95,000
   Accounting fees and expenses......................................... 200,000
   Legal fees and expenses.............................................. 200,000
   Printing and engraving expenses...................................... 200,000
   Transfer agent fees and expenses.....................................  10,000
   Blue sky fees and expenses...........................................   3,000
   Miscellaneous fees and expenses......................................  42,000
                                                                         -------
     Total.............................................................. 750,000
                                                                         =======
</TABLE>

Item 14. Indemnification of Directors and Officers.

   Section 102 of the Delaware General Corporation Law, or the DGCL, as
amended, allows a corporation to eliminate the personal liability of directors
of a corporation to the corporation or its stockholders for monetary damages
for a breach of fiduciary duty as a director, except where the director
breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit.

   Section 145 of the DGCL provides, among other things, that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of Plumtree) by reason of
the fact that the person is or was a director, officer, agent or employee of
Plumtree or is or was serving at our request as a director, officer, agent, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding. The power to indemnify applies
(a) if the person is successful on the merits or otherwise in defense of any
action, suit or proceeding, or (b) if the person acted in good faith and in a
manner he reasonably believed to be in the best interest, or not opposed to the
best interest, of Plumtree, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
power to indemnify applies to actions brought by or in the right of Plumtree as
well, but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in these actions no indemnification shall be made in
the event of any adjudication of negligence or misconduct in the performance of
his duties to Plumtree, unless the court believes that in light of all the
circumstances indemnification should apply.

   Section 174 of the DGCL provides, among other things, that a director who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption may be held liable for these actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to
these actions to be entered in the books containing the minutes of the meetings
of the board of directors at the time the action occurred or immediately after
the absent director receives notice of the unlawful acts.

                                      II-1
<PAGE>

   The Registrant's Second Amended and Restated Certificate of Incorporation
includes a provision that eliminates the personal liability of its directors
for monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from or limitation of liability is not permitted under
the Delaware General Corporation Law.

   The Registrant's Amended and Restated Bylaws provide that:

  . the Company must indemnify its directors and officers to the fullest
    extent permitted by Delaware law;

  . the Company may indemnify its other employees and agents to the same
    extent that we indemnified our officers and directors, unless otherwise
    determined by our board of directors; and

  . the Company must advance expenses, as incurred, to the Registrant's
    directors and officers in connection with a legal proceeding to the
    fullest extent permitted by Delaware law.

   The indemnification provisions contained in the Registrant's Second Amended
and Restated Certificate of Incorporation and Amended and Restated Bylaws are
not exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Registrant maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of this status.

   The Registrant intends to enter into agreements to indemnify its directors,
and officers, in addition to indemnification provided for in the Registrant's
bylaws. These agreements, among other things, will provide for indemnification
of these persons for expenses, judgments, fines, and settlement amounts
incurred by any such person in any action or proceeding arising out of the
person's services as a director or officer of Registrant or as a director or
officer of another corporation or other enterprise at the Registrant's request.

Item 15. Recent Sales of Unregistered Securities.

   During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below. When the
Registrant has relied on Regulation D, Rule 506 thereof or Section 4(2) of the
Securities Act, the investors in unregistered securities have been accredited
investors.

  (a) On August 4, 1999, and December 12, 1999, Registrant issued and sold an
      aggregate of 5,041,445 shares of Series D preferred stock to 15
      investors for $1.59 per share, or an aggregate of $8,015,898. Upon the
      closing of this offering, each share of Series D preferred stock will
      automatically convert into one share of common stock. The foregoing
      purchases and sales were exempt from registration under the Securities
      Act pursuant to Section 4(2) thereof and Regulation D promulgated
      thereunder.

  (b) On September 25, 1999, Registrant issued a warrant to Lighthouse
      Capital Partners III, L.P. to purchase up to 9,375 shares of Series D
      preferred stock for a weighted average exercise price of $1.59 per
      share. The issuance of this warrant was exempt from registration under
      the Securities Act pursuant to Section 4(2) thereof on the basis that
      the transaction did not involve a public offering.

  (c) On April 5, 2000, Registrant issued and sold 19,618 shares of common
      stock to Ramsey Bierne Associates in consideration for services
      rendered. The foregoing purchase and sale was exempt from registration
      under the Securities Act pursuant to Section 4(2) thereof and
      Regulation D promulgated thereunder on the basis that the transactions
      did not involve a public offering.

  (d) On April 27, 2000, Registrant issued a warrant to Lighthouse Capital
      Partners III, L.P. to purchase 11,250 shares of common stock for $2.00
      per share. The issuance of this warrant

                                      II-2
<PAGE>

      was exempt from registration under the Securities Act pursuant to
      Section 4(2) hereof on the basis that the transaction did not constitute
      a public offering.

  (e) On May 2, 2000, May 8, 2000 and May 12, 2000, Registrant issued and
      sold an aggregate of 2,430,783 shares of Series E preferred stock to 25
      investors for $9.60 per share, or an aggregate of $23,333,526. Upon the
      closing of this offering, each share of Series E preferred stock will
      automatically convert into one share of common stock. The foregoing
      purchases and sales were exempt from registration under the Securities
      Act pursuant to Section 4(2) thereof and Regulation D promulgated
      thereunder.

  (f) On May 8, 2000, Registrant issued a warrant to The Procter & Gamble
      Company to purchase 100,000 shares of common stock for $2.00 per share.
      This warrant was exercised in September 2000. The issuance of this
      warrant was exempt from registration under the Securities Act pursuant
      to Section 4(2) thereof on the basis that the transaction did not
      involve a public offering.

  (g) On May 18, 2000, June 14, 2000 and on July 12, 2000, an aggregate of
      225,000 shares of common stock was issued upon exercise of options
      under the Registrant's 1997 Equity Incentive Plan at a weighted average
      exercise price of $2.58 per share for an aggregate $580,500. The
      foregoing purchases and sales were exempt from registration under the
      Securities Act pursuant to Section 4(2) thereof and Regulation D
      promulgated thereunder on the basis that the transactions did not
      involve a public offering.

  (h) On May 31, 2000, Registrant issued a warrant to WXI/San Realty, L.L.C.
      to purchase 32,391 shares of common stock for $9.60 per share. The
      issuance of this warrant was exempt from registration under the
      Securities Act pursuant to Section 4(2) thereof on the basis that the
      transaction did not involve a public offering.

  (i) On September 20, 2000, Registrant issued a warrant to WXI/San Realty,
      to purchase 8,639 shares of common stock for $9.60 per share. The
      issuance of this warrant was exempt from registration under the
      Securities Act pursuant to Section 4(2) thereof on the basis that the
      transaction did not involve a public offering.

  (j) An aggregate of 3,476,251 shares of common stock has been issued upon
      exercise of options under the Registrant's 1997 Equity Incentive Plan
      at a weighted average exercise price of $0.51 per share or an aggregate
      of $1,782,197. The foregoing purchases and sales were exempt from
      registration under the Securities Act pursuant to Section 4(2) or Rule
      701.

  (k) On November 21, 2001 Registrant issued an aggregate of 297,594 shares
      of common stock pursuant to an information statement to 21 accredited
      and/or sophisticated investors in connection with the acquisition of a
      privately held corporation. The issuance of shares was exempt from
      registration under the Securities Act pursuant to Section 4(2) thereof
      and Regulation D promulgated thereunder.


  (l) On November 30, 2001 Registrant issued an aggregate of 60,000 shares
      of common stock to 7 accredited investors as partial consideration for
      certain assets acquired by the Registrant from a privately held
      corporation. The issuance of shares was exempt from registration under
      the Securities Act pursuant to Section 4(2) thereof on the basis that
      the transaction did not involve a public offering.


   None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, except that Credit Suisse
First Boston Corporation acted as placement agent in connection with the
transaction described in paragraph (e) above. The recipients in such
transactions represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution, and appropriate legends were affixed to the share certificates
and instruments issued in those transactions.

                                     II-3
<PAGE>

Item 16. Exhibits and Financial Statement Schedules.

   a. Exhibits


<TABLE>
<CAPTION>
   Exhibit Description
   ------- -----------
   <C>     <S>
    1.1    Form of Underwriting Agreement
    3.1**  Amended and Restated Certificate of Incorporation of the Registrant
    3.2**  Bylaws of the Registrant
    4.1**  Specimen common stock certificate
    4.2**  Amendment No. 1 to Amended and Restated Investor Rights Agreement
    4.3**  Warrant to purchase Series A Preferred Stock, dated April 8, 1997,
            issued to Lighthouse Capital Partners II, L.P.
    4.4**  Warrant to purchase Series C Preferred Stock, dated April 20, 1998,
            issued to Silicon Valley Bank
    4.5**  Warrant to purchase Series D Preferred Stock, dated April 2, 1999,
            issued to Silicon Valley Bank
    4.6**  Warrant to purchase Series D Preferred Stock, dated September 1,
            1999, issued to Lighthouse Capital Partners III, L.P.
    4.7**  Warrant to purchase Common Stock, dated April 27, 2000, issued to
            Lighthouse Capital Partners III, L.P.
    4.8**  Warrant to purchase Common Stock, dated May 8, 2000, issued to The
            Procter & Gamble Company
    4.9**  Warrant to purchase Common Stock, dated May 31, 2000, issued to
            WXI/SAN Realty, L.L.C.
    4.10** Warrant to purchase Common Stock, dated September 20, 2000, issued
            to WXI/SAN Realty, L.L.C.
    5.1**  Opinion of Wilson Sonsini Goodrich & Rosati, Professional
            Corporation
   10.1**  Form of Indemnification Agreement between the Registrant and each of
            its directors and officers
   10.2**  1997 Equity Incentive Plan, as amended, and form of agreements
            thereunder
   10.3**  2002 Stock Plan, and form of agreements thereunder
   10.4**  2002 Employee Stock Purchase Plan, and form of agreements thereunder
   10.5**  2002 Director Option Plan, and form of agreements thereunder
   10.6**  Loan and Security Agreement, dated March 14, 2001, between the
            Registrant and Silicon Valley Bank
   10.7**  Office Lease for 500 Sansome Street, dated April 7, 1999, between
            the Registrant and BPG Sansome, L.L.C.
   10.8**  First Amendment to Lease for 500 Sansome Street, dated May 3, 2000,
            between the Registrant and WXI/SAN Realty, L.L.C.
   10.9**  Offer letter between the Registrant and John H. Kunze
   10.10** Offer letter between the Registrant and Eric Borrmann
   10.11** Offer letter between the Registrant and John Hogan
   10.12** Offer letter between the Registrant and Jim Flatley
   10.13** Second Amendment to Lease for 500 Sansome Street, dated September
            20, 2000, between the Registrant and WXI/SAN Realty, L.L.C.
   10.14** Third Amendment to Lease for 500 Sansome Street, dated November 22,
            2000, between the Registrant and WXI/SAN Realty, L.L.C.
   21.1    Subsidiaries of the Registrant
   23.1    Consent of Arthur Andersen LLP
   23.2**  Consent of Wilson Sonsini Goodrich & Rosati, Professional
            Corporation (included in Exhibit 5.1)
   24.1**  Power of Attorney (included on signature page)
   27.1**  Financial Data Schedule
</TABLE>

--------
*  To be filed by amendment.
** Previously filed.

   b. Financial Statement Schedules

                                      II-4
<PAGE>

Item 17. Undertakings.

   The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing certificates in the denominations and registered in the names as
required by the Underwriters to permit prompt delivery to each purchaser.

   Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been informed 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 by the registrant 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 pubic 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 of
      1933, 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 under Rule 424(b)(1) or
      (4) or 497(h) under the Securities Act shall be deemed to be part of
      this registration statement as of the time it was declared effective.

  (2) For the purpose of determining any liability under the Securities Act
      of 1933, each post-effective amendment that contains a form of
      prospectus shall be deemed to be a new registration statement relating
      to the securities offered therein, and the offering of such securities
      at that time shall be deemed to be the initial bona fide offering
      thereof.

                                      II-5
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 5 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in San Francisco,
State of California, on February 26, 2002.


                                          PLUMTREE SOFTWARE, INC.

                                                     /s/ John H. Kunze
                                          By: _________________________________
                                                       John H. Kunze
                                               President and Chief Executive
                                                           Officer

   Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
                 Name                              Title                   Date
                 ----                              -----                   ----


<S>                                    <C>                           <C>
        /s/ John H. Kunze               President, Chief Executive   February 26, 2002
______________________________________     Officer and Director
            John H. Kunze                  (Principal Executive
                                                 Officer)


        /s/ Eric Borrmann*                Chief Financial Officer    February 26, 2002
______________________________________   (Principal Financial and
            Eric Borrmann                   Accounting Officer)

         /s/ John Dillon*                        Director            February 26, 2002
 ______________________________________
             John Dillon

        /s/ Rupen Dolasia*                       Director            February 26, 2002
 ______________________________________
            Rupen Dolasia

        /s/ Pierre Lamond*                       Director            February 26, 2002
______________________________________
            Pierre Lamond

       /s/ Bernard Whitney*                      Director            February 26, 2002
______________________________________
           Bernard Whitney
</TABLE>


     /s/ John H. Kunze
*By: ____________________________
         John H. Kunze
      (Attorney-in-fact)

                                      II-6
<PAGE>

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
 Exhibit Description
 ------- -----------
 <C>     <S>
  1.1    Form of Underwriting Agreement
  3.1**  Amended and Restated Certificate of Incorporation of the Registrant
  3.2**  Bylaws of the Registrant
  4.1**  Specimen common stock certificate
  4.2**  Amendment No. 1 to Amended and Restated Investor Rights Agreement
  4.3**  Warrant to purchase Series A Preferred Stock, dated April 8, 1997,
          issued to Lighthouse Capital Partners II, L.P.
  4.4**  Warrant to purchase Series C Preferred Stock, dated April 20, 1998,
          issued to Silicon Valley Bank
  4.5**  Warrant to purchase Series D Preferred Stock, dated April 2, 1999,
          issued to Silicon Valley Bank
  4.6**  Warrant to purchase Series D Preferred Stock, dated September 1, 1999,
          issued to Lighthouse Capital Partners III, L.P.
  4.7**  Warrant to purchase Common Stock, dated April 27, 2000, issued to
          Lighthouse Capital Partners III, L.P.
  4.8**  Warrant to purchase Common Stock, dated May 8, 2000, issued to The
          Procter & Gamble Company
  4.9**  Warrant to purchase Common Stock, dated May 31, 2000, issued to
          WXI/SAN Realty, L.L.C.
  4.10** Warrant to purchase Common Stock, dated September 20, 2000, issued to
          WXI/SAN Realty, L.L.C.
  5.1**  Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
 10.1**  Form of Indemnification Agreement between the Registrant and each of
          its directors and officers
 10.2**  1997 Equity Incentive Plan, as amended, and form of agreements
          thereunder
 10.3**  2002 Stock Plan, and form of agreements thereunder
 10.4**  2002 Employee Stock Purchase Plan, and form of agreements thereunder
 10.5**  2002 Director Option, and form of agreements thereunder
 10.6**  Loan and Security Agreement, dated March 14, 2001, between the
          Registrant and Silicon Valley Bank
 10.7**  Office Lease for 500 Sansome Street, dated April 7, 1999, between the
          Registrant and BPG Sansome, L.L.C.
 10.8**  First Amendment to Lease for 500 Sansome Street, dated May 3, 2000,
          between the Registrant and WXI/SAN Realty, L.L.C.
 10.9**  Offer letter between the Registrant and John H. Kunze
 10.10** Offer letter between the Registrant and Eric Borrmann
 10.11** Offer letter between the Registrant and John Hogan
 10.12** Offer letter between the Registrant and Jim Flatley
 10.13** Second Amendment to Lease for 500 Sansome Street, dated September 20,
          2000, between the Registrant and WXI/SAN Realty, L.L.C.
 10.14** Third Amendment to Lease for 500 Sansome Street, dated November 22,
          2000, between the Registrant and WXI/SAN Realty, L.L.C.
 21.1    Subsidiaries of the Registrant
 23.1    Consent of Arthur Andersen LLP
 23.2**  Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
          (included in Exhibit 5.1)
 24.1**  Power of Attorney (included on signature page)
 27.1**  Financial Data Schedule
</TABLE>

--------
*  To be filed by amendment.
** Previously filed.