FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
SUPPORT.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 7389 94-3282005
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction
of incorporation or Classification Code Number) Identification No.)
organization)
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575 Broadway
Redwood City, CA 94063
(650) 556-9440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RADHA RAMASWAMI BASU
Chief Executive Officer
SUPPORT.COM, INC.
575 Broadway
Redwood City, CA 94063
(650) 556-9440
(Name, address, including zip code and telephone number, including area code,
of agent for service of process)
Copies to:
Jorge del Calvo, Esq. Mark A. Bertelsen, Esq.
Allison Leopold Tilley, Esq. Jose F. Macias, Esq.
Davina K. Kaile, Esq. Betsey Sue, Esq.
Pillsbury Madison & Sutro LLP Wilson Sonsini Goodrich & Rosati
2550 Hanover Street 650 Page Mill Road
Palo Alto, CA 94304 Palo Alto, CA 94304
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement numbers of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to 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 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
CALCULATION OF FILING FEE
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Proposed Maximum
Class of Securities Aggregate Offering Amount of
To Be Registered Price(1) Registration Fee
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Common Stock, $.001 par value....... $62,100,000 $16,395
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(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes up to shares that may be sold to cover over-allotments,
if any.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration filed with the Securities +
+and Exchange Commission is effective. This prospectus is not an offer to sell +
+securities, and we are not soliciting offers to buy these securities in any +
+state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 2000
Shares
(logo)
Common Stock
Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $ and $ per share. We have applied to list our common stock on The Nasdaq Stock Market's National Market under the symbol "SPRT."
The underwriters have an option to purchase a maximum of additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
Underwriting
Price to Discounts and Proceeds to
Public Commissions Support.com
-------- ------------- -----------
Per Share.................................... $ $ $
Total........................................ $ $ $
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Delivery of the shares of common stock will be made on or about .
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Credit Suisse First Boston
Chase H&Q
Bear, Stearns & Co. Inc.
Wit SoundView
The date of this prospectus is .
GATEFOLD
Graphic depicting Support.com's business:
the new infrastructure of support
Support.com Logo
Representative Corporate IT Internet Customers
Support.com provides web-enabled
list of automated, personalized support
Support outsourcers software for eBusiness and
corporate IT, e-Commerce companies that seek to
differentiate themselves through
support outsourcer, enhanced customer service.
Internet service Internet service Extranet Partners Business can lower costs, increase
provider Clients customer satisfaction and increase
provider and Suppliers revenue by using support.com's
Internet support infrastructure
application service Application service Intranet Employees to support customers, partners,
provider suppliers and employees over
provider customers. intranets and extranets and the
Internet.
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TABLE OF CONTENTS
Page
----
Summary............................. 3
Risk Factors........................ 6
Special Note Regarding Forward-
Looking Statements................. 19
Use of Proceeds..................... 20
Dividend policy..................... 20
Capitalization...................... 21
Dilution............................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 24
Business............................ 30
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Page
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Management....................... 47
Certain Transactions............. 57
Principal Stockholders........... 59
Description of Capital Stock..... 61
Shares Eligible for Future Sale.. 66
Underwriting..................... 68
Notice to Canadian Residents..... 71
Legal Matters.................... 72
Experts.......................... 72
Where You Can Find More
Information..................... 72
Index To Financial Statements.... F-1
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You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may be used only where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.
Dealer Prospectus Delivery Obligation
Until (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
SUMMARY
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully before making a decision whether to purchase our common stock.
Support.com
We are a leading provider of eBusiness infrastructure software that optimizes, automates and personalizes user support over the Internet. Our comprehensive suite of eSupport software products and services is designed to accelerate eBusiness growth by increasing the strategic value of support organizations and reducing support inefficiencies that would otherwise constrain expanding Internet initiatives. We offer customers the ability to automate problem avoidance through self-healing, promote call avoidance through user self-service and improve problem resolution through optimized assisted support. We sell our products and services to corporate information technology departments, Internet service providers, application service providers and support outsourcers. Our customers include Bear Stearns, Compaq Professional Services, Computer Sciences Corp., everdream, Excite@Home, Globo Cabo, JCPenney and micronpc.com.
Businesses are seeking to deploy Internet, intranet and extranet technology solutions that automate and optimize interactions between a business, its employees, its customers, and members of its network of suppliers, distributors and business partners. According to the Gartner Group, the volume of nonfinancial goods and services sold through business-to-business e-commerce is expected to reach over $7 trillion worldwide in 2004. As organizations leverage the Internet to conduct business in this automated environment, high-quality user support becomes a competitive asset that enables them to differentiate their products and services and improve the efficiency of their operations.
We believe technical support is the most critical form of user support as businesses and users increasingly rely on information technology infrastructure and the Internet to conduct commerce. The growing complexity of information systems, the proliferation of electronic devices, and the escalation in the number of users has made technical support increasingly difficult to deliver. In addition, many organizations lack an adequate support infrastructure to meet the demands imposed by the increasing volume of Internet commerce transactions.
The growing complexity of support requires a highly personalized, automated and Web-based approach to intelligently identify and resolve user problems. Organizations need to transform eBusiness support operations from inefficient cost centers to highly productive and scalable competitive assets that increase customer loyalty, improve operational efficiencies and generate incremental revenue. We believe this can only be accomplished by adopting comprehensive eSupport solutions that deliver automated user support over the Internet. IDC estimates that the market for these eSupport solutions will grow from $3 billion in 1999 to over $14 billion in 2003.
We offer a comprehensive suite of eSupport software products. Our product suite consists of:
. Healing Agent -- User-based support agent that promotes personalized
self-service and makes software self-healing by
proactively identifying and repairing problems.
. Support Center -- Centralized support infrastructure that optimizes remote
assisted service and enables enterprise-wide problem
resolution.
. Support Portal -- Web platform that enables interactive full service and
personalized online support.
. Foundry -- Web support content authoring environment for automating
support actions and managing support content.
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Our eSupport solution delivers the following benefits:
. Reduced costs through the automation and optimization of the support process.
. Increased customer satisfaction through rapid problem resolution.
. Accelerated eBusiness growth by converting the traditional call center into a revenue-generating business services desk.
We believe that our leadership in providing eSupport infrastructure software gives us a competitive advantage as we develop solutions to address broader customer support opportunities.
We were incorporated in Delaware in December 1997 under the name Replicase, Inc. We changed our name to Tioga Systems, Inc. in October 1998 and to Support.com in December 1999. Our principal executive offices are located at 575 Broadway, Redwood City, California 94063, and our telephone number at that address is (650) 556-9440. Our Web site is located at www.support.com. The information on our Web site is not part of this prospectus.
Unless otherwise indicated, the number of shares of our common stock to be
outstanding after this offering is based on the number of shares outstanding on
December 31, 1999 and assumes: (1) no exercise of the underwriters' over-
allotment option, (2) the exercise of warrants to purchase 136,972 shares of
our common stock that will expire if not exercised prior to completion of this
offering and (3) conversion of all outstanding shares of preferred stock into
common stock, and excludes: (1) 3,944,895 shares issuable upon exercise of
options outstanding at a weighted average exercise price of $0.47 per share,
(2) 146,678 shares issuable upon exercise of warrants outstanding and
(3) 7,307,545 additional shares available for future issuance under our stock
plans.
Our trademarks include Support.com, the Support.com logo, ContextResponse Technology, Self-Healing, SupportAction and TierZero. This prospectus also includes trade names, trademarks and service marks of other companies and organizations.
The Offering
Common stock offered by Support.com................ shares
Common stock to be outstanding after the offering.. shares
Use of proceeds.................................... For repayment of debt and
general corporate
purposes, including
working capital. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol............. SPRT
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Summary Financial Data
(in thousands, except per share data)
Period from
inception
(December 3, 1997) Year Ended
to December 31, December 31,
1998 1999
------------------ ------------
Statement of Operations Data:
Total revenue................................. $ 18 $ 3,315
Loss from operations.......................... (2,804) (14,464)
Net loss...................................... (2,750) (14,294)
Accretion on redeemable convertible preferred
stock........................................ (214) (1,072)
Net loss attributable to common stockholders.. (2,964) (15,366)
Net loss per share:
Basic and diluted........................... (0.57) (2.31)
Weighted average shares--basic and diluted.. 5,227 6,643
Pro forma net loss per share:
Basic and diluted........................... (0.71)
Weighted average shares--basic and diluted.. 20,137
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December 31, 1999
---------------------
Pro Forma
Actual as Adjusted
-------- -----------
Balance Sheet Data:
Cash, cash equivalents and short-term investments......... $ 12,489 $
Working capital........................................... 9,338
Total assets.............................................. 17,525
Long-term obligations, net of current portion............. 2,277
Redeemable convertible preferred stock.................... 21,449
Stockholders' equity (deficit)............................ (13,253)
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The statement of operations for the year ended December 31, 1998 is presented for the period from inception (December 3, 1997). Operating expenses totaled approximately $9,000 for the period from inception (December 3, 1997) to December 31, 1997.
Please see note 1 of the notes to the financial statements for an explanation of the determination of the number of shares used in computing per share data.
The pro forma as adjusted balance sheet data gives effect to the sale of the shares of common stock that we are offering under this prospectus at an assumed initial public offering price of $ per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. See "Use of Proceeds" and "Capitalization."
RISK FACTORS
Any investment in our shares of common stock involves a high degree of risk. 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, results of operations and financial condition would likely suffer. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Support.com
We expect continuing losses and may never achieve profitability, which may harm our future operating performance and may cause the market price of our stock to decline.
We incurred net losses of approximately $17.0 million for the period from December 3, 1997 (inception) through December 31, 1999. We expect to continue to incur substantial net losses for the foreseeable future. If we continue to incur net losses, we may not be able to increase our number of employees or our investment in capital equipment, sales, marketing and research and development programs in accordance with our present plans. We do not know when or if we will become profitable. If we do not become profitable within the timeframe expected by securities analysts or investors, the market price of our stock will likely decline. If we do achieve profitability, we may not sustain or increase profitability in the future and may not be able to continue to operate.
If we do not meet quarterly financial expectations, our stock price could decline.
We were incorporated in December 1997. Because of our limited operating history and other factors, our quarterly revenue and operating results are difficult to predict. In addition, due to the emerging nature of the eSupport market and other factors, our quarterly revenue and operating results may fluctuate from quarter to quarter. It is possible that our operating results in some quarters may fall below the expectations of securities analysts or investors. In this event, the market price of our common stock will likely decline.
A number of factors are likely to cause fluctuations in our operating results, including, but not limited to, the following:
. the growth rate of the eSupport market generally;
. demand for our eSupport infrastructure software;
. the price and mix of products and services we offer;
. our ability to attract and retain customers and maintain customer satisfaction;
. the amount and timing of operating costs and capital expenditures relating to expansion of our business and infrastructure;
. technical difficulties or system outages; and
. the announcement, introduction, pricing and market acceptance of new or enhanced products and services by us or our competitors.
Our quarterly results depend on the size of a small number of orders, so the delay or loss of any single large order during a quarterly period, and especially an order for a perpetual license rather than a subscription license, could harm that quarter's results and cause our stock price to decline.
Each quarter, we derive a significant portion of our license revenue from a small number of relatively large orders for the licensing of our eSupport infrastructure software. We also license our eSupport infrastructure software under perpetual and subscription licenses. Perpetual licenses typically result in our
recognition of a larger amount of revenue in the quarter in which the license is granted as compared with subscription licenses. Revenue from a perpetual license is generally recognized upon delivery of a product. Revenue from a subscription license is recognized on a monthly basis over the term of the subscription, which is typically three years. In 1999, though 18% of our licenses were perpetual, these licenses accounted for 67% of our revenue. As a result, our operating results could suffer if any large orders, and especially orders for perpetual licenses, are delayed or cancelled in any future period. We expect that we will continue to depend upon a small number of large orders for a significant portion of our license revenue.
Because a small number of customers has accounted for and may continue to account for substantial portions of our revenue, our revenue could decline due to the delay of customer orders or the failure of existing customers to renew licenses.
In 1999, Bear Stearns accounted for 53% of our total revenue. No other single customer accounted for 10% or more of our total revenue in 1999, although our top four customers together accounted for approximately 81% of our total revenue in 1999. Because we have a small number of customers and a few customers are likely to continue to account for a significant portion of our revenue, our revenue could decline due to the loss or delay of a single customer order or the failure of an existing customer to renew its subscription license. We may not obtain additional customers. The failure to obtain additional customers, the loss or delay of customer orders and the failure of existing customers to renew licenses will harm our business and operating results.
Our business will suffer if our gross margin fluctuates.
Our competitors may offer eSupport infrastructure software that meets or exceeds the performance and capabilities of our products. If competitive price pressures cause prices to fall faster than we expect or if we must reduce our prices for any reason, we may experience pressure on our gross margin. In addition, our gross margin will depend in part on the following:
. our ability to introduce new products and services to the market;
. our competitors' prices, products and services and market share;
. our costs related to third-party technologies in our product offerings;
. increased services-related costs associated with increased services orders;
. increased licenses and sales through indirect channels which typically carry lower gross margins; and
. general economic conditions.
In addition, we expect to continue to spend substantial financial and other resources on developing and introducing new products and services, and expanding our sales and marketing organization and operating infrastructure. We expect that our operating expenses will continue to increase in absolute dollars and may increase as a percentage of revenue. If our revenue does not correspondingly increase, our business and operating results could suffer. We base our expense levels in part on our expectations regarding future revenue levels. If our revenue for a particular quarter is lower than we expect, we may be unable to proportionately reduce our operating expenses for that quarter.
Our future success depends on the broad adoption and acceptance of our products and services.
We must successfully offer our customers a comprehensive, integrated support solution to enable us to expand market acceptance of our eSupport solution. Specifically, we must encourage our customers to transition from using traditional support methods. To accomplish this, we must:
. continually improve the performance, features and reliability of our products and services;
. develop new products, services, functionality, compatibility and technologies that address changing industry standards and customer needs; and
. develop integration with other support-related technologies.
We may not be successful in achieving any of these objectives. If our efforts to achieve broad market acceptance and adoption of our products and services fail, our business and operating results will suffer. Factors that might influence market acceptance of our solution include the following, over which we have little or no control:
. willingness of enterprises to transition to automated support and eSupport;
. the growth of the Internet and commercial online services;
. the willingness of businesses to manage high volumes of customer communications over the Internet;
. acceptance of competitors' automated support or eSupport solutions; and
. changes in security and reliability of online transactions and communications.
We must attract and retain qualified personnel, which is particularly difficult for us because we are headquartered in the San Francisco Bay Area, where competition for personnel is extremely intense.
Our future success will also depend on our ability to attract, train, retain and motivate other highly skilled engineering, technical, managerial, sales and marketing and customer support personnel. We currently plan to substantially increase the number of personnel over the next 12 months. Competition for these personnel is intense, especially in the San Francisco Bay Area and after a company has completed an initial public offering. We have had difficulty hiring qualified personnel as quickly as we have desired. In particular, we may be unable to hire a sufficient number of qualified support, training and engineering professionals. Our inability to hire, integrate and retain qualified personnel in sufficient numbers could reduce the quality of our products and services. If we fail to retain and recruit the necessary personnel, our ability to develop new products and services and to provide acceptable levels of customer service could suffer. In addition, if we hire employees from our competitors, these competitors may claim that we have engaged in unfair hiring practices. We could incur substantial costs in defending ourselves against any of these claims, regardless of the merits of such claims.
If we fail to expand our sales and marketing activities, we may be unable to expand our brand recognition and increase our revenue, which would harm our business.
If we do not successfully expand our sales and marketing activities, we cannot expand our business and our stock price could decline. We believe that continued expansion of our brand recognition will be critical to achieve widespread acceptance of our eSupport infrastructure software. Favorable public perception of our brand will depend largely on our ability to continue providing our customers with effective eSupport infrastructure software and the success of our marketing efforts. Our brand promotion activities may not yield increased revenue and, even if they do, any increased revenue may not offset the expenses we incur in building our brand.
Failure to successfully develop and introduce new versions and releases of eSupport infrastructure software that meet changing customer demands or technological standards would harm our business.
Our industry is characterized by rapid technological change, frequent new product introductions and enhancements, changes in customer demands and evolving industry standards. Our existing products will be rendered obsolete if we fail to introduce new products or product enhancements that meet new customer
demands, support new standards or integrate with new or upgraded versions of packaged applications. In addition, the life cycle of our products is difficult to estimate.
If we fail to develop, in a timely manner, new or enhanced versions of our eSupport infrastructure software or to provide new products and services that achieve rapid and broad market acceptance, our business will suffer. We may fail to identify new product and service opportunities successfully or develop and timely bring new products and services to market. In addition, we may incur substantial expense in developing new or enhanced versions of our products and services. If we experience delays in completing development of, enhancements to, new or localized versions of, or cross platform capabilities for, our products, our operating results would suffer. We also may need to develop and acquire new software products or support services to broaden our product and service offerings. We may be unable to develop or acquire marketable products or services on a timely basis, if at all. In addition, product innovations may not achieve the market penetration or price stability necessary for profitability.
Our sales are currently concentrated in the corporate information technology, support outsourcer and Internet service provider markets, and if our customers in these markets decrease their spending on eSupport solutions, or we fail to penetrate other industries, our revenue will likely decline.
Sales to customers in the corporate information technology, support outsourcer and Internet service provider markets accounted for the majority of our total revenue in 1998 and 1999. We expect to continue to direct our sales and marketing efforts toward these markets. Given our market position, the high degree of competition and the rapidly changing environment in these industries, we may be unable to make sales to these types of businesses. In addition, customers in these markets are likely to have different requirements and may require us to change our product design or features, sales methods, support capabilities or pricing policies. If our customers in these markets decrease their spending on eSupport solutions, or we fail to penetrate other industries, our revenue will likely decline.
If our product does not operate with the many hardware and software platforms used by our customers, our business may fail.
We currently serve a customer base with a wide variety of constantly changing hardware, packaged software applications and networking platforms. With the exception of our Support Portal, our eSupport infrastructure software is currently available only on Microsoft Windows operating systems. If there is widespread adoption of other operating system environments, or if we fail to release versions of our eSupport infrastructure software that are compatible with these other operating systems, our business and operating results will suffer. Our future success also depends on several factors, including:
. our ability to integrate our product with multiple platforms and existing, or legacy, systems and to modify our product as new versions of packaged applications are introduced;
. the portability of our product, particularly the number of operating systems and databases that our product can source or target;
. our ability to anticipate and support new standards, especially Internet standards;
. the integration of additional software modules under development with our existing product; and
. our management of software being developed by third parties for our customers or for use with our product.
Our business may not sustain revenue growth or be profitable and we may change our business model in an effort to become profitable.
Our business depends on our ability to generate revenue streams from multiple sources, including direct and indirect sales of software products and sales of our services. The demand for our product and service offerings is largely undetermined at this time. We do not know if our business model will succeed or be sustainable as our business grows. Furthermore, we may revise our business model as consumer preferences change and new competitors emerge. As e- commerce and the demand for eSupport continue to evolve, we may need to develop complementary products and services as additional sources of revenue. Accordingly, we may change our business model to attempt to take advantage of new business opportunities, including business areas in which we do not have extensive experience. If we make these changes to our business model and are not successful, it will harm our business and reputation.
Our products and services rely on third-party programming tools and applications, and if we lose access to these tools and applications or are unable to modify our product in response to changes in these tools and applications, our revenue could decline.
Our programs utilize third-party programming tools and applications. We also depend upon access to the application program interfaces, known as APIs, used for integration of external software products and our software. Our access to APIs of third-party applications is controlled by the providers of these applications. If the application provider denies or delays our access to APIs, our business may be harmed. Some application providers may become competitors or establish alliances with our competitors, increasing the likelihood that we would not be granted access to their APIs. Loss of the ability to use these technologies, delays in upgrades or failure of these third parties to support these technologies could cause our revenue to decline.
Our failure to integrate third-party technologies could harm our business.
We intend to continue to license technologies from third parties including applications used in our research and development activities and technologies, which are integrated into our products and services. These technologies may not continue to be available to us on commercially reasonable terms or at all. In addition, we may fail to successfully integrate any licensed technology into our products or services. Third-party licenses expose us to increased risks, including, but not limited to, risks with the integration of new technology, the diversion of resources from the development of our own proprietary technology, our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs. Our inability to obtain any of these licenses could delay product and service development until equivalent technology can be identified, licensed and integrated. This in turn would harm our business and operating results.
We may engage in future acquisitions or investments that could dilute our existing stockholders, cause us to incur significant expenses or harm our business.
We may use a portion of the net proceeds of this offering to acquire or invest in complementary businesses, technologies or products, although we currently have no specific agreements or commitments and are not currently engaged in any negotiations with respect to these transactions. Integrating any newly acquired businesses, technologies or products may be expensive and time- consuming. To finance any acquisitions, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our stockholders. We may be unable to complete any acquisitions or investments on commercially reasonable terms, if at all. Even if completed, we may be unable to operate any acquired businesses profitably or otherwise implement our growth strategy successfully. If we are unable to integrate any newly acquired entities or technologies effectively, our operating results could suffer. Future acquisitions by us could also result in large and immediate write-offs, incurrence of debt and contingent liabilities or amortization of expenses related to goodwill and other intangibles, any of which could harm our operating results.
Our recent growth has placed a strain on our management systems and resources and if we fail to integrate new employees or manage our future growth, our business could suffer.
We are currently experiencing a period of rapid expansion in our personnel, facilities, systems and infrastructure. For example, substantially all of our employees were hired in 1999, and we expect that our hiring rate will continue at a rapid pace. We expect further significant expansion, including expansion outside the San Francisco Bay Area, will be required to address any future growth in our consumer base, the breadth of our product and service offerings and other opportunities. For example, we will need to obtain additional office space prior to the end of 2000, and if we fail to obtain sufficient space, our business could suffer. Our expansion has placed, and we expect that it will continue to place, a significant strain on our management controls and operational and financial resources and may negatively impact our ability to provide adequate levels of service to our customer. Our failure to expand, train and motivate our workforce and to manage growth could disrupt our operations, delay execution of our business plan and consequently harm our business.
The integration of new senior management personnel into our management team may interfere with our operations.
Over the last 12 months, we have hired a number of new officers, including our Chief Executive Officer, Radha R. Basu, our Chief Financial Officer, Brian M. Beattie, and our Senior Vice President of Sales and Business Development, Jim R. Hilbert. To integrate into our company, these individuals must spend a significant amount of time learning our business model and management system, in addition to performing their regular duties. Accordingly, the integration of new personnel could result in some disruption to our ongoing operations. In addition, if our senior management are unable to work effectively as a team, our business operations could be harmed.
If we lose the services of any of our senior management or other key personnel, our business may be harmed.
Our success will depend on the skills, experience and performance of our senior management, engineering, sales, marketing and other key personnel, many of whom have worked together for only a short period of time. We do not have long-term employment agreements with many of our key employees. The loss of the services of any of our senior management or other key personnel, including our Chief Executive Officer, Radha R. Basu, our Chief Financial Officer, Brian Beattie, our Chief Technology Officer, Scott W. Dale, and our Chief Software Officer, Cadir B. Lee, could harm our business.
Our failure to expand our strategic alliances would impede our revenue growth.
We must successfully establish relationships that can enable us to expand market acceptance of our eSupport infrastructure software. Specifically, we must establish and extend existing distribution alliances with specialized technology and services firms such as support outsourcers. These relationships are intended to provide us access to the marketing and lead generation capabilities of these firms, which have already established relationships with small- to medium-sized businesses, Internet service providers and large corporate customers. We must also establish and extend existing solutions alliances with leading providers of complementary support technologies such as call center/help desk management companies, knowledge management companies and systems management firms. Without adequate strategic alliances, we may have to devote substantially more resources than we would otherwise to the sales, marketing and implementation of our products and the development of complementary products in order to deliver comprehensive support solutions, and our efforts may not be as effective as those who have such alliances. In many cases, the firms with which we wish to ally have extensive relationships with our existing and potential customers and influence the decisions of these customers by recommending products. If we fail to maintain, establish or successfully implement these alliances, our ability to achieve market acceptance of our eSupport infrastructure software will suffer and our business and operating results will be harmed.
Failure to expand and upgrade our infrastructure to meet customer requirements would harm our business.
As the volume and complexity of customers' needs increase, we will need to expand our systems and network infrastructure. In addition, in the event we transition to new delivery models for our support products, we may need to expand our systems and network infrastructure. The expansion and adaptation of our network infrastructure for any reason will require substantial financial, operational and management resources as well as uncertain equipment incompatibility and capacity issues. We may not be able to expand or adapt our network infrastructure to meet additional demand or our customers' changing requirements in a timely manner or at all.
Our business could suffer if our products fail to perform properly due to undetected errors or similar problems.
Our eSupport infrastructure software depend on complex software, both internally developed and licensed from third parties. Complex software often contains undetected errors or "bugs." Although we conduct testing during product development, we may be forced to delay commercial release of software until problems are corrected and, in some cases, may need to provide enhancements to correct errors in released software. If we do detect any errors before we ship a product, we might have to limit product shipment for an extended period of time while we address the problem. We may not discover software errors that affect our new or current products or enhancements until after they are deployed. Therefore, it is possible that, despite testing by us, errors may occur in our software. These errors could result in:
. damage to our reputation;
. lost sales;
. delays in commercial release;
. product liability claims;
. delays in or loss of market acceptance of our products;
. product returns; and
. unexpected expenses and diversion of resources to remedy errors.
If our system security is breached, our business and reputation could suffer.
A fundamental requirement for online communications, transactions and support is the secure transmission of confidential information. Third parties may attempt to breach our security or that of our customers. We may be liable to our customers for any breach in such security and any breach could harm our customers, our business and our reputation. In addition, our software contains features which may allow us or our customers to control, monitor or collect data from computers running the software without notice to the computing users. Therefore we may be subject to claims associated with invasion of privacy or inappropriate disclosure, use or loss of this information. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could harm our reputation and our business and operating results. Also, computers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays or loss of data. We may be required to expend significant capital and other resources to further protect against security breaches or to rectify problems caused by any breach.
Due to the lengthy sales cycles of some of our products, the timing of our sales is difficult to predict and may cause us to miss our revenue expectations.
Our sales cycle for our eSupport infrastructure software can be as long as nine months or more and may vary substantially from customer to customer. While our customers are evaluating our products and services,
we may incur substantial sales and marketing expenses and spend significant management effort. Consequently, if revenue forecasted from a specific customer for a particular quarter is not realized in that quarter, we may incur significant expenses that are not offset by corresponding sales. This makes it more difficult to predict quarterly financial performance, or to achieve it, and any delay in completing sales in a particular quarter could harm our business and cause our operating results to vary significantly.
If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer.
We intend to expand further into international markets. If our revenue from international operations does not exceed the expense associated with establishing and maintaining our international operations, our business could suffer. We have limited experience in international operations and may not be able to compete effectively in international markets. Some risks we face in conducting business internationally include:
. difficulties and costs of staffing and managing international operations;
. differing technology standards;
. difficulties in collecting accounts receivable and longer collection periods;
. political and economic instability;
. fluctuations in currency exchange rates;
. imposition of currency exchange controls;
. potentially adverse tax consequences;
. reduced protection for intellectual property rights in foreign countries;
. dependence on local vendors;
. compliance with multiple conflicting and changing governmental laws and regulations;
. longer sales cycles; and
. import and export restrictions and tariffs.
Technical problems with either our internal or our outsourced computer and communications systems could reduce our ability to provide eSupport services and could harm our business and our reputation.
The success of our eSupport infrastructure software depends on the efficient and uninterrupted operation of our own and outsourced computer and communications hardware and software systems. These systems and operations are vulnerable to damage or interruption from human error, natural disasters, telecommunications failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. Since all of our internal computer and communications hardware and networks systems are located in the San Francisco Bay Area, an earthquake or other natural disaster could affect all of our facilities and our systems located there simultaneously. We have no formal disaster recovery plan in the event of damage to or interruption of our internal or outsourced systems, and business interruption insurance may not adequately compensate us for losses that may occur. Any system failure that causes an interruption in our customers' ability to use our eSupport products or services or a decrease in their performance could harm our relationships with our customers and result in reduced revenue.
Problems arising from use of our products with other vendors' products could cause us to incur significant costs, divert attention from our product development efforts and cause customer relations problems.
Our customers may use our eSupport products together with products from other companies. As a result, when problems occur, it may be difficult to identify the source of the problem. Even when these problems are
not caused by our products, they may cause us to incur significant warranty costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems.
Our pending patents may never be issued and, even if issued, may provide us with little protection.
Our success and ability to compete depend to a significant degree upon the protection of our software and other proprietary technology rights. We regard the protection of patentable inventions as important to our future opportunities. It is possible that:
. our pending patent applications may not result in the issuance of patents;
. any patents issued to us may not be broad enough to protect our proprietary rights;
. any issued patent could be successfully challenged by one or more third parties, which could result in our loss of the right to prevent others from exploiting the inventions claimed in those patents;
. current and future competitors may independently develop similar technologies, duplicate our products or design around any of our patents; and
. effective patent protection may not be available in every country in which we do business.
We rely upon trademarks, copyrights and trade secrets to protect our proprietary rights, which may not be sufficient to protect our intellectual property.
We also rely on a combination of laws, such as copyright, trademark and trade secret laws, and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our proprietary rights. However, despite any precautions that we have taken,
. laws and contractual restrictions may not be sufficient to prevent misappropriation of our technologies or deter others from developing similar technologies;
. current federal laws that prohibit software copying provide only limited protection from software "pirates," and effective trademark, copyright and trade secret protection may be unavailable or limited in foreign countries;
. other companies may claim common law trademark rights based upon state or foreign laws that precede the federal registration of our marks; and
. policing unauthorized use of our products and trademarks is difficult, expensive and time-consuming, and we may be unable to determine the extent of this unauthorized use.
Also, the laws of other countries in which we market our products may offer little or no effective protection of our proprietary technologies. Reverse engineering, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for it, which would significantly harm our business.
We may face intellectual property infringement claims that could be costly to defend and result in our loss of significant rights.
Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. In addition, other parties may assert infringement claims against us. Although we have not received notice of any alleged infringement, our products may infringe issued patents that may relate to our products. In addition, because the contents of patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to our software products. We and our customers may be
subject to legal proceedings and claims from time to time, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. Intellectual property litigation is expensive and time- consuming and could divert management's attention away from running our business. This litigation could also require us to develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. Our failure or inability to develop non-infringing technologies or license the proprietary rights on a timely basis would harm our business.
We might have liability for Internet content and we may not have adequate liability insurance.
As a provider of eSupport services to Internet-related businesses, we face potential liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials transmitted via the Internet. Furthermore, some foreign governments, such as Germany, have enforced laws and regulations related to content distributed over the Internet that are more strict than those currently in place in the United States.
Although we carry general liability and umbrella liability insurance, our insurance may not cover claims of these types or may not be adequate to indemnify us for all liability that may be imposed. There is a risk that a single claim or multiple claims, if successfully asserted against us, could exceed the total of our coverage limits. There is also a risk that single claim or multiple claims asserted against us may not qualify for coverage under our insurance policies as a result of coverage exclusions that are contained within these policies. Should either of these risks occur, capital contributed by our shareholders may need to be used in order to settle claims. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could have a material adverse effect on our reputation and our business and operating results, or could result in the imposition of criminal penalties.
Industry Risks
We must compete successfully in the eSupport market or our business will fail.
We may encounter competition from companies such as customer communications software companies, question/answer companies, customer relationship management solution providers, consolidated service desk solution vendors, Internet infrastructure companies and operating systems providers. The market for our products is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Although we do not currently compete against any one entity with respect to all aspects of our eSupport solution, our integrated software solution does compete against various vendors' software products designed to accomplish specific elements of a complete eSupport solution. For example, we currently compete with companies that provide automated development of support solutions such as Serena Software, Inc., as well as with companies that provide automated delivery of support solutions such as Motive Communications, Inc.
Our potential competitors may have longer operating histories, significantly greater financial, technical, and other resources or greater name recognition than we do. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competitive pressures could reduce our market share or require us to reduce the price of products and services, any of which could harm our business and operating results.
Our success depends on the continued growth and levels of performance of Internet usage.
Because a majority of our products are designed to support businesses operating over the Internet, our revenue growth depends on the continued development and maintenance of the Internet infrastructure. This continued development of the Internet would include maintenance of a reliable network with the necessary speed, data capacity and security, as well as timely development of complementary products, including high
speed modems, for providing reliable Internet access and services. Because global commerce on the Internet and the online exchange of information is new and evolving, we cannot predict whether the Internet will prove to be a viable commercial marketplace in the long term. The success of our business will rely on the continued improvement of the Internet as a convenient means of consumer interaction and commerce, as well as an efficient medium for the delivery and distribution of information by enterprises to their employees.
Governmental regulation and legal uncertainties could impair the growth of the Internet and decrease demand for our products or increase our cost of doing business.
The laws and regulations that govern our business change rapidly. Although our operations are currently based in California, the United States government and the governments of other states and foreign countries have attempted to regulate activities on the Internet and the manufacture of computer software and distribution. Although there are currently few laws and regulations directly applicable to the Internet and the use of the Internet as a commercial medium, a number of laws have been proposed involving the Internet. These proposed laws include laws addressing user privacy, pricing, content, copyrights, distribution, antitrust and characteristics and quality of products and services. Moreover, the applicability to the Internet of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. Evolving areas of law that are relevant to our business include privacy law, proposed encryption laws, content regulation and sales and use tax laws and regulations. Because of this rapidly evolving and uncertain regulatory environment, we cannot predict how these laws and regulations might affect our business. Any new laws and regulations could harm us by subjecting us to liability or forcing us to change how we do business. For example, in 1998, Congress passed the Internet Freedom Act, which imposes a three-year moratorium on state and local taxes on Internet-based transactions. We cannot assure you that this moratorium will be extended. Failure to renew this moratorium would allow various states to impose taxes on e-commerce, which might harm our business directly and indirectly by harming the businesses of our customers, potential customers and business alliances.
Our business could be disrupted if any of the computer systems or software we rely on experience Year 2000 problems.
We have executed a plan designed to make our computer systems, applications, computer and manufacturing equipment and facilities Year 2000 ready. To date, none of our systems, applications, equipment or facilities have experienced material difficulties from the transition to Year 2000. Although we have not experienced any Year 2000 problems, it is possible that we could still face problems or disruptions. For instance, we may face problems with systems that have not been utilized since 1999 or in connection with the leap year. While we believe that all of our systems are Year 2000 compliant, we cannot assure you that we will not discover a problem during 2000 that needs to be upgraded, modified or replaced. In addition, we depend on a number of third-party vendors to provide both information and non-information technology systems and services. While we believe that our material third-party systems and services are Year 2000 compliant, we cannot be sure that we will not experience any problems with these systems and services during 2000. We also cannot provide any assurance that governmental agencies, utility companies, Internet access companies and others outside of our control will not experience any future Year 2000 problems.
Offering Risks
Our stock price may be volatile, and you may not be able to sell your shares at or above the offering price.
Prior to this offering, our common stock has not been publicly traded, and an active trading market may not develop or be sustained after this offering. You may not be able to sell your shares at or above the offering price. The price at which our common stock will trade after this offering is likely to be highly volatile and may fluctuate substantially due to factors such as the following:
. actual or anticipated fluctuations in our operating results;
. changes in or our failure to meet securities analysts' expectations;
. announcements of technological innovations;
. introduction of new competitors;
. introduction of new products and services by us or our competitors;
. developments with respect to intellectual property rights;
. additions or departures of key personnel;
. conditions and trends in the Internet and other technology industries;
. fluctuations in stock market price and volume, which are particularly common among securities of software and internet-oriented companies; and
. general market conditions.
Purchasers of our common stock will suffer immediate and substantial dilution.
Purchasers of our common stock in this offering will experience immediate dilution of $ in the pro forma net tangible book value per share of common stock, based on an assumed initial public offering price of $ per share. Purchasers will also experience additional dilution upon the exercise of outstanding stock options and warrants. The initial public offering price is expected to be substantially higher than the book value per share of our common stock. Some elements of our market value do not originate from measurable transactions. Therefore, there is not a corresponding rise in "book," or historical accounting, value for our rise in market value, if any. Examples of these elements include the perceived value associated with our strategic relationships, perceived growth prospects of our market and our perceived competitive position within that market.
After this offering, our directors, executive officers and principal stockholders will continue to have substantial control over matters requiring stockholder approval and may not vote in the same manner as our other stockholders.
After this offering, our directors, executive officers and stockholders who currently own over 5% of our common stock will collectively beneficially own, in the aggregate, approximately % of our outstanding common stock. These stockholders, if they vote together, will be able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in control of Support.com.
Future sales of our common stock may depress our stock price.
Sales of a substantial number of shares of common stock, including shares issued upon the exercise of outstanding options and warrants, in the public market after this offering or after the expiration of lockup and holding periods could cause the market price of our common stock to decline. After this offering, we will have approximately shares of common stock outstanding. All the shares sold in this offering will be freely tradable. The remaining shares of common stock outstanding after this offering are subject to lock-up agreements that prohibit the sale of the shares for 180 days after the date of this prospectus. Any or all of these shares may be released prior to expiration of the 180-day lockup period at the discretion of Credit Suisse First Boston Corporation. Immediately after the 180-day lockup period, of these shares of outstanding options and warrants will become available for sale. The remaining shares of our common stock will become available at various times thereafter upon the expiration of one-year holding periods.
Due to our expected stock price volatility, we may become involved in securities class action litigation, which could divert management's attention and harm our business.
The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stocks of technology companies, particularly Internet companies.
These broad market fluctuations may cause the market price of our common stock to decline. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management's attention and resources, which could harm our business and operating results.
We may need additional capital, and raising additional capital may dilute existing stockholders.
We believe that our existing capital resources, including the anticipated proceeds of this offering, will enable us to maintain our current and planned operations for at least the next 12 months. However, we may choose to, or be required to, raise additional funds due to unforeseen circumstances. If our capital requirements vary materially from those currently planned, we may require additional financing sooner than anticipated. This financing may not be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to hire, train or retain employees, to fund our expansion, take advantage of unanticipated opportunities, develop or enhance services or products, or otherwise respond to competitive pressures would be significantly limited.
Our certificate of incorporation, bylaws and Delaware corporate law contain provisions which could delay or prevent a change in control even if the change in control would be beneficial to our stockholders.
Delaware law as well as our certificate of incorporation and bylaws contain provisions that could delay or prevent a change in control of Support.com, even if it were beneficial to the stockholders to do so. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions:
. authorize the issuance of preferred stock that can be created and issued by the board of directors without prior stockholder approval to increase the number of outstanding shares and deter or prevent a takeover attempt;
. prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
. prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;
. limit the ability of stockholders to call special meetings of stockholders; and
. establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law and the terms of our stock option plans may discourage, delay or prevent a change in control of Support.com.
If we do not use the proceeds in a manner that increases our operating results or market value, our business could suffer.
Our management will have significant flexibility in applying the net proceeds of this offering. The net proceeds could be applied in ways that do not increase our operating results or market share. We intend generally to use the net proceeds from this offering to repay $2.4 million in principal under secured and subordinated debt facilities and for general corporate purposes, including working capital. We have not yet determined the actual expected expenditures and thus cannot estimate the amounts to be used for each specified purpose. The actual amounts and timing of these expenditures will vary significantly depending on a number of factors, including, but not limited to, the amount of cash used in or generated by our operations and the market response to the introduction of any new product and service offerings. Depending on future developments and
circumstances, we may use some of the proceeds for purposes other than those described above. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately.
Shares issued, and option grants made, under our 1998 Stock Option Plan violated the registration requirements of state securities laws.
Shares issued and options granted under our 1998 Stock Option Plan violated state securities laws because these stock issuances and option grants were not exempt from registration or qualification under state securities laws and registration or qualification was not obtained. If the rescission offer that we intend to make to the holders of these shares and options beginning approximately 30 days after the effective date of this offering is accepted, we could be required to make aggregate payments to the holders of these shares and options of up to $ plus statutory interest. If any or all of the offerees reject the rescission offer, we may continue to be liable under state securities laws for up to an aggregate amount of approximately $ plus statutory interest. See "Rescission Offer."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate to our, and in some cases our customers' and/or alliance partners', future plans, objectives, expectations, intentions and financial performance, and the assumptions that underlie these statements. In some cases, you can identify forward-looking statements because they use terms such as "anticipates," "believes," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should" or "will" or the negative of those terms or other comparable words. These statements involve known and unknown risks, uncertainties and other factors that may cause industry trends or our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These factors include those listed under "Risk Factors," "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus.
Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results or changes in our expectations. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $ million from the sale of shares of our common stock, and $ million if the underwriters' over-allotment option is exercised in full at the initial public offering price of $ per share, after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.
We intend to use the net proceeds of this offering to repay $2.4 million in principal under secured and subordinated debt facilities and for general corporate purposes, including working capital. We do not have more specific plans for the net proceeds from this offering. The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. We may also use a portion of the net proceeds to acquire additional businesses, products and technologies, to lease additional facilities, or to establish joint ventures that we believe will complement our current or future business. However, we have no specific plans, agreements or commitments to do so and are not currently engaged in any negotiations for any acquisition or joint venture. As a result, we will retain broad discretion in the allocation of the net proceeds of this offering. Pending the uses described above, we will invest the net proceeds of this offering in short term interest bearing, investment-grade securities. We cannot predict whether the proceeds will be invested to yield a favorable return. We believe that our available cash, together with the net proceeds of this offering, will be sufficient to meet our capital requirements for at least the next 12 months.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not anticipate paying any dividends in the foreseeable future. We currently expect to retain our earnings, if any, for the development of our business. Our bank line of credit currently prohibits the payment of dividends.
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to:
. the assumed exercise of outstanding warrants to purchase an aggregate of 136,972 shares of common stock that expire upon completion of this offering; and
. the conversion of all outstanding shares of preferred stock into common stock and changes to our authorized capital stock upon completion of this offering;
. on the same pro forma basis as adjusted to give effect to the sale of shares of common stock by us at an assumed initial public offering price of $ per share and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
(in thousands except share
data)
Long-term obligations, excluding current
portion....................................... $ 2,277 $ 2,277 $
-------- -------- ----
Redeemable convertible preferred stock:
12,156,108 shares authorized:
Series B--7,346,108 shares designated,
7,346,108 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 5,641 -- --
Series C--4,810,000 shares authorized,
4,638,618 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 15,808 -- --
Stockholders' equity (net capital deficiency):
Series A preferred stock, 3,571,600 shares
authorized, 3,571,600 shares issued and
outstanding actual, none authorized, issued
and outstanding pro forma and pro forma as
adjusted.................................... 1 -- --
Common Stock, 31,060,000 shares authorized,
10,874,374 shares issued and outstanding
actual; 150,000,000 shares authorized,
26,567,672 shares issued and outstanding pro
forma; shares issued and
outstanding pro forma as adjusted........... 1 3
Additional paid-in capital................... 19,491 41,384
Receivable from stockholders................. (1,450) (1,450)
Deferred compensation........................ (14,252) (14,252)
Accumulated deficit.......................... (17,044) (17,044)
-------- -------- ----
Total stockholders' equity (deficit)....... (13,253) (8,641)
-------- -------- ----
Total capitalization....................... $ 10,473 $ 10,918
======== ======== ====
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This table excludes the following shares:
. 146,678 shares of common stock issuable upon exercise of warrants that will be outstanding after this offering;
. 3,944,895 shares of common stock subject to options outstanding under our 1998 Stock Option Plan as of December 31, 1999; and
. 7,307,545 shares of common stock reserved for issuance under our 1998 Stock Option Plan, 2000 Omnibus Equity Incentive Plan and our 2000 Employee Stock Purchase Plan.
DILUTION
The pro forma net tangible book value of our common stock, on December 31, 1999, assuming the issuance of 136,972 shares of common stock upon the exercise of warrants that will expire upon completion of the offering, and after giving effect to the conversion of all outstanding shares of preferred stock upon completion of the offering, was approximately $8.6 million, or approximately $0.33 per share. 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 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 afterwards. Assuming our sale of shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book value at December 31, 1999 would have been approximately $ million or $ per share. This represents an immediate increase in net tangible book value of $ per share to the existing stockholders and an immediate dilution of $ per share to new investors purchasing common stock in this offering. The following table illustrates this per share dilution:
Assumed initial public offering price per share..................... $
Pro forma net tangible book value per share at December 31, 1999... $0.33
Increase per share attributable to new investors...................
-----
Pro forma net tangible book value per share after this offering.....
----
Pro forma dilution per share to new investors....................... $
====
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The following table summarizes, on a pro forma basis, as of December 31, 1999, 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 the assumed initial public offering price of $ per share, and we have not deducted estimated underwriting discounts and commissions and estimated offering expenses in our calculations.
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
Existing stockholders.......... 26,567,672 % $22,772,000 % $0.86
New investors.................. $ $
---------- ------ ----------- ------
Total........................ 100.00% $ 100.00%
========== ====== =========== ======
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The foregoing discussion and table assume no exercise of any outstanding stock options. The exercise of options outstanding under our stock option plans having an exercise price less than the offering price would increase the dilutive effect to new investors.
If the underwriters exercise the over-allotment in full, the following will occur:
. the number of shares of common stock held by existing stockholders will decrease to approximately % of the total number of shares of our outstanding common stock; and
. the number of shares held by new investors will increase to , or approximately % of the total number of shares of our common stock outstanding after completion of this offering.
SELECTED FINANCIAL DATA
The following selected statement of operations data for the period from inception (December 3, 1997) through December 31, 1998 and the year ended December 31, 1999 and the selected balance sheet data as of December 31, 1998 and 1999 are derived from our audited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any future period. The data have been derived from financial statements that have been prepared in accordance with generally accepted accounting principles and should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus. See note 1 of the notes to our financial statements for an explanation of the determination of the number of shares used in computing basic and diluted net loss per share.
Period from
inception
(December 3, 1997) Year ended
to December 31, December 31,
1998 1999
------------------ ------------
(in thousands
except per share data)
Statement of Operations Data:
Revenue:
License fees................................ $ 18 $ 2,746
Services.................................... -- 569
------- --------
Total revenue............................. 18 3,315
Costs and expenses:
Cost of license fees........................ -- 4
Cost of services............................ -- 965
Research and development.................... 1,132 2,401
Sales and marketing......................... 1,197 8,974
General and administrative.................. 477 1,881
Amortization of deferred compensation....... 16 3,554
------- --------
Total costs and expenses.................. 2,822 17,779
------- --------
Loss from operations.......................... (2,804) (14,464)
Interest and other income (expense), net...... 54 170
------- --------
Net loss...................................... (2,750) (14,294)
Accretion on redeemable convertible preferred
stock........................................ (214) (1,072)
------- --------
Net loss attributable to common stockholders.. $(2,964) $(15,366)
======= ========
Basic and diluted net loss per share.......... $ (0.57) $ (2.31)
======= ========
Shares used in computing basic and diluted net
loss per share............................... 5,227 6,643
======= ========
Unaudited pro forma basic and diluted net loss
per share.................................... $ (0.71)
========
Shares used in computing unaudited pro forma
basic and diluted net loss per share......... 20,137
========
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December 31,
-----------------
1998 1999
------- --------
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments............ $ 2,807 $ 12,489
Working capital (deficit).................................... 2,979 9,338
Total assets................................................. 3,672 17,525
Long-term obligations, net of current portion................ 449 2,277
Redeemable convertible preferred stock....................... 5,237 21,449
Total stockholders' equity (deficit)......................... (2,423) (13,253)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with the financial statements and the related notes included elsewhere in this prospectus. The following discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in "Risk Factors."
Overview
We are a leading provider of eSupport infrastructure software that automates and personalizes the delivery of support to users over the Internet. We were incorporated in December 1997. From our founding through the end of 1998, we primarily engaged in research activities and developing and marketing our products. We first began generating revenue from software license fees from the initial version of our products in December 1998. During 1999, we continued to enhance the core functionality of our products, and build our management team and operational infrastructure. In June 1999, we began shipping the second version of our products and in January 2000, we began shipping the third version of our products. As our revenue increased sequentially from quarter to quarter during 1999, we also incurred significant operating expenses as we expanded our research and development organization, our direct sales force and professional services department. At December 31, 1999, we had an accumulated deficit of $17.0 million.
Our revenue is principally generated from software licenses and related professional services. We market our products through a combination of direct sales, resellers, support outsourcers and distributors. Through 1999, substantially all of our revenue was derived from direct sales. We focused on building our indirect sales channel in the fourth quarter of 1999. Although we expect direct sales to continue to account for a majority of revenue in the future, we anticipate a more significant portion of sales to be generated through our indirect channel. In 1998, no revenue was attributable to licenses to customers outside of North America and, in 1999, 2% of our revenue was attributable to these customers. We plan to expand our international operations significantly, particularly in Europe and Asia.
We license our software under subscription and perpetual licenses. Revenue under subscription licenses is recognized ratably over the term of the subscription period beginning upon delivery of the product. Subscription licenses typically have a term of three years. Payments under a subscription agreement are typically made at the beginning of each annual period. We began licensing software under a subscription model in June 1999. Due to the fact that revenue under perpetual license agreements is recognized more rapidly than subscription-based revenue, a majority of the revenue recognized to date has been derived from perpetual licenses. However, to date, a majority of the licenses executed were subscription-based. We recognize revenue from perpetual licenses when persuasive evidence of an agreement exists, product has been delivered, no obligations remain, the fee is fixed and determinable and collectibility is probable. When services are an essential element of an arrangement, we recognize revenue under the arrangement as the services are delivered. We do not recognize revenue from sales to resellers and other distributors until our product is delivered to the end user.
Services revenue consist primarily of fees from professional services, such as consulting services, maintenance and support. Services revenue from professional services is recognized as the services are delivered. Our maintenance arrangements provide technical support and include the right to unspecified upgrades. Maintenance revenue is typically based on a percentage of the license fee and is recognized over the life of the related agreement. Customer advances and billed amounts due from customers in excess of revenue recognized under subscription and maintenance agreements are recorded as deferred revenue.
We intend to continue to invest in product development and technologies to enhance our current products and services, develop new products and services and further advance our solution offerings. In addition, an important part of our strategy is to expand our operations and employee base and build our sales, marketing, customer support, technical and operational resources. As a result, we expect to continue to incur substantial operating losses for the foreseeable future, and our expected increase in operating expenses will require significant increases in revenue before we become profitable.
For purposes of this discussion, references to 1998 include the period from our inception on December 3, 1997 to December 31, 1998.
Results of Operations
Revenue
Total revenue increased from $18,000 in 1998 to $3.3 million in 1999. Bear Stearns, which licensed our software under a perpetual licensing arrangement, accounted for 53% of our total revenue in 1999. No other single customer accounted for more than 10% of our total revenue.
License revenue
License revenue increased from approximately $18,000 in 1998 to $2.7 million in 1999. This increase was primarily due to the fact that we did not ship our first product until December 1998.
Services revenue
Services revenue increased from $0 in 1998 to $569,000 in 1999. This increase was primarily due to maintenance on new licenses and increased implementation and consulting services performed in connection with increased license sales.
Cost of revenue
Total cost of revenue increased from $0 in 1998 to approximately $969,000 in 1999.
Cost of license revenue
Cost of license revenue in 1999 consists primarily of expenses incurred to manufacture, package and distribute software products and related documentation and license fees paid to third parties under technology license arrangements which have not been significant to date. Cost of license revenue increased from $0 in 1998 to approximately $4,000 in 1999. We expect cost of license revenue to continue to remain a relatively small percentage of total revenue and to grow in absolute dollars as we license third party technologies.
Cost of services revenue
Cost of services revenue includes salaries and other expenses related to our customer support organization and related overhead expenses, and payments made to third parties for consulting services provided to our customers. Cost of services revenue increased from $0 in 1998 to approximately $965,000 in 1999. This increase was primarily due to an increase in the number of employees in our customer support and professional services organizations from no employees at December 31, 1998 to 13 at December 31, 1999. Cost of services revenue exceeds services revenue during 1999 due to the increase in the number of personnel in our services and organization and our investment in experienced management in anticipation of future growth. We expect to continue to invest heavily in customer support, professional services, consulting and training and expect cost of services revenue to increase accordingly.
Operating Expense
Research and development. Research and development expense consists primarily of payroll expenses and related costs for research and development personnel. Research and development expense is expensed as incurred. Research and development expenses increased from approximately $1.1 million in 1998 to approximately $2.4 million in 1999. This increase was primarily due to the increase in the number of engineering personnel from 10 at December 31, 1998 to 30 at December 31, 1999. We expect research and development expense to increase in absolute dollars in 2000 as we continue to hire additional research and development personnel and spend additional amounts on third party development efforts.
Sales and marketing. Sales and marketing expense consists primarily of payroll expense, including salaries and commissions and related costs for sales and marketing personnel, promotional expenditures, including public relations, advertising and trade shows. Sales and marketing expense increased from approximately $1.2 million in 1998 to approximately $9.0 million in 1999. This increase was primarily due to an increase in the number of direct sales, pre- sales support and marketing employees from 10 employees at December 31, 1998 to 43 employees at December 31, 1999. We also increased the number of regional and international sales offices from two at December 31, 1998 to 11 at December 31, 1999. In addition, we expense sales commissions in the period in which a sale occurs. As a result, we expect that sales and marketing expense will continue to be a significant component of operating expense. We expect sales and marketing expense will increase in absolute dollars as we increase our sales force, establish sales offices in additional domestic and international locations and increase advertising and marketing programs and other promotional activities.
General and administrative. General and administrative expense consists primarily of payroll expense and related costs of administrative personnel and professional fees for legal, accounting and other professional services. General and administrative expense increased from approximately $477,000 in 1998 to approximately $1.9 million in 1999. The increase was primarily due to increased numbers of administrative personnel from five at December 31, 1998 to 15 at December 31, 1999. We expect general and administrative expense to increase as we hire additional administrative personnel to support the anticipated growth of our business and our operations as a public company.
Deferred stock-based compensation. In connection with the grant of stock options to employees and consultants, we have recorded deferred stock-based compensation related to stock options through December 31, 1999 of approximately $17.8 million. This amount represents the difference between the exercise price of these stock option grants and the deemed fair value of the common stock at the time of grant. Of this amount, we amortized approximately $3.5 million through December 31, 1999. The remaining $14.3 million and the additional amount of stock-based compensation from recent grants will be amortized using the graded vesting method over the remaining vesting period of the options. Based on option grants through December 31, 1999, we expect to amortize approximately $2.7 million in the first quarter of 2000, $2.7 million in the second quarter of 2000, $2.1 million in the third quarter of 2000 and $1.8 million in the fourth quarter of 2000 and lower amortization amounts in subsequent quarters.
Interest and other income (expense), net. Interest income, net consists primarily of interest earned on our cash, cash equivalents and short term investments offset by interest expenses associated with our capital leases and equipment advances. Interest and other income, net was approximately $54,000 in 1998 and approximately $170,000 in 1999. The increase in interest income and other income, net relates primarily to increased average cash balances resulting from our equity financing in June 1999.
Provision for income taxes. From inception through December 31, 1999, we incurred net losses for federal and state tax purposes and have not recognized any tax provision or benefit. As of December 31, 1999, we had $10.1 million of federal and state net operating loss carryforwards to offset future taxable income. The net operating loss carryforwards begin to expire on varying dates beginning in 2005 through 2019. Given our limited operating history, our losses incurred to date 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.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statement of operations data for the four quarters ended December 31, 1999. This information has been derived from our unaudited financial statements, which, in management's opinion, have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the quarters presented. This information should be read in conjunction with the audited financial statements and related notes included elsewhere in this prospectus. The operating results for any quarter are not necessarily indicative of the operating results for any future period.
Three months ended
----------------------------------
Mar. June Sept. Dec.
31, 30, 30, 31,
1999 1999 1999 1999
------- ------- ------- -------
Statement of Operations Data:
Revenue
License fees............................. $ 330 $ 492 $ 624 $ 1,300
Services................................. 4 21 154 390
------- ------- ------- -------
Total revenue.......................... 334 513 778 1,690
Costs and expenses
Cost of license fees..................... 1 -- 2 1
Cost of services......................... 73 128 240 524
Research and development................. 373 370 787 871
Sales and marketing...................... 862 1,648 2,576 3,888
General and administrative............... 182 322 488 889
Amortization of deferred compensation.... 52 183 1,324 1,995
------- ------- ------- -------
Total costs and expenses............... 1,543 2,651 5,417 8,168
------- ------- ------- -------
Loss from operations....................... (1,209) (2,138) (4,639) (6,478)
Interest and other income (expense), net... 2 (22) 88 102
------- ------- ------- -------
Net loss................................... $(1,207) $(2,160) $(4,551) $(6,376)
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Our quarterly revenue increased sequentially in 1999 due to the introduction of and increased demand for our software products as well as the growth of our direct sales force. Additionally, in June 1999, we began offering subscription licenses of our software. Services revenue consisting of the maintenance components of our license agreements and consulting services commenced in the second quarter. Services revenue and related costs increased sequentially as we hired services personnel and grew our customer base.
On a quarterly basis we have increased the level of spending throughout the organization. Total operating expenses increased primarily due to expenses associated with building a sales and marketing infrastructure, and increased spending on research and development to support new product introductions. Specifically:
. Sales and Marketing. During the third and fourth quarters, sales and marketing expenses increased due to additional personnel costs which include commissions and travel expenditures, as we grew our direct sales force and indirect sales channel. We also incurred expenses in this period in connection with the launch and branding of the Support.com name and Web site.
. Research and Development. In the third quarter, research and development costs increased due to additional hiring of engineering personnel, as well as legal expenses associated with obtaining patents on intellectual property.
. General and Administrative. In the fourth quarter, general and administrative costs increased as we hired additional personnel to manage our expanding operations and incurred expenses associated with executive recruiting, information technology and other infrastructure developments.
Interest and other income (expense), net increased in the third and fourth quarters primarily due to the financing we obtained in June 1999. We invested the proceeds of the financing in short term investments.
We have incurred operating losses since inception, and we may never achieve profitability in the future. In the past a significant portion of our sales have been realized near the end of the quarter. Accordingly, a delay in an anticipated sale past the end of a particular quarter could negatively impact our results of operations for that quarter. We believe that future operating results will be subject to quarterly fluctuations due to a variety of factors, many of which are beyond our control.
Liquidity and Capital Resources
Since our inception in December 1997, we have financed our operations primarily through the private placement of our preferred stock, and to a lesser extent through revenues, bank borrowings and capital equipment lease financing. As of December 31, 1999, we had $12.5 million in cash, cash equivalents and short-term investments. Net cash provided by financing activities was $17.9 million in 1999 and $5.5 million in 1998. In both cases, the cash was primarily attributable to net proceeds from the issuance of preferred stock.
We have both a secured and subordinated debt facility with a single lender under which we are entitled to borrow up to $2.5 million, all of which has been used. We intend to repay $2.4 million in principal under secured and subordinated debt facilities with the proceeds of this offering. We also have an aggregate of $2.5 million available under equipment lease credit facilities, of which $1.1 million is currently outstanding. Under the equipment lease line, we are entitled to lease equipment with payment terms extending 48 months. The ability to lease new equipment expires in July 2001. Amounts outstanding under these facilities bear interest at rates ranging from 9.0% to 12.0% and are secured by substantially all of our assets.
Net cash used in operating activities was $2.4 million in 1998 and $8.0 million in 1999. Cash used in operating activities was primarily the result of net losses and increases in accounts receivable, partially offset by increases in deferred revenue accounts payable and accrued expenses.
Net cash used in investing activities was $307,000 in 1998 and $8.7 million in 1999. Net cash used in investing activities during 1999 included $8.5 million net purchases of short-term investments.
As of December 31, 1999, our principal commitments consisted of obligations outstanding under notes payable, capital and operating leases. Although we have no material commitments for capital expenditures, we anticipate a substantial increase in our capital expenditures and lease commitments consistent with our anticipated growth in operations, infrastructure and personnel. As of December 31, 1999, future lease commitments for our office facility were $1.3 million in 2000 and $850,000 in 2001. We expect to require additional space to meet our needs in the next 12 months. Adequate space may not be available on commercially reasonable terms.
We believe that the net proceeds from the sale of common stock in this offering, together with our current cash balances, will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months. In addition, although there are no present understandings, commitments or agreements with respect to any acquisition of other businesses, products and technologies, we from time to time evaluate potential acquisitions of other businesses, products and technologies and may in the future require additional equity or debt financings to consummate any potential acquisitions.
If we require additional capital resources to grow our business internally or to acquire complementary technologies and businesses at any time in the future, we may seek to sell additional equity or debt securities. The sale of additional equity or convertible debt securities could result in additional dilution to our
stockholders. We cannot assure you that any financing arrangements will be available to us, or be available in amounts or on terms acceptably to us.
Year 2000 Issues
The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations causing disruptions of operations for any company using such computer programs or hardware. We have executed a plan designed to make our computer systems, applications, computer and manufacturing equipment and facilities Year 2000 ready. To date, none of our systems, applications, equipment or facilities have experienced material difficulties from the transition to Year 2000. Although we have not experienced any Year 2000 problems, it is possible that we could still face problems or disruptions. For instance, we may face problems with systems that have not been utilized since 1999 or in connection with the leap year. While we believe that all of our systems are Year 2000 compliant, we cannot assure you that we will not discover a problem during 2000 that needs to be upgraded, modified or replaced. In addition, we depend on a number of third-party vendors to provide both information and non-information technology systems and services. While we believe that our material third-party systems and services are Year 2000 compliant, we cannot be sure that we will not experience any problems with these systems and services during 2000. We also cannot provide any assurance that governmental agencies, utility companies, Internet access companies and others outside of our control will not experience any future Year 2000 problems.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Financial Instruments and for Hedging Activities," which provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. SFAS 133 is effective for all fiscal quarters for fiscal years beginning after June 15, 2000 and is not anticipated to have a significant impact on our operating results or financial condition when adopted.
Qualitative and Quantitative Disclosures about Market Risk
We develop products in the United States and market and sell in North America, South American, Asia and Europe. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. As all sales are currently made in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Due to the nature of our short- term investments, we have concluded that there is no material market risk exposure.
Our investment policy requires us to invest funds in excess of current operating requirements in:
. obligations of the U.S. government and its agencies;
. investment grade state and local government obligations;
. securities of U.S. corporations rated A1 or AA by Standard and Poors or the Moody's equivalent; and
. money market funds, deposits or notes issued or guaranteed by U.S. and non-U.S. commercial banks, meeting certain credit rating and net worth requirements with maturities of less than two years.
At December 31, 1999, our cash and cash equivalents consisted primarily of demand deposits and money market funds held by large institutions in the U.S. and our short-term investments were invested in corporate debt securities maturing in less than one year.
BUSINESS
Overview
We are a leading provider of eBusiness infrastructure software that optimizes, automates and personalizes user support over the Internet. Our comprehensive suite of eSupport software services is designed to accelerate eBusiness growth by increasing the strategic value of support organizations and reducing support inefficiencies that would otherwise constrain expanding Internet initiatives. We offer customers the ability to automate problem avoidance through self-healing, promote call avoidance through user self- service and improve problem resolution through optimized, assisted support. By deploying our eSupport infrastructure, customers can transform eBusiness support operations from inefficient cost centers to highly productive and scalable competitive assets that increase customer loyalty, improve operational efficiencies and generate incremental revenue. We sell our products and services to corporate information technology departments, Internet service providers, application service providers and support outsourcers. Our customers include Bear Stearns, Compaq Professional Services, Computer Sciences Corp., everdream, Excite@Home, Globo Cabo, JCPenney and micronpc.com.
Industry Background
User Support Is Critical for eBusiness
Businesses are increasingly relying on the Internet to sell more products and services, drive efficiencies in supply chains and distribution channels, establish and improve customer relationships and increase employee productivity. Among these organizations are traditional businesses that are increasingly conducting business over the Internet, companies that are formed specifically to deliver products and services over the Internet, and Internet- related technology vendors and service providers. To support their eBusiness initiatives, businesses are deploying Internet, intranet and extranet technology solutions that automate and optimize the interaction between the enterprise and its employees and customers, as well as the members of an extended enterprise of suppliers, distributors and business partners.
In this environment, high-quality support is critical for customers and eBusiness infrastructure users and the growth of eBusiness initiatives. As businesses increase their reliance on the Internet, user support becomes a primary interface between a business and its employees, supply chain partners and customers. High-quality, personalized and continuous user support enables internal and external systems to run more efficiently, improves employee productivity and increases customer acquisition, retention and satisfaction. Therefore, deploying a comprehensive Internet-based support infrastructure is becoming a competitive asset that enables a company to differentiate its products and services and improve the efficiency of its operations.
The Growing Difficulty in Delivering User Support
We believe technical support has become the most critical form of user support, as businesses and users increasingly rely upon complex IT infrastructure and the Internet to conduct business. IDC estimates that 59% of businesses either lose business, or are no longer able to conduct business, if their system or network is not available. In addition, delivering technical support is increasingly complex and difficult as systems become more sophisticated, different electronic devices proliferate and the number of users and their demands grow.
Millions of Unique Users Are Leveraging the Power of the Web. According to IDC, the number of people using the Web will grow from 196 million in 1999 to 502 million in 2003. These users have a broad range of support requirements and levels of sophistication. Supporting this growing demographic is further complicated by each user's dependence on different applications and devices. These users also face a proliferation of new Web-based services and require real-time training and electronic support.
Computing Environments Are Becoming More Complicated. A typical business uses a broad range of operating systems, networking technologies, e-commerce software, security solutions, server applications,
legacy systems, packaged and internally developed applications and productivity tools. In many cases, these applications are integrated within the corporation and with the systems and applications of the extended enterprise, through a variety of networks and protocols.
Electronic Devices Are Proliferating. Businesses and consumers use many different electronic devices to conduct business, access the Internet and purchase products and services, such as personal computers, personal digital assistants and other mobile devices. Each device bears an individual profile--a different configuration of applications, operating system components, network access protocols and personal settings. To illustrate this proliferation, according to IDC, the number of shipped personal computers alone will grow from approximately 112 million in 1999 to 190 million in 2003.
Applications Are Multiplying. Meta Group estimates that the number of programs on the average personal computer has risen from approximately 200 in 1997 to over 600 in 1999. These applications are frequently upgraded, and combinations will increase exponentially. In addition, we believe that the variability of device configurations will increase as customers download, install and use thousands of programs from the Internet or access hosted applications.
Existing Support Solutions Are Inadequate
Existing approaches to user support are increasingly inefficient and costly in today's rapidly evolving and dynamic Internet economy. Providing scalable, personalized technical support is especially difficult. Businesses have traditionally provided support to users on-site or remotely through call centers and help desks. These methods are highly labor intensive because support is typically provided through time consuming phone interaction, e-mail or on-site visits. Moreover, call centers and help desks generally experience high turnover and have difficulty scaling. Support professionals are provided with limited knowledge of users, their systems and business needs and therefore cannot properly and rapidly diagnose and resolve users' problems. In addition, user self-help options such as manuals and software help features have been of limited effectiveness, as they are static and require intensive user effort.
The increasing complexity of support requires a highly personalized, automated and Web-based approach to the development and delivery of support. To date, support infrastructure technology investments have primarily focused on making incremental improvements to existing call center and help desk solutions. For example, work-flow solutions, such as automated call-tracking, knowledge management systems, which develop knowledge bases, and Web-based applications, such as email response management systems, have increased the efficiency of support delivery. However, these solutions do not reduce the need for assisted support, offer automated proactive support or provide Web-based technologies for personalized problem diagnosis or resolution.
The Growth of eSupport
According to the Gartner Group, the volume of nonfinancial goods and services sold through business-to-business e-commerce is expected to reach over $7 trillion worldwide in 2004. However, most organizations lack an adequate support infrastructure to meet the demands imposed by this increasing volume of Internet commerce. The inadequacy of existing support infrastructure impedes the growth and rapid acceptance of eBusiness. Therefore, businesses are seeking more effective and efficient ways to deliver user support. Support solutions must deliver highly personalized services that are able to automatically and intelligently identify and resolve user problems and questions. Organizations need to transform eBusiness support operations from inefficient cost centers to highly productive and scalable competitive assets that increase customer loyalty, improve operational efficiencies and generate incremental revenue. To do so, businesses must fully build out their Web-based support infrastructure. The market for eSupport, the automated delivery of user support over the Internet, is estimated by IDC to grow from $3 billion in 1999 to over $14 billion in 2003.
The Support.com Solution
We are a leading provider of comprehensive eSupport infrastructure software that optimizes, automates and personalizes user support. We sell and market our products to corporate information technology
departments, support outsourcers, Internet service providers, applications
service providers and other businesses that leverage the Internet. We offer a
comprehensive eSupport solution that automates problem avoidance through self-
healing, promotes call avoidance through user self-service, and optimizes
online assisted support. Our Web-based offerings are available in a variety of
configurations, including a full-service Web site, or support portal, that
serves as the nexus of an eBusiness support infrastructure.
The key features of our products include:
Personalized Support. Our software automatically discovers and tracks the unique characteristics of each user's system and that system's components in order to personalize and optimize the support process.
Self-Healing. Our software dynamically recognizes, diagnoses and proactively resolves potential problems as they arise, without the need for the user to request specific assistance.
Self-Service. Our software empowers users to resolve their own problems through a single, intuitive interface that provides adaptive, context-sensitive resolution of problems and queries.
Assisted Service. Our solution ensures that, if and when a problem or query is escalated to the level at which it requires the assistance of a support analyst, that analyst will have detailed information about the user's system and access to dynamically evolving sets of support actions to optimize problem resolution.
Web Support Content Authoring. Our solution enables support analysts to develop support actions that automatically implement problem diagnosis and repair, user training and "just-in-time" help through the Web. These actions are made available to other support analysts and users to further automate the support process.
Internet-Based Architecture. Our products are primarily Web-based, meaning that they can be delivered and updated through the Internet, are secure, scalable and extensible. By structuring our software this way, we are able to offer solutions to users, corporate information technology departments and other support providers that are geographically unconstrained and easy to use and deploy. By leveraging the Internet to architect a new eSupport process, we are able to fundamentally improve the effectiveness of support with dynamic and detailed information exchange.
Through the above features, our solutions:
Accelerate eBusiness Growth. Our software's high degree of automation and scalability provides our customers with a means for eliminating the support bottlenecks that would otherwise constrain their rapidly expanding eBusiness initiatives. Our products provide extensive information-gathering capabilities that can add value outside the technical support context by helping our customers convert the traditional help desk into a revenue generating business services desk. For instance, one of our customers utilizes our eSupport solution in their support portal to drive sales of additional products and services.
Leverage the Web to Reduce Support Costs. Traditional support solutions involve multiple instances of human interaction by telephone and in person. Our products enable fully automated problem and query resolution directly by users--that is, without necessarily requiring remote or in-person assistance. We refer to this user self-service as "Tier Zero," and believe that it is a uniquely effective and efficient means of providing support. By providing a 24 hour, seven-days-a-week automated "support button" on systems, our software minimizes escalation of problems from Tier Zero to levels requiring human interaction. As a result, our customers can leverage their existing support infrastructure, significantly reduce their overall support costs, and create an internal environment that allows them to attract and retain high-quality support analysts.
Increase Customer Satisfaction through Rapid Problem Resolution. Our products are personalized, context-sensitive, and adapt to dynamically changing system environments. Our patented DNA Probe, for example, recognizes individual system settings and provides our eSupport solution with the information necessary to resolve technical problems at Tier Zero. In situations where problems are not eliminated at Tier Zero, the Support.com infrastructure also proactively provides support analysts with detailed user and process information and problem history. Our approach resolves user problems faster and more proactively than traditional support solutions, which significantly increases user satisfaction and reduces downtime.
Rapidly Deploy and Integrate with Existing Solutions. Our products are architected to reduce customer configuration deployment times and installation costs. Our software helps customers to preserve their investments in and deployments of call center and help desk products, workflow tools, knowledge bases and other applications. Our solution enhances these capabilities and integrates them into a cohesive, automated and personalized Internet support infrastructure. In addition to integrating with a customer's existing support infrastructure, our solution is designed to effectively support third-party software and does not require lengthy development, testing or maintenance cycles.
Enable Businesses to Achieve Competitive Advantage. Our comprehensive eSupport solution effectively accelerates problem resolution, reduces system downtime and increases user productivity, each of which is important to maintaining a competitive advantage in today's Internet economy. In addition, we offer our customers the ability to differentiate their product offerings, improve their customer satisfaction and enhance their online presence by enabling them to brand their own version of our support portal.
Support.com Strategy
Our mission is to be the leading provider of comprehensive eSupport infrastructure software. Key components of our strategy include:
Capitalize on the Growth of eBusiness and the Internet. We believe that as businesses continue to leverage the power of the Internet to realize efficiencies in their interactions with customers, supply chain partners and employees, the opportunities to provide Web-based products that address the support needs of these constituencies will be substantial. As companies increasingly use the Internet to automate business processes, their contact with customers is progressively becoming limited to those support interactions that occur when a user has a problem. Our goal is to leverage our technologies and Web-based architecture to help our customers capitalize on these interactions, ultimately providing unprecedented levels of customer care via the Internet.
Continue to Develop Leading-Edge Support Technologies. Our eSupport product offerings are based on patented technology and solve many complex user support problems, namely those revolving around technical support. We intend to continue investing substantial resources in developing innovative technologies that enhance the personalization, automation and overall effectiveness of our solutions. We also plan to continue developing technologies to support additional platforms and applications and to address the complex and evolving natures of corporate computing environments and the Internet. We believe that our focus on providing technical support infrastructure gives us a competitive advantage as we develop solutions to address broader customer support opportunities.
Extend Market Leadership Position by Expanding Our Sales and Distribution Capabilities. We plan to continue developing both our internal sales force and our indirect sales channel of resellers, systems integrators, support outsourcers and other service providers. We also intend to expand our Web-based sales strategies. We believe that leveraging our indirect sales channel and Web sales will add tremendous cost efficiencies to and increase the scalability of our sales process. Distribution of our products through Internet service providers and application service providers, which typically have large numbers of customers, will help promote recognition of our brand and enhance our market penetration and position. We intend to further penetrate our markets by leveraging our existing base of reference accounts to support our consultative selling efforts and to attract new customers.
Leverage and Expand our Technology Relationships. Our relationships with key technology vendors are important to delivering a comprehensive and robust support solution and increasing our brand recognition. We work with leading technology companies in such areas as knowledge management, customer communications, call center and help desk software to ensure that our offerings can be integrated with our customers' existing infrastructure. We intend to deepen our relationships with these and other key technology providers in an effort to enhance the functionality of our solutions, support additional platforms and applications and extend the reach of our product offerings.
Continue to Enhance Customer Value. We work in close partnership with our customers to develop an in-depth understanding of their businesses, to optimize their eSupport infrastructure and to increase their return on investment. We intend to continue to provide a high level of customer service and support through our services organization and by using our own eSupport technologies. We will continue to proactively work with our customers to improve the quality of our product offerings and to identify and address their new support challenges as they grow with the Internet.
Products
Our eSupport infrastructure products and services enable our customers to support their customers, supply chain partners and employees automatically and via the Internet, extranets or intranets. Our software allows our customers to provide their users with personalized, automated support solutions tailored to meet the needs of their respective business environments. Support solutions generated by our products are unique for each user and are "intelligent" in that they are interactive, adaptable and have the capability to automatically update themselves as the user's support requirements change. In addition, our products are Web-based, which reduces user deployment and installation expenses. This ease of deployment makes our software particularly scalable in corporate environments.
The following table highlights the features of our products:
Product Description
Healing Agent A comprehensive, context-sensitive user-based support
application that enables personalized self-service and makes
software self-healing by proactively identifying and repairing
problems on users' systems.
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Support Center A centralized support infrastructure and a suite of software
components for remote assisted service, enterprise-wide
problem resolution and management and administration of the
overall support environment. Builds on the Healing Agent's
support capabilities to optimize the support process when a
support request is escalated to a support analyst.
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Support Portal An interactive Web platform that enables companies to drive
enhanced self-service and assisted service. Works with the
Internet-enabled Support Center and Healing Agent to provide
support organizations with the components and infrastructure
they need to provide interactive, full-service and
personalized online support.
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Foundry A comprehensive application for authoring automated support
actions and managing support content that can then be utilized
by the Healing Agent, Support Center and Support Portal.
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Our eSupport suite consists of four products that provide a modular approach to building comprehensive eSupport solutions. The following diagram illustrates the components of our eSupport Suite and how they interact:
[GRAPHIC APPEARS HERE]
Healing Agent
The Healing Agent provides users with self-healing and automated self- service capabilities to resolve problems and questions that otherwise would require a call to the call center or help desk. The Healing Agent effectively acts as the user's personalized, context-sensitive support assistant, proactively identifying and automatically solving problems as they arise. In addition, the Healing Agent provides a single source of information for addressing software and system malfunctions, known as "break/fix" problems, and responding to users' queries, called "how-to" questions. The result is fewer calls to the call center or help desk, shorter problem resolution cycles and a more satisfying user experience. The Healing Agent serves as the foundation for our comprehensive support infrastructure.
The Healing Agent includes the following features:
Self-Healing Capabilities. Proactively identifies problems and resolves them before they manifest themselves. By actively monitoring the applications and components of a user's changing system, the Healing Agent can intelligently eliminate problems before they cause downtime.
Automated Self-Service. Enables users to address support problems that otherwise would require calls to the call center or help desk, including "break/fix" problems, "how-to" questions and requests for system modifications. This reduces the number of calls to the call center and provides users with a more efficient and satisfying support experience.
Support for Disconnected and Mobile Users. Allows users to solve problems when they are completely disconnected from their networks. The solutions critical to disconnected and mobile users reside locally on the user's machine.
Undo Capability. Provides users with the ability to undo actions taken by the Healing Agent. This increases receptiveness to self-service for both users and support analysts by reducing the perceived risk of using the recommended solution.
Support Center
The Support Center provides a centralized support infrastructure and a suite of software components for remote assisted service, enterprise-wide problem resolution and management and administration of the overall support environment. This product suite provides support analysts with the ability to deliver context-sensitive diagnosis and resolution of user problems. The Support Center builds on the Healing Agent's support capabilities to optimize the support process when a support request is escalated to the call center or help desk. The Support Center provides support for a comprehensive range of call types, including "break/fix" problems, "how-to" questions and requests for system modifications.
The Support Center enables support analysts to provide enhanced assisted service with a powerful set of tools for diagnosing and resolving problems from remote locations. By integrating the Healing Agent's knowledge and user history with remote assisted service, the Support Center automatically provides support analysts with key information that they would otherwise have to gather manually. The Support Center allows support analysts to automatically identify the fundamental causes of problems and enable users and support staff to systematically and rapidly resolve them without desktop visits or protracted interactions between the user and the analyst. The result is significant reductions in call times, which in turn results in improved service to users and lower support costs.
The enterprise healing capabilities of the Support Center enable the support organization to proactively solve problems for a large number of users across the organization before user productivity becomes impaired. Enterprise healing allows the support organization to identify problems that could potentially affect large numbers of users and preemptively repair them before users suffer downtime.
The administration and management capabilities of the Support Center provide centralized user management, usage and status reporting, storage maintenance, security administration and instructions for the Healing Agent. The Support Center manages characteristics and privileges for users and support analysts and reports on support activities. For instance, periodic maintenance can be performed from the Support Center to manage security parameters and storage requirements. The Support Center provides centralized instructions for the Healing Agents, which control their behavior and activity.
The Support Center includes the following features:
Knowledge-Driven Remote Diagnosis. Provides the support analyst with the knowledge and tools to remotely diagnose problems on a user's system. The Support Center provides support analysts with information about the current configuration of a user's system, a history of all prior actions taken to resolve the user's problems and a comprehensive suite of tools to present context-sensitive solutions to the support analyst for execution. This allows for analysis of problems based on the status of the user's system and personalized support requirements and results in better and quicker diagnosis of the fundamental cause of the problem and its solution.
Remote Repair. Enables the support analyst to remotely solve problems with no user interaction. This reduces desktop visits and costly, time-consuming interaction with users. Remote repair allows the support analyst to initiate online chat sessions with users, edit their files and execute commands on their systems.
Reporting. Provides support organizations with information for monitoring support transactions, proactively identifying trends and potential problems and measuring the effectiveness of our eSupport suite.
Extensibility. Provides an open architecture to enhance and extend the capabilities of the Support Center to meet evolving support needs. In addition, the Support Center enables support organizations to transfer and leverage information with knowledge bases and automatically transfers information into call tracking databases.
Security. The user can control which activities are allowed or disallowed by the support analyst. In addition, support administrators manage overall user and group security. All support activity occurs using industry standard security, including encryption and the use of digital certificates.
Undo capabilities. Allows support analysts to undo actions taken from the Support Center. This provides support analysts with flexibility in controlling actions that may have a negative effect. This increases receptiveness to remote assisted support for both users and support personnel by reducing the perceived risk of using the recommended solution.
Support Portal
The Support Portal is an interactive Web platform that enables businesses to add to or enhance self-service or assisted service capabilities. The Support Portal works with the Internet-enabled Support Center and Healing Agent to provide support organizations with the components and infrastructure they need to build interactive, full-service, context-sensitive and personalized online support. The Support Portal enhances existing support solutions, such as knowledge bases and call tracking systems, by delivering context-sensitive information that allows for better solution matching and automated problem resolution. The result is a support experience in which the Support Portal interacts with the user, the system and other support technologies to provide a personalized solution to the user's support request.
The Support Portal includes the following features:
Web-Based Solution. Scales with the organization's eBusiness initiatives. The Support Portal serves as a single point of integration for all support content, technologies and processes.
Interactive, Context-Sensitive Support. Interacts with users' systems to guide those users through the complexities of their specific environments, offering them context-sensitive, personalized support.
Support Process Automation. Connects users to support providers and automates and mitigates inefficiencies in the support process. This includes:
. self-service;
. routing of support requests to the support organization;
. user identification and privilege verification;
. problem description;
. diagnosis and repair; and
. logging of actions taken by all parties involved in the support transaction.
Foundry
The Foundry is a development environment for authoring support actions and managing support content that can then be utilized by the Healing Agent, Support Center and Support Portal. The Foundry's authoring capabilities enable support organizations to create automated solutions, or SupportActions, that support user applications and operating system components, automate common support activities and schedule jobs to manage user systems. SupportActions can be created for a complete range of support requests, including "break/fix" problems, "how-to" questions and requests for system modifications.
The Foundry includes the following features:
Content Creation and Content Management. The Foundry enables support organizations to create, publish, integrate and maintain automated SupportActions. Product attributes include:
. a platform for authoring automated SupportActions from a point-and-click interface. This includes support content automation and the ability to easily integrate existing support content into a database of solutions and content.
. automated categorizing and indexing of support content and SupportActions, which enables users to quickly find the appropriate solution to their problem.
Personalization. The Foundry enables the support organization to create personalized support content. Using the Foundry's capabilities, a company can:
. create support solutions that automatically identify and address the unique support requirements of each user. These solutions are automatically updated to reflect any changes in the user's support requirements.
. deliver automated support solutions to a single user or set of users based on the unique characteristics of their systems, the history of their support needs, and other criteria.
Technology
We believe that our core technologies provide the foundation for a scalable support infrastructure. The intelligent nature of our core technologies enables our products to automatically adapt to varying environments and to reduce the manual labor associated with the support process.
DNA Probe--Personalized Support
The DNA Probe provides detailed data about each user, their system, and the software on their system. The patented DNA Probe technology automatically identifies the characteristics of each user's software applications and operating system components and tracks them over time. This personalized data can then be used to quickly sift through large amounts of information, compare historical data and highlight potential fundamental causes of problems. For example, the DNA Probe technology automatically identifies all of the network settings for each individual user, including the network address, machine name, Internet configuration and the specific drivers for their network card. In contrast to other support process methodologies, which involve authoring generic solutions and attempting to apply those to numerous unique users, support organizations can use the DNA Probe's ability to learn about each dynamic environment to efficiently provide users with personalized support solutions.
ContextResponse--Context-Sensitive Support
ContextResponse analyzes the data gathered by the DNA Probe, identifies and diagnoses the most relevant information, and then delivers a solution for a user's problem or question. It is the ability to gather, analyze and transmit context-sensitive information which efficiently automates the support process. ContextResponse personalizes and automates the support process by:
. automatically gathering information that otherwise would require a time- consuming and frequently complex interaction between the user and the support analyst. For example, rather than asking a user to identify their specific operating system parameters and software versions, ContextResponse automatically gathers this information and electronically relays the information to the support analyst.
. analyzing information to identify potential problems. ContextResponse is designed to identify the fundamental cause of a problem by analyzing the results of diagnostic programs and/or comparing the user's current system configuration to a previous working configuration, a reference configuration or another user's configuration.
SupportActions--Point and Click Development and Delivery
Many custom support solutions can be packaged as SupportActions, which enable the automation of common support activities such as answering "break/fix" problems or "how-to" questions. Support analysts use the Foundry to create custom SupportActions via a simple point-and-click interface. Support organizations can integrate existing programs, commands and content into SupportActions to turn static information into automated knowledge. For example, the support organization could integrate frequently asked questions or a diagnostic program into a SupportAction so that the user can automatically perform the steps described by the answers to the frequently asked questions or the diagnostics program. SupportActions can accomodate many scripting languages and a wide range of content.
Change Management Infrastructure
Our change management infrastructure provides a common mechanism for the distribution and application of changes to one or more machines. This infrastructure is used across all products to ensure that changes made to a user's machine are consistent, reversible and recorded. Repair to a user's machine, comparison of one machine to another, installation, modification and distribution can all be achieved using our common change management infrastructure. Support solutions are easier to develop with this infrastructure because steps that are done manually and are potentially error- prone are replaced by automatic and consistent mechanisms. This can facilitate rapid development and reduce the cost of on-going maintenance.
Nexus--Enhanced Communication Infrastructure
Our products communicate directly with each other using secure protocols, but firewalls and other network components often restrict direct communication across the Internet. In the event that a firewall or other device prevents direct communication between remote parties, our products are designed to communicate indirectly using our Nexus technology as an intermediary. Our Nexus technology allows communication to take place between parties in circumstances where direct communication is unreliable or impossible.
Software Vaults--Efficient Storage Management
Once a user's problem is diagnosed, the solution is delivered to the user from the Software Vault. Support solutions generally require access to a large amount of support content, in the form of files, programs and other information, which must be available locally and/or across a network. Our patent-pending Software Vault provides storage, retrieval and management of this support content. All files and programs associated with supported applications, operating system components and all SupportActions are stored in the Software Vault.
The Software Vault provides a redundant, distributed mechanism for this support content. For example, if a particular file on a user's system has been corrupted and needs to be replaced, one or more Software Vaults will be accessed in a logical sequence until the needed file has been found. Software Vaults reside on servers to support thousands of users, and portions of Software Vaults can also be placed locally on a user's system to provide support for critical applications and operating system components when the user is completely disconnected from the network.
The Software Vault's file storage mechanism is highly efficient. By storing each unique file only once, the Software Vault minimizes disk space, communications and bandwidth requirements. For example, if a number of users have multiple applications that all use a particular version of a file or program, only one copy of that file is kept in the Software Vault.
Services and Support
Our services organization provides a range of support offerings from architectural design to on-going customer support and is critical to our focus on customer satisfaction. Our services group configures solutions for our customers that are deployed across all or parts of their organization. Our services and support capabilities are divided into three areas:
. Implementation--Provides architectural design, transformation, product integration and deployment services to our customers. Each implementation is customized according to the customer's organizational and technical requirements.
. Education--Trains our customers and those parties with whom we have alliances in the design, implementation and use of our products.
. Technical Support--Responds to design, feature, implementation and deployment questions.
Under a maintenance contract, our customers receive generally available new releases, corrections, enhancements, updates and other changes to the products they have licensed.
As of January 31, 2000, we had 12 employees engaged in services and support activities.
Customers
We market and sell our eSupport solutions to corporate information technology departments, support outsourcers, Internet service providers, application service providers and other businesses that leverage the Internet.
The following is a representative list of companies who have purchased our products and services organized by our customer focus categories:
Corporate ISP/ASP Support Outsourcers --------- ------------- ---------------------------- Bear Stearns everdream Compaq Professional Services Broadcom Excite@Home CompuCom Cadence Design Systems Globo Cabo Computer Sciences Corp. Chase H&Q Jamcracker Cotelligent Equifax micronpc.com Service 911.com JCPenney Xerox Connect Madge Networks McKesson HBOC |
Case Studies
The following case studies illustrate how our customers integrate our solution:
Customer Description
Bear, Stearns & Co. Bear, Stearns & Co. Inc. is a leading investment
Inc. banking and securities trading and brokerage firm
serving organizations and individuals worldwide. Bear
Stearns was seeking a solution to manage the more than
11,000 troubleshooting calls per month received by its
support organization from internal and external
traders. Bear Stearns selected us because of our
ability to solve complex problems related to the
diverse environments of its systems. By using our
software, Bear Stearns support analysts can remotely
support these users, streamline the support process and
solve their most common problems in a more effective
and timely manner. Bear Stearns support analysts now
have more time to focus on additional support issues.
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Excite@Home Excite@Home is a global media company that provides
high-speed Internet access to over 1,000,000 consumer
and small business users. Excite@Home needed a solution
to better manage calls related to connectivity
difficulties, their most common support call,
representing 35% of all calls received. They chose the
Support.com Healing Agent, which is installed as a
standard part of Excite@Home's service. The Healing
Agent supports PC, network and Internet configurations,
provides continuous support for network components and
client software, and can automatically solve user's
connection problems. With the Support.com solution, the
number of calls to the call center have decreased and
the time it takes to solve problems when calls do come
in has decreased. We are also working with other
organizations to create an Excite@Home Support Portal
that will enable its users to access our eSupport
solutions, as well as the virus protection, aggregated
support content and e-commerce offerings of other
vendors.
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Customer Description
JCPenney JCPenney, the worldwide leader in the retail industry,
was seeking a solution to enhance its support process
while providing a better service level to its
employees. JCPenney uses our software to provide a full
range of eSupport solutions focused on automating the
support process and improving the user community
experience with the help desk.
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Compaq Professional Compaq Professional Services, a division of Compaq
Services Computer Corporation, operates one of the world's
largest and leading multi-lingual help desks, providing
service to more than one million corporate computer
users. Compaq was looking for a solution to resolve
user problems as quickly as possible and decrease
overall support costs. The eSupport solution for Compaq
is a part of the Compaq Professional Services global
help desk and provides comprehensive self-healing,
self-service and assisted service over the Internet.
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everdream everdream is an application service provider that
delivers hardware, software, networking infrastructure
and support to small business customers, thereby
offering its customers a single point of support. With
the integration of our self-healing, self-service and
assisted service technology on the everdream platform,
everdream is able to increase the number of technical
problems solved for its customers and decrease the time
it takes to solve them. As a result, everdream's
customers can experience increased productivity and
cost savings.
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Strategic Alliances
An important element of our sales and marketing strategy is to leverage and expand our strategic alliances with key industry leaders to increase market awareness, acceptance and distribution of our products and services. We have established formal and informal distribution and solutions alliances with industry leaders to help us to deliver comprehensive solutions and allow us to focus on our core area of expertise: developing eSupport software. We employ this network of alliances to expand our sales, service and marketing capabilities and to extend the technical and functional application of our eSupport solutions.
Distribution Alliances
We have established distribution alliances with specialized technology and services firms that deliver our solutions to specific market segments. These distribution relationships allow us to benefit from the marketing and lead generation capabilities of these firms and are intended to increase geographic sales coverage and to address small- to-medium-sized businesses and large corporate customers. In turn, the companies with which we have distribution alliances can enhance their product and service offerings and increase customer satisfaction with our products while effectively managing costs associated with providing support to their customers.
The following table illustrates our formal distribution alliances:
Target Category Company
Support Outsourcers deliver outsourced Compaq Professional Services
technical support and help desk capabilities CompuCom
to large corporations. Computer Sciences Corp.
Cotelligent
Service 911.com
Sykes Enterprises
Xerox Connect
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Internet Service Providers offer their Excite@Home
customers Internet access.
Globo Cabo
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PC Vendors provide support to their customers Omni Tech
in connection with their hardware product
offerings. Premio Computer
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Application Service Providers offer hardware, everdream
software, networking infrastructure with
Internet accessible applications and support Jamcracker
to small- and medium-sized companies. micronpc.com
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Support Integrators provide strategic Support Technologies
consulting and implementation services to
organizations building their support
infrastructure.
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Solutions Alliances
We have established solutions alliances with leading providers of complementary support technologies such as call center/help desk management companies, knowledge management companies and systems management firms. Our relationships with these technology providers help us deliver comprehensive solutions to our customers and provide us the ability to rapidly adapt our solutions to our customers' needs. We also seek to generate referral sales from these alliances. By establishing alliances with Support.com, these technology providers can provide a more comprehensive support solution to their customers while informing and educating their customers about new support products and technologies.
The following table illustrates our formal and informal solutions alliances:
Target Category Company
Call Center/Help Desk Management solution providers HP OpenView
offer software that allows organizations to respond to Peregrine Systems
service call requests and monitor support activity. Remedy
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Knowledge Management companies provide solutions that Inference
collect, organize and share an enterprise's support
data. ServiceWare
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Email Management solutions providers enable help Kana Communications
desk/customer service departments to route, track and
respond to high volumes of customer email.
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Systems Management solutions providers enable global Computer Associates
organizations to control their IT resources, increase
application availability and improve customer service. Tivoli
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Password Reset companies provide solutions to automate Courion
the reset and synchronization of user passwords.
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Content Providers deliver support-related content. MyHelpdesk.com
Shaman Corporation
ZDNet
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Hardware Diagnostics solutions providers offer utilities PC-Doctor
to accurately determine the cause of hardware problems.
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Research and Development
The emerging market for eSupport solutions is characterized by rapid technological change, new product introductions and enhancements, evolving customer requirements and rapidly changing industry standards. We devote a substantial portion of our resources to developing new and enhanced versions of our eSupport infrastructure software, conducting product testing and quality assurance testing and improving our core technologies, ultimately strengthening our technological expertise in the market for eSupport.
As of January 31, 2000, we had 30 employees in research and development activities. Our research and development expenditures were approximately $1.1 million in 1998 and $2.4 million in 1999. We expect to continue to devote significant resources to research and development for the next several years.
Sales and Marketing
Sales
Our sales efforts target corporate information technology departments, support outsourcers, Internet service providers, application service providers and other businesses that leverage the Internet, through a combination of direct and indirect sales channels. Direct channels are characterized by direct relationships with customers, while indirect channels utilize existing customers and strategic alliances to generate new business. Our corporate customers consist of clients which leverage their intranet and/or extranet for their eBusiness initiatives. We address these corporate entities through direct channels to targeted industries, including financial services, telecommunications, retail and manufacturing, and indirect channels to outsourcers, live support providers and system integrators. Our Internet market customers consist of Internet service provider and application service provider clients, which we address through direct sales channels. We have established specialized task forces to oversee each of our targeted customer segments. A telephone and Web sales team will be responsible for lead generation, customer follow-up, add-on business and new sales via the Web to existing customers and new market segments.
We maintain direct and indirect sales personnel in North America covering the United States, Canada and Latin America, in the United Kingdom covering Europe, the Middle East and Africa, and in Singapore covering the Asia Pacific region. The direct and indirect sales force is organized into account teams that include sales executives and system engineers. The direct sales force is divided regionally and provides business and technical continuity to our customers. Our indirect sales force is responsible for globally enabling large service providers to sell and deploy our eSupport products to new customers. The indirect team is focused on enabling these channels through training, certification and sales and marketing assistance.
Our sales strategy utilizes partner relationships and consultative selling techniques and incorporates a comprehensive communication infrastructure for both our direct and indirect sales forces. We plan to continue to invest and increase the size and geographical locations of both our direct and indirect sales model on a global basis.
Marketing
Our marketing efforts include needs assessment and market analysis, brand awareness, category education and lead generation, and educating organizations in our target markets, including corporate information technology departments, support outsourcers, Internet service providers, application service providers and other businesses that leverage the Internet.
Needs assessment and market analysis include such activities as:
. conducting market research;
. establishing and maintaining close relationships with leading industry analysts;
. developing close relationships with professional associations for help desk and support professionals; and
. capturing, organizing and prioritizing customer and industry feedback to provide product direction to our research and development organization.
Brand awareness, category education and lead generation include such activities as:
. performing educational seminars;
. developing and implementing direct mail and advertising campaigns;
. performing marketing programs including Web seminars and Web direct mail;
. managing and maintaining public relations campaigns
. participating in industry-related events, conferences and tradeshows; and
. developing and maintaining our Web site.
Our Solutions Alliances Program is comprised of a select group of technology vendors in which together we focus on a range of joint marketing strategies and programs to extend the reach of our presence in the marketplace. We intend to continue to pursue these partnerships in the future.
As of January 31, 2000, approximately 45 of our employees were engaged in sales and marketing activities.
Competition
The market for our products is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Although we do not currently compete against any one entity with respect to all aspects of our eSupport solution, we do compete with various vendors in regards to specific elements of our eSupport solution. These elements include automated development of support solutions, automated delivery of support solutions, and an Internet support infrastructure. For example, we currently compete with companies that provide automated development of support solutions, such as Serena Software, Inc. We also compete with companies that provide automated delivery of support solutions, such as Motive Communications, Inc.
In the future, we may encounter competition from other software companies to
the extent that we enter each other's market. These companies may include:
customer communications software companies, such as Kana Communications, Inc.
and eGain Communications, Inc.; question/answer companies, such as Ask Jeeves;
customer relationship management, or CRM, solutions companies, such as Siebel
Systems, Inc., Oracle Corporation and Silknet Software, Inc.; consolidated
service desk (CSD) solution vendors, such as Clarify Inc., Peregrine Systems,
Inc. and Remedy Corporation; and operating systems providers, such as Microsoft
Corporation.
Our potential competitors may have longer operating histories, significantly greater financial, technical, and other resources, or greater name recognition than we do. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition could seriously harm our ability to sell additional software, maintenance renewals and services on terms favorable to us. Competitive pressures could reduce our market share or require us to reduce the price of products and services, any of which could harm our business, financial condition and operating results.
We believe that the principal competitive factors in our market include:
. establishing a significant base of reference customers;
. demonstrating ongoing value and return-on-investment;
. product functionality, quality and performance;
. introducing new products to the market in a timely manner;
. customer service and support; and
. pricing.
Although we believe our solutions compete favorably with respect to each of these factors, the market for our products is new and rapidly evolving. We may not be able to maintain our competitive position against current and potential competitors, especially those with greater resources.
Intellectual Property
The status of United States patent protection in the software industry is not well defined and will evolve as the U.S. Patent and Trademark Office grants additional patents. We have one patent in the general area of automated discovery of dynamic configurations. We currently have four patent applications pending in the United States, and we may seek additional patents in the future. We do not know if our patent applications or any future patent application will result in a patent being issued with the scope of the claims we seek, if at all, or whether any patents we have or may receive will be challenged or invalidated. It is difficult to monitor unauthorized use of technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and our competitors may independently develop technology similar to ours. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects of our technologies that we believe constitute innovations providing significant competitive advantages. The pending and any future applications may or may not result in the issuance of valid patents.
Our success depends in part upon our rights in proprietary software technology, some of which is patented. We rely on a combination of copyright, trade secret, trademark and contractual protection to establish and protect our proprietary rights that are not protected by patent, and we enter into confidentiality agreements with those of our employees and consultants involved in product development. We routinely require our employees, customers and potential business partners to enter into confidentiality and nondisclosure agreements before we will disclose any sensitive aspects of our products, technologies or business plans. In addition, we require employees to agree to surrender to us any proprietary information, inventions or other intellectual property they generate or come to possess while employed by us. Despite our efforts to protect our proprietary rights through confidentiality and license agreements, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. These precautions may not prevent misappropriation or infringement of our intellectual property.
Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. In addition, other parties may assert infringement claims against us. Although we have not received notice of any alleged infringement, our products may infringe issued patents that may relate to our products. In addition, because patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to our software products. We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming and could divert management's attention away from running our business. This litigation could also require us to develop non-infringing technologies or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. Our failure or inability to develop non-infringing technologies or license the proprietary rights on a timely basis would harm our business.
Employees
As of January 31, 2000, we had 102 full-time employees, including 30 in research and development, 12 in services, 45 in sales and marketing and 15 in general and administrative. None of our employees are covered by collective bargaining agreements. We believe our relations with our employees are good.
Legal Proceedings
We are not a party to any material legal proceeding. We may be subject to various claims and legal actions arising in the ordinary course of business.
Facilities
Our corporate headquarters are located in Redwood City, California, where we lease approximately 23,200 square feet under a lease that expires in August 2001. As of December 31, 1999, we also leased office space in 6 other cities for our sales and support personnel. The terms of these leases expire beginning in April 2000 and ending in July 2001, and automatically renew unless earlier terminated. We are currently subleasing our previous office space in Palo Alto, California, and anticipate continuing to do so until that lease expires in July 2001.
We expect to require additional space to meet our needs in the next 12 months. We are currently pursuing our options with respect to obtaining additional facilities. Adequate space may not be available on commercially reasonable terms.
MANAGEMENT
Directors and Executive Officers
Our directors, executive officers and key employees and their ages as of December 31, 1999 are as follows:
Name Age Position
---- --- --------
Radha R. Basu.................. 49 Chief Executive Officer, President and Director
Mark J. Pincus................. 34 Chairman of the Board
Brian M. Beattie............... 46 Chief Financial Officer, Senior VP of Finance and
Administration
Jim R. Hilbert................. 39 Senior Vice President of Sales and Business
Development
Scott W. Dale.................. 30 Chief Technical Officer
Cadir B. Lee................... 28 Chief Software Officer
Lucille K. Hoger............... 46 Vice President of Operations
Michael P. O'Rourke............ 40 Vice President of Engineering
Anthony C. Rodoni.............. 35 Vice President of Marketing
Matthew T. Cowan............... 28 Director
William L. Dunn(2)............. 63 Director
Bruce Golden(1)................ 40 Director
Edward S. Russell(2)........... 39 Director
Roger J. Sippl(1).............. 44 Director
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Radha R. Basu. Ms. Basu has served as President, Chief Executive Officer and as a director of Support.com since July 1999. Ms. Basu worked at Hewlett- Packard Company, a computing and imaging solutions provider company, from November 1978 to January 1999, and held various general management positions, most recently the general manager of the Electronic Business Software Organization. Ms. Basu also serves as chairman of the board of directors of Seec, Inc., an eBusiness solutions company. Ms. Basu holds a B.S. in Engineering from the University of Madras, a Masters degree in Electrical Engineering and Computer Science from the University of Southern California and is a graduate of the Stanford University Executive Management Program.
Mark J. Pincus. Mr. Pincus co-founded, and has served as the Chairman of Support.com since its inception in December 1997. Mr. Pincus served as the Chief Executive Officer and President of Support.com since its inception until July 1999. Mr. Pincus is also a part-time employee of Support.com. From 1995 to 1997, Mr. Pincus was a co-founder and Chief Executive Officer of FreeLoader, Inc., a Web-based push technology service. From 1994 to 1995, he served as Vice President with Columbia Capital, a venture capital firm. From 1993 to 1994, he served as Manager at Tele-Communications, Inc. now AT&T Cable. Mr. Pincus holds a B.S. in Economics from Wharton, University of Pennsylvania and an MBA from Harvard Business School.
Brian M. Beattie. Mr. Beattie has served as Executive Vice President of Finance and Administration and Chief Financial Officer of Support.com since October 1999. From May 1998 to May 1999, he served as Vice President of Finance, Mergers and Acquisitions of Nortel Networks Corporation, a voice and data networking company. From July 1996 to April 1998, Mr. Beattie served as Group Vice President of Meridian Solutions of Nortel Networks Corporation. From February 1993 to June 1996, Mr. Beattie served as Vice President Finance, Enterprise Networks, for Nortel Networks Corporation. Mr. Beattie holds a Bachelor of Commerce and an MBA from Concordia University in Montreal.
Jim R. Hilbert. Mr. Hilbert has served as Senior Vice President of Sales and Business Development of Support.com since December 1999. From December 1998 to December 1999, he served as Vice President and General Manager of Tivoli Systems, Inc., a provider of systems management software and subsidiary of International Business Machines Corporation. From March 1997 to December 1998, he served as Vice President of Sales of Tivoli Systems, Inc. From 1987 to 1997, he served in several senior management positions in sales and marketing for Amdahl Corporation, a computer company. Mr. Hilbert holds a B.S. in Computer Science from the University of Texas.
Scott W. Dale. Mr. Dale co-founded Support.com and has served as the Chief Technical Officer of Support.com since its inception in December 1997. From January 1997 to December 1997, Mr. Dale served as a software consultant for M&I Data Services, a financial transaction software company. From July 1992 to January 1997, Mr. Dale served as a software consultant to Hewlett-Packard Company, a computing and imaging solutions provider company. Mr. Dale holds a B.S. in Computer Science from Stanford University.
Cadir B. Lee. Mr. Lee co-founded Support.com and has served as the Chief Software Officer of Support.com since its inception in December 1997. From 1995 to 1997, Mr. Lee served as a software consultant to Hewlett-Packard Company, a computing and imaging solutions provider company. Mr. Lee holds a B.S. in Biological Sciences and a B.A. in Music from Stanford University.
Lucille K. Hoger. Ms. Hoger has served as the Vice President of Operations of Support.com since February 2000. From 1996 to 2000, Ms. Hoger served as the Chief Operating Officer at ConnectInc.com, an e-commerce software company. From 1992 to 1995, she served as a principal for Gemini Consulting, an affiliate of Cap Gemini, a consulting company. Ms. Hoger holds a B.A. in Accounting from Southwest Texas State University.
Michael P. O'Rourke. Mr. O'Rourke has served as the Vice President of Engineering of Support.com since December 1999. From July 1999 to December 1999 he served as Vice President of Operations of Support.com. Prior to joining Support.com, Mr. O'Rourke served in several executive positions at Tivoli Systems, a provider of systems management software and subsidiary of International Business Machines Corporation. Mr. O'Rourke served as Vice President of the Packaged Solutions Business Unit at Tivoli Systems from December 1998 to June 1999, as Vice President of the Enterprise Business Unit from February 1998 to December 1998, as Vice President of Marketing and Partner Programs from June 1996 to February 1998, as Director of Partner Programs from July 1995 to June 1996 and as Director of Application Development from April 1993 to July 1995. Mr. O'Rourke holds a B.S. in Computer Science from the University of Vermont.
Anthony C. Rodoni. Mr. Rodoni has served as Vice President of Marketing of Support.com since June 1998. From March 1988 to June 1998, Mr. Rodoni served in a variety of management positions, most recently as General Manager of the Data Warehouse Business Unit, at Informix Software, Inc., a database software company. Mr. Rodoni holds a B.S. in Computer Science from the University of California at Santa Barbara and an MBA from Santa Clara University.
Matthew T. Cowan. Mr. Cowan has served as a director of Support.com since June 1999. From September 1998 to the present, Mr. Cowan has served as General Partner of Bowman Capital Management, a premier institutional investor specializing in both public and private technology growth companies. From July 1994 to September 1998, Mr. Cowan served as Director, Corporate Business Development of Intel Corporation. Mr. Cowan holds a B.A. degree in Political Science from Tufts University.
William L. Dunn. Mr. Dunn has served as a director of Support.com since April 1998. From 1961 to 1989, Mr. Dunn served as an Executive Vice-President of Dow-Jones & Company, a publishing company. Mr. Dunn holds a B.A. in Economics from Drake University.
Bruce Golden. Mr. Golden has served as a director of Support.com since June 1998. Since September 1997, Mr. Golden has served initially as entrepreneur-in- residence and then as a Partner at Accel Partners, a
venture capital firm. From 1993 to August 1996, Mr. Golden served as a Vice President of Marketing at Illustra Information Technology, which was acquired by Informix Corporation in 1996, at which time Mr. Golden was employed by Informix Corporation, a database company. Mr. Golden holds a B.A. in Political Science from Columbia University.
Edward S. Russell. Mr. Russell has served as a director of Support.com since June 1998. Since October 1996, Mr. Russell served as a General Partner at Softbank Technology Ventures, Inc. From 1988 to October 1996, Mr. Russell served as the Executive Director at SBC Warburg. Mr. Russell is a director of Buy.com, a multi-category Internet superstore. Mr. Russell received his B.S. in Computer Science from Carnegie Mellon University and an Executive MBA from London School of Business.
Roger J. Sippl. Mr. Sippl has served as a director of Support.com since January 1999. Since August 1995, Mr. Sippl has served as the managing partner of Sippl Macdonald Ventures, a venture capital firm. From 1980 to 1989, Mr. Sippl was the founder and served as Chief Executive Officer and Chairman of the Board of Informix Corporation a database company. From 1989 to 1993, Mr. Sippl served as Chairman of the Board of Informix Corporation. From December 1990 to 1996, he co-founded and served as a director of The Vantive Corporation, a customer relationship management solutions company. From 1996 to 1998, he served as Chairman of the Board of The Vantive Corporation. From February 1993 until March 1998, Mr. Sippl was the founder and served as the Chief Executive Officer and Chairman of the Board of Visigenic Software, Inc., a software tools provider company. From March 1998 to July 1998, he served as Chief Technology Officer of Borland International, Inc. Mr. Sippl holds a B.S. in Computer Science from the University of California at Berkeley.
There are no family relationships among any of our directors or executive officers.
Board Committees
Our board of directors has a compensation committee and an audit committee.
Our compensation committee is responsible for, among other things, determining salaries, incentives and other forms of compensation for directors, officers and other employees of Support.com and administering various incentive compensation and benefit plans. Prior to December 1999, we did not have a compensation committee. Our board of directors established executive compensation levels for 1999. Bruce Golden and Roger J. Sippl are the current members of the compensation committee. Radha R. Basu, our Chief Executive Officer, will participate in all discussions and decisions regarding salaries and incentive compensation for all employees and consultants of Support.com, except that she will be excluded from decisions regarding her own salary and incentive compensation.
Our audit committee reviews our annual audit and meets with our independent auditors to review our internal controls and financial management practices. Edward S. Russell and William L. Dunn are the current members of the audit committee.
Director Compensation
Except for the grant of stock options and the grant of common stock pursuant to restricted stock purchase agreements, we do not currently compensate our directors for their services as directors. Our directors are eligible to participate in our 2000 Omibus Equity Incentive Plan and our directors who are employees of Support.com are eligible to participate in our 2000 Employee Stock Purchase Plan. We also reimburse each member of our board of directors for out- of-pocket expenses incurred in connection with attending board meeting.
In addition, we granted Bruce Golden, a director of Support.com, an option to purchase 50,000 shares of our common stock under our 1998 Stock Plan at a purchase price of $0.10 per share. We granted William Dunn, a director of Support.com, the right to purchase 80,000 shares of our common stock pursuant to a
restricted stock purchase agreement at a purchase price of $0.10 per share. On February 18, 1999, Mr. Dunn purchased these shares of our common stock, subject to our right of repurchase which lapses over time. We granted Roger J. Sippl, a director of Support.com, the right to purchase 100,000 shares of our common stock pursuant to a restricted stock purchase agreement, at a purchase price of $0.10 per share. On January 14, 1999, Mr. Sippl purchased these shares of our common stock, subject to our right of repurchase which lapses over time.
Executive Compensation
The following table provides summary information concerning compensation earned by or paid to our chief executive officer, our former chief executive officer and to our three other most highly compensated executive officers whose total annual salary and bonus exceeded $100,000, for services rendered in all capacities to Support.com during 1999. These individuals are referred to as the "named executive officers." Other than the salary and bonus described below, Support.com did not pay any executive officer named in the Summary Compensation Table any fringe benefits, perquisites or other compensation in excess of 10% of that executive officer's salary and bonus during 1999.
Summary Compensation Table
Long-Term
Compensation
Awards
------------
Annual
Compensation(1) Security
---------------- Underlying
Name and Principal Position Salary Bonus Options (#)
--------------------------- -------- ------- ------------
Radha R. Basu(1).................................. $ 94,744 $45,834 1,680,189
President and Chief Executive Officer
Mark J. Pincus(2)................................. 146,692 -- 500,000
Chairman of the Board
Scott W. Dale..................................... 120,833 -- 250,000
Chief Technical Officer
Cadir B. Lee...................................... 120,833 -- 250,000
Chief Software Officer
Anthony C. Rodoni................................. 135,000 30,000 25,000
Vice President of Marketing
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Option Grants in Last Fiscal Year
The percentage of total options granted is based on an aggregate of 6,326,139 options granted in 1999. The exercise price on the date of grant was equal to the fair market value on the date of grant as determined by the board of directors. Options have a maximum term of 10 years subject to earlier termination for specified events related to cessation of employment. The 5% and 10%, assumed rates of appreciation are mandated by the rules of the Securities and Exchange Commission and do not represent Support.com's estimate or projection of the future stock price.
The values reflected in the table may never be achieved. The dollar values have been calculated by determining the difference between the fair market value of the securities underlying the options at December 31, 1999 and the exercise prices of the options. Solely for purposes of determining the value of the options at December 31, 1999, we have assumed that the fair market value of shares of common stock issuable upon exercise of options was $ per share, the assumed initial public offering price, since the common stock was not traded in an established market prior to the offering.
These stock options were granted under the 1998 Stock Plan and are immediately exercisable. We have a right to repurchase at cost any shares which have been exercised but remain unvested at the time of the officer's cessation of employment. Ms. Basu's options vest at a rate of 25% upon the first anniversary of her vesting start date and 1/48 per month thereafter. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Ms. Basu is terminated without cause or if she terminates her employment under certain circumstances following such event, all of her remaining unvested shares will vest.
Of Mr. Pincus' 500,000 options, 250,000 options vest at a rate of 25% upon the first anniversary of his vesting start date and 1/48 per month thereafter, and 250,000 options vest at a rate of 1/12 per month over one year. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Mr. Pincus is terminated without cause or if he terminates his employment under certain circumstances following such event, all of his remaining unvested shares will vest.
Mr. Dale's and Mr. Lee's options vest at a rate of 25% upon the first anniversary of each of their vesting start dates and 1/48 per month thereafter.
Mr. Rodoni's options were fully vested on the date of grant.
Option Grants in Last Fiscal Year
Potential
Realizable
Value at
Assumed Annual
Rates of
Stock Price
Percentage of Exercise Appreciation
Total Options or Base for Option Term
Options Granted in Price Expiration ---------------
Name Granted 1999 ($/Share) Date 5% 10%
---- --------- ------------- --------- ---------- ------- -------
Radha R. Basu..... 1,680,189 26.55% $0.40 7/15/09 $ $
Mark J. Pincus.... 500,000 7.90 0.99 7/22/09
Scott W. Dale..... 250,000 3.95 0.90 7/22/09
Cadir B. Lee...... 250,000 3.95 0.90 7/22/09
Anthony C.
Rodoni........... 7,500 0.12 0.10 2/11/09
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table assumes a per-share fair market value equal to $ , the mid-point of the initial public offering price of $ .
Number of Unexercised Value of Unexercised
Shares Options at Fiscal In-the-Money Options at
Acquired on Value Year-End Fiscal Year-End(3)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
Radha R. Basu........... -- $ 1,680,189/-- $ /
Mark J. Pincus.......... 500,000 --/-- /
Scott W. Dale........... -- 250,000/--
Cadir B. Lee............ -- 250,000/--
Anthony C. Rodoni....... 286,944 170,556/--
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Compensation Committee Interlocks and Insider Participation
The members of our compensation committee are currently Bruce Golden and Roger J. Sippl. No interlocking relationship exists, or has existed in the past, between the board of directors or compensation committee and the board of directors or compensation committee of any other company.
1998 Stock Option Plan
The board of directors in October 1998 adopted our 1998 Stock Option Plan. Our 1998 Stock Option Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code to employees and the grant of nonstatutory stock options to employees, non-employee directors and consultants. A total of 8,124,434 shares of common stock have been reserved for issuance under our 1998 Stock Option Plan as of December 31, 1999. In February 2000 we increased the number of shares of common stock reserved for issuance under our 1998 Stock Option Plan by an aggregate of 1,300,000 shares.
Our compensation committee and our non-insider option committee administer our 1998 Stock Option Plan. Our compensation committee consists of at least two directors who are "non-employee directors," as defined in Rule 16b-3. The board of directors may amend our 1998 Stock Option Plan as desired without further action by Support.com's stockholders except as required by applicable law. Our 1998 Stock Option Plan will continue in effect until terminated by the board or for a term of 10 years from its amendment and restatement date, whichever is earlier.
The consideration for each award under our 1998 Stock Option Plan will be established by the compensation committee, but in no event will the option price for incentive stock options be less than 100% of the fair market value of the stock on the date of grant. Awards will have such terms and be exercisable in such manner and at such times as the compensation committee may determine. However, each incentive stock option must expire within a period of not more than 10 years from the date of grant.
Generally, options granted under the 1998 Stock Option Plan vest over four years and are nontransferable other than by will or the laws of descent and distribution. In the event of specified changes in control of Support.com, the acquiring or successor corporation may assume or substitute for options outstanding under the 1998 Stock Option Plan, or these options will terminate. Some options granted to our executive officers provide for partial acceleration upon a change in control of Support.com. As of December 31, 1999,
. 4,171,994 shares of common stock have been issued upon the exercise of options; and
. 7,545 shares were available for future awards.
2000 Omnibus Equity Incentive Plan
The 2000 Omnibus Equity Incentive Plan was adopted by our board of directors on February 15, 2000 and will be submitted for approval by our stockholders prior to the completion of this offering. The 2000 Omnibus Equity Incentive Plan will be administered by our compensation committee. The 2000 Omnibus Equity Incentive Plan provides for the direct award or sale of shares of common stock and for the grant of options to purchase shares of common stock. The 2000 Omnibus Equity Incentive Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code and the grant of nonstatutory stock options and stock purchase rights to employees, non-employee directors, advisors and consultants.
4,000,000 shares of common stock have been authorized for issuance under the 2000 Omnibus Equity Incentive Plan. However, in no event may one participant in the 2000 Omnibus Equity Incentive Plan receive option grants or direct stock issuances for more than 1,000,000 shares in the aggregate per fiscal year. The number of shares reserved for issuance under the 2000 Omnibus Equity Incentive Plan will be increased on the first day of each of our fiscal years from 2000 through 2009 by the lesser of:
. 2,000,000;
. 5% of our outstanding common stock on the last day of the immediately preceding fiscal year; or
. the number of shares determined by the board of directors.
The 2000 Omnibus Equity Incentive Plan will have the following program features:
. Qualified employees will be eligible for the grant of incentive stock options to purchase shares of common stock;
. Qualified non-employee directors will be eligible to receive automatic option grants, to be made at periodic intervals, to purchase shares of common stock at an exercise price equal to 100% of the fair market value of those shares on the date of grant;
. The compensation committee will determine the exercise price of options or the purchase price of stock purchase rights, but in no event will the option price for incentive stock options be less than 100% of the fair market value of the stock on the date of grant;
. The exercise price or purchase price may, at the discretion of the compensation committee, be paid in, among other things, cash, cash equivalents, full-recourse promissory notes, past services or future services.
The 2000 Omnibus Equity Incentive Plan will include change in control provisions that may result in the accelerated vesting of outstanding option grants and stock issuances. The committee may grant options or stock purchase rights in which all or some of the shares shall become vested in the event of a change in control of the company. Change in control is defined under the 2000 Omnibus Equity Incentive Plan as:
. a change in the composition of the board of directors, as a result of which fewer than one-half of the incumbent directors are directors who either:
. had been directors of the company 24 months prior to the change; or
. were elected, or nominated for election, to the board with the affirmative votes of at least a majority of the directors who had been directors 24 months prior to the change and who were still in office at the time of the election or nomination; or
. an acquisition or aggregation of securities by a person, as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, as a result of which the person becomes the beneficial owner of twenty percent or more of the voting power of Support.com's outstanding securities.
The board of directors will be able to amend or modify the 2000 Omnibus Equity Incentive Plan at any time, subject to any required stockholder approval. The 2000 Omnibus Equity Incentive Plan will terminate no later than .
2000 Employee Stock Purchase Plan
The board of directors adopted our 2000 Employee Stock Purchase Plan on February 15, 2000, to be effective upon completion of this offering. We will be submitting it for approval by our stockholders prior to the completion of this offering. A total of 2,000,000 shares of common stock have been reserved for issuance under our employee stock purchase plan. The number of shares reserved for issuance under the 2000 Employee Stock Purchase Plan will be increased on the first day of each of our fiscal years from 2000 through 2009 by the lesser of:
. 2,000,000;
. 3% of our outstanding common stock on the last day of the immediately preceding fiscal year; or
. the number of shares determined by the board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees (including
officers and employee directors of Support.com but excluding 5% or greater
stockholders) are eligible to participate if they are customarily employed for
more than 20 hours per week and for at least five months in any calendar year.
Our 2000 Employee Stock Purchase Plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's total compensation. The maximum number of shares a participant may
purchase during a single offering period is 1,000 shares.
The 2000 Employee Stock Purchase Plan will be implemented by a series of overlapping offering periods of 24 months' duration, with new offering periods, other than the first offering period, commencing on January and July of each year. The board of directors will establish participation periods for our 2000 Employee Stock Purchase Plan, none of which will exceed six months. During each participation period, payroll deductions will accumulate, without interest. On the purchase dates set by the board of directors for each participation period, accumulated payroll deductions will be used to purchase common stock. The initial offering period is expected to commence on the date of this offering and end on December 31, 2001. The initial purchase period is expected to begin on the date of this offering and end on June 30, 2000.
The purchase price will be equal to 85% of the fair market value per share of common stock on either the first day of the participation period or on the purchase date, whichever is less. Employees may withdraw their accumulated payroll deductions at any time. Participation in our 2000 Employee Stock Purchase Plan ends automatically on termination of employment with Support.com. Immediately prior to the effective time of a corporate reorganization, the participation period then in progress shall terminate and stock will be purchased with the accumulated payroll deductions, unless the 2000 Employee Stock Purchase Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan for
which Support.com's employees will generally be eligible. Pursuant to the
401(k) Plan, employees may elect to reduce their current compensation and have
the amount of such reduction contributed to the 401(k) Plan. To date,
Support.com has made no matching contributions. The 401(k) Plan is intended to
qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so
that contributions to the 401(k) Plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by Support.com, if any, will be deductible by Support.com when
made.
Employment Agreements and Change in Control Arrangements
We have offer letters with our Chief Executive Officer, our Chief Financial Officer, our Senior Vice President of Sales and Business Development, our Vice President of Engineering, our Vice President of Marketing and our Vice President of Operations.
Ms. Basu's offer letter, dated July 15, 1999, provides for an initial annual salary of $200,000 commencing on July 15, 1999 and eligibility for benefits and an incentive bonus of up to $100,000. The offer letter also provides for her election to our Board of Directors. Ms. Basu received an option to purchase 1,680,189 shares of our common stock at an exercise price of $0.40 per share under our 1998 Stock Option Plan, of which options to purchase 420,047 shares vest on July 15, 2000 and the remainder will vest ratably over a 36-month period thereafter. The offer letter allows Ms. Basu to exercise her options pursuant to a full-recourse promissory note. If we terminate her employment without cause or if she terminates her employment under certain circumstances, we must pay her salary and other benefits for twelve months following termination, unless Ms. Basu is employed full-time by another employer, as well as pay a pro-rata share of her bonus if certain criteria are met prior to termination. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Ms. Basu is terminated without cause or if she terminates her employment under certain circumstances following such event, all of her remaining unvested shares will vest and she will receive her salary for 12 months in a lump sum and benefits for 12 months following termination and a pro-rata share of her bonus if certain criteria are met prior to termination. Ms. Basu's employment is at will and may be terminated at any time, with or without formal cause.
Mr. Beattie's offer letter, dated September 27, 1999, provides for an initial annual salary of $180,000 commencing on October 1, 1999 and a $15,000 bonus paid immediately upon signing of the letter. Mr. Beattie is also eligible for benefits and an annual bonus of up to $72,000. Mr. Beattie received an option to purchase 560,000 shares of our common stock at an exercise price of $0.90 per share under our 1998 Stock Option Plan, of which options to purchase 140,000 shares vest on October 1, 2000 and the remainder will vest ratably over a
36-month period thereafter. If we terminate his employment without cause or if he terminates his employment under certain circumstances, we must pay his salary and other benefits for six months following termination, unless Mr. Beattie is employed full-time by another employer, as well as pay a pro-rata share of his bonus if certain criteria are met prior to termination. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Mr. Beattie is terminated without cause or if he terminates his employment under certain circumstances following such event, his shares will vest as to 50% of any unvested shares and he will receive his salary for six months in a lump sum and benefits for six months following termination and a pro-rata share of his bonus if certain criteria are met prior to termination. Mr. Beattie's employment is at will and may be terminated at any time, with or without formal cause.
Mr. Hilbert's offer letter, dated December 7, 1999, provides for an initial annual salary of $150,000 commencing on December 9, 1999 and eligibility for benefits and an incentive bonus. Mr. Hilbert received an option to purchase 500,000 shares of our common stock at an exercise price of $0.90 per share under our 1998 Stock Option Plan, of which options to purchase 125,000 shares vest on December 9, 2000 and the remainder will vest ratably over a 36-month period thereafter. If we terminate his employment without cause or if he terminates his employment under certain circumstances, we must pay his salary and other benefits for six months following termination, unless Mr. Hilbert is employed full-time by another employer. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Mr. Hilbert is terminated without cause or if he terminates his employment under certain circumstances following such event, his shares will vest as to 50% of any unvested shares and he will receive his salary for six months in a lump sum and benefits for six months following termination and a pro-rata share of his bonus if certain criteria are met prior to termination. Mr. Hilbert's employment is at will and may be terminated at any time, with or without formal cause.
Mr. O'Rourke's offer letter, dated May 26, 1999, provides for an annual salary of $160,000 commencing on July 15, 1999, eligibility for benefits and an annual incentive bonus for shares of common stock up to 25,000 shares per year for two years related to certain criteria and a $30,000 bonus paid immediately upon signing of the letter. Mr. O'Rourke received an option to purchase 350,000 shares of our common stock at an exercise price of $0.40 per share under our 1998 Stock Option Plan, of which options to purchase 87,500 shares vest on July 6, 2000 and the remainder will vest ratably over a 36-month period thereafter. Mr. O'Rourke's employment is at will and may be terminated at any time, with or without formal cause.
Mr. Rodoni's offer letter, dated June 24, 1998, provides for an annual salary of $135,000 and eligibility for benefits and an incentive bonus of up to $30,000 and options to purchase 25,000 shares of common stock in 1999 and $15,000 in 1998 and shares of common stock tied to certain criteria. In lieu of his cash bonus in 1998, Mr. Rodoni received a grant of 7,500 shares of our common stock. Mr. Rodoni received an option to purchase 425,000 shares of our common stock at an exercise price of $0.10 per share under our 1998 Stock Option Plan, of which options to purchase 148,750 shares vest on June 25, 1999 and the remainder will vest ratably over a 36-month period thereafter. In the event we merge or consolidate with another entity or sell all or substantially all of our assets, his shares will vest as to 50% of any unvested shares. Mr. Rodoni's employment is at will and may be terminated at any time, with or without formal cause.
Ms. Hoger's offer letter, dated January 18, 2000, provides for an annual salary of $160,000 commencing on February 1, 2000 and eligibility for benefits and an incentive bonus of up to $20,000. In connection with this offer letter, Ms. Hoger received an option to purchase 300,000 shares of our common stock at an exercise price of $2.00 per share under our 1998 Stock Option Plan, of which options to purchase 75,000 shares vest on January 20, 2001 and the remainder vest ratably over a 36-month period thereafter. On January 20, 2001, Ms. Hoger is eligible to receive an additional option to purchase 50,000 shares of our common stock. If we terminate her employment without cause or if she terminates her employment under certain circumstances, we must pay her salary and other benefits for six months, unless Ms. Hoger is employed full-time by another employer. In the event we merge or consolidate with another entity or sell all or substantially all of our assets and Ms. Hoger is terminated without cause or if she terminates her employment under certain circumstances
following such event, her shares will vest as to 50% of any unvested shares and she will receive her salary and benefits for six months following termination. Ms. Hoger's employment is at will and may be terminated at any time, with or without cause.
We have formal employment agreements with our Chief Technical Officer and our Chief Software Officer.
Scott Dale, our Chief Technical Officer, entered into an employment agreement with us in August 1999. This agreement establishes Mr. Dale's annual salary of $150,000 and eligibility for benefits and bonuses tied to criteria established by our Board of Directors. The initial term of the agreement is one year and is automatically renewed for three successive additional one-year terms unless terminated on or before 30 days prior to the last day of the prior term. If we terminate his employment for cause, we must pay his salary and other benefits through the date of his termination. If his employment is terminated for disability, we must pay his salary and other benefits for a three-month period following the date of termination. In connection with this agreement, Mr. Dale received options to purchase 250,000 shares of our common stock at an exercise price of $0.90 per share under our 1998 Option Plan, of which options to purchase 62,500 shares vest on July 22, 2000 and the remainder will vest ratably over a 36-month period thereafter. Mr. Dale's agreement also contains a non-competition provision.
Cadir Lee, our Chief Software Officer, entered into an employment agreement with us in August 1999. This agreement establishes Mr. Lee's annual salary of $150,000 and eligibility for benefits and bonuses tied to criteria established by our Board of Directors. The initial term of the agreement is one year and is automatically renewed for three successive additional one-year terms unless terminated on or before 30 days prior to the last day of the prior term. If we terminate his employment for cause, we must pay his salary and other benefits through the date of his termination. If his employment is terminated for disability, we must pay his salary and other benefits for a three-month period following the date of termination. In connection with this agreement, Mr. Lee received options to purchase 250,000 shares of our common stock at an exercise price of $0.90 per share under our 1998 Option Plan, of which options to purchase 62,500 shares vest on July 22, 2000 and the remainder will vest ratably over a 36-month period thereafter. Mr. Lee's agreement also contains a non-competition provision.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or redemption; or
. any transaction from which the director derived an improper personal benefit.
This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification.
We are entering into agreements to indemnify our directors and executive officers, in addition to indemnification provided for in our certificate of incorporation and bylaws. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.
CERTAIN TRANSACTIONS
Since our inception, there has not been any transaction or series of transactions to which we were or are a party in which the amount involved exceeded or exceeds $60,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than the transactions described below.
Transactions with Management and Others
Between December 8, 1997 and June 22, 1998 we issued and sold 6,428,880 shares of common stock to our founders for an aggregate consideration of $646. Between December 8, 1997 and June 14, 1999, we issued and sold 15,556,326 shares of our preferred stock for an aggregate consideration of $20,475,388.80. Between December 8, 1997 and March 19, 1998 we issued and sold 3,571,600 shares of Series A preferred stock at a price of $0.07 per share. We issued and sold 7,346,108 shares of Series B preferred stock at a price of $0.68747 per share on June 22, 1998. We issued and sold 4,638,618 shares of Series C preferred stock at a price of $3.27148 per share on June 14, 1999. Upon completion of this offering, each share of Series A, Series B and Series C preferred stock will convert into one share of common stock.
The following table summarizes purchases, valued in excess of $60,000, of shares of our capital stock by our directors, executive officers and our 5% stockholders:
Shares
-----------------------------
Series A Series B Series C
--------- --------- ---------
Directors and Executive Officers:
Mark J. Pincus.................................. 1,535,788 -- --
Roger J. Sippl (1).............................. -- -- 305,672
5% Stockholders Affiliated with Directors:
Entities affiliated with Accel VI L.P. (2)...... -- 3,618,503 775,394
Entities affiliated with Softbank Technology
Ventures IV (3)................................ -- 3,254,834 697,465
Entities affiliated with Spinnaker Founders
Fund, L.P. (4)................................. -- -- 1,528,359
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These affiliates purchased the securities described above at the same price and on the same terms and conditions as the unaffiliated investors in the private financings. Mark J. Pincus was affiliated with Support.com at the time he purchased the above securities. Accel VI L.P, Softbank Technology Ventures IV and their affiliated entities became affiliates of Support.com in connection with the Series B preferred stock financing. Spinnaker Founders Fund, L.P. and its affiliated entities became affiliates of Support.com in connection with the Series C preferred stock financing.
Indebtedness of Management
It is our current policy that all transactions between us and our officers, directors, 5% stockholders and their affiliates will be entered into only if these transactions are approved by a majority of the disinterested
directors, are on terms no less favorable to us than could be obtained from unaffiliated parties and are reasonably expected to benefit us.
Options granted to our directors, executive officers and key employees are immediately exercisable as to both vested and unvested shares, with unvested shares being subject to a right of repurchase in our favor in the event of termination of employment prior to vesting of all shares. The following individuals have elected to pay the exercise price for certain of their outstanding options pursuant to full recourse promissory notes secured by the common stock underlying the options. The notes bear interest at 5.86% per year and payment on the notes is set forth below. As of December 31, 1999, the original and outstanding aggregate principal amounts of the promissory notes executed by each executive officer in favor of Support.com are set forth below:
Aggregate
Original
and
Outstanding
Executive Officer Note Amount
----------------- -----------
Mark J. Pincus/Chairman of the Board......................... $ 99,999.90(1)
Mark J. Pincus/Chairman of the Board......................... $147,500.10(2)
Mark J. Pincus/Chairman of the Board......................... $247,500.00(2)
Brian M. Beattie/Chief Financial Officer..................... $504,000.00(3)
Jim R. Hilbert/Senior Vice President......................... $449,950.00(3)
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All future transactions, including loans, between us and our officers, directors, principal stockholders and their affiliates will be approved by a majority of the board of directors, including a majority of the independent and disinterested directors.
For information concerning indemnification of directors and officers, see "Management--Limitation of Liability and Indemnification Matters."
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of common stock as of December 31, 1999, by:
. each person or entity known to us to own beneficially more than 5% of our common stock;
. each of the named executive officers;
. each of our directors; and
. all executive officers and directors as a group.
The following table assumes no exercise of the underwriters' over-allotment option. Applicable percentage ownership is based on 26,567,672 shares of common stock outstanding as of December 31, 1999 and shares outstanding immediately after completion of this offering.
Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of December 31, 1999 are deemed outstanding. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite that stockholder's name.
Unless otherwise indicated, the address for the following stockholders is c/o Support.com Corp., 575 Broadway, Redwood City, California 94063.
Percentage of
Common Stock
Total Shares -----------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
------------------------------------ ------------ -------- --------
5% Stockholders:
Entities affiliated with Accel VI L.P. (1)..... 4,393,896
Entities affiliated with Softbank Technology
Ventures IV (2)............................... 3,952,299
Entities affiliated with Spinnaker Founders
Fund, L.P. (3)................................ 1,528,359
Executive Officers and Directors:
Radha R. Basu (4).............................. 1,680,189
Mark J. Pincus ................................ 5,250,228
Scott W. Dale (5).............................. 2,375,114
Cadir B. Lee (6)............................... 2,375,114
Anthony C. Rodoni (7).......................... 457,500
Matthew T. Cowan (3)........................... 1,528,359
William L. Dunn (8)............................ 80,000
Bruce Golden (1)(9)............................ 4,443,897
Edward S. Russell (2).......................... 3,952,299
Roger J. Sippl (10)............................ 405,672
All directors and executive officers as a group
(14 persons)(11).............................. 24,358,372
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by Accel Internet Fund II L.P. Accel Internet Fund II Associates L.L.C., or
AIF2A, is the General Partner of Accel Internet Fund II L.P. and has the
sole voting and investment power. Arthur C. Patterson, ACP Family
Partnership L.P., James R. Swartz, James W. Breyer, Swartz Family
Partnership L.P., J. Peter Wagner, and G. Carter Sednaoui are the Managing
Members of AIF2A and share such powers. Includes 57,121 shares held by
Accel Keiretsu VI L.P. Accel Keiretsu VI Associates L.L.C. is the General
Partner of Accel Keiretsu VI L.P. and has the sole voting and investment
power. Arthur C. Patterson, James R. Swartz, James W. Breyer, J. Peter
Wagner, and G. Carter Sednaoui are the Managing Members of Accel Keiretsu
VI Associates L.L.C. and share such powers. Includes 303,179 shares held by
Accel Investors '98 L.P. Arthur C. Patterson, James R. Swartz, James W.
Breyer, J. Peter Wagner, and G. Carter Sednaoui are the General Partners of
Accel Investors '98 L.P. and therefore share the voting and investment
powers. Bruce Golden, a partner at Accel Partners and one of our directors,
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in entities affiliated with Accel Partners.
(2) Principal address for each entity affiliated with Softbank Technology
Ventures IV is 333 W. San Carlos St., Suite 1225, San Jose, California
95110. Number of shares includes 3,874,090 shares held by Softbank
Technology Ventures IV, L.P. and 78,209 shares held by Softbank
Technology Advisors Fund, L.P. Edward S. Russell, a general partner at
Softbank Technology Ventures, Inc. and one of our directors, disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest in entities affiliated with Softbank Technology
Ventures, Inc.
(3) Principal address for each entity affiliated with Spinnaker Founders Fund,
L.P. is c/o Bowman Capital Management, 1875 South Grand Street, Suite 600,
San Mateo, California 94402. Number of shares includes 470,315 shares held
by Spinnaker Founders Fund, L.P., 366,806 shares held by Spinnaker
Technology Fund, L.P., 366,806 shares held by Spinnaker Technology
Offshore Fund, Ltd., 263,297 shares held by Spinnaker Offshore Founders
Fund, Ltd. and 61,135 shares held by Spinnaker Clipper Fund, L.P. Mr.
Cowan is a General Partner of Bowman Capital Management and one of our
directors, disclaims beneficial ownership of all these shares except to
the extent of his pecuniary interest in entities affiliated with Spinnaker
Founders Fund, L.P.
(4) Includes 1,680,189 shares of common stock issuable upon immediately
exercisable options and subject to our right of repurchase.
(5) Includes 250,000 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase.
(6) Includes 250,000 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase.
(7) Includes 56,319 shares of common stock subject to our right of
repurchase, 166,806 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase and 25,000
shares of common stock immediately exercisable options.
(8) Includes 80,000 shares of common stock subject to our right of
repurchase.
(9) Includes 50,000 shares of common stock subject to our right of
repurchase.
(10) Includes 200,000 shares of common stock held by Sippl MacDonald Ventures
II, L.P., 105,672 shares of common stock held by Sippl Investments LLC
and 100,000 shares of common stock held by Mr. Sippl, subject to our
right of repurchase. Mr. Sippl, a managing partner of Sippl MacDonald
Ventures and one of our directors, disclaims beneficial ownership of the
shares held by Sippl MacDonald Ventures II, L.P. and Sippl Investments
LLC, except to the extent of his pecuniary interest in those entities.
(11) Includes 305,444 shares of common stock subject to our right of
repurchase and 2,350,745 shares of common stock issuable under
immediately exercisable options and subject to our right of repurchase.
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and after giving effect to the conversion of all outstanding preferred stock into common stock and the amendment of our certificate of incorporation, our authorized capital stock will consist of 150,000,000 shares of common stock, $.0001 par value and 5,000,000 shares of preferred stock, $.001 par value.
Common Stock
As of December 31, 1999, there were 10,874,374 shares of common stock outstanding held by approximately 98 stockholders of record.
Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of common stock are entitled to the following:
Dividends. Holders of common stock are entitled to receive dividends out of assets legally available for the payment of dividends at the times and in the amounts as the board of directors from time to time may determine.
Voting. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and will not have cumulative voting rights unless Support.com is subject to Section 2115 of the California Corporations Code.
Cumulative voting for the election of directors is not authorized by our certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election.
Preemptive rights, conversion and redemption. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption.
Liquidation, dissolution and winding-up. Upon liquidation, dissolution or winding-up of Support.com, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation of any preferred stock.
Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be, upon payment therefore, duly and validly issued, fully paid and nonassessable.
Preferred Stock
The board of directors is authorized, without action by the stockholders, to designate and issue up to 5,000,000 shares of preferred stock in one or more series. The board of directors can fix the rights, preferences and privileges of the shares of each series and any qualifications, limitations or restrictions on these shares.
The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock.
The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes could have the effect of delaying, deferring or preventing a change in control of Support.com. We have no current plans to issue any shares of preferred stock.
Warrants
We issued warrants to purchase 98,511 shares of Series C preferred stock at an exercise price of $1.979 per share and 38,461 shares of our Series C preferred stock at an exercise price of $6.50 per share. These warrants expire upon completion of this offering. We also issued warrants to purchase 27,511 shares of Series C preferred stock at an exercise price of $3.27 per share and 119,167 shares of Series C preferred stock at an exercise price of $18.00 per share, which do not expire upon completion of this offering.
Registration Rights
Upon completion of this offering, the holders of 15,594,787 shares of common stock issuable upon conversion of the Series A, B and C preferred stock and upon the exercise of warrants have the right to cause us to register these shares under the Securities Act as follows:
. Demand Registration Rights. At the earlier of June 14, 2002 or six months after this offering, one or more holders of 30% of the common stock issued upon conversion of Series A, B or C preferred stock may request that we register their shares.
. Piggyback Registration Rights. The holders of registrable securities may request to have their shares registered anytime we file a registration statement to register any of our securities for our own account or for the account of others subject to a pro rata cutback to a minimum of 20% of any offering other than our initial public offering.
. S-3 Registration Rights. The holders of at least 5% of registrable securities have the right to request registrations on Form S-3 if we are eligible to use Form S-3 and have not already effected such an S-3 registration within the past six (6) months and if the aggregate proceeds are at least $1,000,000.
Registration of shares of common stock pursuant to the exercise of demand registration rights, piggyback registration rights or S-3 registration rights under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration. See "Shares Eligible for Future Sale" and "Certain Transactions." Support.com will pay all registration expenses, other underwriting discounts and commissions in connection with any registration. The registration rights terminate five years following completion of this offering, or, with respect to each holder of registrable securities, when the holder can sell all of the holder's shares in any 90-day period under Rule 144 under the Securities Act.
Section 2115
We are currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, some provisions of California corporate law will apply to that
company if more than 50% of its outstanding voting securities are held of
record by persons having addresses in California and the majority of the
company's operations occur in California. For example, while we are subject to
Section 2115, stockholders may cumulate votes in electing directors. This means
that each stockholder may vote the number of votes equal to the number of
candidates multiplied by the number of votes to which the stockholder's shares
are normally entitled in favor of one candidate. This potentially allows
minority stockholders to elect some members of the board of directors. When we
are no longer subject to Section 2115, cumulative voting will not be allowed
and a holder of 50% or more of our voting stock will be able to control the
election of all directors. In addition to this difference, Section 2115 has the
following effects:
. enables removal of directors with or without cause with majority stockholder approval;
. places limitations on the distribution of dividends;
. extends additional rights to dissenting stockholders in any reorganization, including a merger, sale of assets or exchange of shares; and
. provides for information rights and required filings in the event we effect a sale of assets or complete a merger.
We anticipate that our common stock will be qualified for trading as a national market security on the Nasdaq National Market and that we will have at least 800 stockholders of record by the record date for our
2000 annual meeting of stockholders. If these two conditions occur, then we will no longer be subject to Section 2115 as of the record date for our 2000 annual meeting of stockholders.
Delaware Anti-Takeover Law and Certain Charter Provisions
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless:
. prior to this date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
. on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.
In general, Section 203 defines an interested stockholder as any entity or person who, together with affiliates and associates owns, or within three years, did own beneficially 15% or more of the outstanding voting stock of the corporation. Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested stockholder; and
. any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder.
. subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
. any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
Certificate of Incorporation and Bylaws
Undesignated Preferred Stock. Under our certificate of incorporation, the board of directors has the power to authorize the issuance of up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without further vote or action by the stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, may:
. delay, defer or prevent a change in control of Support.com;
. discourage bids for the common stock at a premium over the market price of our common stock;
. adversely affect the voting and other rights of the holders of our common stock; and
. discourage acquisition proposals or tender offers for our shares and, as a consequence, inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts.
Advance Notice Provisions. Our bylaws establish advance notice procedures for stockholder proposals and nominations of candidates for election as directors other than nominations made by or at the direction of the board of directors or a committee of the board.
Special Meeting Requirements. Our bylaws provide that special meetings of stockholders be called by the chairman of the board, the chief executive officer or the board of directors.
Cumulative Voting. Both our certificate of incorporation and our bylaws do not provide for cumulative voting in the election of directors.
The provisions described above may only be amended by approval of the holders of at least 66 2/3% of the outstanding common stock and may have the effect of deterring a hostile takeover or delaying a change in control or management of Support.com.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Securities Transfer & Trust.
Nasdaq National Market Listing
We have applied to have our common stock quoted on the Nasdaq National Market under the symbol "SPRT."
RESCISSION OFFER
Shares issued, and option grants made under, our 1998 Stock Option Plan were not exempt from registration or qualification under California state securities laws. These stock issuances and option grants violated the registration requirements of California state securities laws because registration or qualification was not obtained. We intend to make a rescission offer to the holders of these shares and options which will be held open for 30 days after the effective date of this offering. Offerees will be able to accept our rescission offer prior to its expiration date by returning to us shares to be repurchased and an election notice that we will deliver to the offerees together with the prospectus that becomes effective. If accepted, our rescission offer could require us to make aggregate payments to the holders of these shares and options of up to approximately $ plus statutory interest.
This rescission offer will cover an aggregate of shares issuable
pursuant to options granted under the 1998 Stock Option Plan, of which
shares were issued upon option exercises. These securities were granted or sold
in violation of the registration requirements of the California state
securities laws. Although we were able to rely upon Rule 701 exemption under
the federal securities law, we were unable to rely on the exemption provided by
Section 25102(f) of the California Corporation Code because these options were
granted, and these shares were issued, to more than 35 persons during a 12-
month period, or on the exemption provided by Section 25102(o) of the
California Corporation Code because the required filing under that section was
not made. We will offer to rescind such prior sales at the price per share paid
therefor, or $0.10 per share, under the 1998 Stock Option Plan, plus interest
thereon at a statutory rate as the case may be from the date of purchase by the
purchaser to the expiration of the rescission offer. In addition, we will offer
to rescind such prior option grants at a price of $ per share.
As of the date hereof, we are not aware of any claims for rescission of any claims for rescission against us.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale.
Nevertheless, sales of substantial amounts of our common stock in the public market after the restrictions lapse could cause the market price of our common stock to decline.
When this offering is completed, we will have a total of shares of common stock outstanding, assuming no exercise of outstanding options. The shares offered by this prospectus will be freely tradable unless they are purchased by our "affiliates," as defined in Rule 144 under the Securities Act of 1933. The remaining 26,567,672 shares are "restricted," which means they were originally sold in offerings that were not subject to a registration statement filed with the Securities and Exchange Commission. These restricted shares may be resold only through registration under the Securities Act of 1933 or under an available exemption from registration, such as provided through Rule 144.
Lock-up Agreements
The holders of shares of common stock have agreed to a 180-day "lock-up" with respect to these shares. This generally means that they cannot sell these shares during the 180 days following the date of this prospectus. After the 180-day lock-up period, these shares may be sold in accordance with Rule 144. Credit Suisse First Boston may release some or all of these shares prior to the expiration of the lock-up period.
Rule 144
In general, under Rule 144, a person or persons whose shares are aggregated, who has beneficially owned restricted securities for at least one year, including the holding period of any holder who is not an affiliate, is entitled to sell within any three-month period a number of our shares of common stock that does not exceed the greater of:
. 1% of the then outstanding shares of our common stock, which will equal approximately shares upon completion of this offering; or
. the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the date on which notice of sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are subject to restrictions relating to manner of sale, notice and the availability of current public information about us. Under Rule 144 and subject to volume limitations, of the restricted shares will be eligible for sale beginning 180 days after the date of the final prospectus and the remaining restricted shares will become salable at various times thereafter.
Rule 144(k)
A person who is not deemed an affiliate of ours at any time during the 90 days preceding a sale and who has beneficially owned shares for at least two years, including the holding period of any prior owner who is not an affiliate, would be entitled to sell shares following this offering under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information or notice requirements of Rule 144.
Rule 701 and Options
Rule 701 permits resales of shares in reliance upon Rule 144 but without compliance with some restrictions, including the holding period requirement, of Rule 144. Any employee, officer or director or
consultant who purchased his or her shares pursuant to 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 such 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 90 days after the date of this prospectus before selling such shares. However, all shares issued by us pursuant to Rule 701 are subject to lock-up provisions and will only become eligible for sale upon the expiration of 180 days after the date of this prospectus.
Registration
Following this offering, we intend to file a registration statement under the Securities Act covering shares of common stock subject to outstanding options or issued or issuable under our 1998 Stock Plan, our 2000 Stock Incentive Plan and our 2000 Employee Stock Purchase Plan. Based on the number of shares subject to outstanding options at December 31, 1999, and currently reserved for issuance under these plans, this registration statement would cover approximately 15,424,434 shares.
This registration statement will automatically become effective upon filing. Accordingly, shares registered under this registration statement will, subject to Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the expiration of the 180-day lock-up agreements. In addition, holders of 15,594,787 shares of common stock will be entitled to registration rights. See "Description of Capital Stock-- Registration Rights."
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting agreement dated , 2000, we have agreed to sell to the underwriters named below, for whom Credit Suisse First Boston Corporation, Chase Securities Inc., Bear, Stearns & Co. Inc. and SoundView Technology Group, Inc., are acting as representatives, the following respective numbers of shares of common stock:
Number of
Underwriter Shares
----------- ---------
Credit Suisse First Boston Corporation.............................
Chase Securities Inc...............................................
Bear, Stearns & Co. Inc............................................
SoundView Technology Group, Inc....................................
---
Total..........................................................
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The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a concession of $ per share. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering, the public offering price and concession and discount to broker/dealers may be changed by the representatives.
The following table summarizes the compensation and estimated expenses we will pay.
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
Underwriting Discounts
and Commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
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The underwriters have informed us that they do not expect discretionary sales to exceed 5% of the shares of common stock being offered.
We have agreed not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any of our common stock, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus, except issuances pursuant to the exercise of employee stock options outstanding on the date hereof.
Our officers and directors and all of our stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such aforementioned transaction is to be settled by delivery of our common stock or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, without the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering price, up to shares of the common stock for employees, directors and certain other persons associated with us who have expressed an interest in purchasing common stock in the offering. The number of shares available for sale to the general public in the offering will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against certain liabilities under the Securities Act, or to contribute to payments which the underwriters may be required to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock Market's National Market under the symbol "SPRT."
Prior to this offering, there has been no public market for the common stock. The initial public offering price will be determined by negotiation between us and the representatives. The principal factors to be considered in determining the public offering price include the following:
. the information included in this prospectus and otherwise available to the representatives;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for our future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this offering; and
. the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies.
Entities associated with Chase Securities Inc. beneficially own 61,135 shares of the Series C preferred stock of Support.com. Additionally, Access Technology Partners, L.P., a fund of outside investors that is managed by an entity affiliated with Chase Securities Inc. owns 244,538 shares of the Series C Preferred Stock of Support.com. Chase Securities Inc. is also our customer.
In 1999, we had total revenue of $3.3 million. Bear, Stearns & Co. Inc. accounted for 53% of our total revenue in 1999.
The representatives may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by such syndicate member is purchased in a syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the common stock to be higher than it would otherwise be in the absence of these transactions. These transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.
A prospectus in electronic format will be made available on the Web sites maintained by one or more of the underwriters participating in this offering. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Distribution will be allocated by the representatives of the underwriters to underwriters that may make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on the websites maintained by the underwriters is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by Support.com or any underwriter in its capacity as underwriter and should not be relied upon by investors.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are effected. Accordingly, any resale of the common stock in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of the common stock in Canada who receives a purchase confirmation will be deemed to represent to us and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such common stock without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Ontario securities law. As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or such persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the common stock to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any common stock acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from us. Only one such report must be filed in respect of common stock acquired on the same date and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of the common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and with respect to the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
Selected legal matters with respect to the validity of the common stock offered by this prospectus are being passed upon for Support.com by Pillsbury Madison & Sutro LLP, Palo Alto, California. Certain partners of Pillsbury Madison & Sutro LLP beneficially own an aggregate of 7,642 shares of Support.com common stock. Legal matters in connection with this offering will be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our financial statements at December 31, 1998 and 1999 and for the period from inception (December 3, 1997) to December 31, 1998 and the year ended December 31, 1999, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information with respect to Support.com and the common stock offered by this prospectus, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. You may read and copy any document we file at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC's Web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities and Exchange Act, as amended, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms and the Web site of the SEC referred to above.
SUPPORT.COM, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)........................................................ F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
|
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Support.com, Inc.
We have audited the accompanying balance sheets of Support.com, Inc. as of December 31, 1998 and 1999, and the related statements of operations, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for the period from inception (December 3, 1997) to December 31, 1998 and for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Support.com, Inc. at December 31, 1998 and 1999, and the results of its operations and its cash flows for the period from inception (December 3, 1997) to December 31, 1998 and for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Palo Alto, California
February 15, 2000
|
SUPPORT.COM, INC.
BALANCE SHEETS
(in thousands except share and per share data)
Pro Forma
Stockholders'
December 31, Equity at
----------------- December 31,
1998 1999 1999
------- -------- -------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents................... $ 2,807 $ 4,023
Short-term investments...................... -- 8,466
Accounts receivable, less allowance of $10
and $40, respectively...................... 65 3,450
Prepaids and other current assets........... 516 451
------- --------
Total current assets...................... 3,388 16,390
Property and equipment, net................... 256 881
Other assets.................................. 28 254
------- --------
$ 3,672 $ 17,525
======= ========
Liabilities and stockholders' equity (deficit)
Current liabilities:
Notes payable, current portion.............. $ 50 $ 921
Capital lease obligations, current portion.. -- 274
Accounts payable............................ 98 1,227
Accrued compensation........................ 60 1,168
Other accrued liabilities................... 159 494
Deferred revenue............................ 42 2,968
------- --------
Total current liabilities................. 409 7,052
Notes payable, net of current portion......... 449 1,478
Capital lease obligations, net of current
portion...................................... -- 799
Commitments
Redeemable convertible preferred stock;
7,346,108 and 12,156,108 shares authorized at
December 31, 1998 and 1999, $0.0001 par
value, issuable in series:
Series B redeemable convertible preferred
stock; 7,346,108 shares designated, issued
and outstanding at December 31, 1998 and
1999, and none pro forma (liquidation
preference at December 31, 1999 of
$5,668).................................... 5,237 5,641
Series C redeemable convertible preferred
stock; 4,810,000 shares designated;
4,638,618 shares issued and outstanding at
December 31, 1999, and none pro forma
(liquidation preference at December 31,
1999 of $15,844)........................... -- 15,808
Stockholders' equity (deficit):
Series A convertible preferred stock; par
value $0.0001, 3,571,600 shares authorized,
3,571,600 shares issued and outstanding at
December 31, 1998 and 1999, and none pro
forma (liquidation preference at December
31, 1999 of $250).......................... 1 1 $ --
Common stock; par value $0.0001, 31,060,000
shares authorized, 6,468,880 and 10,874,374
shares issued and outstanding at December
31, 1998 and 1999, respectively;
150,000,000 authorized, 26,430,700 shares
issued and outstanding pro forma........... 1 1 3
Additional paid-in capital.................. 478 19,491 40,939
Receivable from stockholders................ -- (1,450) (1,450)
Deferred compensation....................... (153) (14,252) (14,252)
Accumulated deficit......................... (2,750) (17,044) (17,044)
------- -------- --------
Total stockholders' equity (deficit)...... (2,423) (13,253) $ 8,196
------- -------- ========
Total liabilities and stockholders' equity
(deficit)................................ $ 3,672 $ 17,525
======= ========
|
See accompanying notes.
SUPPORT.COM, INC.
STATEMENTS OF OPERATIONS
(in thousands except per share data)
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
Revenue:
License fees........................ $ 18 $ 2,746
Services............................ -- 569
------- --------
Net revenues...................... 18 3,315
------- --------
Costs and expenses:
Cost of license fees................ -- 4
Cost of services.................... -- 965
Research and development............ 1,132 2,401
Sales and marketing................. 1,197 8,974
General and administrative.......... 477 1,881
Amortization of deferred
compensation....................... 16 3,554
------- --------
Total costs and expenses.......... 2,822 17,779
------- --------
Loss from operations.................. (2,804) (14,464)
Interest income....................... 105 501
Interest expense...................... (51) (331)
------- --------
Net loss.............................. (2,750) (14,294)
Accretion on redeemable convertible
preferred stock...................... (214) (1,072)
------- --------
Net loss attributable to common
stockholders......................... $(2,964) $(15,366)
======= ========
Basic and diluted net loss per share.. $ (0.57) $ (2.31)
======= ========
Shares used in computing basic and
diluted net loss per share........... 5,227 6,643
======= ========
Pro forma basic and diluted net loss
per share (unaudited)................ $ (0.71)
========
Shares used in computing pro forma
basic and diluted net loss per share
(unaudited).......................... 20,137
========
|
See accompanying notes.
SUPPORT.COM, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
(in thousands except share and per share data)
Redeemable
Convertible Convertible Notes
Preferred Stock Preferred Stock Common Stock Additional Receivable
------------------ ---------------- ----------------- Paid-In From
Shares Amount Shares Amount Shares Amount Capital Stockholders
---------- ------- --------- ------ ---------- ------ ---------- ------------
Issuance of
common stock to
founders at
$0.0001,
$0.0077, and
$0.0155 per
share for cash.. -- $ -- -- $ -- 6,428,880 $ 1 $ -- $ --
Issuance of
Series A
convertible
preferred stock
at $0.07 per
share for cash,
net of issuance
costs of $6..... -- -- 3,571,600 1 -- -- 244 --
Issuance of
Series B
redeemable
convertible
preferred stock
at $0.68747 per
share for cash
and receivable,
net of issuance
costs of $27.... 7,346,108 5,023 -- -- -- -- -- --
Issuance of
common stock
upon exercise of
stock options... -- -- -- -- 40,000 -- 4 --
Issuance of
warrants and
stock options to
non-employees... -- -- -- -- -- -- 275 --
Accretion on
redeemable
convertible
preferred
stock........... -- 214 -- -- -- -- (214) --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 169 --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- --
---------- ------- --------- ---- ---------- ---- ------- -------
Balances at
December 31,
1998............ 7,346,108 5,237 3,571,600 1 6,468,880 1 478 --
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... 4,638,618 15,140 -- -- -- -- -- --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... -- -- -- -- 4,131,994 -- 1,914 (1,450)
Issuance of
common stock and
restricted stock
to non-
employees....... -- -- -- -- 273,500 -- 169 --
Issuance of
warrants and
stock options to
non-employees... -- -- -- -- -- -- 349 --
Accretion on
redeemable
convertible
preferred
stock........... -- 1,072 -- -- -- -- (1,072) --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 17,653 --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- --
---------- ------- --------- ---- ---------- ---- ------- -------
Balances at
December 31,
1999............ 11,984,726 $21,449 3,571,600 $ 1 10,874,374 $ 1 $19,491 $(1,450)
--------------------------------------------------
========== ======= ========= ==== ========== ==== ======= =======
Total
Deferred Stockholders'
Stock Accumulated Equity
Compensation Deficit (Deficit)
------------ ----------- -------------
Issuance of
common stock to
founders at
$0.0001,
$0.0077, and
$0.0155 per
share for cash.. $ -- $ -- $ 1
Issuance of
Series A
convertible
preferred stock
at $0.07 per
share for cash,
net of issuance
costs of $6..... -- -- 245
Issuance of
Series B
redeemable
convertible
preferred stock
at $0.68747 per
share for cash
and receivable,
net of issuance
costs of $27.... -- -- --
Issuance of
common stock
upon exercise of
stock options... -- -- 4
Issuance of
warrants and
stock options to
non-employees... -- -- 275
Accretion on
redeemable
convertible
preferred
stock........... -- -- (214)
Deferred
compensation
related to grant
of stock
options......... (169) -- --
Amortization of
deferred
compensation.... 16 -- 16
Net loss........ -- (2,750) (2,750)
------------ ----------- -------------
Balances at
December 31,
1998............ (153) (2,750) (2,423)
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... -- -- --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... -- -- 464
Issuance of
common stock and
restricted stock
to non-
employees....... -- -- 169
Issuance of
warrants and
stock options to
non-employees... -- -- 349
Accretion on
redeemable
convertible
preferred
stock........... -- -- (1,072)
Deferred
compensation
related to grant
of stock
options......... (17,653) -- --
Amortization of
deferred
compensation.... 3,554 -- 3,554
Net loss........ -- (14,294) (14,294)
------------ ----------- -------------
Balances at
December 31,
1999............ $(14,252) $(17, 044) $(13,253)
--------------------------------------------------
============ =========== =============
|
See accompanying notes.
SUPPORT.COM, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
Operating activities
Net loss............................. $(2,750) $(14,294)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 23 294
Amortization of deferred
compensation...................... 16 3,554
Other.............................. 39 425
Changes in assets and liabilities:
Accounts receivable, net......... (65) (3,385)
Prepaids and other current
assets.......................... (29) (129)
Accounts payable................. 98 1,129
Accrued compensation............. 60 1,108
Other accrued liabilities........ 159 335
Deferred revenue................. 42 2,926
------- --------
Net cash used in operating
activities.......................... (2,407) (8,037)
------- --------
Investing activities
Purchases of property and equipment.. (279) (89)
Proceeds from sale of equipment...... -- 99
Other assets......................... (28) (226)
Purchases of short-term investments.. -- (12,266)
Sales of short-term investments...... -- 3,800
------- --------
Net cash used in investing
activities.......................... (307) (8,682)
------- --------
Financing activities
Proceeds from notes payable.......... 500 2,000
Proceeds from sale-leaseback......... -- 183
Proceeds from issuance of preferred
stock, net.......................... 5,017 15,390
Proceeds from issuances of common
stock............................... 5 501
Repayment of notes payable........... (1) (100)
Principal payments under capital
lease obligations................... -- (39)
------- --------
Net cash provided by financing
activities.......................... 5,521 17,935
------- --------
Net increase in cash and cash
equivalents........................... 2,807 1,216
Cash and cash equivalents at beginning
of period............................. -- 2,807
------- --------
Cash and cash equivalents at end of
period................................ $ 2,807 $ 4,023
======= ========
Supplemental disclosure of noncash
financing activities
Note received from stockholder in
exchange for preferred stock........ $ 250 $ --
======= ========
Note received from stockholders in
exchange for common stock........... $ -- $ 1,450
======= ========
Equipment acquired under capital
lease obligation.................... $ -- $ 1,112
======= ========
Supplemental schedule of cash flow
information
Interest paid........................ $ 39 $ 249
======= ========
|
See accompanying notes.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Nature of Operations
Support.com, Inc. ("Support.com" or the "Company"), formerly known as Tioga Systems, Inc. and Replicase, Inc., was incorporated in the state of Delaware on December 3, 1997. Support.com is a provider of eBusiness infrastructure software that optimizes, automates and personalizes user support over the Internet. The Company's suite of eSupport software products and services is designed to accelerate eBusiness growth by enabling the elimination of user support bottlenecks that would otherwise constrain expanding Internet initiatives. The Company sells its products primarily in the United States and, to a lesser extent in Europe, through its direct sales force.
The Company commenced operations in December 1997. Operations through December 31, 1997 consisted of initial development activities. As such activities were not significant, the results have been included in operations for the period ended December 31, 1998.
The Company has incurred operating losses to date and had an accumulated deficit of $17,044,000 at December 31, 1999. The Company's activities have been primarily financed through private placements of equity securities and capital lease financings. Support.com may need to raise additional capital through the issuance of debt or equity securities and capital lease financings. Such financing may not be available on terms satisfactory to the Company, if at all. If adequate funds are not available, the Company may be required to reduce its level of spending.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash investments and trade receivables. Support.com invests cash which is not required for immediate operating needs principally in money market funds and commercial paper, which incur minimal risk. Support.com's customers are currently concentrated in the United States. The Company performs ongoing evaluations of its customers' financial condition and generally does not require collateral. The Company maintains reserves for credit losses, and such losses have been within management's expectations.
For the year ended December 31, 1999, one customer accounted for 53% of revenue.
Fair Value of Financial Instruments
The fair value of notes payable is estimated by discounting the future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The carrying value of the notes payable approximated its fair value. The fair value of short-term and long-term capital lease obligations is estimated based on current interest rates available to Support.com for debt instruments with similar terms, degrees of risk and remaining maturities. The carrying values of these obligations approximate their respective fair values.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Cash, Cash Equivalents and Short-Term Investments
Support.com considers all highly liquid, low-risk debt instruments with an original maturity at the date of purchase of three months or less to be cash equivalents. Through December 31, 1998, Support.com maintained cash and cash equivalents in money market accounts with major financial institutions for which the carrying amount approximated its fair value. Upon the completion of the Series C Financing (see Note 4), Support.com invested some of its proceeds in short-term investments with original maturities of greater than three months. At December 31, 1999, cash equivalents and short-term investments consist primarily of commercial paper, other debt instruments and money market funds. Support.com's cash equivalents and short-term investments are classified as available-for-sale in accordance with the provisions of the FASB's Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
Currently, Support.com classifies its securities as available-for-sale, which are reported at amortized cost which approximated fair value at December 31, 1998 and 1999. Material unrealized gains and losses, if any, are reported in stockholders' equity (deficit) and included in other comprehensive loss. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, both of which are included in interest income. Realized gains and losses are recorded using the specific identification method. For the period from December 3, 1997 (inception) to December 31, 1998 and for the year ended December 31, 1999, gross unrealized gains and losses on available-for-sale securities were immaterial.
The following is a summary of available-for-sale securities at cost, which approximates fair value (in thousands):
December 31, December 31,
1998 1999
------------ ------------
Cash and cash equivalents
Cash............................................. $ 699 $ 296
Money market funds............................... 2,108 2,729
Municipal bonds.................................. -- 998
------ ------
$2,807 $4,023
====== ======
Short-term investments
Municipal bonds.................................. $ -- $6,466
Auction backed securities........................ -- 2,000
------ ------
$ -- $8,466
====== ======
|
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation which is provided using the straight-line method over the estimated useful lives of the assets, generally three years.
Revenue Recognition
License revenue is comprised of fees for perpetual and subscription licenses of the Company's software by corporate customers and resellers. Revenue from perpetual license fees is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no obligations remain, the fee is fixed or determinable and collectibility is probable. If the fee due from the customer is not fixed or determinable, revenue is recognized as payments become due from the customers. If collectibility is not considered probable,
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
revenue is recognized when the fee is collected. Revenue related to arrangements with resellers is recognized when the product is delivered to the end user. Revenue from subscription licenses is recognized ratably over the term of the subscription beginning upon the delivery of the licensed product.
Services revenue is primarily comprised of revenue from consulting fees, maintenance arrangements and training. Arrangements that include software services are evaluated to determine whether those services are essential to the functionality of other elements of the arrangement. When software services are considered essential, revenue under the arrangement is recognized as the services are delivered in accordance with SOP 81-1, "Accounting for Performance of Construction Type and Certain Production Type Contracts." When software services are not considered essential, the revenue allocable to the software services based on vendor-specific objective evidence is recognized as the services are performed.
Maintenance agreements provide for technical support and include the right to unspecified upgrades on an if-and-when-available basis. Maintenance revenue is deferred and recognized on a straight-line basis as services revenue over the life of the related agreement, which is typically one year.
Customer advances and billed amounts due from customers in excess of revenue recognized are recorded as deferred revenue.
Support.com adopted Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2"), and Statement of Position 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue Recognition" ("SOP 98-4"), as of January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance for recognizing revenue on software transactions and supersede SOP 91-1, "Software Revenue Recognition." Full implementation guidelines for these standards have not yet been issued. Once available, the current revenue accounting practices may need to change and such changes could affect Support.com's future revenues and results of operations. In December 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 98-4 to extend the deferral of the application of certain passages of SOP 97-2 provided by SOP 98-4 through fiscal years beginning on or before March 15, 1999. All other provisions of SOP 98-9 are effective for transactions entered into in fiscal years beginning after March 15, 1999. Support.com does not expect the final adoption of SOP 98- 9 to have a material impact on its future revenues or results of operations.
Research and Development
Research and development expenditures are generally charged to operations as incurred. Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed," requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company's product development process, technological feasibility is established upon the completion of a working model. Costs incurred by the Company between the completion of the working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has charged all such costs to research and development expense in the accompanying statement of operations. The Company did not incur any cost related to software developed or obtained for internal use as defined SOP 98-1.
Advertising Costs
Advertising costs are recorded as sales and marketing expense in the period in which they are incurred. Advertising expense for the period from inception (December 3, 1997) to December 31, 1998 and the year ended December 31, 1999 were approximately $0 and $70,675, respectively.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and has adopted the disclosure only alternative of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123").
Any deferred stock compensation calculated according to APB 25 is amortized over the vesting period of the individual options, generally four years, using the graded vesting method. The graded vesting method provides for vesting of portions of the overall awards at interim dates and results in greater vesting in earlier years than straight-line.
All stock-based awards to non-employees are accounted for at their fair value, as calculated using the Black-Scholes model, in accordance with FAS No. 123 and Emerging Issues Task Force Consensus No. 96-18. The options are subject to periodic re-valuation over their vesting terms.
Net Loss Per Share
Basic and diluted net loss per share are presented in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"), for all periods presented. Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin No. 98, ordinary shares and convertible preferred shares issued or granted for nominal consideration prior to the anticipated effective date of Support.com's initial public offering must be included in the calculation of basic and diluted net loss per share as if they had been outstanding for all periods presented. To date, Support.com has not had any issuances or grants for nominal consideration.
Basic and diluted net loss per share has been computed using the weighted- average number of shares of common stock outstanding during the period. Had Support.com been in a net income position, diluted earnings per share would have included the shares used in the computation of basic net loss per share as well as the impact of common shares outstanding subject to repurchase and outstanding options and warrants to purchase an additional 2,306,761 and 7,586,002 shares, prior to the application of the treasury stock method, for the period from inception (December 3, 1997) to December 31, 1998 and the year ended December 31, 1999, respectively. Such shares have been excluded because they are antidilutive for all periods presented. Shares of convertible preferred stock have been excluded from the computation.
Comprehensive Loss
Support.com adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"), at December 31, 1998. Under FAS 130, Support.com is required to display comprehensive income and its components as part of the financial statements. Other comprehensive income includes certain changes in equity that are excluded from net loss. The Company has no material components of other comprehensive loss and, as a result, the comprehensive loss is the same as the net loss for all periods presented.
Segment Information
Support.com operates in one segment. For the year ended December 31, 1999, revenue from customers located outside the United States was approximately $46,000 and was derived from customers in Canada and the United Kingdom.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share is computed using the weighted-average number of shares of common stock outstanding, including the pro forma effects of the automatic conversion of Support.com's convertible preferred stock into shares of common stock, effective upon the closing of Support.com's initial public offering as if such conversion occurred at the date of original issuance. Pro forma stockholders' equity at December 31, 1999, as adjusted for the conversion of the convertible preferred stock, is disclosed on the balance sheet.
A reconciliation of shares used in the calculation of basic and diluted and pro forma net loss per share follows (In thousands except per share data):
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
Net loss attributable to common
stockholders....................... $(2,964) $(15,366)
======= ========
Basic and diluted:
Weighted-average shares of common
stock outstanding................ 6,432 7,166
Less weighted-average shares
subject to repurchase............ (1,205) (523)
------- --------
Shares used in computing basic and
diluted net loss per share....... 5,227 6,643
======= ========
Basic and diluted net loss per
share.............................. $ (0.57) $ (2.31)
======= ========
Pro forma:
Net loss.......................... $(14,294)
========
Shares used above................. 6,643
Unaudited pro forma adjustment to
reflect weighted effect of
assumed conversion of convertible
preferred stock.................. 13,494
--------
Shares used in computing unaudited
pro forma basic and diluted net
loss per share................... 20,137
========
Unaudited pro forma basic and
diluted net loss per share......... $ (0.71)
========
|
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which will be effective for the year ending December 31, 2001. This statement establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement also requires that changes in the derivative's fair value be recognized in earnings unless specific hedge accounting criteria are met. Support.com believes the adoption of SFAS 133 will not have a material effect on the financial statements, since it currently does not invest in derivative instruments and engage in hedging activities.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
2. Property and Equipment
Property and equipment are stated at cost and consist of the following (In thousands):
December
31,
------------
1998 1999
---- ------
Computer and software equipment................................ $168 $1,193
Furniture and equipment........................................ 106 5
Leasehold improvements......................................... 5 --
---- ------
279 1,198
Accumulated depreciation and amortization...................... (23) (317)
---- ------
$256 $ 881
==== ======
|
As of December 31, 1999, property and equipment included amounts acquired under capital leases of approximately $1,112,000, with related accumulated amortization of approximately $267,000. This includes property and equipment with a net book value of approximately $122,000 at December 31, 1999 that was acquired in 1998 and financed in 1999 through a sale-leaseback transaction.
3. Capital Leases, Borrowings and Commitments
In October 1998, the Company entered into a Loan and Security Agreement, a Subordinated Loan and Security Agreement and a Lease Agreement with a financial institution. In connection with each of these agreements, the Company issued warrants to the financial institution (see Note 4). Additionally, the Company cannot declare or pay any cash dividends or make a distribution on any class of stock without the consent of the lender.
The Loan and Security Agreement allows the Company to borrow up to $1,500,000 in minimum installments of $500,000 evidenced by secured promissory notes. Each promissory note bears interest at the rate of 9% per annum, is payable in 36 monthly installments, and is secured by substantially all of the Company's assets. At December 31, 1999, the Company had borrowed $1,500,000 under this agreement. Remaining principal payments under these notes for the years ending December 31, 2000, 2001 and 2002 are approximately $639,000, $699,000 and $61,000, respectively.
The Subordinated Loan and Security Agreement allows the Company to borrow up to $1,000,000 in two installments of $500,000 evidenced by subordinated secured promissory notes. Each promissory note bears interest at the rate of 12.5% per annum, is payable in 9 monthly installments of interest only followed by 33 monthly installments of principal and interest. Each note is secured by substantially all of the Company's assets. At December 31, 1999, the Company had borrowed $1,000,000 under this agreement. Principal payments due for the years ended December 31, 2000, 2001 and 2002 are approximately $282,000, $362,000 and $356,000, respectively.
The Lease Agreement allows the Company to borrow up to $2,500,000. The Company can borrow under this agreement until 2001 and advances may only be used to finance purchases of equipment, software and tenant improvements, subject to certain limitations. Advances are secured by the assets acquired. Each equipment advance is payable in 48 monthly installments of principal and interest, computed at the monthly rate of 2.9% of the principal balance. At December 31, 1999, the Company had borrowed approximately $1,112,000 under this agreement.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
The Company leases its facilities under noncancelable operating lease agreements which expire at various dates from 2000 to 2001. Rent expense was approximately $783,000 for the year ended December 31, 1999 and approximately $184,000 for the period from inception (December 3, 1997) to December 31, 1998. The Company has subleased one of its facilities to a third party. Sublease rental income was approximately $162,000 for the year ended December 31, 1999 and approximately $45,000 for the period from inception (December 3, 1997) to December 31, 1998. Payments due under the sublease rental agreement are approximately $309,000 in 2000 and $178,000 in 2001. The sublease rental agreement expires in July 2001.
As of December 31, 1999, minimum payments under noncancelable lease agreements were as follows (in thousands):
Years ending Capital Operating
December 31, Leases Leases
------------ ------- ---------
2000.................................................... $ 336 $1,349
2001.................................................... 344 850
2002.................................................... 344 --
2003.................................................... 187 --
------ ------
Total minimum lease and principal payments............ 1,211 $2,199
======
Amount representing interest............................. (138)
------
Present value of future payments......................... 1,073
Current portion of capital lease obligations............. 274
------
Noncurrent portion....................................... $ 799
======
|
4. Redeemable Convertible Preferred Stock and Stockholders' Equity
Preferred Stock
Each share of preferred stock is, at the option of the holder, convertible into one share of common stock, subject to certain adjustments for dilution, if any, resulting from future stock issuances. The outstanding shares of preferred stock automatically convert into common stock immediately prior to the closing of an underwritten public offering of common stock under the Securities Act of 1933 in which the Company receives at least $15,000,000 in gross proceeds and the market valuation for the Company is at least $125,000,000. Each class of preferred stock automatically converts into common stock at the election of holders of at least a majority of the outstanding shares.
As of December 31, 1999, convertible preferred stock consisted of the following:
Non-
cumulative Liquidation
Shares Shares Dividend Preference
Authorized Outstanding Per Share Per Share
---------- ----------- ---------- -----------
Series A....................... 3,571,600 3,571,600 $ -- $0.070
Series B....................... 7,346,108 7,346,108 $0.550 $0.687
Series C....................... 4,810,000 4,638,618 $0.262 $3.271
---------- ----------
15,727,708 15,556,326
========== ==========
|
The holders of Series B and C preferred stock are entitled to receive dividends payable in preference and priority to any payment of any dividend on Series A preferred stock and common stock. No dividends have been declared as of December 31, 1999.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
The liquidation preference of the convertible preferred stock is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization affecting such share and, in addition, an amount equal to all declared but unpaid dividends on the shares of preferred stock. The liquidation preference of the Series B and C preferred stock is increased at the rate, without compounding, of 8% per year, such rate to be prorated over the length of any partial year. Any remaining assets would then be distributed on a pro rata basis among the holders of common stock.
The majority of the holders of Series B redeemable convertible preferred stock can require the Company to redeem one-third, two-thirds, and all of the outstanding Series B redeemable convertible preferred stock, together with a 8% annual rate of return, at any time after June 19, 2003, June 19, 2004 and June 19, 2005, respectively. The carrying amount of Series B redeemable convertible preferred stock is being increased by periodic accretions so that its carrying amount will equal the redemption amount at the redemption date.
The majority of the holders of Series C redeemable convertible preferred stock can require the Company to redeem one-third, two-thirds, and all of the outstanding Series C redeemable convertible preferred stock, together with a 8% annual rate of return, at any time after June 14, 2004, June 14, 2005 and June 14, 2006, respectively. The carrying amount of Series C redeemable convertible preferred stock is being increased by periodic accretions so that its carrying amount will equal the redemption amount at the redemption date.
The preferred stockholders have voting rights equal to the common shares issuable upon conversion of their preferred shares.
At December 31, 1998, the Company had a receivable from a stockholder for $250,229 in connection with the purchase of Series B preferred stock. The receivable was included in prepaids and other currents assets. The Company collected the receivable during 1999.
Common Stock
The Company has reserved shares of common stock for issuance at December 31, 1999 as follows:
Stock Option Plan................................................. 3,952,440
Warrants.......................................................... 164,483
Conversion of preferred stock..................................... 15,556,326
----------
19,673,249
==========
|
Certain option holders have exercised options to purchase shares of common stock in exchange for four-year, full recourse promissory notes. The notes bear interest at 5.9% and expire on various dates through 2003. The Company has the right to repurchase all unvested shares purchased by the notes at the original exercise price in the event of employee termination. The number of shares subject to this repurchase right decreases as the shares vest under the original option terms, generally over four years. As of December 31, 1999, there were 1,560,000 shares subject to repurchase. These options were exercised at prices ranging from $0.90 to $0.99, with a weighted-average exercise price of $0.93 per share.
Subsequent to year end, an option holder exercised 1,680,189 options to purchase shares of common stock in exchange for a four-year, full recourse promissory note. The note has terms which are identical to the notes exercised prior to year end. These options were exercised at at a price per share of $0.40.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Stock Warrants
In October 1998 and July 1999, the Company issued warrants to a financial institution in conjunction with the Loan and Security Agreement, Subordinated Loan and Security Agreement and the master lease agreement (see Note 3). The warrant issued in October 1998 allows the financial institution to purchase 98,511 shares of the Company's Series C preferred stock at an exercise price of $1.98 per share. The warrant issued in July 1999 allows the financial institution to purchase 27,511 shares of the Company's Series C preferred stock at an exercise price of $3.27 per share. The warrants became exercisable in June 1999 and July 1999, respectively. The warrants granted in July 1999 shall be exercisable for a period of seven years or three years from the effective date of the Company's initial public offering, whichever is longer. The warrants granted in October 1998 will expire 7 years from issuance or at the time of the Company's initial public offering. The warrants were valued using the Black-Scholes model. The total value of approximately $308,000 is being amortized to interest expense over the term of the financing agreements.
In August 1999, the Company issued warrants to a lessor in conjunction with a sublease agreement. The warrant allows the lessor to purchase 38,461 shares of the Company's Series C preferred stock at an exercise price of $6.50 per share. The warrant is immediately exercisable and expires in November 2001 or at the time of the Company's initial public offering. The warrants were valued using the Black-Scholes model. The total value of approximately $35,000 is being amortized to interest expense over the term of the lease agreements.
1998 Stock Option Plan
During fiscal 1998, the Company adopted the 1998 Stock Option Plan (the "Plan"). Under the Plan, up to 8,124,434 shares of the Company's common stock may be granted as options or sold to eligible participants. Under the Plan, options to purchase common stock may be granted at no less than 85% of the fair value on the date of the grant (110% of fair value in certain instances), as determined by the board of directors. Options under the plan are immediately exercisable; however, shares issued are subject to the Company's right to repurchase such shares at the original issuance price, which lapses in a series of installments measured from the vesting commencement date of the option. Options generally vest and the repurchase rights lapse over a 48-month period from the date of grant and have a maximum term of 10 years.
Pro forma information regarding net loss is required by FAS 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of FAS 123. The fair value of these options was estimated at the date of grant using the minimum value method with the following weighted-average assumptions: risk-free interest rates of 6.5%; a dividend yield of 0%; and a weighted-average expected life of the option of 4.5 years for the years ended December 31, 1998 and 1999.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period of the options using a graded vesting method. The effects of applying FAS 123 for pro forma disclosures are not likely to be representative of the effects on reported net loss for future years.
Support.com's pro forma information follows (in thousands, except per share amounts):
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
Net loss:
As reported...................... $(2,964) $(15,366)
Pro forma........................ (2,969) (15,468)
Basic and diluted net loss per
share:
As reported...................... $ (0.57) $ (2.31)
Pro forma........................ (0.57) (2.33)
|
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Information with respect to stock option activity is summarized as follows:
Options Outstanding Weighted
Options ----------------------- Average
Available Number of Price Per Exercise
for Grant Shares Share Price
---------- ---------- ----------- --------
Shares authorized.............. 2,929,434 -- -- --
Options granted................ (2,343,250) 2,343,250 $ 0.10 $0.10
Options exercised.............. -- (40,000) $ 0.10 $0.10
Options canceled............... 95,000 (95,000) $ 0.10 $0.10
---------- ---------- -----------
Balance at December 31, 1998... 681,184 2,208,250 $ 0.10 $0.10
Shares authorized.............. 5,195,000 -- -- --
Options granted................ (6,326,139) 6,326,139 $0.10-$0.99 $0.57
Options exercised.............. -- (4,131,994) $0.10-$0.99 $0.46
Options canceled............... 457,500 (457,500) $0.10-$0.90 $0.23
---------- ---------- -----------
Balance at December 31, 1999... 7,545 3,944,895 $0.10-$0.90 $0.47
========== ========== ===========
|
At December 31, 1998 and 1999, zero and 3,299,905 shares which had been issued upon exercise of options were subject to repurchase. At December 31, 1998 and 1999, options to acquire 5,500 and 444,899 shares were vested but not exercised.
Exercise prices for options outstanding as of December 31, 1999 and the weighted-average remaining contractual life are as follows:
Options Outstanding and Exercisable
-------------------------------------------------
Weighted-
Average
Remaining
Exercise Number of Contractual
Price Range Shares Life
----------- --------- -----------
(In years)
$0.10 764,556 7.79
$0.40 2,163,689 9.54
$0.90 1,016,650 9.68
--------- ----
3,944,895 9.22
========= ====
|
The weighted-average fair value of options granted during 1998 and 1999 was $0.02 and $0.12, respectively.
Stock Compensation
During the period from December 31, 1997 (inception) to December 31, 1998 and for the year ended December 31, 1999, in connection with the grant of certain share options to employees, Support.com recorded deferred stock compensation of approximately $169,000 and $17.7 million, respectively, representing the difference between the exercise price and the deemed fair value of Support.com's common stock on the date such stock options were granted. Such amounts are included as a reduction of stockholders' equity (deficit) and are being amortized by charges to operations on a graded vesting method. Support.com recorded amortization of deferred stock compensation expense of approximately $16,000 in 1998 and $3.5 million in 1999. At
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
December 31, 1999, Support.com had a total of approximately $14.3 million remaining to be amortized over the corresponding vesting period of each respective option, generally four years. The amortization expense relates to options awarded to employees in all operating expense categories. This amount has not been separately allocated to these categories.
5. Income Taxes
The difference between the amount of income tax benefit calculated and the amount of income tax recorded using the U.S. federal statutory rate of 35% is primarily due to net operating losses not being benefited. Accordingly, there is no provision for income taxes for the period from December 17, 1997 (inception) to December 31, 1998 and for the year ended December 31, 1999.
Significant components of Support.com's deferred tax assets are as follows (in thousands):
December 31,
----------------
1998 1999
------- -------
Deferred tax assets:
Net operating loss carryforwards......................... $ 1,000 $ 4,100
Deferred compensation.................................... -- 1,400
Other.................................................... 100 900
------- -------
Total deferred tax assets.............................. 1,100 6,400
Valuation allowances....................................... (1,100) (6,400)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
|
The Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes Support.com's historical operating performance and the reported cumulative net losses in all periods, the Company has provided a full valuation allowance against its net deferred tax assets.
The valuation allowance increased by approximately $1.1 million and $5.3 million during the period from December 17, 1997 (inception) to December 31, 1998 and for the year ended December 31, 1999, respectively.
As of December 31, 1999, the Company had federal and state net operating loss carryforwards each of approximately $10.1 million. The net operating loss carryforwards will expire at various dates beginning in 2005 through 2019, if not utilized.
Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of net operating loss carryforwards before utilization.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
6. Subsequent Events (Unaudited)
Initial Public Offering
In February 2000, the 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 ("IPO"). If the offering is consummated under the terms presently anticipated, all of the currently outstanding convertible preferred stock will convert to shares of common stock upon the closing of the IPO on a one-for-one basis. The effect of this conversion has been reflected as unaudited pro forma stockholders' equity in the accompanying balance sheet at December 31, 1999.
In February 2000, the Board of Directors also authorized 5,000,000 shares of undesignated preferred stock, for which the Board of Directors is authorized to fix the designation, powers, preferences and rights, and an increase in the authorized number of shares of common stock to 150,000,000 shares.
2000 Employee Stock Purchase Plan
In February 2000, the Board of Directors approved the adoption of Support.com's 2000 Employee Stock Purchase Plan (the "2000 Purchase Plan"). A total of 2,000,000 shares of common stock have been reserved for issuance under the 2000 Purchase Plan. On January 1 of each year, the number of shares reserved automatically increases by the lesser of 2,000,000 shares, 3% of the outstanding shares, or an amount determined by the Board of Directors. The 2000 Purchase Plan permits eligible employees to acquire shares of Support.com's common stock through periodic payroll deductions of up to 15% of total compensation. No more than 1,000 shares may be purchased on any purchase date per employee. Each offering period will have a maximum duration of 24 months. Purchases occur on the last day of each June and December of each offering period. The price at which the common stock may be purchased is 85% of the lesser of the fair market value of Support.com's common stock on each employee's applicable enrollment date or on the last day of the respective purchase period. The initial offering period commenced on the effectiveness of the initial public offering and will end on the last business day of December 2001.
2000 Omnibus Equity Incentive Plan
In February 1999, the Board of Directors approved the adoption of Support.com's 2000 Omnibus Equity Incentive Plan (the "2000 Incentive Plan"), subject to stockholder approval. A total of 4,000,000 shares of common stock have been reserved for issuance to eligible participants under the 2000 Incentive Plan. On January 1 of each year, the number of shares reserved automatically increases by the lesser of 2,000,000 shares, 5% of outstanding shares, or an amount determined by the Board of Directors. The types of awards that may be made under the 2000 Incentive Plan include the grant of incentive stock options, the grant of nonstatutory stock options and stock purchase rights to employees, non-employee directors, advisors and consultants. Any shares not yet issued under Support.com's 1998 Stock Option Plan as of the date of Support.com's initial public offering will be available for grant under the 2000 Incentive Plan. The exercise price for incentive stock options may not be less than 100% of the fair market value of Support.com's common stock on the date of grant (85% for nonstatutory options).
Increase in Shares Available Under the 1998 Stock Option Plan
In February 2000, the Board of Directors authorized, and the stockholders approved, an increase of 1,300,000 shares for issuance under Support.com's stock option plan.
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Option Activity
From January 1, 2000 to February 15, 2000, options to purchase 690,000 shares of common stock were granted to employees pursuant to the 1998 Stock Option Plan with exercise prices of between $2.00 and $5.50 per share. The Company estimates that additional deferred compensation of $3.7 million will be recorded as a result of these option grants and will be amortized to expense in accordance with the Company's policy. The Company also expects to incur non- cash charges of at least $700,000 in the first quarter of 2000 associated with other option arrangements.
Rescission Offer
Shares issued, and option grants made under, the Company's 1998 Stock Plan were not exempt from registration or qualification under California state securities laws, and these stock issuances and option grants violated the registration requirements of California state securities laws because registration or qualification was not obtained. The Company intends to make a rescission offer to the holders of these shares and options which will be held open for 30 days after the effective date of this offering. If accepted, the rescission offer could require the Company to make payments including statutory interest.
[Company Logo]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses expected to be incurred by the Registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee and the National Association of Securities Dealers, Inc. filing fee.
Payable by
Registrant
----------
SEC registration fee.............................................. $16,395
National Association of Securities Dealers, Inc. filing fee....... 6,710
Nasdaq National Market Listing Fee................................ 95,000
Accounting fees and expenses...................................... *
Legal fees and expenses........................................... *
Printing and engraving expenses................................... *
Blue Sky fees and expenses........................................ *
Registrar and Transfer Agent's fees............................... *
Miscellaneous fees and expenses................................... *
-------
Total........................................................... *
=======
|
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article XI.B. of the Registrant's Amended and Restated Certificate of Incorporation (Exhibit 3.1 hereto) and Article XII of the Registrant's Amended and Restated Bylaws (Exhibit 3.2 hereto) provide for indemnification of the Registrant's directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. The Registrant has also entered into agreements with its directors and officers that will require the Registrant, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent not prohibited by law. The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the Underwriters of the Registrant, its directors and officers, and by the Registrant of the Underwriters, for certain liabilities, including liabilities arising under the Act and affords certain rights of contribution with respect thereto.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by ourselves, our underwriters and our directors and officers of the underwriters, for certain liabilities, including liabilities arising under the Act and affords certain rights of contribution with respect thereto.
Item 15. Recent Sales of Unregistered Securities
1. From December 1997 to December 31, 1999, the Registrant issued and sold 10,874,374 shares of common stock to employees, directors and consultants at prices ranging from $0.0001 to $0.90 per share.
2. From December 8, 1997 to March 19, 1998, the Registrant issued and sold 3,571,600 shares of Series A preferred stock to a total of 4 investors for an aggregate purchase price of $250,012.00.
3. On June 22, 1998, the Registrant issued and sold 7,346,108 shares of Series B preferred stock to a total of 9 investors for an aggregate purchase price of $5,050,228.87.
4. On June 14, 1999, the Registrant issued and sold 4,638,618 shares of Series C preferred stock to a total of 35 investors for an aggregate purchase price of $15,175,147.93.
II-1
The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each of these 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 thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had adequate access, through their relationship with the Registrant, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
See exhibits listed on the Exhibit Index following the signature page of the Form S-1, which is incorporated herein by reference.
(b) Financial Statement Schedules
Schedules other than those referred to above have been omitted because they are not applicable or not required or because the information is included elsewhere in the Financial Statements or the notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the 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, as amended, 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.
(3) The Registrant will provide to the underwriters at the closing(s) specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Redwood City, State of California, on the 18th day of February, 2000.
Support.Com, Inc.
/s/ Radha Ramaswami Basu
By __________________________________
Radha Ramaswami Basu
President, Chief Executive Officer
and Director
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Radha Ramaswami Basu, Brian M. Beattie and Mark
A. Vranesh, and each of them, his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments, including post-effective amendments, to this
Registration Statement, and any registration statement relating to the
offering covered by this Registration Statement and filed pursuant to Rule
462(b) under the Securities Act of 1933 and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
each of said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Radha Ramaswami Basu President, Chief Executive February 18, 2000
____________________________________ Officer and Director
Radha Ramaswami Basu (Principal Executive
Officer)
/s/ Brian M. Beattie Senior Vice President of February 18, 2000
____________________________________ Finance and Administration,
Brian M. Beattie Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Mark J. Pincus Director February 18, 2000
____________________________________
Mark J. Pincus
/s/ Matthew T. Cowan Director February 18, 2000
____________________________________
Matthew T. Cowan
|
II-3
Name Title Date
---- ----- ----
/s/ William L. Dunn Director February 18, 2000
____________________________________
William L. Dunn
/s/ Bruce Golden Director February 18, 2000
____________________________________
Bruce Golden
/s/ Edward S. Russell Director February 18, 2000
____________________________________
Edward S. Russell
/s/ Roger J Sippl Director February 18, 2000
____________________________________
Roger J. Sippl
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II-4
EXHIBIT INDEX
Exhibit
Number Description of Document
------- -----------------------
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation, to be effective
upon consummation of this offering.
3.2 Amended and Restated Bylaws, to be effective upon consummation of this
offering.
3.3 Amended and Restated Certificate of Incorporation.
3.4 Certificate of Correction of the Amended and Restated Certificate of
Incorporation.
3.5 Bylaws.
4.1* Form of Common Stock Certificate.
4.2 Registration Rights Agreement, dated June 22, 1998, by and among the
registrant and the parties who are signatories thereto.
4.3 Amended and Restated Registration Rights Agreement, dated June 14,
1999, by and among the registrant and the parties who are signatories
thereto.
4.4 Warrant Agreement to Purchase Shares of Series C Convertible Preferred
Stock, dated July 12, 1999, by and between the registrant and
Comdisco, Inc.
4.5 Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.6 Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.7 Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.8 Letter Agreement, dated June 7, 1999, by and between the registrant
and Comdisco, Inc.
4.9 Warrant Agreement to Purchase Shares of Series C Preferred Stock by
and between the registrant and Excite, Inc.
4.10* Warrant Agreement to Purchase Shares of Series C Preferred Stock dated
February 17, 2000 by and between the registrant and General Electric
Company.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1 Registrant's 1998 Stock Option Plan.
10.2 Registrant's 2000 Omnibus Equity Incentive Plan.
10.3 Registrant's 2000 Employee Stock Purchase Plan.
10.4 Form of Directors and Officers' Indemnification Agreement.
10.5 Employment Agreement, dated June 24, 1998, by and between the
registrant and Anthony C. Rodoni.
10.6 Employment Agreement, dated May 26, 1999, by and between the
registrant and Michael O'Rourke.
10.7 Employment Agreement, dated July 15, 1999, by and between the
registrant and Radha R. Basu.
10.8 Employment Agreement, dated August 16, 1999, by and between the
registrant and Scott Dale.
10.9 Employment Agreement, dated August 16, 1999, by and between the
registrant and Cadir Lee.
10.10 Employment Agreement, dated September 27, 1999, by and between the
registrant and Brian M. Beattie.
10.11 Employment Agreement, dated December 7, 1999, by and between the
registrant and Jim Hilbert.
10.12 Employment Agreement, dated January 18, 2000, by and between the
registrant and Lucille Hoger.
10.13* Employment Agreement, dated February , 2000, by and between the
registrant and Mark Pincus.
10.14 Sublease Agreement, dated August 6, 1999, by and between the
registrant and Excite, Inc.
10.15+ Enterprise License Agreement, dated May 27, 1999, by and between the
registrant and Bear, Stearns & Co., Inc.
10.16+ Amendment No. 1 to Enterprise License Agreement, dated October 6,
1999, by and between the registrant and Bear, Stearns & Co., Inc.
10.17* Enterprise License Agreement dated February 17, 2000 by and between
the registrant and General Electric Company.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-3.
27.1 Financial Data Schedule for Support.com, Inc. (in EDGAR format only).
|
+ Confidential Treatment Requested.
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SUPPORT.COM, INC.
SUPPORT.COM, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
FIRST: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on December 3, 1997 under the name Replicase, Inc.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the President of the Corporation this ___ day of __________, 2000.
SUPPORT.COM, INC.
By _____________________________________
Radha R. Basu
President and Chief Executive Officer
ARTICLE I
The name of this Corporation is SUPPORT.COM, INC.
ARTICLE II
The registered office of the Corporation within the State of Delaware is located at 30 Old Rudnick Lane, in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.
ARTICLE IV
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
ARTICLE VII
ARTICLE VIII
The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of at least sixty-six and two-thirds percent (66 2/3%) of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board of Directors). The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation, provided, however, that in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provisions of the Bylaws of the Corporation.
ARTICLE IX
The books of the Corporation may be kept at such place within or without the State of Delaware as the bylaws of the Corporation may provide or as may be designated from time to time by the board of directors of the Corporation.
ARTICLE X
Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receivers appointed for the Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority, in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ARTICLE XI
If the Delaware General Corporation Law hereafter is amended to further eliminate or limit the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law.
including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in the second paragraph hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation for any expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
If a claim under the first paragraph of this section is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Amended and Restated Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
ARTICLE XII
The Corporation reserves the right to amend or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon a stockholder herein are granted subject to this reservation.
ARTICLE XIII
Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this Article XIII, or Articles VI, VII, VIII and XI.
EXHIBIT 3.2
AMENDED AND RESTATED
B Y L A W S
OF
SUPPORT.COM, INC.
(a Delaware corporation)
Adopted effective _______ __, 2000
TABLE OF CONTENTS
Page
----
ARTICLE I Offices..................................................................................... 1
Section 1. Registered Office.............................................................. 1
Section 2. Other Offices.................................................................. 1
ARTICLE II Meetings of Stockholders................................................................... 1
Section 1. Annual Meetings................................................................ 1
Section 2. Special Meetings............................................................... 2
Section 3. Notice of Meeting.............................................................. 2
Section 4. List of Stockholders........................................................... 2
Section 5. Quorum......................................................................... 2
Section 6. Adjournments................................................................... 3
Section 7. Voting......................................................................... 3
Section 8. Proxies........................................................................ 3
Section 9. Judges of Election............................................................. 3
Section 10. Written Consent............................................................... 3
Section 11. Waiver of Notice.............................................................. 3
ARTICLE III Board of Directors........................................................................ 4
Section 1. Number......................................................................... 4
Section 2. Election and Term of Office.................................................... 4
Section 3. Nominations.................................................................... 4
Section 4. Vacancies and Additional Directorships......................................... 5
Section 5. Powers......................................................................... 5
Section 6. Resignation and Removal of Directors........................................... 5
Section 7. Compensation of Directors...................................................... 5
Section 8. Chairman of the Board.......................................................... 5
ARTICLE IV Meeting of the Board of Directors.......................................................... 5
Section 1. Place.......................................................................... 5
Section 2. Regular Meetings............................................................... 6
Section 3. Special Meetings............................................................... 6
Section 4. Quorum......................................................................... 6
Section 5. Adjourned Meetings............................................................. 6
Section 6. Written Consent................................................................ 6
Section 7. Communications Equipment....................................................... 6
Section 8. Waiver of Notice............................................................... 7
ARTICLE V Committees of the Board..................................................................... 7
Section 1. Designation, Power, Alternate Members and Term of Office....................... 7
Section 2. Meetings, Notices and Records.................................................. 7
Section 3. Quorum and Manner of Acting.................................................... 8
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Section 4. Resignations................................................................... 8
Section 5. Removal........................................................................ 8
Section 6. Vacancies...................................................................... 8
Section 7. Compensation................................................................... 8
ARTICLE VI Officers................................................................................... 8
Section 1. Officers....................................................................... 8
Section 2. Duties......................................................................... 9
Section 3. Resignations................................................................... 9
Section 4. Removal........................................................................ 9
Section 5. Vacancies...................................................................... 9
Section 6. Chief Executive Officer........................................................ 9
Section 7. President...................................................................... 9
Section 8. Vice President................................................................. 9
Section 9. Secretary...................................................................... 10
Section 10. Assistant Secretaries......................................................... 10
Section 11. Chief Financial Officer and Treasurer......................................... 10
Section 12. Assistant Treasurers.......................................................... 11
Section 13. Salaries...................................................................... 11
ARTICLE VII Certificates of Stock..................................................................... 11
Section 1. Stock Certificates............................................................. 11
Section 2. Books of Account and Record of Stockholders.................................... 11
Section 3. Transfers of Shares............................................................ 12
Section 4. Regulations.................................................................... 12
Section 5. Lost, Stolen or Destroyed Certificates......................................... 12
Section 6. Stockholder"s Right of Inspection.............................................. 12
ARTICLE VIII Deposit of Corporate Funds............................................................... 13
Section 1. Borrowing...................................................................... 13
Section 2. Deposits....................................................................... 13
Section 3. Checks, Drafts, Etc............................................................ 13
ARTICLE IX Record Dates............................................................................... 13
ARTICLE X Dividends................................................................................... 14
ARTICLE XI Fiscal Year................................................................................ 14
ARTICLE XII Indemnification........................................................................... 14
Section 1. Right to Indemnification....................................................... 14
Section 2. Right of Claimant to Bring Suit................................................ 15
Section 3. Non-Exclusivity of Rights...................................................... 15
Section 4. Insurance...................................................................... 15
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Section 5. Severability................................................................... 16
Section 6. Intent of Article.............................................................. 16
ARTICLE XIII Corporate Seal........................................................................... 16
ARTICLE XIV Amendments................................................................................ 16
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BYLAWS
OF
SUPPORT.COM, INC.
(a Delaware corporation)
At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than fifty (50) days nor more than seventy-five (75) days prior to the meeting; provided, however, that in the event that less than sixty-five (65) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 1 by any stockholder of any business properly brought before the annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute.
The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he or
she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.
Each committee may meet and transact any and all business delegated to that committee by the Board of Directors by means of a conference telephone or similar communications equipment provided that all persons participating in the meeting are able to hear and
communicate with each other. Participation in a meeting by means of conference telephone or similar communication shall constitute presence in person at such meeting.
mortgages, bond and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent. Each Vice President shall perform such other duties as are assigned by these Bylaws or as from time may be assigned by the Board of Directors, the Chief Executive Officer or the President.
reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation; (vii) sign (unless the Secretary or an Assistant Secretary or Assistant Treasurer shall sign) certificates representing stock of the Corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (viii) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board of Directors or the Chief Executive Officer.
thereby, the name of the person to whom such certificate was issued and the date of issuance thereof.
agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business.
In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors.
Subject to any agreement to which the Corporation is a party or by which it is bound, the Board of Directors may declare to be payable, in cash, in other property or in stock of the Corporation of any class or series, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board of Directors may at any time deem to be advisable. Before declaring any such dividend, the Board of Directors may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends.
The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.
paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law so requires, the payment of such expenses incurred by a director, officer, employee or representative in such person's capacity as a director, officer, employee or representative (and not in any other capacity in which service was or is rendered by such person while a director, officer, employee or representative, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article or otherwise.
The Corporate Seal shall be circular in form and shall bear the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors.
The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation, provided, however, that any adoption, amendment or repeal of Bylaws of the corporation by the Board of Directors shall require the approval of at sixty-six and two-thirds percent (66 2/3%) of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal these Bylaws, provided, however, that in addition to any vote of the holders of any class or series of stock of this corporation required by law or by the Restated Certificate of Incorporation of this corporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provisions of these Bylaws.
CERTIFICATE OF SECRETARY
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of SUPPORT.COM, INC., a Delaware corporation; and
2. That the foregoing Bylaws, comprising 16 pages, constitute the Bylaws of such corporation as duly adopted at a meeting of the board of directors of such corporation held on February 15, 2000.
Dated: _______ __, 2000.
Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TIOGA SYSTEMS, INC.
TIOGA SYSTEMS, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
TIOGA SYSTEMS, INC.
By /s/ Radha R. Basu
--------------------------------------
Radha R. Basu
Chief Executive Officer
|
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TIOGA SYSTEMS, INC.
FIRST: The name of this Corporation is Support.com, Inc. ----- SECOND: The address of this Corporation's registered office in the ------ |
State of Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent, and the name of the registered agent of the Corporation in the State of Delaware at such address is CorpAmerica, Inc.
This Corporation shall from time to time in accordance with the laws of the State of Delaware increase the authorized amount of its Common Stock if at any time the number of shares of Common Stock remaining unissued and available for issuance shall not be sufficient to permit conversion of the Preferred Stock.
The Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock shall, except as otherwise specifically provided herein, with respect to dividend rights and rights on liquidation, dissolution and winding-up, rank pari passu with each other and senior and prior to all other class or series of stock of this Corporation (collectively, the "Junior Securities"). The designations, powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock are as follows:
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation). The
holders of the outstanding Series A Convertible Preferred Stock shall not be
entitled to annual cash dividends. Dividends paid to the holders of Preferred
Stock pursuant to this Section 1 shall be paid pari passu with respect to each
series of Preferred Stock, to the extent such series of Preferred Stock is
entitled to such dividends. No cash dividend shall be declared or paid with
respect to the Common Stock or any Junior Securities unless an equivalent
dividend (which shall be in addition to any dividend on the Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock referred to in the
first sentence of this Section 1) is declared and set apart or paid with respect
to the Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock (each, on an as-converted basis).
The right to dividends on shares of Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock set forth in the first sentence of this
Section 1 shall not be cumulative, and no right shall accrue to holders of
shares of Series B Convertible Preferred Stock or Series C Convertible Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior year.
(a) The holders of Series A Convertible Preferred Stock shall be entitled to receive, prior to and in preference to any distribution of any of the assets or surplus funds of this Corporation to the holders of the Junior Securities by reason of their ownership of such stock, an amount equal to $0.07 (as adjusted for any recapitalizations, stock combinations, stock dividends, stock splits and the like with respect to such shares) per share, plus an amount equal to all declared but unpaid dividends on each share of Series A Convertible Preferred Stock held by them.
(b) The holders of Series B Convertible Preferred Stock shall be entitled to receive, prior to and in preference to any distribution of any of the assets or surplus funds of this Corporation to the holders of the Junior Securities by reason of their ownership of such stock, an amount equal to $0.68747 (as adjusted for any recapitalizations, stock combinations, stock dividends, stock splits and the like with respect to such shares) per share, increased at the rate, without compounding, of eight percent (8%) per year, such rate to be prorated over the length of any partial year.
(c) The holders of Series C Convertible Preferred Stock shall be entitled to receive, prior to and in preference to any distribution of any of the assets or surplus funds of this Corporation to the holders of the Junior Securities by reason of their ownership of such stock, an amount equal to $3.27148 (as adjusted for any recapitalizations, stock combinations, stock dividends, stock splits and the like with respect to such shares) per share, increased at the rate, without compounding, of eight percent (8%) per year, such rate to be prorated over the length of any partial year.
(d) If upon any such liquidation, dissolution or winding up of this Corporation remaining assets of this Corporation available for distribution to its stockholders shall be insufficient to pay the holders of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock the full amount to which they shall be entitled, then
the entire assets and funds of this Corporation legally available for distribution shall be distributed ratably to the holders of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
(e) After payment has been made to the holders of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock of the full amounts to which they shall be entitled as described above, the holders of the Common Stock shall be entitled to the remaining assets based on the number of shares of Common Stock held by them.
(f) For purposes of this Section 2, a merger or consolidation of this Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations into this Corporation, or the sale of all or substantially all of the assets of this Corporation or any other corporate reorganization in which consolidation, merger, sale of assets or reorganization the stockholders of this Corporation receive distributions in cash or securities or another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a liquidation, dissolution or winding up of this Corporation unless the stockholders of this Corporation hold more than fifty percent (50%) of the voting equity securities or assets of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a liquidation, dissolution or winding up.
(a) At any meeting of stockholders of this Corporation (and in connection with any written action of stockholders in lieu of a meeting) with respect to any and all matters presented to the stockholders of this Corporation for their actions or consideration, each holder of outstanding shares of Preferred Stock shall be entitled to the number of votes (rounded down to the next whole number) equal to the number of shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible (as adjusted from time to time pursuant to Section 4 hereof). Except as provided by law or by the provisions of Section 3(b) or Section 3(c) below, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class, on an as converted basis.
(b) So long as at least twenty-five percent (25%) of the initially authorized shares of Series A Convertible Preferred Stock shall remain outstanding (as adjusted for stock splits, stock dividends and the like), this Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A Convertible Preferred Stock:
(i) amend or repeal any provision of this Corporation's Certificate of Incorporation or Bylaws if such action would materially and adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Convertible Preferred Stock;
(ii) authorize or issue shares of any class or series of stock having any preference or priority as to dividends or assets superior to or pari passu with any such preference or priority of the Series A Convertible Preferred Stock; or
(iii) merge or consolidate with, or sell substantially all of this Corporation's assets to, any other person or entity, unless the stockholders of this Corporation immediately prior to such transaction would hold more than fifty percent (50%) of the voting equity securities or assets of the surviving corporation or acquiring corporation, as the case may be, immediately following such merger, consolidation or sale of assets.
(c) So long as at least twenty-five percent (25%) of the initially authorized shares of Series B Convertible Preferred Stock shall remain outstanding (as adjusted for stock splits, stock dividends and the like), this Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series B Convertible Preferred Stock:
(i) take any action that changes the rights, preferences or powers of the Series B Convertible Preferred Stock;
(ii) take any action that authorizes any class of stock having rights, preferences and privileges superior to the Series B Convertible Preferred Stock;
(iii) take any action that reclassifies any outstanding shares into shares having rights as to dividends or assets senior to or on a parity with the Series B Convertible Preferred Stock; or
(iv) amend this Corporation's Certificate of Incorporation in a manner that adversely affects the rights of the Series B Convertible Preferred Stock. Corporation.
(d) So long as at least twenty-five percent (25%) of the initially authorized shares of Series C Convertible Preferred Stock shall remain outstanding (as adjusted for stock splits, stock dividends and the like), this Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series C Convertible Preferred Stock:
(i) take any action that changes the rights, preferences or powers of the Series C Convertible Preferred Stock;
(ii) take any action that authorizes any class of stock having rights, preferences and privileges superior to the Series C Convertible Preferred Stock;
(iii) take any action that reclassifies any outstanding shares into shares having rights as to dividends or assets senior to or on a parity with the Series C Convertible Preferred Stock; or
(iv) amend this Corporation's Certificate of Incorporation in a manner that adversely affects the rights of the Series C Convertible Preferred Stock.
(e) So long as at least twenty-five percent (25%) of the initially authorized shares of Series B and Series C Convertible Preferred Stock shall remain outstanding (as adjusted for stock splits, stock dividends and the like), this Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series B and C Convertible Preferred Stock, voting together as a class:
(i) make any declaration or payment of a dividend on the Common Stock (other than a dividend payable solely in shares of Common Stock);
(ii) effect any redemption or repurchase of Common Stock except in the event of termination of employment at cost;
(iii) approve a sale of all or substantially all of the assets of this Corporation or a merger (other than a merger in which the holders of the stock of this Corporation immediately prior to the effectiveness of such merger constitute a majority of the stockholders of the surviving entity), or a liquidation of this Corporation;
(iv) effect any material change in this Corporation's line of business;
(v) enter into any material agreement between this Corporation and any officer or director other than transactions in the ordinary course of business or with the unanimous consent of the Board of Directors of this Corporation;
(vi) issue debt in excess of the net worth of this Corporation; or
(vii) issue Common Stock or grant of options to purchase Common Stock other than (A) the grant of options to purchase up to 5,624,434 shares of Common Stock and the issuance of shares upon the exercise of such options, each as provided for under this Corporation's employee stock option plan and (B) the grant of options to purchase Common Stock or the issuance of shares of Common Stock in transactions unanimously approved by this Corporation's Board of Directors.
determined as hereinafter provided, in effect at the time of conversion. Each share of Series C Convertible Preferred Stock shall be convertible into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $3.27148 by the Series C Conversion Price, determined as hereinafter provided, in effect at the time of conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock and Series C Convertible Preferred Stock shall initially be $0.07 with respect to each share of Series A Convertible Preferred Stock (the "Series A Conversion Price"), $0.68747 with respect to each share of Series B Convertible Preferred Stock (the "Series B Conversion Price") and $3.27148 with respect to each share of Series C Convertible Preferred Stock (the "Series C Conversion Price"). The initial Series A Conversion Price, the initial Series B Conversion Price and the initial Series C Conversion Price shall each be subject to adjustments as hereinafter provided.
delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as a result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, or in the case of automatic conversion then on the date of closing of the offering, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall, upon surrender, no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the applicable conversion date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Preferred Stock so converted shall be retired and canceled and shall not be reissued, and this Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Preferred Stock accordingly.
property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series A Convertible Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.
(A) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;
(B) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights;
(C) to effect any reclassification or capitalization of its Common Stock outstanding involving a change in the Common Stock; or
(D) to merge or consolidate with or into any other Corporation, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, this Corporation shall send to each holder of Series A Convertible Preferred Stock:
(1) at least twenty (20) days prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in (A) and (B) above; and
(2) in the case of the matters referred to in (C) and (D) above, at least twenty (20) days prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to the holders of the Series A Convertible Preferred Stock at the address for each such holder as shown on the books of this Corporation.
Series C Convertible Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series B Convertible Preferred Stock or Series C Convertible Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.
(A) If at any time, or from time to time, this Corporation shall issue or sell Additional Shares of Common Stock (as defined below), other than as a Diluting Distribution or in a transaction subject to Section
4(e)(iii), for a consideration per share less than the Series B
Dilution Price in effect at the time of such issuance or sale, then
the Series B Conversion Price shall be adjusted, as of the opening of
business on the date of any such issue or sale, to a rate determined
by multiplying the Series B Conversion Price then in effect by a
fraction (x) the numerator of which shall be (1) the number of shares
of Common Stock equal to the Determination Date Outstanding Amount of
Common Stock as of the Determination Date, plus (2) the aggregate
number of Additional Shares of Common Stock issued during a period
from the Determination Date to the date of such issue or sale (the
"Adjustment Period"), and (y) the denominator of which shall be (1)
the number of shares of Common Stock equal to the Determination Date
Outstanding Amount of Common Stock as of the Determination Date, plus
(2) the number of Additional Shares of Common Stock that the aggregate
consideration received by this Corporation for the total number of
Dilutive Shares of Common Stock issued during the Adjustment Period
would purchase at such Series B Conversion Price. Similarly, if at any
time, or from time to time, this Corporation shall issue or sell
Additional Shares of Common Stock, other than as a Diluting
Distribution or in a transaction subject to Section 4(e)(iii), for a
consideration per share less than the Series C Dilution Price in
effect at the time of such issuance or sale, then the Series C
Conversion Price shall be adjusted, as of the opening of business on
the date of any such issue or sale, to a rate determined by
multiplying the Series C Conversion Price then in effect by a fraction
(x) the numerator of which shall be (1) the number of shares of Common
Stock equal to the Determination Date Outstanding Amount of Common
Stock as of the Determination Date, plus (2) the aggregate number of
Additional Shares of Common Stock issued during a the Adjustment
Period, and (y) the denominator of which shall be (1) the number of
shares of Common Stock equal to the Determination Date Outstanding
Amount of Common Stock as of the Determination Date, plus (2) the
number of Additional Shares of Common Stock that the aggregate
consideration received by this Corporation for the total number of
Dilutive Shares of Common Stock issued during the Adjustment Period
would purchase at such Series C Conversion Price.
(B) For the purpose of making any adjustment in the Series B Conversion Price or Series C Conversion Price, or the number of shares of Common Stock issuable on the conversion of Series B Convertible Preferred Stock or Series C Convertible Preferred Stock as provided hereto, the consideration received by this Corporation for any issue or sale of securities shall:
(1) to the extent it consists of cash, be computed at the net amount of cash received by this Corporation before deduction of any underwriting or similar commissions, concessions, or compensation paid or allowed by this Corporation in connection with such issue or sale;
(2) to the extent it consists of property other than cash be computed at the fair market value of that property as determined in good faith by a unanimous vote of the Board of Directors or, if the Board of Directors is unable to unanimously agree on such a value, as reasonably determined by the appraisal of an investment bank of national reputation to be selected by the holders of the majority of shares of the Series B Convertible Preferred Stock and Series C Convertible Preferred Stock then outstanding, voting together as a single class, with the consent of this Corporation, which consent shall not be unreasonably withheld (the "Investment Bank"); and
(3) if Additional Shares of Common Stock, Convertible Securities (as defined in Section 4(e)(iv)(C) hereof), or other rights or options to purchase either Additional Shares of Common Stock or Convertible Securities, are issued or sold together with other stock or securities or other assets of this Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be determined in good faith by unanimous vote of the Board of Directors or, if necessary, an Investment Bank to be allocable to such Additional Shares of Common Stock, Convertible Securities, or rights or options.
(C) For purposes of the adjustment provided in this Section
4(e)(iv), if at any time or from time to time after the Determination
Date this Corporation shall issue any rights or options for the
purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such rights, options, convertible stock or
securities being hereinafter referred to as the "Convertible
Securities," which shall also include any rights or options
convertible into Convertible Securities), then, in each case, if the
Effective Price (defined below) of such rights, options, or
Convertible Securities shall be less than the Series B Dilution Price
or the Series C Dilution Price, as applicable, this Corporation shall
be deemed to have issued at the time of the issuance of such rights or
options of Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares
an amount equal to the total amount of the consideration, if any,
received by this Corporation for the issuance of such rights or
options or Convertible Securities, plus, in the case of such options
or rights, the maximum amounts of consideration, if any, payable to
this Corporation upon exercise or conversion of such options or
rights. "Effective Price" shall mean the quotient determined by
dividing the total amount of such consideration by such maximum number
of Additional Shares of Common Stock as determined pursuant to this
subsection. No further adjustment of the Series B Conversion Price or
the Series C Conversion Price adjusted upon the issuance of such
rights, options, or Convertible Securities shall be made as a result
of the actual issuance of Additional Shares of Common Stock on
the exercise of any such rights or options or the conversion of any such Convertible Securities.
(D) If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Series B Conversion Price or Series C Conversion Price adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted with respect to any shares of Series B Convertible Preferred Stock or Series C Convertible Preferred Stock remaining outstanding at the time of such expiration to the Series B Conversion Price or Series C Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by this Corporation on the conversion of such Convertible Securities and in the case of such rights or options, the amount of the consideration, if any, actually received by this Corporation on the exercise of such rights or options.
Convertible Preferred Stock or Series C Convertible Preferred Stock at the facsimile number or address provided by such holder at least thirty (30) days prior to the record date specified therein a notice specifying (1) the date on which any such record is to be taken for the purpose of such dividend or other distribution or vote and a description including the amount of such dividend or distribution or nature of the matter to be voted upon, (2) the date on which any such reorganization, reclassification, dissolution, liquidation or winding up is expected to become effective, (3) the time, when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, dissolution, liquidation or winding up, (which, with respect to holders of Series B Convertible Preferred Stock or Series C Convertible Preferred Stock, shall be within ten (10) business days of the effective date of a reorganization or reclassification and as soon as practicable after the Liquidation Event), and (4) if available, the nature and amount of such securities or property deliverable upon such reorganization, reclassification, dissolution, liquidation or winding up.
(i) At any time on or after June 19, 2003, and prior to June 19, 2004, any holder of Series B Convertible Preferred Stock then issued and outstanding (a "Requesting Holder") shall have the right to require the Corporation to redeem up to one-third of the Series B Convertible Preferred Stock then held by the Requesting Holder at the Redemption Price (as hereinafter defined) by delivery of written notice to the Corporation (a "Redemption Notice").
(ii) At any time on or after June 19, 2004, and prior to June 19, 2005, a Requesting Holder shall have the right to require the Corporation to redeem up to two-thirds of the Series B Convertible Preferred Stock then held by the Requesting Holder (less any amount previously redeemed) at the Redemption Price (as hereinafter defined) by delivery of a Redemption Notice.
(iii) At any time on or after June 19, 2005, a Requesting Holder shall have the right to require the Corporation to redeem all of the Series C Convertible Preferred Stock then held by the Requesting Holder at the Redemption Price (as hereinafter defined) by delivery of a Redemption Notice.
(i) At any time on or after June 14, 2004, and prior to June 14, 2005, any holder of Series C Convertible Preferred Stock then issued and outstanding (a "Requesting Holder") shall have the right to require the Corporation to redeem up to one-third of the Series C Convertible Preferred Stock then held by the Requesting Holder at the Redemption Price (as hereinafter defined) by delivery of written notice to the Corporation (a "Redemption Notice").
(ii) At any time on or after June 14, 2005, and prior to June 14, 2006, a Requesting Holder shall have the right to require the Corporation to redeem up to two-thirds of the Series C Convertible Preferred Stock then held by the Requesting Holder (less any amount previously redeemed) at the Redemption Price (as hereinafter defined) by delivery of a Redemption Notice.
(iii) At any time on or after June 14, 2006, a Requesting Holder shall have the right to require the Corporation to redeem all of the Series C Convertible Preferred Stock then held by the Requesting Holder at the Redemption Price (as hereinafter defined) by delivery of a Redemption Notice.
or Series C Convertible Preferred Stock whose shares are to be redeemed at their respective addresses appearing on the books of the Corporation of the Redemption Date with respect to such shares of Series B or Series C Convertible Preferred Stock, the Redemption Price of such shares, and the time, place and manner in which the holder is to surrender to the Corporation the certificate or certificates representing such shares, and shall include with such notice financial statements of the Corporation for the prior fiscal year and notice of all rights under this Section 5.
percent (75%) of the outstanding shares of Common Stock and Preferred Stock, voting together as a single class:
(a) merge or consolidate with, or sell substantially all of this Corporation's assets to, any other person or entity, unless the stockholders of this Corporation would hold more than fifty percent (50%) of the voting equity securities or assets of the surviving corporation or acquiring corporation, as the case may be, immediately following such merger, consolidation or sale of the assets.
(b) voluntarily liquidate, dissolve or wind up the affairs of this Corporation; or
(c) amend, repeal or adopt any provision of this Corporation's Certificate of Incorporation inconsistent with this Article FIFTH.
however, that, except as provided in paragraph (c) of this Article EIGHTH with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the Corporation.
* * * * *
EXHIBIT 3.4
CERTIFICATE OF CORRECTION OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF SUPPORT.COM, INC.
Support.com, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the corporation is Support.com, Inc. (the "Company").
2. That an Amended and Restated Certificate of Incorporation was filed by the Secretary of State of Delaware on December 13, 1999, and that said Amended and Restated Certificate of Incorporation requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.
3. Due to clerical error, the first paragraph of Article FOURTH inadvertently stated as follows:
4. The first paragraph of Article FOURTH of the Amended and Restated Certificate of Incorporation is hereby corrected to read in its entirety as follows:
IN WITNESS WHEREOF, the undersigned has signed this Certificate of Correction to the Amended and Restated Certificate of Incorporation of Support.com, Inc. this 16th day of February, 2000.
By /s/ Radha R. Basu
-----------------------------------------
Radha R. Basu
Chief Executive Officer and President
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EXHIBIT 3.5
BYLAWS
OF
REPLICASE, INC.
Page
----
ARTICLE 1-STOCKHOLDERS................................................................................ 1
1.1 ANNUAL MEETINGS............................................................................ 1
1.2 SPECIAL MEETINGS........................................................................... 1
1.3 NOTICE OF MEETINGS......................................................................... 1
1.4 ADJOURNMENTS............................................................................... 1
1.5 QUORUM..................................................................................... 2
1.6 ORGANIZATION............................................................................... 2
1.7 VOTING; PROXIES............................................................................ 2
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.................................... 3
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE...................................................... 3
1.10 ACTION BY CONSENT OF STOCKHOLDERS.......................................................... 4
ARTICLE 2-BOARD OF DIRECTORS.......................................................................... 4
2.1 NUMBER; QUALIFICATIONS..................................................................... 4
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES.................................................. 4
2.3 REGULAR MEETINGS........................................................................... 5
2.4 SPECIAL MEETINGS........................................................................... 5
2.5 TELEPHONIC MEETINGS PERMITTED.............................................................. 5
2.6 QUORUM; VOTE REQUIRED FOR ACTION........................................................... 5
2.7 ORGANIZATION............................................................................... 5
2.8 INFORMAL ACTION BY DIRECTORS............................................................... 5
ARTICLE 3-COMMITTEES.................................................................................. 6
3.1 COMMITTEES................................................................................. 6
3.2 COMMITTEE RULES............................................................................ 6
ARTICLE 4-OFFICERS.................................................................................... 6
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION; REMOVAL;
VACANCIES.................................................................................. 6
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS.................................................... 7
ARTICLE 5-STOCK....................................................................................... 7
5.1 CERTIFICATES............................................................................... 7
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5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES................. 7
ARTICLE 6-INDEMNIFICATION............................................................................. 8
6.1 RIGHT TO INDEMNIFICATION................................................................... 8
6.2 PREPAYMENT OF EXPENSES..................................................................... 8
6.3 CLAIMS..................................................................................... 8
6.4 NON-EXCLUSIVITY OF RIGHTS.................................................................. 8
6.5 OTHER INDEMNIFICATION...................................................................... 9
6.6 AMENDMENT OR REPEAL........................................................................ 9
ARTICLE 7-MISCELLANEOUS............................................................................... 9
7.1 FISCAL YEAR................................................................................ 9
7.2 SEAL....................................................................................... 9
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES..................... 9
7.4 INTERESTED DIRECTORS; QUORUM............................................................... 9
7.5 FORM OF RECORDS............................................................................ 10
7.6 AMENDMENT OF BYLAWS........................................................................ 10
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ARTICLE 1
An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.
Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as expressly provided in a resolution of the Board of Directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons.
Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the corporation.
Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his or her absence by the Vice Chairman of the Board, if any, or in his or her absence by the President, or in his or her absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
Except as otherwise provided by the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law,
the certificate of incorporation or these Bylaws, be decided by the vote of the holders of shares of stock having a majority of the votes which could be cast by the holders of all shares of stock entitled to vote thereon which are present in person or represented by proxy at the meeting.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
(60) days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.
Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2
The Board of Directors shall consist of three (3) or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors need not be stockholders.
The Board of Directors shall initially consist of the persons named as directors in the Certificate of Incorporation or as elected by the sole incorporator, and each director so elected shall hold office until the first annual meeting of stockholders or until his or her successor is elected and qualified. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholder shall elect directors of whom shall hold office for a term of one (1) year or until his or her successor is elected and qualified. Any director may resign at any time upon written notice to the corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced or until his or her successor is elected and qualified.
Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given.
Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the President, any Vice President, the Secretary, or by any member of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four (24) hours before the special meeting.
Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Bylaw shall constitute presence in person at such meeting.
At all meetings of the Board of Directors a majority of the whole Board of Directors shall constitute a quorum for the transaction of business. Except in cases in which the Certificate of Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his or her absence by the Vice Chairman of the Board, if any, or in his or her absence by the President, or in his or her absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.
ARTICLE 3
The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the corporation. The Board of Directors may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it.
Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article 3 of these Bylaws.
ARTICLE 4
The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board and a Vice Chairman of the Board from among its members. The Board of Directors may also choose one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation. Any number
of offices may be held by the same person. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.
The officers of the corporation shall have such powers and duties in the management of the corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties.
ARTICLE 5
Every holder of stock shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the corporation, certifying the number of shares owned by him or her in the corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.
The corporation may issued a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
ARTICLE 6
The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as is presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding") by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board of Directors of the corporation.
The corporation shall pay the expenses incurred in defending any Proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise.
If a claim for indemnification or payment of expenses under this Article is not paid in full within sixty (60) days after a written claim therefor has been received by the corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
The rights conferred on any person by this Article 6 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
The corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non- profit enterprise.
Any repeal or modification of the foregoing provisions of this Article 6 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE 7
The fiscal year of the corporation shall be determined by resolution of the Board of Directors.
The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.
Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.
No contract or transaction between the corporation and one (1) or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other
organization in which one (1) or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith, authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
Any records maintained by the corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.
These Bylaws may be altered or repealed, and new Bylaws made, by the Board of Directors, but the stockholders may make additional Bylaws and may alter and repeal any Bylaws whether adopted by them or otherwise.
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of June 22 1998, by and among Replicase, Inc., a Delaware corporation (the "Company"), and the parties listed on Schedule 1 attached hereto.
WHEREAS, Mark Pincus, a resident of the State of California, Cadir Lee, a resident of the State of California, Scott Dale, a resident of the State of California and Sunil Paul, a resident of the State of California (collectively, the "Series A Stockholders"), hold all of the outstanding Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Stock"), of the Company;
WHEREAS, by entering into this Agreement, the Company wishes to provide to the Series A Stockholders certain registration rights with respect to the Series A Stock;
WHEREAS, the Company intends that such registration rights shall be subordinate to the registration rights granted to Investors under that certain Registration Rights Agreement, dated as of the date hereof, by and among the Company and the Investors ("Investor Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Common Shares" means the shares of the common stock, par value $0.0001 per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
"Holder" means a Series A Stockholder (to the extent that such stockholder is a holder of Registrable Securities) or any assignee thereof in accordance with Section 11.
"Investors" means collectively Accel VI, L.P., Accel Internet Fund II, L.P., Accel Keiretsu VI, L.P., Accel Investors '98 L.P., Softbank Technology Advisors Fund, L.P., Softbank Technology Ventures IV, Flatiron Partners, WHP Partners, and Ronald Conway.
"Investor Rights Agreement" shall have the meaning ascribed thereto in the recitals hereof.
"Majority in interest of the Holders" means Holders holding a majority of the Registrable Securities held by all Holders.
"Person" means any individual, partnership, joint venture, corporation, limited liability company, association, trust or any other entity or organization.
"Preferred Stock" means the Series A Stock.
"Qualifying Request" means a request from one or more Holders owning in the aggregate at least ten percent (10%) of the Registrable Securities held by the Holders.
"register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.
"Registrable Securities" means (i) any Common Shares issuable (without
regard to any restriction or conversion that may be applicable to any particular
holder of Preferred Stock) or issued upon conversion of the Preferred Stock, and
(ii) any Common Shares issued (or issuable upon conversion or exercise of any
warrant, right or other securities which is issued) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, or upon
conversion of, such Preferred Stock, Common Shares, warrants, rights or other
securities; provided, however, that any shares of Preferred Stock or Common
Shares sold by a Person in a transaction in which such Person's rights under
this Agreement are not assigned pursuant to Section 11 below shall cease to be
Registrable Securities from and after the time of such sale.
The number of shares of "Registrable Securities then outstanding" shall be determined by the number of Common Shares outstanding, and the number of Common Shares issuable, which are Registrable Securities.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Stock" has the meaning ascribed thereto in the recitals above.
"Series A Stockholder" has the meaning ascribed thereto in the recitals above.
"Stockholders' Rights Agreement" means that certain Stockholders' Rights Agreement, by and among the Company and each of the Series A Stockholders, dated June 19, 1998.
"Violation" means any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement under this Agreement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents filed under state securities or "blue sky" laws in connection therewith, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.
2. Request for Registration.
(a) If at any time more than one hundred eighty (180) days after
the initial public offering of the Company's securities, the Company shall
receive a written Qualifying Request that the Company file a registration
statement under the Securities Act, then the Company shall, within ten (10) days
of the receipt thereof, give written notice of such request to all Holders and
shall, subject to the limitations of Section 2(b) below, effect as soon as
practicable, and in any event within sixty (60) days of the receipt of such
request, the registration under the Securities Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 19 below;
provided, however, that (i) Registrable Securities having at least a proposed
aggregate offering price of $3,000,000 are to be registered, and (ii) the
Company shall be obligated to effect only two (2) registrations pursuant to this
Section 2(b); provided, further, that such notice shall be provided to all
Investors holding registrable securities under the Investor Rights Agreement in
accordance with the notice provisions of the Investor Rights Agreement who shall
have participation rights in such registration under this section 2(a) equal to
the Holders; provided, further, that in the event that a written qualifying
request (as that term is defined in the Investor Rights Agreement) is made by
Investors prior to the Company filing a registration statement in accordance
with a Qualifying Request made under this Section 2(a), such Qualifying Request
will be deemed withdrawn and shall not be consummated. Expect as otherwise
provided in Section 6 hereof, registrations which are not consummated shall not
be counted for this purpose.
(b) If Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company and the Company shall include such information in the written notice referred to in Section 2(a). In such event, the right of any Holder to include such Holder's Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed between the Holders making the Qualifying Request and such Holder) to the extent provided herein; provided, however, that each Investor holding registered securities shall be eligible to participate in such underwriting and the Holders' rights to participate in such underwriting will be subordinate in all respects to Investor's rights to participate in such underwriting. A majority in interest of the Holders and Investors participating in the underwriting shall, after consultation with the Board of Directors of the Company, select the managing underwriter or underwriters in such underwriting, such underwriter(s) to be reasonably satisfactory to the Company. All Holders and Investors proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 4(f)) enter into an underwriting agreement in customary form with the underwriter or underwriters so selected or such underwriting; provided, however, that no such Holder or Investor shall be required to make any representations or warranties except as they relate to such Holder's or Investor's ownership of shares and
authority to enter into the underwriting agreement and to such Holder's or Investor's intended method of distribution, and the liability of such Holder or Investor shall be limited to an amount equal to the net proceeds from the offering received by such Holder or Investor. Notwithstanding any other provision of this Section 2, if the underwriter advises the Holders and Investors in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Holders and Investors shall so advise the Company and the Company shall so advise all Holders or Investors of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated (i) first to the Investors, (ii) then to the Holders making the Qualifying Request, and (iii) thereafter among all other Holders thereof, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each such other Holder.
(c) In addition to any other rights to demand registration
pursuant to this Section 2, Holders shall have the right to demand on an
unlimited basis that the Company, at the Company's expense, include any or all
of their Registrable Securities, in a registration statement on Form S-3 under
the 1933 Act for the purpose of attempting to effect the public sale of such
shares; provided, however, that (i) such Holders making such a demand under this
Section 2(c) own in the aggregate at least five percent (5%) of the Registrable
Securities; (ii) Registrable Securities having at least a proposed aggregate
offering price of $1,000,000 are to be registered; (iii) Form S-3 is available
with respect to the Registrable Securities; and (iv) the Company shall not be
required to prepare and file a registration statement on Form S-3 for the
purpose of attempting to effect the public sale of shares as provided for in
this Section 2(c) more than once in any six (6) month period. The other terms
and conditions relating to a demand registration referred to in this Section 2,
including, without limitation, any subordination to the rights of Investors
shall be applicable to a demand registration referred to in this Section 2(c),
as the same may be applicable.
(d) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2, a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed by reason of a material pending transaction and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of such Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period.
3. Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for holders of the Company's equity securities other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-8 relating solely to the sale of securities to participants in a Company stock plan or to other compensatory arrangements to the extent
includable on Form S-8, or a registration on Form S-4), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 19, the Company shall,
subject to the provisions of Section 8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered. The Company shall have no obligation under this
Section 3 to make any offering of its securities, or to complete an offering of
its securities that it proposes to make, and shall incur no liability to any
Holder for its failure to do so.
4. Obligations of the Company. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities being registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days or until the Holders have completed the distribution referred to in such registration statement, whichever occurs first (but in any event for at least any period required under the Securities Act); provided, however, that before filing such registration statement or any amendments thereto, the Company will furnish to the Holders copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as Holders may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or "blue sky" laws of such states or jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto (i) to qualify to do business in any state or jurisdiction where it would not otherwise be required to qualify but for the requirements of this clause (d), or (ii) to file a general consent to service of process in any such state or jurisdiction.
(e) Use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the Company's business or operations to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities.
(f) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.
(h) Notify each Holder of Registrable Securities covered by such
registration statement and such Holder's underwriters, if any, and confirm such
advice in writing: (i) when the registration statement has become effective,
(ii) when any post-effective amendment to the registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement to
the registration statement or prospectus or for additional information.
(i) Notify each Holder of Registrable Securities if at any time the SEC should institute or threaten to institute any proceedings for the purpose of issuing, or should issue, a stop order suspending the effectiveness of the registration statement. Upon the occurrence of any of the events mentioned in the preceding sentence, the Company will use its best efforts to prevent the issuance of any such stop order or to obtain the withdrawal thereof as soon as possible. The Company will advise each Holder of Registrable Securities promptly of any order or communication of any public board or body addressed to the Company suspending or threatening to suspend the qualification of any Registrable Securities for sale in any jurisdiction.
(j) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, (i) on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and
(ii) on the date that the registration statement with respect to such securities becomes effective, a "comfort" letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, and, if such securities are being sold through underwriters, a reaffirmation of such letter on the date that such Registrable Securities are delivered to the underwriters for sale.
(k) As soon as practicable after the effective date of the registration statement, and in any event within sixteen (16) months thereafter, make "generally available to its security holders" (within the meaning of Rule 158 under the Securities Act) an earning statement (which need not be audited) covering a period of at least twelve (12) months beginning after the effective date of the registration statement and otherwise complying with Section 11(a) of the Securities Act.
5. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. If any registration statement or comparable statement under the Securities Act refers to a Holder or any of its affiliates, by name or otherwise, as the holder of any securities of the Company then, unless counsel to the Company advises the Company that the Securities Act requires that such reference be included in any such statement, each such Holder shall have the right to require the deletion of such reference to itself and its affiliates.
6. Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions relating to Registrable Securities,
incurred in connection with registrations, filing or qualifications pursuant to
Section 2, including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel (selected by the Holders holding a majority of the Registrable
Securities being registered) for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay the
fees and disbursements of counsel for the Holders in connection with any
registration begun pursuant to Section 2 if the registration request
subsequently is withdrawn at the request of the Holders of Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses pro rata), unless the Holders holding a majority of Registrable
Securities then outstanding agree to forfeit one (1) demand registration
pursuant to Section 2; provided further, however, that if at the time of such
withdrawal, (a) the Holders have learned of a material adverse change in the
condition (financial or otherwise), business or prospects of the Company from
that known to the Holders at the time of their request or (b) there has occurred
a material adverse change in marketing factors related to the sale of
Registrable
Securities to the public from those existing at the time of the Holders' request, then the Holders shall not forfeit any demand registration rights and shall retain their rights pursuant to Section 2.
7. Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 3 for each Holder, including without limitation all registration, filing and qualification fees, printers' and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders (selected by the Holders of a majority of the Registrable Securities being registered), but excluding underwriting discounts and commissions relating to Registrable Securities.
8. Underwriting Requirements. In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it; provided, however, that no Holder participating in such underwriting shall be required to make any representations or warranties except as they relate to such Holder's ownership of shares and authority to enter into the underwriting agreement and to such Holder's intended method of distribution, and the liability of such Holder shall be limited to an amount equal to the net proceeds from the offering received by such Holder. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be sold (other than by the Company) that the underwriters reasonably believe compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering; provided, that, the number of remaining shares to be included in the underwriting shall be allocated (i) first to the Investors participating in such underwriting, (ii) then to Holders of Registrable Securities, and (ii) thereafter among all other remaining selling shareholders.
9. Indemnification. In the event any Registrable Securities are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, its heirs, personal representatives and assigns, each of such Holder's partners and members, and each of such Holder's partners' and members' officers, directors, employees and affiliates, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon a Violation (provided,
however, that the Company will not be required to indemnify any of the foregoing Persons on account of any losses, claims, damages or liabilities arising from a Violation if and to the extent that such Violation was made in a preliminary prospectus and was corrected in a subsequent prospectus that was required by law to be delivered to the Person making the claim with respect to which indemnification is sought hereunder (and such subsequent prospectus was made available by the Company to permit delivery of such prospectus in a timely manner), and such subsequent prospectus was not so delivered to such Person); and the Company will pay to each such indemnified party, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case to a particular indemnified party for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by or on behalf of such indemnified party.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling Person of any such underwriter or other Holder, against any losses,
claims damages or liabilities (joint or several) to which any of the foregoing
Persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any Person intended to be indemnified pursuant to this
Section 9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and provided further, that, in no event shall the
liability of any Holder under this Section 9(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under the Section 9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnifying party under this Section 9 except if, and only to the extent that, the indemnifying party is actually prejudiced thereby; and such failure to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 9.
(d) The obligations of the Company and Holders under this
Section 9 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Agreement and otherwise.
(e) Any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party.
(f) If for any reason the foregoing indemnity is unavailable, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything to the contrary in this Section 9, no Holder shall be required, pursuant to this Section 9, to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the losses, claims, damages,
liabilities or expenses of the indemnified party relate.
10. Reports Under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public.
(b) uses its commercially reasonable efforts to take such action as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 under the Securities Act (at any time after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned in whole or in part by a Holder, provided that such assignee delivers to the Company a written instrument by which such assignee agrees to be bound by the obligations imposed on Holders under (i) this Agreement to the same extent as if such assignee was a party hereto, and (ii) the Stockholders Rights Agreement to the same extent as if such transferee or assignee was a party thereto.
12. Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders owning in the aggregate at least a majority of the Registrable Securities enter into any agreement with any holder or prospective holder of any securities of the Company
which would allow such holder or prospective holder (a) to include such securities in any registration filed under this Agreement, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such Holder's securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to request a registration.
13. "Market Stand-Off" Agreement". Each Holder hereby agrees that, during the period of ninety (90) days following the effective date of a registration statement of the Company filed under the Securities Act in connection with an underwritten offering, it shall not, to the extent requested by the Company and such underwriter, sell or otherwise transfer or dispose of (other than to donees or partners who agree to be similarly bound) any Registrable Securities held by it except Registrable Securities included in such registration; provided, however, that:
(a) such agreement shall be applicable only to a registration statement initiated by the Company which covers shares of Common Shares or other securities of the Company to be sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company and all other Persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements.
14. Amendment; Waiver. In connection with the granting of registration rights to any other Person as contemplated under Section 12 hence, any provision of this Agreement may be amended in connection therewith only with the written consent of the Company and the Holders of a majority of the Registrable Securities then outstanding. In all other instances, any provision of this Agreement may be amended only with the written consent of the Holders owning in the aggregate at least a majority of the Registrable Securities held by all Holders. The observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party to be charged. Any amendment or waiver effected in accordance with this Section 14 shall be binding upon each holder of Registrable Securities at the time outstanding, each future holder of all such securities, and the Company.
15. Changes in Registrable Securities. If, and as often as, there are any changes in the Registrable Securities by way of stock split, stock divided, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions of this Agreement, as may be required, so that the rights and privileges granted hereby shall continue with respect to the Registrable Securities as so changed. Without limiting the generality of the foregoing, the Company will require any successor by merger or consolidation to assume and agree to be bound by the terms of this Agreement, as a condition to any such merger or
consolidation.
16. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than the parties hereto and their respective successors and assign, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein.
17. Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.
18. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
19. Notices. All notices under this Agreement shall be in writing and shall be deemed to have been delivered personally, or, if sent by an overnight delivery service maintaining records of receipt or by telecopier or other electronic means of written communication, on the first business day after it is sent. Notices shall be addressed as follows or to such other address as the parties shall specify by written notice:
If to the Company:
Replicase, Inc.
1779 Woodside Road
Suite 204
Redwood City, CA 94061
Attn: Mark Pincus
Telephone: (650) 369-5211
Facsimile: (650) 368-5221
with a copy to:
Michael E. Cutler, Esq.
Covington & Burling
P.O. Box 7566
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044-7566
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
If to a Holder, to the address set forth on Schedule 1 attached hereto.
20. Severability. Any invalidity, illegality or limitation on the enforceability of this Agreement or any part thereof, by any party whether arising by reason of the law of the respective party's domicile or otherwise, shall in no way affect or impair the validity, legality or enforceability of this Agreement with respect to other parties. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
21. Title and Subtitles. The titles of the Sections of this Agreement are for convenience of reference only and are not be considered in construing this Agreement.
22. Delays or Omissions; Remedies Cumulative. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the parties, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a party of any breach or default under this Agreement, or any waiver by a party of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to a party, shall be cumulative and not alternative.
23. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
24. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.
REPLICASE, INC.
By: /s/ Mark Pincus
---------------------------------
Mark Pincus
President & CEO
|
PURCHASERS
EXHIBIT 4.3
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
WHEREAS, certain of the Investors (as defined in Section 1 hereof) possess certain registration rights and other rights pursuant to a Registration Rights Agreement dated as of June 22, 1998, between the Company and such Investors (the "1998 Agreement"), whereby such Investors received certain registration rights in connection with the purchase of the Company's Series B Convertible Preferred Stock, par value $0.0001 per share (the "Series B Stock"); and
WHEREAS, the 1998 Agreement provided that it could be amended, discharged or terminated under certain circumstances; and
WHEREAS, the undersigned Investors who were a party to the 1998 Agreement desire to terminate the 1998 Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the 1998 Agreement; and
WHEREAS, the Company and certain of the Investors have entered into a Series C Convertible Preferred Stock Purchase Agreement (the "Series C Purchase Agreement") of even date herewith pursuant to which the Company desires to sell to such Investors and the Investors desire to purchase from the Company shares of the Company's Series C Convertible Preferred Stock, par value $0.0001 per share (the "Series C Stock"); and
WHEREAS, a condition to the Series C Investors' obligations under the Series C Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors with certain rights to register shares of the Company's common stock issuable upon conversion of shares of the Company's Series C Stock; and
WHEREAS, the Company and the prior Investors desire to induce the Series C Investors to purchase shares of Series C Stock pursuant to the Series C Purchase Agreement by agreeing to the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Common Shares" means the shares of common stock, par value $0.0001 per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
"Holder" means an Investor (to the extent that such Investor is a holder of Registrable Securities) or any assignee thereof in accordance with Section 11.
"Investors" shall mean persons who purchased shares of Series C Stock pursuant to the Series C Purchase Agreement or who possessed registration and other rights pursuant to the 1998 Agreement immediately prior to its termination hereby.
"Majority in interest of the Holders" means Holders holding a majority of the Registrable Securities held by all Holders.
"Person" means any individual, partnership, joint venture, corporation, limited liability company, association, trust or any other entity or organization.
"Preferred Stock" means the Series B Stock and the Series C Stock.
"Qualified IPO" means a firm commitment underwritten public offering by the Company of shares of Common Stock (i) pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended (or any successor form) and (ii) with a pre-money valuation of the Company of at least $125 million and resulting in gross proceeds to the Company of $15 million.
"Qualifying Request" means a request from one or more Holders owning in the aggregate at least thirty percent (30%) of the Registrable Securities held by the Holders.
"register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.
"Registrable Securities" means (i) any Common Shares issuable (without
regard to any restriction or conversion that may be applicable to any particular
holder of Preferred Stock) or issued upon conversion of the Preferred Stock, and
(ii) any Common Shares issued (or issuable upon conversion or exercise of any
warrant, right or other securities which is issued) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, or upon
conversion of, such Preferred Stock, Common Shares, warrants, rights or other
securities; provided, however, that any shares of Preferred Stock or Common
Shares sold by a Person in a transaction in which such Person's rights under
this Agreement are not assigned pursuant to Section 11 below shall cease to be
Registrable Securities from and after the time of such sale.
The number of shares of "Registrable Securities then outstanding" shall be determined by the number of Common Shares outstanding, and the number of Common Shares issuable, which are Registrable Securities.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Stockholders" means Mark Pincus, a resident of the State of California, Cadir Lee, a resident of the State of California, Scott Dale, a resident of the State of California, and Sunil Paul, a resident of the State of California.
"Series B Stock" has the meaning ascribed thereto in the recitals above.
"Series C Purchase Agreement" has the meaning ascribed thereto in the recitals above.
"Series C Stock" has the meaning ascribed thereto in the recitals above.
"Stockholders' Rights Agreement" means that certain Amended and Restated Stockholders' Rights Agreement, by and among the Company and each of the Stockholders that are signatories thereto, of even date herewith.
"Violation" means any of the following statements, omissions or violations:
(i) any untrue statement or alleged untrue statement of a material fact
contained in a registration statement under this Agreement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or any documents filed under state securities or "blue
sky" laws in connection therewith, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law.
2. Request for Registration.
(a) If at any time which is the earlier of (i) more than one hundred
eighty (180) days after the initial public offering of the Company's securities
and (ii) June ____, 2002, the Company shall receive a written Qualifying Request
that the Company file a registration statement under the Securities Act, then
the Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations of
Section 2(b) below, effect as soon as practicable, and in any event within sixty
(60) days of the receipt of such request, the registration under the Securities
Act of all Registrable Securities which the Holders request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 19 below; provided, however, that (i) Registrable
Securities having at least a proposed aggregate offering price of $3,000,000 are
to be registered, and (ii) the Company shall be obligated to effect only two (2)
registrations pursuant to this Section 2(a). Except as otherwise provided in
Section 6 hereof, registrations which are not consummated shall not be counted
for this purpose.
(b) If Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company and
the Company shall include such information in the written notice referred to in
Section 2(a). In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed between the Holders making the Qualifying Request and such Holder) to the extent provided herein. A majority in interest of the Holders participating in the underwriting shall, after consultation with the Board of Directors of the Company, select the managing underwriter or underwriters in such underwriting, such underwriter(s) to be reasonably satisfactory to the Company. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 4(f)) enter into an underwriting agreement in customary form with the underwriter or underwriters so selected for such underwriting: provided, however, that no such Holder shall be required to make any representations or warranties except as they relate to such Holder's ownership of shares and authority to enter into the underwriting agreement and to such Holder's intended method of distribution, and the liability of such Holder shall be limited to an amount equal to the net proceeds from the offering received by such Holder. Notwithstanding any other provision of this Section 2, if the underwriter advises the Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Holders shall so advise the Company and the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated (i) first to the Holders making the Qualifying Request, and (ii) thereafter among all other Holders thereof, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each such other Holder.
(c) In addition to any other rights to demand registration pursuant to this Section 2, Holders shall have the right to demand on an unlimited basis that the Company, at the Company's expense, include any or all of their Registrable Securities, in a registration statement on Form S-3 under the 1933 Act for the purpose of attempting to effect the public sale of such shares; provided, however, that (i) such Holders making such a demand under this Section 2(c) own in the aggregate at least five percent (5%) of the Registrable Securities; (ii) Registrable Securities having at least a proposed aggregate offering price of $1,000,000 are to be registered; (iii) Form S-3 is available with respect to the Registrable Securities; and (iv) the Company shall not be required to prepare and file a registration statement on Form S-3 for the purpose of attempting to effect the public sale of shares as provided for in this Section 2(c) more than once in any six (6) month period. The other terms and conditions relating to a demand registration referred to in this Section 2 shall be applicable to a demand registration referred to in this Section 2 shall be applicable to a demand registration referred to in this Section 2(c), as the same may be applicable.
(d) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2, a certificate signed by the President of the Company stating that in the good faith judgement of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed by reason of a material pending transaction and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of such Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) months period.
3. Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for holders of the Company's equity securities other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-8 relating solely to the sale of securities to participants in a Company stock plan or to other compensatory arrangements to the extent includable on Form S-8, or a registration on Form S-4), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 19, the Company shall, subject to the provisions of Section 8, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. The Company shall have no obligation under this Section 3 to make any offering of its securities, or to complete an offering of its securities that it proposes to make, and shall incur no liability to any Holder for its failure to do so.
4. Obligations of the Company. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities being registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days or until the Holders have completed the distribution referred to in such registration statement, whichever occurs first (but in any event for at least any period required under the Securities Act); provided that before filing such registration statement or any amendments thereto, the Company will furnish to the Holders copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as Holders may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or "blue sky" laws of such states or jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto (i) to qualify to do business in any state or jurisdiction where it would not otherwise be required to qualify but for the
requirements of this clause (d), or (ii) to file a general consent to service of process in any such state or jurisdiction.
(e) Use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the Company's business or operations to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities.
(f) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.
(h) Notify each Holder of Registrable Securities covered by such
registration statement and such Holder's underwriters, if any, and confirm such
advice in writing: (i) when the registration statement has become effective,
(ii) when any post-effective amendment to the registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement
to the registration statement or prospectus or for additional information.
(i) Notify each Holder of Registrable Securities if at any time the SEC should institute or threaten to institute any proceedings for the purpose of issuing, or should issue, a stop order suspending the effectiveness of the registration statement. Upon the occurrence of any of the events mentioned in the preceding sentence, the Company will use its best efforts to prevent the issuance of any such stop order or to obtain the withdrawal thereof as soon as possible. The Company will advise each Holder of Registrable Securities promptly of any order or communication of any public board or body addressed to the Company suspending or threatening to suspend the qualification of any Registrable Securities for sale in any jurisdiction.
(j) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, (i) on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) on the date that the registration statement with respect to such securities becomes effective, a "comfort" letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration
of Registrable Securities, and, if such securities are being sold through underwriters, a reaffirmation of such letter on the date that such Registrable Securities are delivered to the underwriters for sale.
(k) As soon as practicable after the effective date of the registration statement, and in any event within sixteen (16) months thereafter, make "generally available to its security holders" (within the meaning of Rule 158 under the Securities Act) an earning statement (which need not be audited) covering a period of at least twelve (12) months beginning after the effective date of the registration statement and otherwise complying with Section 11(a) of the Securities Act.
5. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. If any registration statement or comparable statement under the Securities Act refers to an Investor or any of its affiliates, by name or otherwise, as the holder of any securities of the Company then, unless counsel to the Company advises the Company that the Securities Act requires that such reference be included in any such statement, each such Holder shall have the right to require the deletion of such reference to itself and its affiliates.
6. Expenses of Demand Registration. All expenses, other than underwriting discounts and commissions relating to Registrable Securities, incurred in connection with registrations, filing or qualifications pursuant to Section 2, including, without limitation, all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel (selected by the Holders holding a majority of the Registrable Securities being registered) for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay the fees and disbursements of counsel for the Holders in connection with any registration begun pursuant to Section 2 if the registration request subsequently is withdrawn at the request of the Holders of Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata), unless the Holders holding a majority of Registrable Securities then outstanding agree to forfeit one (1) demand registration pursuant to Section 2; provided further, however, that if at the time of such withdrawal, (a) the Holders have learned of a material adverse change in the condition (financial or otherwise), business or prospects of the Company from that known to the Holders at the time of their request or (b) there has occurred a material adverse change in marketing factors related to the sale of Registrable Securities to the public from those existing at the time of the Holders' request, then the Holders shall not forfeit any demand registration rights and shall retain their rights pursuant to Section 2.
7. Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 3 for each Holder, including without limitation all registration, filing and qualification fees, printers' and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling
Holders (selected by the Holders of a majority of the Registrable Securities being registered), but excluding underwriting discounts and commissions relating to Registrable Securities.
8. Underwriting Requirements. In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it or by the persons entitled to select the underwriters; provided, however, that no Holder participating in such underwriting shall be required to make any representations or warranties except as they relate to such Holder's ownership of shares and authority to enter into the underwriting agreement and to such Holder's intended method of distribution, and the liability of such Holder shall be limited to an amount equal to the net proceeds from the offering received by such Holder. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be sold (other than by the Company) that the underwriters reasonably believe compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering; provided, that, the number of remaining shares to be included in the underwriting shall be allocated (i) first to the Holders of Registrable Securities (excluding Holders of Registrable Securities who are also Series A Stockholders, employees or directors of the Company), (ii) second to the Holders of Registrable Securities who are also Series A Stockholders, employees or directors of the Company, and (iii) thereafter among all other remaining selling stockholders. Notwithstanding the forgoing, in no event shall the amount of the securities of the selling Holders included in the offering be reduced below twenty percent (20%) of the total amount of the securities to be included in such offering, unless such offering is the initial public offering of the Company's securities, in which case the selling Holders may be completely excluded if the managing underwriter makes the determination described above and no other stockholders' securities are included.
9. Indemnification. In the event any Registrable Securities are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, its heirs, personal representatives and assigns, each of such Holder's partners and members, and each of such Holder's partners' and members' officers, directors, employees and affiliates, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon a Violation (provided, however, that the Company will not be required to indemnify any of the foregoing Persons on account of any losses, claims, damages or liabilities arising from a Violation if and to the extent that such Violation was made in a preliminary prospectus and was corrected in a subsequent prospectus that was required by law to be delivered to the Person making the claim with respect to which indemnification is sought hereunder (and such subsequent prospectus was made available by the Company to permit delivery of such prospectus in a timely manner), and such subsequent prospectus was not so delivered to such
Person); and the Company will pay to each such indemnified party, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case to a particular indemnified party for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by or on behalf of such indemnified party.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each Person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
Person of any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing Persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by or on behalf of
such Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any Person intended to be indemnified pursuant to this Section 9(b),
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld; and
provided further, that, in no event shall the liability of any Holder under this
Section 9(b) exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by any indemnified party under this Section 9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party, would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the indemnified party under this Section 9 except if, and only to the extent that, the indemnifying party is actually prejudiced thereby; and such failure to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 9.
(d) The obligations of the Company and Holders under this Section 9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Agreement and otherwise.
(e) Any indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party.
(f) If for any reason the foregoing indemnity is unavailable, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i)
In such proportion as is appropriate to reflect the relative benefits received
by the indemnifying party on the one hand and the indemnified party on the other
(taking into consideration the fact that the provision of the registration
rights and indemnification hereunder was a material inducement to the Investors
to purchase Registrable Securities) or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand (taking into consideration the fact that the
provision of the registration rights and indemnification hereunder was a
material inducement to the Investors to purchase Registrable Securities) and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything to the contrary in this Section 9, no Holder shall be
required, pursuant to this Section 9, to contribute any amount in excess of the
net proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages, liabilities or
expenses of the indemnified party relate.
10. Reports Under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public;
(b) uses its commercially reasonable efforts to take such action as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that is has complied with the reporting requirements of Rule 144 under the Securities Act (at any time after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned in whole or in part by a Holder to one or more of its partners or affiliates or to one or more transferees or assignees of not less than five percent (5%) of all Registrable Securities held by a Holder, provided that such transferee or assignee delivers to the Company a written instrument by which such transferee or assignee agrees to be bound by the obligations imposed on Holders under (i) this Agreement to the same extent as if such transferee or assignee was a party hereto, and (ii) the Stockholders' Rights Agreement to the same extent as if such transferee or assignee was a party thereto. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Agreement.
12. Limitations on Subsequent Registration Rights; Existing Registrations Rights; Termination of Registration Rights.
(a) From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders owning in the aggregate at least a majority of the Registrable Securities enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under this Agreement, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such prospective holder's securities will not reduce the amount of the Registrable Securities of the Holders that there are no "registration rights" relating to securities of the Company that exist on the date hereof other than those provided herein and
those provided under that certain Registration Rights Agreement, dated as of June 22, 1998, by and among the Company and the Series A Stockholders.
(b) The right of any Holder to request registration or inclusion in any registration pursuant to Section 2 or Section 3 hereof shall terminate after the earlier of (i) seven (7) years following the closing of the initial public offering of Common Stock of the Company, or (ii) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder's shares of Registrable Securities during any ninety (90) day period.
13. "Market Stand-Off" Agreement". Each Holder hereby agrees that, during the period of ninety (90) days following the effective date of a registration statement of the Company filed under the Securities Act in connection with an underwritten offering, it shall not, to the extent requested by the Company and such underwriter, sell or otherwise transfer or dispose of (other than to donees or partners who agree to be similarly bound) any Registrable Securities held by it except Registrable Securities included in such registration; provided, however, that:
(a) such agreement shall be applicable only to a registration statement initiated by the Company which covers shares of Common Shares or other securities of the Company to be sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company and all other Persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements.
14. Amendment; Waiver. In connection with the granting of registration rights to any other Person as contemplated under Section 12 hence, any provision of this Agreement may be amended in connection therewith only with the written consent of the Company and the Holders of a majority of the Registrable Securities then outstanding. In all other instances, any provision of this Agreement may be amended only with the written consent of the Holders owning in the aggregate at least a majority of the Registrable Securities held by all Holders. The observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the party to be charged. Any amendment or waiver effected in accordance with this Section 14 shall be binding upon each holder of Registrable Securities at the time outstanding, each future holder of all such securities, and the Company.
15. Changes in Registrable Securities. If, and as often as, there are any changes in the Registrable Securities by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions of this Agreement, as may be required, so that the rights and privileges granted hereby shall continue with respect to the Registrable Securities as so changed. Without limiting the generality of the foregoing, the Company will require any successor by merger or consolidation to assume and agree to be bound by the terms of this Agreement, as a condition to any such merger or consolidation.
16. Subsequent Closings. In the event that the Company shall conduct subsequent sales of Series C Preferred Stock pursuant to and in accordance with the terms of the Series C Purchase Agreement, any holder of such shares of Series C Preferred Stock shall be deemed an Investor with all of the rights of an Investor under this Agreement; provided that as a condition thereto such Investor and the Company shall sign a counterpart signature page to this Agreement.
17. Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than the parties hereto and their respective successors and assign, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein.
18. Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware, without regard to the conflicts of laws provisions thereof.
19. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
20. Notices. All notices under this Agreement shall be in writing and shall be deemed to have been delivered personally, or, if sent by an overnight delivery service maintaining records of receipt or by telecopier or other electronic means of written communication, on the first business day after it is sent. Notices shall be addressed as follows or to such other address as the parties shall specify by written notice:
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA 94303
Attn: Mark Pincus
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
with a copy to:
Allison Leopold Tilley, Esq.
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Telephone: (650) 233-4518
Facsimile: (650) 233-4545
If to an Investor, to the address set forth on Schedule 1 attached hereto.
with a copy to:
Jon E. Gavenman
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 233-8539
Facsimile: (650) 233-8386
21. Severability. Any invalidity, illegality or limitation on the enforceability of this Agreement or any part thereof, by any party whether arising by reason of the law of the respective party's domicile or otherwise, shall in no way affect or impair the validity, legality or enforceability of this Agreement with respect to other parties. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
22. Title and Subtitles. The titles of the Sections of this Agreement are for convenience of reference only and are not be considered in construing this Agreement.
23. Delays or Omissions; Remedies Cumulative. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the parties, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by a party of any breach or default under this Agreement, or any waiver by a party of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to a party, shall be cumulative and not alternative.
24. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
25. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
26. Aggregation of Stock. All shares of Preferred Stock held or acquired by affiliated entities or persons shall be aggregated for the purpose of determining the availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.
TIOGA SYSTEMS, INC.
By _______________________________
Mark Pincus
President & CEO
By _______________________________
Its ______________________________
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Convertible Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of July 12, 1999 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company"), has entered into a Master Lease Agreement dated as of October 27, 1998, Equipment Schedule No. VL-3 and VL-4 dated as of July 12, 1999, and related Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder");
WHEREAS, the Company has granted the Warrantholder a Warrant dated as of October 27, 1998 in connection with the Leases; and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for the amendment to such Leases, the additional right to purchase shares of its Series C Convertible Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Leases and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, 27,511 fully paid and non- assessable shares of the Company's Series C Convertible Preferred Stock ("Preferred Stock") at a purchase price of $3.27148 per share (the "Exercise Price"). The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof.
Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period of five (5) years after the Effective Date, or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is earlier.
The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula:
Where: X = the number of shares of Preferred Stock to be issued
to the Warrantholder.
Y = the number of shares of Preferred Stock requested to
be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
|
For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a five (5) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the five (5) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
registration under the Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute then enforced, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered, listed or approved for listing on such domestic securities exchange, as the case may be.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant.
The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement.
The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows:
rights; (iii) there shall be any Merger Event; (iv) there shall be an initial public offering; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company.
All outstanding shares of Common Stock, Preferred Stock and any other securities were issued in full compliance with all Federal and state securities laws. In addition as of the date hereof:
(i) the authorized capital of the Company consists of (A) 31,000,000 shares of Common Stock, par value $0.0001 per share (the "Common Stock") of which, 6,533,380 shares are currently issued and outstanding, and (B) 15,657,708 shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"), 3,571,600 shares of which have been designated Series A Convertible Preferred Stock (the "Series A Preferred"), all of which are currently issued and outstanding, 7,346,108 shares of which have been designated Series B Convertible Preferred Stock (the "Series B Preferred"), all of which are currently issued and outstanding, and 4,700,000 shares of which have been designated Series C Convertible Preferred Stock (the "Series C Preferred"), of which 4,638,619 shares are currently issued and outstanding. The Series A Preferred, the Series B Preferred and the Series C Preferred are convertible, at the option of the holders thereof, into Common Stock according to the terms of the Certificate, as amended.
(ii) The Company has reserved 5,624,434 shares of Common Stock for issuance under its 1998 Stock Option Plan. Other than as described in this subsection (d), there are no options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company
(iii) In accordance with the terms of the Amended and Restated Stockholders' Rights Agreement dated as of June 14, 1999 between the Company' and the stockholders of the Company named therein, the holders of the Series B Preferred and Series C Preferred shall, subject to certain limited exceptions, have preemptive rights to purchase their pro rata share of any new issuances of the Company's capital stock.
This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
(a) such agreement shall be applicable only to a registration statement initiated by the Company which covers shares of Common Shares or other securities of the Company to be sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company and all other Persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
Company: TIOGA SYSTEMS, INC.
By /s/
-----------------------------------------
Title July 26, 1999
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Warrantholder: COMDISCO, INC.
By /s/ James Labe
------------------------------------------
Title President, Comdisco Ventures Division
--------------------------------------
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EXHIBIT I
NOTICE OF EXERCISE
To: _____________________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of the Series C Convertible Preferred Stock of Tioga Systems, Inc., pursuant to the terms of the Warrant Agreement dated the 12th day of July, 1999, (the 'Warrant Agreement') between Tioga Systems, Inc. and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Convertible Preferred Stock of Tioga Systems, Inc., the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of Series C Convertible Preferred Stock in the name of the undersigned or in such other name as is specified below.
Warrantholder: COMDISCO, INC.
By____________________________
Title_________________________
Date__________________________
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _______________________________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the Series C Convertible Preferred Stock of Tioga Systems, Inc., pursuant to the terms of the Warrant Agreement, and further acknowledges that ______ shares remain subject to purchase under the terms of the Warrant Agreement.
COMPANY: TIOGA SYSTEMS, INC.
By________________________________________
Title_____________________________________
Date______________________________________
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to
whose address is_____________________________________
Dated___________________________________________
Holder's Signature______________________________
Holder's Address________________________________
Signature Guaranteed:________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement.
EXHIBIT 4.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") has entered into a Master Lease Agreement dated as of October 27, 1998, Equipment Schedule No. VL-1 and VL-2 dated as of October 27, 1998, and related Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Leases, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Leases and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, that number of fully paid and non-assessable shares of the Company's Series C Preferred Stock ("Preferred Stock") equal to $500,000 multiplied by 3% divided by a purchase price equal to the average of $0.68747 and the price per share of the next round of financing which shall be defined as an initial public offering, acquisition or merger of the Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months from the date hereof, the price to be used for the price per share of the Next Round shall be based on a fairness opinion of valuation of the Company by an investment banking firm to be mutually agreed upon by the Company and Warrantholder and the Company shall pay for such opinion. In the event the Company and Warrantholder can not mutually agree on an investment banking firm to provide such fairness opinion of valuation, then each party shall select an investment bank of their choice (and at their own expense) and the valuation shall be the numeric average of the valuations received from the investment banking firms.
The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof.
Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence upon the close of the Next Round and shall be exercisable for a period of (i) seven (7) years or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is longer.
Notwithstanding the term of this Warrant Agreement as set forth above, the right to purchase Preferred Stock as granted shall expire, if not previously exercised, immediately upon the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first public offering of securities for its own account pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Initial Public Offering"), provided that the Preferred stock issuable to Warrantholder upon exercise hereof shall be included in such registration statement, and provided further that the underwriters so request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering is proposed within a reasonable period of time prior to the filing of a registration statement and if the Company fails to deliver such written notice within a reasonable period of time, anything to the contrary in this Warrant Agreement notwithstanding, the rights to purchase will not expire until ten (10) business days after the Company delivers such notice to the Warrantholder. Such notice shall also contain such details of the proposed Initial Public Offering as are reasonable in the circumstances and notice that this Warrant Agreement is expected to expire upon closing thereof. If such closing does not take place, the Company shall promptly notify the Warrantholder that such proposed transaction has been terminated. Anything to the contrary in this Warrant Agreement notwithstanding, the Warrantholder may rescind any exercise of its purchase rights promptly after such notice of termination of the proposed transaction if the exercise of warrants occurred after the Company notified the Warrantholder that the Initial Public Offering was proposed or if the exercise were otherwise precipitated by such proposed Initial Public Offering. In the event of such rescission, the Warrants will continue to be exercisable on the same terms and conditions.
The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
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For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering,and:
(a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21 ) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system
(or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant.
The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement.
The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows:
shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of preferred stock or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable) shall be applicable to the greatest extent possible.
winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company.
(i) the authorized capital of the Company consists of (A) 20,000,000 shares of Common Stock, par value $0.0001 per share (the "Common Stock") of which, 6,428,880 shares are currently issued and outstanding, and (B) 15,000,000 shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"), 3,571,600 shares of which have been designated Series A Convertible Preferred Stock (the "Series A Preferred"), all of which are currently issued and outstanding and 7,346,108 shares of which have been designated Series B Convertible Preferred Stock (the "Series B Preferred"), all of which are currently issued and outstanding. The Series A Preferred and the Series B Preferred are convertible, at the option of the holders thereof, into Common Stock at a current conversion ratio of 1:1.
(ii) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company.
(iii) In accordance with the terms of the Stockholders' Rights Agreement dated as of June 22, 1998 between the Company and the stockholders of the Company named therein, the holders of the Series B Preferred shall, subject to certain limited exceptions, have preemptive rights to purchase their pro rata share of any new issuances of the Company's capital stock.
This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend.
Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.
to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
-----------------------------------------
Title CEO
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WARRANTHOLDER: COMDISCO, INC.
By /s/ JAMES P. LABE
------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
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EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________________
1. The undersigned Warrantholder hereby elects to purchase _______ shares of the Series ___ Preferred Stock of ____________, pursuant to the terms of the Warrant Agreement dated the ___ day of ____________, 20__ (the "Warrant Agreement") between ____________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any.
2. In exercising its rights to purchase the Series __ Preferred Stock of ____________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement.
3. Please issue a certificate or certificates representing said shares of Series __ Preferred Stock in the name of the undersigned or in such other name as is specified below.
Warrantholder: COMDISCO, INC.
By_______________________________
Title____________________________
Date_____________________________
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase _____ shares of the Series __ Preferred Stock of ___________ pursuant to the terms of the Warrant Agreement, and further acknowledges that ____ shares remain subject to purchase under the terms of the Warrant Agreement.
COMPANY:
By_______________________________
Title____________________________
Date_____________________________
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to
whose address is________________________________________
Dated______________________________________________
Holder's Signature_________________________________
Holder's Address___________________________________
Signature Guaranteed:___________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement.
EXHIBIT 4.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") has entered into a Subordinated Loan And Security Agreement dated as of October 27, 1998, and related Subordinated Promissory Note(s) (collectively, the "Loans") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Loans, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Loans and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, that number of fully paid and non- assessable shares of the Company's Series C Preferred Stock ("Preferred Stock") equal to $1,000,000 multiplied by 13.5% divided by a purchase price equal to the average of $0.68747 and the price per share of the next round of financing which shall be defined as an initial public offering, acquisition or merger of the Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months from the date hereof, the price to be used for the price per share of the Next Round shall be based on a fairness opinion of valuation of the Company by an investment banking firm to be mutually agreed upon by the Company and Warrantholder and the Company shall pay for such opinion. In the event the Company and Warrantholder can not mutually agree on an investment banking firm to provide such fairness opinion of valuation, then each party shall select an investment bank of their choice (and at their own expense) and the valuation shall be the numeric average of the valuations received from the investment banking firms.
The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof.
Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the earlier of (a) the close of the Next Round or (b) October 27, 2000 and shall be exercisable for a period of (i) seven (7) years or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is longer.
Notwithstanding the term of this Warrant Agreement as set forth above, the right to purchase Preferred Stock as granted shall expire, if not previously exercised, immediately upon the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first public offering of securities for its own account pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Initial Public Offering"), provided that
the Preferred stock issuable to Warrantholder upon exercise hereof shall be included in such registration statement, and provided further that the underwriters so request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering is proposed within a reasonable period of time prior to the filing of a registration statement and if the Company fails to deliver such written notice within a reasonable period of time, anything to the contrary in this Warrant Agreement notwithstanding, the rights to purchase will not expire until ten (10) business days after the Company delivers such notice to the Warrantholder. Such notice shall also contain such details of the proposed Initial Public Offering as are reasonable in the circumstances and notice that this Warrant Agreement is expected to expire upon closing thereof. If such closing does not take place, the Company shall promptly notify the Warrantholder that such proposed transaction has been terminated. Anything to the contrary in this Warrant Agreement notwithstanding, the Warrantholder may rescind any exercise of its purchase rights promptly after such notice of termination of the proposed transaction if the exercise of warrants occurred after the Company notified the Warrantholder that the Initial Public Offering was proposed or if the exercise were otherwise precipitated by such proposed Initial Public Offering. In the event of such rescission, the Warrants will continue to be exercisable on the same terms and conditions.
The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit 11 (the "Acknowledgment of Exercise") indicating the number of shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula:
Y(A-B)
X = ------------
A
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
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B = the Exercise Price.
For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant.
The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement.
The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows:
Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company.
(i) the authorized capital of the Company consists of (A) 20,000,000 shares of Common Stock, par value $0.0001 per share (the "Common Stock") of which, 6,428,880 shares are currently issued and outstanding, and (B) 15,000,000 shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"), 3,571,600 shares of which have been designated
Series A Convertible Preferred Stock (the "Series A Preferred"), all of which are currently issued and outstanding and 7,346,108 shares of which have been designated Series 6 Convertible Preferred Stock (the "Series B Preferred"), all of which are currently issued and outstanding. The Series A Preferred and the Series B Preferred are convertible, at the option of the holders thereof, into Common Stock at a current conversion ratio of 1:1.
(ii) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company
(iii) In accordance with the terms of the Stockholders' Rights Agreement dated as of June 22, 1998 between the Company' and the stockholders of the Company named therein, the holders of the Series B Preferred shall, subject to certain limited exceptions, have preemptive rights to purchase their pro rata share of any new issuances of the Company's capital stock.
This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend.
Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.
certified mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by facsimile, (847) 518-5465 and (847) 518-5088 and (ii) to the Company at 1816 Embarcadero Road, Palo Alto, CA 94303, attention: Chief Financial Officer (and/or if by facsimile, (650) 565-8300 or at such other address as any such party may subsequently designate by written notice to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
---------------------------------------------
Title CEO
------------------------------------------
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WARRANTHOLDER: COMDISCO, INC.
By /s/ James P. Labe
---------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
-----------------------------------------
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EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________________
(1) The undersigned Warrantholder hereby elects to purchase ________ shares of the Series __ Preferred Stock of_______________ pursuant to the terms of the Warrant Agreement dated the __ day of _________ 2000 (the `Warrant Agreement') between _________________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series __ Preferred Stock of _________________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of Series __ Preferred Stock in the name of the undersigned or in such other name as is specified below.
Warrantholder: COMDISCO, INC.
By: _______________________
Title: _______________________
Date: _______________________
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _________________________________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase __________ shares of the Series __ Preferred Stock of ___________________ pursuant to the terms of the Warrant Agreement, and further acknowledges that _____________ shares remain subject to purchase under the terms of the Warrant Agreement.
Company:
By: _____________________________________
Title: __________________________________
Date: ___________________________________
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to
whose address is__________________________________________
Dated:__________________________
Holders Signature:______________
Holder's Address:_______________
Signature Guaranteed: ____________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement.
EXHIBIT 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") has entered into a Loan And Security Agreement dated as of October 27, 1998, and related Promissory Note(s) (collectively, the "Loans") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Loans, the right to purchase shares of its Series C Preferred Stock:
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Loans and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
The Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe to and purchase, from the Company, that number of fully paid and non- assessable shares of the Company's Series C Preferred Stock ("Preferred Stock") equal to $1,500,000 multiplied by 3% divided by a purchase price equal to the average of $0.68747 and the price per share of the next round of financing which shall be defined as an initial public offering, acquisition or merger of the Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months from the date hereof, the price to be used for the price per share of the Next Round shall be based on a fairness opinion of valuation of the Company by an investment banking firm to be mutually agreed upon by the Company and Warrantholder, and the Company shall pay for such opinion. In the event the Company and Warrantholder cannot mutually agree on an investment banking firm to provide such fairness opinion of valuation, then each party shall select an investment bank of its choice (and at its own expense), and the valuation shall be the numeric average of the valuations received from the investment banking firms.
The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof.
Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the earlier of (a) the close of the Next Round or (b) October 27, 2000 and shall be exercisable for a period of (i) seven (7) years or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is longer.
Notwithstanding the term of this Warrant Agreement as set forth above, the right to purchase Preferred Stock as granted shall expire, if not previously exercised, immediately upon the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first public offering of securities for its own account pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Initial Public Offering"), provided that
the Preferred Stock issuable to Warrantholder upon exercise hereof shall be included in such registration statement, and provided further that the underwriters so request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering is proposed within a reasonable period of time prior to the filing of a registration statement and if the Company fails to deliver such written notice within a reasonable period of time, anything to the contrary in this Warrant Agreement notwithstanding, the rights to purchase will not expire until ten (10) business days after the Company delivers such notice to the Warrantholder. Such notice shall also contain such details of the proposed Initial Public Offering as are reasonable in the circumstances and notice that this Warrant Agreement is expected to expire upon closing thereof. If such closing does not take place, the Company shall promptly notify the Warrantholder that such proposed transaction has been terminated. Anything to the contrary in this Warrant Agreement notwithstanding, the Warrantholder may rescind any exercise of its purchase rights promptly after such notice of termination of the proposed transaction if the exercise of warrants occurred after the Company notified the Warrantholder that the Initial Public Offering was proposed or if the exercise were otherwise precipitated by such proposed Initial Public Offering. In the event of such rescission, the Warrants will continue to be exercisable on the same terms and conditions.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula:
Y(A-B)
X = ------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
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For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with, the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to, the Effective Date hereof.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant.
The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement.
The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows:
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company.
(e) the authorized capital of the Company consists of (A) 20,000,000 shares of Common Stock, par value $0.0001 per share (the "Common Stock") of which, 6,428,880 shares are currently issued and outstanding, and (B) 15,000,000 shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"), 3,571,600 shares of which have been designated Series A Convertible Preferred Stock (the "Series A Preferred"), all of which are currently issued and outstanding and 7,346,108 shares of which have been designated Series B Convertible Preferred Stock (the "Series B Preferred"), all of which are currently issued and outstanding. The Series A Preferred and the Series B Preferred are convertible, at the option of the holders thereof, into Common Stock at a current conversion ratio of 1:1.
(i) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(ii) In accordance with the terms of the Stockholders' Rights Agreement dated as of June 22, 1998 between the Company and the stockholders of the Company named therein, the holders of the Series B Preferred shall, subject to certain limited exceptions, have preemptive rights to purchase their pro rata share of any new issuances of the Company's capital stock.
This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
(i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend.
Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
-------------------------------------------
Title CEO
----------------------------------------
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WARRANTHOLDER: COMDISCO, INC.
By /s/ JAMES P. LABE
-------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
----------------------------------------
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EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________
(1) The undersigned Warrantholder hereby elects to purchase __________ shares of the Series __ Preferred Stock of __________________________ pursuant to the terms of the Warrant Agreement dated the ____ day of __________, 200_ (the "Warrant Agreement') between ________________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series __ Preferred Stock of _________________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of Series __ Preferred Stock in the name of the undersigned or in such other name as is specified below.
Warrantholder: COMDISCO, INC.
By __________________________________
Title _______________________________
Date ________________________________
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase __________ shares of the Series __ Preferred Stock of ___________________________ pursuant to the terms of the Warrant Agreement, and further acknowledges that __________ shares remain subject to purchase under the terms of the Warrant Agreement.
TIOGA SYSTEMS, INC.
By _____________________________________
Title __________________________________
Date ___________________________________
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to
whose address is _______________________________________
Dated ______________________________
Holder's Signature _________________
Holder's Address ___________________
Signature Guaranteed: __________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement.
Exhibit 4.8
[Letterhead of COMDISCO]
FEDERAL EXPRESS
June 7, 1999
Mr. Mark Vranesh
Director of Finance
1816 Embarcadero Road
Palo Alto, CA 94303
Re: (3) Warrant Agreements Dated as of October 27, 1998 between Comdisco, Inc.
("Warrantholder") and Tioga Systems, Inc., ("Company") collectively the
("Warrants")
Dear Mark:
This letter is to confirm that the above referenced parties agree that the Series C Preferred Stock financing shall be considered the Next Round, as referenced in the Warrants and the resulting number of shares issuable to Warrantholder shall be as follows:
Equipment Lease Warrant Shares issuable 7,578
Secured Debt Warrant Shares issuable 22,733
Subordinated Debt Warrant Shares issuable 68,200
------
Grand Total 98,511
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Please indicate your acceptance of the above agreement by signing in the space provided below and returning these letters to me. We send you a fully executed copy in the next few days. If you have any questions or comments please do not hesitate to call me at (650) 234-1627.
Sincerely,
/s/ Vika Tonga ----------------- Vika Tonga Information Document Specialist |
ACCEPTED AND AGREED TO:
TIOGA SYSTEMS, INC. COMDISCO, INC.
By: Mark Vranesh By: James Labe
------------------ ---------------
Signature: /s/ Mark Vranesh Signature: /s/ James Labe
------------------- ----------------
Title: Dir. Fin./Gen. Sec. Title: President Comdisco
---------------------- Ventures Division
---------------------------
June 14, 1999
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Exhibit 4.9
THIS WARRANT IS NOT TRANSFERABLE. THIS WARRANT IS NOT TRANSFERABLE. ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
TIOGA SYSTEMS, INC.
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") is entering into a Sublease Agreement of even date herewith (the "Lease") with EXCITE, INC., (the "Warrantholder") under the Master Lease (the "Master Lease") dated March 14, 1997, between Martin/Campus Associates L.P. and Warrantholder; and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Lease, the right to purchase shares of its Series C Convertible Preferred Stock (the "Preferred Stock");
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such a Lease and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:
(a) This certifies that, for good and valuable consideration the Company, hereby grants to the Warrantholder, the right to subscribe for and purchase from the Company, 38,461 shares of fully paid and nonassessable shares (the "Warrant Shares") of the Company's Series C Preferred Stock at an exercise price of $6.50 per share (the "Exercise Price").
(b) This Warrant shall be exercisable at any time and from time to time during the period (the "Exercise Period") commencing on the date hereof and ending on November 5, 2001, or three (3) years from the effective date of the Company's initial public offering, whichever is earlier.
on which this Warrant shall have been surrendered and payment made for the Warrant Shares as aforesaid. A stock certificate or certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Warrantholder as promptly as practicable, and in any event within 10 days, thereafter. The stock certificate or certificates so delivered shall be in denominations of 100 shares each or such lesser or greater denominations as may be reasonably specified by the Warrantholder in the Exercise Form. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the stock certificate or certificates, deliver to the Warrantholder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant. No adjustments shall be made on Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable to holders of record of Preferred Stock prior to the date as of which the Warrantholder shall be deemed to be the record holder of such Warrant Shares.
Where X = the number of shares of Preferred Stock to be issued to
Warrantholder under this Section 2.1(b);
Y = the number of shares of Preferred Stock otherwise purchasable
under this Warrant (at the date of such calculation);
A = the fair market value of one share of the Company's Preferred
Stock (at the date of such calculation);
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. The fair market value of one share of Preferred
-----------------
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Stock ("Fair Market Value") shall be reasonably determined by the Company's Board of Directors.
certificate in a name other than that of the then Warrantholder as reflected upon the books of the Company.
"THIS WARRANT IS NOT TRANSFERABLE. ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
Except as otherwise permitted by this Section 3, each stock certificate for Warrant Shares issued upon the exercise of any Warrant and each stock certificate issued upon the direct or indirect transfer of any such Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
Notwithstanding the foregoing, the Warrantholder may require the Company to issue a stock certificate for Warrant Shares without a legend if (i) such Warrant Shares, as the case may be, have been registered for resale under the Securities Act or sold pursuant to Rule 144 under the Securities Act (or a successor rule thereto) or (ii) the Warrantholder has received an opinion of counsel reasonably satisfactory to the Company that such registration is not required with respect to such Warrant Shares.
The Company covenants and agrees that all Warrant Shares which are issued upon the exercise of this Warrant will, upon issuance, be validly issued, fully paid and nonassessable and free from all taxes, liens, security interests, charges and other encumbrances with respect to the issue thereof, other than taxes in respect of any transfer occurring contemporaneously with such issue. The Company further covenants and agrees that, during the Exercise Period, the Company will at all times have authorized and reserved, a sufficient number of shares of Preferred Stock and Common Stock issuable upon conversion thereof, to provide for the exercise of the rights represented by this Warrant.
With regard to the Warrant Shares, the Company shall grant the Warrantholder "piggyback" and such other registration rights as the Company shall grant to the investors in the Company's Series C Preferred Stock financing.
This Warrant has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder.
hereof or until the effective date of the Company's initial public offering, whichever is earlier. The Warrantholder also understands that any sale of its rights as the Warrantholder to purchase the Warrant Shares which might be made by it in reliance upon Rule 144 under the Securities Act may be made only in accordance with the terms and conditions of that Rule.
(a) such agreement shall be applicable only to a registration statement initiated by the Company which covers shares of Common Stock Shares or other securities of the Company to be sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company and all other individuals and entities registration rights (whether or not pursuant to this Agreement) enter into similar agreements.
Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of such bond or indemnification as the Company may require, and, in the case of such mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor. The term "Warrant" as used in this Agreement shall be deemed to include any Warrants issued in substitution or exchange for this Warrant.
The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary.
8.1 The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment as follows:
immediately after the effective date of subdivision or split-up, as the case may be, the number of shares of Common Stock to be delivered upon exercise of this Warrant will be increased so that the Warrantholder will be entitled to receive the number of shares of Preferred Stock that such Warrantholder would have owned immediately following such action had this Warrant been exercised immediately prior thereto, and the Exercise Price will be adjusted as provided below in paragraph (f).
In the event of
(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any Change of Control, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right and the amount and character of any such dividend, distribution or right and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, Change of Control, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization, Change of Control, dissolution, liquidation or winding-up. Such notice shall be mailed at least 20 days prior to the date therein specified, in the case of any date referred to in the foregoing subdivision (i), and at least 20 days prior to the date therein specified, in the case of the date referred to in the foregoing subdivision (ii).
As used herein, unless the context otherwise requires, the following terms have the following respective meanings:
(a) if to the Company, addressed to:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA 94301
Attention: Mark Vranesh
Telecopier: (650) 565-8300
With a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Jorge del Calvo
Telecopier: (650) 233-4545
(b) if to the Warrantholder, addressed to:
Excite@Home Corporation
425 Broadway
Redwood City, California 94063
Attn: General Counsel
with copies to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Jeffrey R. Vetter, Esq.
Except as otherwise provided herein, all such notices and communications shall be deemed to have been received on the date of delivery thereof, if delivered personally, or on the third Business Day after the mailing thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer.
Dated: August __, 1999.
EXCITE HOME CORPORATION TIOGA SYSTEMS, INC.
By [ILLEGIBLE] By /s/ Mark Vranesh
----------------
Title VP, FINANCE Title Corp. Sec./Dir. Fin.
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Exhibit A
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(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase Warrant Shares and (check one):
[_] herewith tenders payment for _______ of the Warrant Shares to the order of Tioga Systems, Inc. in the amount of $_________ in accordance with the terms of this Warrant; or
[_] herewith tenders this Warrant for _______ Warrant Shares pursuant to the Net Issue Exercise provisions of Section 2.1(b) of this Warrant
The undersigned requests that a certificate (or certificates) for such Warrant Shares be registered in the name of the undersigned and that such certificate (or certificates) be delivered to the undersigned's address below.
In exercising this Warrant, the undersigned hereby confirms and acknowledges that the Warrant Shares are being acquired solely for the account of the undersigned and not as a nominee for any other party, or for investment, and that the undersigned will not offer, sell or otherwise dispose of any such Warrant Shares except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.
Dated: ___________________.
(Signature)
(Print Name)
(Street Address)
(City) (State) (Zip Code)
If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder.
EXHIBIT 10.1
REPLICASE, INC.
1998 STOCK OPTION PLAN
(a) "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board of Directors in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Replicase, Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services and is compensated for such services, and any Director of the Company whether compensated for such services or not. If the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include Directors who are not compensated for their services or are paid only a Director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" means that the employment or consulting relationship with the Company, any Parent or Subsidiary is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the
Company. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract, including Company policies. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation The Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Optioned Stock" means the Common Stock subject to an Option.
(s) "Optionee" means an Employee or Consultant who receives an Option.
(t) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1998 Stock Option Plan.
(v) "Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in accordance with Section 12 below.
(x) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code.
If an Option expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an option exchange program, the unpurchased Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of an Option, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares are repurchased by the Company at their original purchase price, and the original purchaser of such Shares did not receive any benefits of ownership of such Shares, such Shares shall become available for future grant under the Plan. For purposes of the preceding sentence, voting rights shall not be considered a benefit of Share ownership.
(i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(m) of the Plan;
(ii) to select the Consultants and Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted hereunder;
(iv) to determine the number of Shares to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted hereunder;
(vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the purchase of unvested shares subject to such terms and conditions as the Administrator may determine; and
(x) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan.
(a) Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option may, if otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The
Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Optionee any right with respect to continuation of his or her employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of common equity securities required to be registered under Section 12 of the Exchange Act or upon the Plan being assumed by a corporation having a class of common equity securities required to be registered under Section 12 of the Exchange Act, the following limitations shall apply to grants of Options to Employees:
(i) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 11.
(ii) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 11), the cancelled Option shall be counted against the limit set forth in subsection (i) above. For this purpose, if the exercise price of an Option is reduced, such reduction will be treated as a cancellation of the Option and the grant of a new Option.
(a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant.
(B) granted to any other person, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote, receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 hereof.
Exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
or inheritance, but only to the extent that the Optionee was entitled to exercise the Option on the date of death. If, at the time of death, the Optionee was not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after the Optionee's death, the Optionee's estate or a person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
exercised, the Option shall terminate immediately prior to the consummation of such proposed action.
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.
The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
REPLICASE, INC.
1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Agreement.
((F1))
You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Stock Option Agreement. The Terms of your grant are set forth below:
Date of Grant ((F2))
Vesting Commencement Date ((F3))
Exercise Price per Share $0. 10 per share
Total Number of Shares Granted ((F4))
Total Exercise Price $((F5))
Type of Option: X Incentive Stock Option
------
------ Nonstatutory Stock Option
Term/Expiration Date: ((F61))
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The Shares subject to this Option shall vest according to the following schedule:
No Shares are currently vested 25% of the Shares subject to the Option (rounded down to the next whole number of shares) shall vest one year after the Vesting Commencement Date, and 1/48th of the Shares subject to the Option (rounded down to the next whole number of shares) shall vest on the first day of each month thereafter, so that all of the Shares shall be vested on the first day of the 48th month after the Vesting Commencement Date.
This Option may be exercised, to the extent vested, for thirty days after termination of Optionee's employment or consulting relationship. A longer period may be applicable, however, upon death or disability of Optionee as provided in the Plan, but in no event later than the Term/Expiration Date as provided above.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an ISO as defined in Section 422 of the Code.
(a) Subject to subsections 2(i)(b) through 2(i)(d) below, this Option shall be exercisable cumulatively according to the vesting schedule set out in the Notice of Grant. Shares subject to this Option shall vest based on continued employment of or consulting services by Optionee with the Company.
(b) This Option may not be exercised for a fraction of a Share.
(c) In the event of Optionee's death, disability or other termination of the employment or consulting relationship, the exercisability of the Option is governed by Sections 7, 8 and 9 below.
(d) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in the Notice of Grant.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which (A) in the case of Shares acquired pursuant to the exercise of a Company option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) to the extent permitted by the Administrator, delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the Exercise Price.
or if the method of payment for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, then the Option may also not be exercised. The Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation before allowing the Option to be exercised.
income tax withholding by the Company on the compensation income recognized by the Optionee.
REPLICASE, INC.
By:____________________________
Title:_________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1998 STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof. Optionee hereby accepts this Option subject to all of the terms and provisions hereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
Dated: _____________________ _________________________________
((F1))
Residence Address:
__________________________________
__________________________________
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EXHIBIT A
1998 STOCK OPTION PLAN
EXERCISE NOTICE
Replicase, Inc.
Attn: President
1816 Embarcadero Road
Palo Alto, CA 94303
Optionee shall enjoy rights as a stockholder until such time as Optionee disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.
otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.
Submitted by: Accepted by:
OPTIONEE: REPLICASE, INC.
_______________________________ By:____________________________
Its:___________________________
Address:
-------
_______________________________
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EXHIBIT B
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INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : REPLICASE, INC.
SECURITY : COMMON STOCK
AMOUNT :
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DATE :
In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.
Signature of Optionee:
Dated: __________________, 19__
EXHIBIT 10.2
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
(Adopted by the Board on February 15, 2000)
TABLE OF CONTENTS
Page
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SECTION 1. ESTABLISHMENT AND PURPOSE............................................................................. 1
SECTION 2. DEFINITIONS........................................................................................... 1
(a) "Affiliate"............................................................................................. 1
(b) "Award"................................................................................................. 1
(c) "Board of Directors".................................................................................... 1
(d) "Change in Control"..................................................................................... 1
(e) "Code".................................................................................................. 2
(f) "Committee"............................................................................................. 2
(g) "Company"............................................................................................... 2
(h) "Consultant"............................................................................................ 2
(i) "Employee".............................................................................................. 2
(j) "Exchange Act".......................................................................................... 2
(k) "Exercise Price"........................................................................................ 2
(l) "Fair Market Value"..................................................................................... 2
(m) "ISO"................................................................................................... 3
(n) "Nonstatutory Option"................................................................................... 3
(o) "Offeree"............................................................................................... 3
(p) "Option"................................................................................................ 3
(q) "Optionee".............................................................................................. 3
(r) "Outside Director"...................................................................................... 3
(s) "Parent"................................................................................................ 3
(t) "Participant"........................................................................................... 3
(u) "Plan".................................................................................................. 3
(v) "Purchase Price"........................................................................................ 3
(w) "Restricted Share"...................................................................................... 3
(x) "Restricted Share Agreement "........................................................................... 3
(y) "SAR"................................................................................................... 3
(z) "SAR Agreement"......................................................................................... 3
(aa) "Service"............................................................................................... 3
(bb) "Share"................................................................................................. 4
(cc) "Stock"................................................................................................. 4
(dd) "Stock Option Agreement"................................................................................ 4
(ee) "Stock Purchase Agreement".............................................................................. 4
(ff) "Stock Unit"............................................................................................ 4
(gg) "Stock Unit Agreement".................................................................................. 4
(hh) "Subsidiary"............................................................................................ 4
(ii) "Total and Permanent Disability"........................................................................ 4
SECTION 3. ADMINISTRATION........................................................................................ 4
(a) Committee Procedures.................................................................................... 4
(b) Committee Responsibilities.............................................................................. 4
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SECTION 4. ELIGIBILITY.......................................................................................... 6 (a) General Rule........................................................................................... 6 (b) Outside Directors...................................................................................... 6 (c) Limitation On Grants................................................................................... 6 (d) Ten-Percent Stockholders............................................................................... 6 (e) Attribution Rules...................................................................................... 7 (f) Outstanding Stock...................................................................................... 7 SECTION 5. STOCK SUBJECT TO PLAN................................................................................ 7 (a) Basic Limitation....................................................................................... 7 (b) Annual Increase in Shares.............................................................................. 7 (c) Additional Shares...................................................................................... 7 (d) Dividend Equivalents................................................................................... 7 SECTION 6. RESTRICTED SHARES.................................................................................... 8 (a) Restricted Stock Agreement............................................................................. 8 (b) Payment for Awards..................................................................................... 8 (c) Vesting................................................................................................ 8 (d) Voting and Dividend Rights............................................................................. 8 SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES........................................................ 8 (a) Duration of Offers and Nontransferability of Rights.................................................... 8 (b) Purchase Price......................................................................................... 9 (c) Withholding Taxes...................................................................................... 9 (d) Restrictions on Transfer of Shares..................................................................... 9 SECTION 8. TERMS AND CONDITIONS OF OPTIONS...................................................................... 9 (a) Stock Option Agreement................................................................................. 9 (b) Number of Shares....................................................................................... 9 (c) Exercise Price......................................................................................... 9 (d) Withholding Taxes...................................................................................... 9 (e) Exercisability and Term................................................................................ 9 (f) Nontransferability..................................................................................... 10 (g) Exercise of Options Upon Termination of Service........................................................ 10 (h) Effect of Change in Control............................................................................ 10 (i) Leaves of Absence...................................................................................... 10 (j) No Rights as a Stockholder............................................................................. 11 (k) Modification, Extension and Renewal of Options......................................................... 11 (l) Restrictions on Transfer of Shares..................................................................... 11 (m) Buyout Provisions...................................................................................... 11 SECTION 9. PAYMENT FOR SHARES................................................................................... 11 (a) General Rule........................................................................................... 11 (b) Surrender of Stock..................................................................................... 11 (c) Services Rendered...................................................................................... 11 (d) Cashless Exercise...................................................................................... 12 (e) Exercise/Pledge........................................................................................ 12 |
(f) Promissory Note.........................................................................................12 (g) Other Forms of Payment................................................................................. 12 SECTION 10. STOCK APPRECIATION RIGHTS........................................................................... 12 (a) SAR Agreement.......................................................................................... 12 (b) Number of Shares....................................................................................... 12 (c) Exercise Price......................................................................................... 12 (d) Exercisability and Term................................................................................ 12 (e) Effect of Change in Control............................................................................ 13 (f) Exercise of SARs....................................................................................... 13 (g) Modification or Assumption of SARs..................................................................... 13 SECTION 11. STOCK UNITS......................................................................................... 13 (a) Stock Unit Agreement................................................................................... 13 (b) Payment for Awards..................................................................................... 13 (c) Vesting Conditions..................................................................................... 13 (d) Voting and Dividend Rights............................................................................. 14 (e) Form and Time of Settlement of Stock Units............................................................. 14 (f) Death of Recipient..................................................................................... 14 (g) Creditors' Rights...................................................................................... 14 SECTION 12. PROTECTION AGAINST DILUTION......................................................................... 15 (a) Adjustments............................................................................................ 15 (b) Dissolution or Liquidation............................................................................. 15 (c) Reorganizations........................................................................................ 15 SECTION 13. DEFERRAL OF AWARDS.................................................................................. 16 SECTION 14. AWARDS UNDER OTHER PLANS............................................................................ 16 SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES............................................................ 16 (a) Effective Date......................................................................................... 16 (b) Elections to Receive NSOs, Restricted Shares or Stock Units............................................ 16 (c) Number and Terms of NSOs, Restricted Shares or Stock Units............................................. 17 SECTION 16. ADJUSTMENT OF SHARES................................................................................ 17 (a) General................................................................................................ 17 (b) Reorganizations........................................................................................ 17 (c) Reservation of Rights.................................................................................. 17 SECTION 17. LEGAL AND REGULATORY REQUIREMENTS................................................................... 18 SECTION 18. WITHHOLDING TAXES................................................................................... 18 (a) General................................................................................................ 18 (b) Share Withholding...................................................................................... 18 SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.................................................................... 18 (a) Scope of Limitation.................................................................................... 18 |
(b) Supersedes Other Provisions............................................................................ 18 SECTION 20. NO EMPLOYMENT RIGHTS................................................................................ 18 SECTION 21. DURATION AND AMENDMENTS............................................................................. 19 (a) Term of the Plan....................................................................................... 19 (b) Right to Amend or Terminate the Plan................................................................... 19 (c) Effect of Amendment or Termination..................................................................... 19 SECTION 22. EXECUTION........................................................................................... 19 |
(Adopted by the Board on February 15, 2000)
The Plan was adopted by the Board of Directors effective February 15, 2000. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units, Options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights.
(i) A change in the composition of the Board of Directors, as a result of which fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company twenty-four (24) months prior to such change; or
(B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the directors who had been directors of the Company twenty-four (24) months prior to such change and who were still in office at the time of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act) who, by the acquisition or aggregation of securities, is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having
the right to vote at elections of directors (the "Base Capital Stock"); except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company. For purposes of this Subsection (ii), the term "person" shall not include an employee benefit plan maintained by the Company.
Market or a successor quotation system, the fair market value of a Share, as determined by the Committee in good faith. Such determination shall be conclusive and binding on all persons.
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan;
(iii) To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of Shares, including (without limitation) the Purchase Price, the vesting of the award (including accelerating the vesting of awards) and to specify the provisions of the Stock Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including (without limitation) the Exercise Price, the vesting or duration of the Option (including accelerating the vesting of the Option), to determine whether such Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the Stock Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or Stock Option Agreement, subject to applicable legal restrictions and to the consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option or other right under the Plan and to determine the sufficiency of such consideration;
(xi) To determine the disposition of each Option or other right under the Plan in the event of an Optionee's or Offeree's divorce or dissolution of marriage;
(xii) To determine whether Options or other rights under the Plan will be granted in replacement of other grants under an incentive or other compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase Agreement; and
(xiv) To take any other actions deemed necessary or advisable for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Options or other rights under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Offerees, all
Optionees, and all persons deriving their rights from an Offeree or Optionee. No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan, any Option, or any right to acquire Shares under the Plan.
(i) Outside Directors shall only be eligible for the grant of Restricted Shares, Stock Units, Nonstatutory Options and SARs.
(ii) As determined by the full Board, each Outside Director shall be
granted a Nonstatutory Option to purchase Shares upon the effectiveness of
the Company's initial public offering or, if later, upon their appointment
as an Outside Director. In addition, upon the conclusion of each regular
annual meeting of the Company's stockholders occurring after 2000 and
following the meeting at which they were appointed, each Outside Director
who will continue serving as a member of the Board thereafter shall receive
a Nonstatutory Option to purchase 8,000 Shares (subject to adjustment under
Section 16). All such Nonstatutory Options shall vest and become
exercisable at the date of grant;
(iii) The Exercise Price of all Nonstatutory Options granted to an Outside Director under this Section 4(b) shall be equal to one hundred percent (100%) of the Fair Market Value of a Share on the date of grant, payable in one of the forms described in Section 9(a), (b) and (d).
(iv) All Nonstatutory Options granted to an Outside Director under
this Section 4(b) shall terminate on the earliest of (A) the tenth (10th)
anniversary of the date of grant of such Options or (B) the date twelve
(12) months after the termination of such Outside Director's service for
any reason.
Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed ten (10) years from the date of grant (five (5) years for Employees described in Section 4(d)). A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee's service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 8(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire.
(i) In the case of an ISO, the acceleration of exercisability shall not occur without the Optionee's written consent.
(ii) If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a :pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting.
return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan.
shall make a determination (at the time of the award) of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(c).
be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.
specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant's death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company, except as provided in the next following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting.
(i) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of NSOs to be granted to Outside Directors under
Section 4(b);
(iv) The number of Common Shares covered by each outstanding Option and SAR;
(v) The Exercise Price under each outstanding Option and SAR; or
(vi) The number of Stock Units included in any prior Award which has not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class.
(i) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.
The Committee (in its sole discretion) may permit or require a Participant to:
(a) Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company's books;
(b) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or
(c) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company's books. Such amounts shall be determined by reference to the Fair Market Value of such Common Shares as of the date when they otherwise would have been delivered to such Participant.
A deferred compensation account established under this Section 13 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13.
The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Common Shares available under Section 5.
Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 15 shall be filed with the Company on the prescribed form.
Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the Company's securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable.
(i) The independent auditors most recently selected by the Board (the "Auditors") determine that the after-tax value of such Award to the Participant, taking into account the effect of all federal, state and local income taxes, employment taxes and excise taxes applicable to the Participant (including the excise tax under section 4999 of the Code), will be greater after the application of this Section 19 than it was before the application of this Section 19; or
(ii) The Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall be subject to this Section 19 (regardless of the after-tax value of such Award to the Participant).
No provision of the Plan, nor any right or Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee.
The Company and its Subsidiaries reserve the right to terminate any person's Service at any time and for any reason, with or without notice.
To record the adoption of the amended and restated Plan by the Board of Directors effective as of February ___, 2000, the Company has caused its authorized officer to execute the same.
SUPPORT.COM, INC.
NOTICE OF STOCK OPTION GRANT
THE SUPPORT.COM, INC. 2000 OMNIBUS EQUITY INCENTIVE PLAN
You have been granted the following option to purchase Common Stock of Support.com, Inc. (the "Company") under the Support.com, Inc. 2000 Omnibus Equity Incentive Plan (the "Plan"):
Name of Optionee:______________________
Total Number of Option Shares Granted:_______________
Type of Option: ___ Incentive Stock Option ___ Nonstatutory Stock Option
Exercise Price Per Share: $________________
Grant Date: ______________________
Vesting Commencement Date: __________________
Vesting Schedule: [Check only one box]
__ Full vesting: This option is fully vested and exercisable as of the the date of grant.
__ Two-Year Vesting: This option becomes exercisable with respect to 50% of the total number of Option Shares, on and after the first anniversary of the Grant Date and with respect to the remaining Option Shares, on and after the second anniversary of the Grant Date.
__ Three-Year Vesting: This option becomes exercisable (i) with respect to 33-1/3 % of the total number of Option Shares, on and after the first anniversary of the Grant Date, (ii) with respect to an additional 33-1/3% of the total number of Option Shares, on or after the second anniversary of the Grant Date, and (iii) with respect to the remaining Option Shares, on and after the third anniversary of the Grant Date.
__ Four-Year Vesting: This option becomes exercisable (i) with respect to 1/4 of the total number of Option Shares, on and after the first anniversary of the Grant Date, (ii) with respect to an additional 1/4 of the total number of Option Shares, on or after the second anniversary of the Grant Date, (iii) with respect to an additional 1/4 of the total number of Option Shares, on and after the third anniversary of the Grant Date, and (iv) with respect to the remaining Option Shares, on and after the fourth anniversary of the Grant Date.
Accelerated Vesting: [Check only one box]
__ Your option is not subject to accelerated vesting.
Your option will become fully vested and exercisable if:
__ The Company is subject to a Change in Control (as defined in
Section 2(b) of the Plan) prior to the date your service
terminates.
__ The Company involuntarily terminates your employment without good cause.
__ You experience a Total and Permanent Disability (as defined in
Section 2(ii) of the Plan).
Post-Termination Exercise Period: [Check only one box]
If your service with the Company terminates for any reason other than Total and Permanent Disability or death, then your option expires on:
__ the date of your termination.
__ the date 90 days after your termination date.
__ the date 6 months after your termination date.
__ the date 12 months after your termination date.
__ the date 24 months after your termination date.
__ the Expiration Date of your option.
Form of Payment: [Check one or more boxes]
Payment may be made in the following form(s):
__ Your personal check, a cashier's check or a money order.
__ In shares of Company stock which have been owned by you or your representative for more than 12 months and which are surrendered to the Company in good form for transfer.
__ By delivering on a form approved by the Committee of an irrevocable direction to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds in an amount
sufficient to pay the option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered to you.
Expiration Date: _____________________
By your signature and the signature of the Company's representative below, you and the Company agree that this option is granted under and governed by the term and conditions of the Plan and this Stock Option Agreement, both of which are attached to and made a part of this document.
OPTIONEE: SUPPORT.COM, INC. _______________________________________ By:_________________________________________ _______________________________________ Title:______________________________________ Please Print Name |
STOCK OPTION AGREEMENT
FOR THE SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
Tax Treatment This option is intended to be an incentive stock option under
Section 422 of the Internal Revenue Code or a nonstatutory
option, as provided in the Notice of Stock Option Grant.
Vesting This option becomes exercisable in accordance with the vesting schedule set forth in the Notice of Stock
Option Grant
Term This option expires on the date shown in the Notice of Stock Option Grant, but in no event later than the
10th anniversary of the Grant Date.
Regular Termination If your service as an employee, consultant or director of the Company or a subsidiary of the Company
terminates for any reason excluding death or total and permanent disability, then this option will expire on
the date specified in the Notice of Stock Option Grant under the heading "Post-Termination Exercise
Period.".
Death or Disability If you become Totally and Permanently Disabled (as defined in Section 2(ii) of the Plan) or die as an
employee, consultant or director of the Company or a subsidiary of the Company, then this option will expire
at the close of business at Company headquarters on the date 12 months after the date of your termination of
employment.
Leaves of Absence For purposes of this option, your service does not terminate when you go on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued
crediting of service is required by the terms of the leave or by applicable law. But your service terminates
when the approved leave ends, unless you immediately return to active work.
Restrictions The Company will not permit you to exercise this option if the issuance of shares at that time would violate
on Exercise any law or regulation.
Notice of Exercise When you wish to exercise this option you must notify the Company by completing the attached "Notice of
Exercise of Stock Option" form and filing it with the Human Resources Department of the Company. The notice
will be effective when it is received by the Company. If someone else wants to exercise this option after
your death, that person must prove to the Company's satisfaction that he or she is entitled to do so.
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Form of Payment When you submit your notice of exercise, you must include payment of the option exercise price for the
shares you are purchasing. Payment may be made in the form specified on your Notice of Stock Option Grant.
Withholding Taxes You will not be allowed to exercise this option unless you make arrangements acceptable to the Company to
and Stock pay any withholding taxes that may be due as a result of the option exercise. These arrangements may include
Withholding withholding shares of Company stock that otherwise would be issued to you when you exercise this option. The
value of these shares, determined as of the effective date of the option exercise, will be applied to the
withholding taxes.
Restrictions on By signing this Agreement, you agree not to sell any option shares at a time when applicable laws, Company
Resale policies or an agreement between the Company and its underwriters prohibit a sale (e.g., a lock-up period
after the Company goes public). This restriction will apply as long as you are an employee, consultant or
director of the Company or a subsidiary of the Company.
Transfer of Option Prior to your death, only you can exercise this option. You cannot transfer or assign this option. For
instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these
things, this option will immediately become invalid. You may in any event dispose of this option in your
will.
Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of
exercise from your former spouse, nor is the Company obligated to recognize your former spouse's interest in
your option in any other way.
Retention Rights Neither your option nor this Agreement give you the right to be retained by the Company or a subsidiary of
the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your service at
any time, with or without cause.
Stockholder Rights You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this
option by giving the required notice to the Company and paying the exercise price. No adjustments are made
for dividends or other rights if the applicable record date occurs before you exercise this option, except
as described in the Plan.
Adjustments In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares
covered by this option and the exercise price per share may be adjusted pursuant to the Plan.
Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Nevada (without regard to
their choice-of-law provisions).
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The Plan and Other The text of the Plan is incorporated in this Agreement by reference. This Agreement and the Plan constitute
Other Agreements the entire understanding between you and the Company regarding this option. Any prior agreements, commitments
or negotiations concerning this option are superseded. This Agreement may be amended only by another written
agreement, signed by both parties.
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BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
NOTICE OF EXERCISE
(exercise by check)
Re: Exercise of Stock Option
Dear Sir or Madam:
Pursuant to the Stock Option Agreement dated __________, 200____ (the "Stock Option Agreement") and the Company's 2000 Omnibus Equity Incentive Plan (the "Plan"), I hereby elect to purchase _____________ shares of the Common Stock of the Company at aggregate exercise price of $__________. I enclose payment and other documents (check all that are applicable):
[ ] My check in the amount of $___________;
The Common Stock is to be issued and registered in the name(s) of:
I understand that there may be tax consequences as a result of the purchase or disposition of the Common Stock, and I have consulted with any tax consultants I wished to consult and I am not relying on the Company for any tax advice. I understand that my exercise is governed by my Stock Option Agreement and the Plan and agree to abide by and be bound by their terms and conditions. I represent that the Common Stock is being acquired solely for my own account and not as a nominee for any other party, or for investment, and that I will not offer, sell or otherwise dispose of any such Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws.
Dated: __________, _____.
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
You have been granted restricted shares of Common Stock of Support.com, Inc. (the "Company") on the following terms:
Name of Recipient: _________________________
------------------------------------------------------------------------
Total Number of Shares Granted: _________________________
------------------------------------------------------------------------
Fair Market Value per Share: $_________________________
------------------------------------------------------------------------
Total Fair Market Value of Award: $_________________________
------------------------------------------------------------------------
Date of Grant: _______ __, ____
------------------------------------------------------------------------
Vesting Commencement Date: _______ __, ____
------------------------------------------------------------------------
Vesting Schedule: The first __% of the total number
of shares granted vest when you
complete __ months of continuous
service from the Vesting
Commencement Date. An additional
__% of the shares vest when you
complete each month of continuous
service thereafter.
------------------------------------------------------------------------
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By your signature and the signature of the Company's representative below, you and the Company agree that these shares are granted under and governed by the terms and conditions of the 2000 Omnibus Equity Incentive Plan (the "Plan") and the Restricted Stock Agreement, both of which are attached to and made a part of this document.
Recipient: Support.com, Inc. ------------------------------------------------------------------------ _________________________ By:_______________________ ------------------------------------------------------------------------ _________________________ Title:______________________ Print Name ------------------------------------------------------------------------ |
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
[Signature Page Follows]
The parties have executed this Agreement as of the date first set forth above.
FECHTOR DETWILER & MITCHELL CO.
By:___________________________
Title:________________________
PURCHASER:
I, ________________________________, spouse of ___________, have read and hereby approve the foregoing Agreement. In consideration of the Company's granting my spouse the right to purchase the Shares as set forth in the Agreement, I hereby agree to be irrevocably bound by the Agreement and further agree that any community property or other such interest shall be similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any amendment or exercise of any rights under the Agreement.
Fechtor Detwiler & Mitchell Co. hereby acknowledges receipt of (check as applicable):
_____ A check in the amount of $__________
_____ The cancellation of indebtedness in the amount of $__________
given by ________________ as consideration for Certificate No. CS-____ for _______ shares of Common Stock of Fechtor Detwiler & Mitchell Co.
Dated: ________________
Fechtor Detwiler & Mitchell Co.
By:________________________________
Title:_____________________________
The undersigned further acknowledges that the Secretary of the Company, or his or her designee, is acting as escrow holder pursuant to the Restricted Stock Purchase Agreement Purchaser has previously entered into with the Company. As escrow holder, the Secretary of the Company, or his or her designee, holds the original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
EXHIBIT 10.3
SUPPORT.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board on _______ __, 2000)
Page
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SECTION 1 Purpose Of The Plan................................................................................. 1
SECTION 2 Definitions......................................................................................... 1
(a) "Accumulation Period............................................................................ 1
(b) "Board"......................................................................................... 1
(c) "Code".......................................................................................... 1
(d) "Committee"..................................................................................... 1
(e) "Company"....................................................................................... 1
(f) "Compensation".................................................................................. 1
(g) "Corporate Reorganization"...................................................................... 1
(h) "Eligible Employee"............................................................................. 2
(i) "Exchange Act".................................................................................. 2
(j) "Fair Market Value"............................................................................. 2
(k) "IPO"........................................................................................... 2
(l) "Offering Period"............................................................................... 2
(m) "Participant"................................................................................... 2
(n) "Participating Company"......................................................................... 2
(o) "Plan".......................................................................................... 2
(p) "Plan Account".................................................................................. 2
(q) "Purchase Price"................................................................................ 3
(r) "Stock"......................................................................................... 3
(s) "Subsidiary".................................................................................... 3
SECTION 3 Administration Of The Plan.......................................................................... 3
(a) Committee Composition........................................................................... 3
(b) Committee Responsibilities...................................................................... 3
SECTION 4 Enrollment And Participation........................................................................ 3
(a) Offering Periods................................................................................ 3
(b) Accumulation Periods............................................................................ 3
(c) Enrollment...................................................................................... 3
(d) Duration of Participation....................................................................... 3
(e) Applicable Offering Period...................................................................... 4
SECTION 5 Employee Contributions.............................................................................. 4
(a) Frequency of Payroll Deductions................................................................. 4
(b) Amount of Payroll Deductions.................................................................... 4
(c) Changing Withholding Rate....................................................................... 4
(d) Discontinuing Payroll Deductions................................................................ 4
(e) Limit on Number of Elections.................................................................... 5
SECTION 6 Withdrawal From The Plan............................................................................ 5
(a) Withdrawal...................................................................................... 5
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(b) Re-enrollment After Withdrawal.................................................................. 5
SECTION 7 Change In Employment Status......................................................................... 5
(a) Termination of Employment....................................................................... 5
(b) Leave of Absence................................................................................ 5
(c) Death........................................................................................... 5
SECTION 8 Plan Accounts And Purchase Of Shares................................................................ 5
(a) Plan Accounts................................................................................... 5
(b) Purchase Price.................................................................................. 5
(c) Number of Shares Purchased...................................................................... 6
(d) Available Shares Insufficient................................................................... 6
(e) Issuance of Stock............................................................................... 6
(f) Unused Cash Balances............................................................................ 6
(g) Stockholder Approval............................................................................ 6
SECTION 9 Limitations On Stock Ownership...................................................................... 7
(a) Five Percent Limit.............................................................................. 7
(b) Dollar Limit.................................................................................... 7
SECTION 10 Rights Not Transferable............................................................................. 7
SECTION 11 No Rights As An Employee............................................................................ 7
SECTION 12 No Rights As A Stockholder.......................................................................... 8
SECTION 13 Securities Law Requirements......................................................................... 8
SECTION 14 Stock Offered Under The Plan........................................................................ 8
(a) Authorized Shares............................................................................... 8
(b) Antidilution Adjustments........................................................................ 8
(c) Reorganizations................................................................................. 8
SECTION 15 Amendment Or Discontinuance......................................................................... 8
SECTION 16 Execution........................................................................................... 9
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SUPPORT.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The Plan was adopted by the Board on _______ __, 2000, effective as of the date of the IPO. The purpose of the Plan is to provide Eligible Employees with an opportunity to increase their proprietary interest in the success of the Company by purchasing Stock from the Company on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under section 423 of the Code.
(i) The consummation of a merger or consolidation of the Company with or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or substantially all of the Company's assets or the complete liquidation or dissolution of the Company.
The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(i) If Stock was traded on The Nasdaq National Market on the date in question, then the Fair Market Value shall be equal to the last- transaction price quoted for such date by The Nasdaq National Market;
(ii) If Stock was traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; or
(iii) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.
beginning of the earliest Offering Period ending in the next calendar year, if he or she then is an Eligible Employee.
(i) Once a Participant is enrolled in the Plan for an Offering Period, such Offering Period shall continue to apply to him or her until the earliest of: (A) the end of such Offering Period; (B) the end of his or her participation under Subsection (d) above; or (C) re-enrollment in a subsequent Offering Period under Paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the last trading day before the commencement of the Offering Period in which the Participant is enrolled is higher than on the last trading day before the commencement of any subsequent Offering Period, the Participant shall automatically be re-enrolled for such subsequent Offering Period.
(iii) When a Participant reaches the end of an Offering Period but his or her participation is to continue, then such Participant shall automatically be re-enrolled for the Offering Period that commences immediately after the end of the prior Offering Period.
shall resume as soon as reasonably practicable after such form has been received by the Company.
(i) 85% of the Fair Market Value of such share on the last trading day in such Accumulation Period; or
(ii) 85% of the Fair Market Value of such share on the last trading day before the commencement of the applicable Offering Period (as determined under Section 4(e)) or, in the case of the first Offering Period under the Plan, 85% of the price at which one share of Stock is offered to the public in the IPO.
(i) Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to purchase 1,000 shares of Stock under this Plan with respect to each Accumulation Period.
Any other provision of the Plan notwithstanding, no Participant shall purchase Stock with a Fair Market Value in excess of $25,000 per calendar year (under this Plan and all other employee stock purchase plans of the Company or any parent or Subsidiary of the Company).
For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined in each case as of the beginning of the Offering Period in which such Stock is purchased. Employee stock purchase plans not described in section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then his or her employee contributions shall automatically be discontinued and shall resume at the beginning of the earliest Accumulation Period ending in the next calendar year (if he or she then is an Eligible Employee).
The rights of any Participant under the Plan, or any Participant's interest in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by beneficiary designation or the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by beneficiary designation or the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 6(a).
Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating
Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause.
A Participant shall have no rights as a stockholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the last day of the applicable Offering Period.
Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company's securities may then be traded.
The Board shall have the right to amend, suspend or terminate the Plan at any time and without notice. Except as provided in Section 14, any increase in the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the stockholders of the Company. In addition, any other amendment of the Plan shall be subject to approval by a
vote of the stockholders of the Company to the extent required by an applicable law or regulation.
To record the adoption of the Plan by the Board on ________ __, 2000, the Company has caused its authorized officer to execute the same.
Support.com, Inc.
By: _____________________________
Title: __________________________
Title: __________________________
EXHIBIT 10.4
(a) was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact Indemnitee is or was an Agent, against Expenses and Liabilities actually and reasonably incurred in connection with such Proceeding if Indemnitee acted in good faith and in a manner reasonably believed to be in the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company or that Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful, or
(b) was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was an agent of the Company, against Expenses and Liabilities actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action if Indemnitee acted in good faith, in a manner Indemnitee believed to be in the best interests of the Company and its stockholders.
(c) to the extent that Indemnitee has been successful on the merits in defense of any Proceeding referred to in clause (a) or (b) above or in defense of any action, claim, issue or matter therein, Indemnitee shall be indemnified against Expenses actually and reasonably incurred by Indemnitee in connection therewith.
In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Indemnitee provided under this Agreement shall include those rights set forth below.
(i) The stockholders of the Company;
(ii) A quorum of the Board consisting of Disinterested Directors;
(iii) Independent Counsel selected by Indemnitee, and reasonably approved by the Board, which counsel shall make the determination in a written opinion; or
(iv) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by Indemnitee and the last of whom is selected by the first two arbitrators so selected; or if for any reason three arbitrators are not selected within 30 days after the appointment of the first arbitrator, then selection of additional arbitrators to complete the three person panel shall be made by the American Arbitration Association under its commercial arbitration rules now in effect.
Neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholder) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.
(i) The Company will be entitled to participate therein at its own expense; and
(ii) Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election so to assume the defense thereof, the Company will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof except as otherwise provided below. Indemnitee shall have the right to employ his counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (A) the employment of counsel by Indemnitee has been authorized by the Company, or (B) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company, or (C) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense.
(iii) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Company nor Indemnitee will unreasonably withhold their consent to any proposed settlement.
If to Indemnitee: _____________________
_____________________
_____________________
If to Company: SUPPORT.COM, INC.
575 Broadway
Redwood City, CA 94063
Attention: President
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or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
paid all court costs and expenses, including reasonable attorneys' fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys' fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
SUPPORT.COM, INC., a Delaware corporation
By ________________________________
Its________________________________
EXHIBIT 10.5
1779 Woodside Road, Suite 204
Redwood City, CA 94061
Tel: 650-369-5211 Fax: 650-368-5221 [LETTERHEAD]
Dear Tony Rodoni;
As a Company employee, you will also be eligible to receive all employee benefits, which will include health insurance. You should note that the Company may modify salaries and benefits from time to time as it deems necessary. You will also be entitled to certain bonuses based on product releases and sales, which will be defined at a later date. (See Employee agreement amendment A for more details)
You should be aware that your employment with the Company is for no specified period and constitutes at will employment. As a result you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice.
For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.
You agree that during the term of your employment with the Company, you will not actively engage in any other employment occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment nor will you engage in any other activities that conflict with your obligations to the Company. (See Employee agreement amendment A for more details)
As a Company employee, you will be expected to abide by the Company's rules and regulations. You will be expected to sign and comply with an Employment Confidential Information, and Invention Assignment
Agreement which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non- disclosure of proprietary information.
In the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in San Mateo County, California. However, we agree that this arbitration provision shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information.
To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me. A duplicate original is enclosed for your records. This letter, along with the agreement relating to proprietary rights between you and the Company, sets forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral. This letter may not be modified or amended except by a written agreement, signed by an officer of the Company and you.
We look forward to working with you.
Sincerely,
REPLICASE, INC.
Mark Pincus
President and CEO
ACCEPTED AND AGREED TO this
24 day of June 1998.
/s/ Tony Rodini
----------------------------
[employee name]
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Enclosures: Duplicate Original Letter,
Employment Confidential Information,
Employment agreement amendment A, and
Invention Assignment Agreement (To be supplied)
This agreement amendment provides clarifications and modifications to the standard employee's agreement and supersedes the original subject as appears in the employee agreement.
. Health Insurance (Lifeguard HMO).
. Dental insurance (Delta)
. Vision insurance
. Life and Disability insurance
. Section 125
. 401K program (no company contribution)
. You will vest into 35% at the end of one year and then vest into the remaining 65% monthly over the following 3 years.
. In case of acquisition or merger your vesting will be accelerated by 50% of the remaining amount.
. Your stock option price will be $0.10 a share.
. Defined as GAAP recognizable and date certain.
. In the case of booked revenue which later turns into bad debts, those revenues will be backed out of this agreement.
. Includes all revenue from direct enterprise sales and OEM licensing deals.
EXHIBIT 10.6
[LETTERHEAD OF TIOGA SYSTEMS, INC.]
Mr. Michael O'Rourke
1019 Spicewood Mesa
Austin, TX 78759
(512) 219-9405
Dear Mike,
I am pleased to offer you a position with Tioga Systems, Inc., a Delaware corporation (the "Company") as Vice President of Operations, commencing on July 15, 1999. You will have an annual salary of $160,000, which will be paid semi-monthly in accordance with the Company's normal payroll procedures. We will recommend to the Board at the next Board meeting that you be granted 350,000 stock options, which will carry vesting and exercise provisions in accordance with the Company's standard policies. The options will be exercisable at the fair market value of the common stock at the Board meeting following the date of grant. (See Employee agreement amendment A for more details.)
You will also be eligible to receive additional bonus option amounts of 25,000 shares at the end of twelve months and 25,000 shares at the end of the next twelve months. Fifty percent (50%) of these amounts (or 12,500 shares) in each year will be based on the Company achieving revenue targets for these periods that will be agreed to with you upon your arrival and fifty percent (50%) in each year will be based upon you achieving MBO criteria, that will also be agreed to with you upon your arrival.
Additionally, you will receive a sign-on bonus of $30,000 which will be paid within five days of your employment commencement date. This amount will "vest" at the rate of $5,000 per month for six months. To the extent your employment terminates within this time, the unvested portion will be payable back to Tioga.
As a Company employee, you will also be eligible to receive all employee benefits, which will include health insurance. You should note that the Company may modify salaries and benefits from time to time as it deems necessary. (See Employee agreement amendment A for more details.)
You should be aware that your employment with the Company is for no specified period and constitutes at will employment. As a result you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice.
For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.
You agree that, during the term of your employment with the Company, you will not actively engage in any other employment, occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you
engage in any other activities that conflict with your obligations to the Company. (See Employee agreement amendment A for more details.)
As a Company employee, you will be expected to abide by the Company's rules and regulations. You will be expected to sign and comply with an Employment, Confidential Information and Invention Assignment Agreement (the "Employee NDA") which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non- disclosure of proprietary information. Your employment will be contingent upon and not be deemed effective until you have executed and returned the Employee NDA to the Company.
As provided in the Employee NDA, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in San Mateo County, California. However, as also provided in the Employee NDA, we agree that this arbitration provision shall not apply to any disputes or claims relating to or arising out of the misuse or misappropriation of the Company's trade secrets or proprietary information.
To indicate your acceptance of the Company's offer, please sign and date this letter in the space provided below and return it to me no later than 3 business days of receipt. A duplicate original is enclosed for your records. This letter, along with the agreement relating to proprietary rights between you and the Company, sets forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral. This letter may not be modified or amended except by a written agreement, signed by an officer of the Company and you.
We look forward to working with you.
Sincerely,
TIOGA SYSTEMS, INC.
/s/ Mark Pincus Mark Pincus CEO and President |
ACCEPTED AND AGREED TO this
26/th/ day of May, 1999.
/s/ Michael O' Rourke . Page 2 |
May 24, 1999
Enclosures: Duplicate Original Letter
Employment agreement amendment A
Employment, Confidential Information and
Invention Assignment Agreement (To be supplied)
. Page 3
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Employee name: Michael O'Rourke
This agreement amendment provides clarifications and modifications to the standard employee's agreement and supersedes the original subject as appears in the employee agreement.
. Page 4
EXHIBIT 10.7
[LETTERHEAD]
July 15, 1999
PERSONAL & CONFIDENTIAL
Ms. Radha R. Basu
21777 Vintage Lane
Saratoga, California 95070
Dear Radha:
On behalf of Tioga Systems, Inc. (the "Company" or "Tioga") I am pleased to offer you the position of Chief Executive Officer and President of the Company. The terms of your employment relationship with the company are as set forth below and as approved by the Company's Board of Directors.
1. Position. You will become the Chief Executive Officer and President of the Company, reporting to the Board of Directors. As such, you will have such responsibilities commensurate with your position and such additional responsibilities as may reasonably be determined by the Board of Directors of the Company (the "Board"). You will also be appointed a member of the Board at the soonest practical date following your commencement of employment.
2. Base Salary and Performance Bonus. You will be paid a base salary of no less than $16,667 per month. Your salary will be payable in accordance with the Company's standard payroll policies (subject to normal required withholding). You will receive a vacation and benefit package similar to that provided for all other executive level employees. You will also be eligible for an annual bonus equal to 50% of your base salary for the prior Fiscal Year upon achieving performance criteria mutually agreed upon by you and the Board. For the Fiscal Year ended December 31, 1999, you will be guaranteed a bonus of 50% of your salary pro rated for the remainder of that Fiscal Year.
3. Stock Options. Subject to the approval of the Board of Directors of the Company, you will be granted an incentive stock option to purchase 1,680,189 shares of Common Stock of the Company at an exercise price per share of $0.90 (which represents the fair market value of the Common Stock of the Company at the date of the grant). Your option will be granted under the Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement. These options will vest 25% at the end of your first year of employment and thereafter monthly at 1/48 per month of the total option amount, so
that at the end of your fourth year of employment you will be vested in 100% of this incentive stock option grant. However, if before the end of the one year anniversary of your employment with the Company, you should be terminated for Cause or resign voluntarily from the Company other than for Good Reason, there will be no vesting. "Cause" and "Good Reason" are defined in Section 5 of this Employment Agreement.
4. At-Will Employment. You will be an employee-at-will, meaning that either you or the Company can terminate your employment relationship at any time, for any reason, with or without cause, and with or without notice. You agree to devote substantially all of your business time and attention to the Company. Nevertheless, you shall be permitted to serve as a member of the board of directors of Seec, Inc. and of Connectinc.com, as well as such other boards of directors of for-profit and not-for-profit organizations as the Board may reasonably approve.
5. Termination of Employment:
(a) In the event your employment is terminated by the Company with or
without Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary, benefits
and reimbursable expenses owing to you through the date of such termination, and
(ii) the bonus you earned for the Fiscal Year preceding the date of your
termination if it has not been paid as of the date of your termination.
(b) If your employment is terminated by the Company, for any reason other than for Cause, or is terminated by you for Good Reason, in addition to the payments provided for in Section 5(a), you will be entitled to receive a severance package consisting of (i) your base monthly salary, paid as though you were still employed by the Company for a period of 12 months in installments, subject to appropriate deductions, (ii) continued participation in all benefit plans as an employee for a period of 12 months, (iii) vesting of all stock options granted to you that would have vested by the end of the month of your termination if your employment had not been terminated, and (iv) bonus for the Fiscal Year in which your employment is terminated, pro rated on a monthly basis based on your termination date, if you have achieved the performance criteria mutually agreed upon by you and the Board for that Fiscal Year. The Company shall have the obligation to make the payments and provide the benefits provided for in this section regardless of your income or efforts to mitigate, if any, however it shall have the right to stop the payments and benefits in Section 5(b)(i) and (ii) if at any time prior to the expiration of twelve months after termination, you become otherwise employed in another full time salaried position with benefits. In order to receive this severance package, you will be required to sign a release in a form acceptable to you and the Company, of any and all claims that you may have against the Company.
(c) "Cause" means a determination in the reasonable good faith of a majority of the Board that you have (i) engaged in materials act in violation of the law, except that with regard to that act, you are not subsequently convicted of a felony or do not enter a plea of guilty or nolo contendre to a felony (except for ordinary traffic violations); you will be entitled to receive the severance package provided for in Section 5(b)(i through
iv), (ii) materially breached your fiduciary duty to the Company; (iii) unreasonably refused to perform the good faith, lawful policies or instructions of the Board; or (iv) failed to fully and faithfully perform your material obligations under this Employment Agreement after having been given thirty days written notice of any such failure and an opportunity to cure. "Good Reason" means (i) you are assigned significant duties inconsistent with your position in the Company or your employment terms and responsibilities are materially diminished by the Company, (ii) you are required to relocate to a regular work location that is more than 50 miles from the Company's offices where you regularly work, without your approval or (iii) a material breach by the Company of its obligations under this Employment Agreement. If you wish to resign your employment for Good Reason, you will be required to give the Company 30 days written notice of resignation. The Company will have 30 days to cure the reason(s) for your resignation. If the reason(s) for your resignation is not cured within 30 days, the period of time you have to exercise your stock options shall begin to run following the expiration of the cure period.
6. Change in Ownership Event. For a period of twelve months following a "Change In Ownership Event" ("Change In Ownership Event" being defined as any sale of all or substantially all of the Company's assets or any merger, consolidation or stock sales which results in the holders of the Company's capital stock immediately prior to such transaction owning less than 50% of the voting power of the Company's capital stock immediately after such transaction), if (a) your employment is terminated by the Company or its successor for any reason other than for Cause (as defined in Section 5 of this Employment Agreement); or (b) you resign for Good Cause, you will be entitled to receive a severance package consisting of (i) vesting of any unvested stock options that were issued to you by the Company, (ii) 12 months of your base salary at that time, payable in a lump sum, subject to normal required withholding, (iii) continued participation in all benefit plans as an employee for a period of 12 months, and (iv) bonus for the Fiscal Year in which your employment is terminated, pro rated on a monthly basis based on your termination date, if you have achieved the performance criteria mutually agreed upon by you and the Board for that Fiscal Year. You shall have a period of 90 days following termination of your employment pursuant to Section 6(a) to exercise such options. If you wish to resign your employment pursuant to Section 6(b), you will be required to give the Company 30 days written notice of resignation. The Company will have 30 days to cure the reason(s) for your resignation. If the reason(s) for your resignation is not cured within 30 days, you shall have a period of 90 days following the cure period to exercise such options. In order to receive this severance package, you will be required to sign a release in a form acceptable to you and the Company, of any and all claims that you may have against the Company.
7. Representation and Warranty. You represent and warrant to the Company that the performance of your duties will not violate any agreements or trade secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with the Company's standard Employment, Confidential Information and Invention
Assignment Agreement (the "Employee NDA") which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of proprietary information. Your employment will be contingent upon and not be deemed effective until you have executed and returned the Employee NDA to the Company. As provided in the Employee NDA, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration. In addition, you will abide by the Company's strict policy that prohibits any employee from using or bringing with him or her from any previous employer any confidential information, trade secrets, or proprietary materials or processes of such former employer. You also agree that, during the term of your employment with the Company, you will not actively engage in any other employment, occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
9. Start Date. Your employment with the Company will commence on Thursday, July 15,1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your commencement date, or our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock Option Agreement, and your Confidentiality and Assignment of Inventions Agreement, which are incorporated by reference, constitutes the entire agreement between the parties and supersedes all other agreements or understandings. This Employment Agreement can only be changed in writing, signed by you and the Chairman of the Board of the Company.
Radha, on behalf of the Board, let me indicate how pleased I am to extend this offer, and how much I look forward to working with you. Please indicate your acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
TIOGA SYSTEMS, INC.
By: /s/ Mark Pincus
-----------------------
Title: Chairman & CEO
--------------------
Mark Pincus
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The forgoing terms and conditions are hereby accepted:
Signed: /s/ Radha R. Basu
--------------------------
Print Name: RADHA R. BASU
----------------------
Date: July 15, 1999
----------------------------
|
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 16th day of August 1999, by and between Tioga Systems, Inc., a Delaware corporation ("the Company"), and Scott Dale, a resident of the State of California (the "Executive").
WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, in accordance with the terms and subject to the conditions provided herein;
NOW THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:
(a) Commencing on the date of this Agreement and continuing until the Expiration Date or the Executive's earlier termination for any reason or no reason, the Company shall pay Executive a base annual salary (the "Base Salary") of One-Hundred Fifty Thousand Dollars ($150,000), payable in accordance with the Company's general business practice.
(b) Subject to the approval of the Board of Directors of the Company, you will be granted an option to purchase 250,000 shares of Common Stock of the Company at an exercise price per share equivalent to the fair market value as determined by the Board of Directors at the next Board meeting and which will cliff vest 25% one year from the effective date hereof and thereafter monthly at 1/48 per month. Your options will be granted under the Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement.
(c) In addition to the Base Salary, the Executive shall be eligible during the Term to earn bonuses in amount and pursuant to criteria established by the CEO and the Board of Directors from time to time.
(d) Executive shall be entitled to up to four (4) weeks leave
for vacation at full pay during each twelve (12) month period during the Term or
any extension thereof, provided, however, that at the end of each such twelve
(12) month period, Executive may accrue and carry over to the next succeeding
twelve (12) month period a maximum of two (2) weeks of unused vacation.
Executive shall also be entitled to all paid holidays and sickness days given to
the Company's senior executive officers, as determined by the Board in its sole
discretion.
(e) During the Term, Executive shall be eligible to participate in all employee benefit plans and arrangements now in effect or which may thereafter be established that are generally applicable to other senior executives of the Company, including without limitation, pension and profit- sharing plans, deferred compensation, supplemental retirement or excess-benefit plans, incentive or other bonus plans, life, health, disability, accident, and dental insurance programs, paid vacations and sabbatical leave plans, and similar plans and programs, in accordance with the rules established for individual participation in any such plan.
(f) During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in connection with his services hereunder in accordance with budgets approved by the Board. Executive shall account to the Company for such expenses in accordance with Company policy.
(a) Executive's employment with the Company shall terminate upon any one of the following:
(i) the effective date (after giving effect to any applicable cure periods) of a written notice of termination sent to Executive stating that the Company's determination made in good faith that it is terminating Executive for "cause" as defined under Section 4(b) ("Termination for Cause");
(ii) the effective date of a written notice of termination sent to the Executive stating that the Company's determination made in good faith that, due to a mental or physical incapacity ("Disability"), Executive has been unable and failed to substantially render the services to be provided by Executive to the Company for a period of not less than six months ("Termination for Disability");
(iii) death of the Executive ("Termination Upon Death");
(iv) the effective date (after giving effect to any applicable cure periods) of a written notice of termination sent to the Company by Executive stating Executive's determination made in good faith of "constructive termination" by the Company as defined under Section 4(b) ("Constructive Termination"); or
(v) the effective date of a written notice sent to Executive stating that the Company is terminating his employment, without cause, which notice can be given by the Company at any time at the Company's sole discretion, for any reason or for no reason ("Termination Without Cause").
(b) For purposes of this Agreement, "cause" for Executive's termination will exist in any case in which the Board determines that:
(i) Executive has willfully refused or willfully failed to perform his obligations under this Agreement or the duties properly assigned to him in accordance with the terms of this Agreement and such refusal or failure is detrimental to the interests of the Company; provided, however, that Executive has failed to cure such breach within thirty (30) days following notice from the Company;
(ii) Executive has been convicted or admitted the commission of an indictable offense (whether or not in connection with the performance by Executive of his duties under this Agreement) which would have a material impact on the business of the Company; or
(iii) Executive has willfully breached his obligations under this Agreement; provided, however, that Executive has failed to cure such breach within thirty (30) days following notice from the Company.
(c) Constructive Termination shall mean:
(i) an involuntary material reduction in Base Salary and employment benefits to which the Executive is entitled under this Agreement unless such a reduction is a reduction of employment benefits, other than salary and bonuses, of general applicability to each senior executive officer of the Company;
(ii) any requirement that the employee move his principal work location to any location more than fifty (50) miles from the principal offices of the Company;
(iii) a material change to function or title; or
(iv) a material reduction in the responsibilities and duties;
provided, however, that in each case the Company has failed to cure any of (i), (ii), (iii), or (iv) within thirty (30) days following notice from the Executive.
(a) In the event of any Termination for Cause, the Company shall immediately pay to Executive only the Base Salary otherwise payable to Executive through the date of termination, and the Company shall have no further obligations to Executive under this Agreement. Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(b) During any period that Executive fails to perform his duties hereunder due to Disability, Executive shall continue to receive his Base Salary during such period of Disability. In the event of Termination for Disability,
(i) the Company shall immediately pay to Executive the compensation and benefits otherwise payable to Executive under Section 3 through the date of termination;
(ii) for three (3) months after the termination of Executive's employment, the Company shall continue to pay Executive (A) his Base Salary at Executive's then-current salary, less applicable withholding taxes, payable on the Company's normal payroll dates during that period, and (B) shall continue his benefits under Section 3(e);
(iii) Executive shall be entitled to receive that portion of the Bonus that Executive has earned as of the date of termination; and
(iv) Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(c) In the event of Termination Upon Death, all obligations of the Company and Executive shall cease, except the Company shall immediately pay to Executive (or to Executive's estate) the Base Salary payable to Executive through the date of termination and Executive shall be entitled to receive that portion of the Bonus that
Executive has earned as of the date of termination. Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(d) In the event of any Constructive Termination or Termination Without Cause,
(i) the Company shall immediately pay to Executive the compensation and benefits otherwise payable to Executive under Section 3 through the date of termination;
(ii) for three (3) months after the termination of Executive's employment, the Company shall continue to pay Executive (A) his salary under Section 3 above at Executive's then-current salary, less applicable withholding taxes, payable on the Company's normal payroll dates during that period, and (B) shall continue his benefits under Section 3(e); and
(iii) Executive shall be entitled to receive that portion of the Bonus that Executive has earned as of the date of termination.
(a) engaging anywhere within the United States in the business of software for application management and/or eSupport (the "Business");
(b) rendering services or advice pertaining to the Business to, or on behalf of, any person, firm, or corporation which is in competition with the Company or any of its affiliates during the Non-Compete Period; or
(c) engaging in, or entering into services or advice pertaining to, any other line of business (i) that the Company or any of its affiliates actively conducts or which Executive knows the Company or any of its affiliates is contemplating conducting and (ii) that competes with the Company or its affiliates in the same geographic area as such line of business is then conducted or is contemplated to be conducted.
(a) Executive represents and warrants to the Company that Executive is under no contractual or other restriction or obligation which would prevent the performance of his duties hereunder, or interfere with the rights of the Company hereunder.
(b) The Company represents and warrants to Executive that (i) it has all requisite power and authority to execute, deliver, and perform this Agreement, (ii) all necessary limited liability company proceedings of the Company have been duly taken to authorize the execution, delivery, and performance of this Agreement, and (iii) this Agreement has been duly authorized, executed, and delivered by the Company, is the legal, valid and binding obligation of the Company, and is enforceable against the Company in accordance with its terms.
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA. 94303
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
If to Executive:
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes and withholdings as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold have been satisfied.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.
TIOGA SYSTEMS, INC.
By: /s/ Radha R. Basu
-----------------------
Radha Basu
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SCOTT DALE
/s/ Scott Dale --------------------------- |
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 16th day of August 1999, by and between Tioga Systems, Inc., a Delaware corporation ("the Company"), and Cadir Lee, a resident of the State of California (the "Executive").
WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, in accordance with the terms and subject to the conditions provided herein;
NOW THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:
(a) Commencing on the date of this Agreement and continuing until the Expiration Date or the Executive's earlier termination for any reason or no reason, the Company shall pay Executive a base annual salary (the "Base Salary") of One-Hundred Fifty Thousand Dollars ($150,000), payable in accordance with the Company's general business practice.
(b) Subject to the approval of the Board of Directors of the Company, you will be granted an option to purchase 250,000 shares of Common Stock of the Company at an exercise price per share equivalent to the fair market value as determined by the Board of Directors at the next Board meeting and which will cliff vest 25% one year from the effective date hereof and thereafter monthly at 1/48 per month. Your options will be granted under the Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement.
(c) In addition to the Base Salary, the Executive shall be eligible during the Term to earn bonuses in amount and pursuant to criteria established by the Board from time to time.
(d) Executive shall be entitled to up to four (4) weeks leave
for vacation at full pay during each twelve (12) month period during the Term or
any extension thereof, provided, however, that at the end of each such twelve
(12) month period, Executive may accrue and carry over to the next succeeding
twelve (12) month period a maximum of two (2) weeks of unused vacation.
Executive shall also be entitled to all paid holidays and sickness days given to
the Company's senior executive officers, as determined by the Board in its sole
discretion.
(e) During the Term, Executive shall be eligible to participate in all employee benefit plans and arrangements now in effect or which may thereafter be established that are generally applicable to other senior executives of the Company, including without limitation, pension and profit- sharing plans, deferred compensation, supplemental retirement or excess-benefit plans, incentive or other bonus plans, life, health, disability, accident, and dental insurance programs, paid vacations and sabbatical leave plans, and similar plans and programs, in accordance with the rules established for individual participation in any such plan.
(f) During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in connection with his services hereunder in accordance with budgets approved by the Board. Executive shall account to the Company for such expenses in accordance with Company policy.
(a) Executive's employment with the Company shall terminate upon any one of the following:
(i) the effective date (after giving effect to any applicable cure periods) of a written notice of termination sent to Executive stating that the Company's determination made in good faith that it is terminating Executive for "cause" as defined under Section 4(b) ("Termination for Cause");
(ii) the effective date of a written notice of termination sent to the Executive stating that the Company's determination made in good faith that, due to a mental or physical incapacity ("Disability"), Executive has been unable and failed to substantially render the services to be provided by Executive to the Company for a period of not less than six months ("Termination for Disability");
(iii) death of the Executive ("Termination Upon Death");
(iv) the effective date (after giving effect to any applicable cure periods) of a written notice of termination sent to the Company by Executive stating Executive's determination made in good faith of "constructive termination" by the Company as defined under Section 4(b) ("Constructive Termination"); or
(v) the effective date of a written notice sent to Executive stating that the Company is terminating his employment, without cause, which notice can be given by the Company at any time at the Company's sole discretion, for any reason or for no reason ("Termination Without Cause").
(b) For purposes of this Agreement, "cause" for Executive's termination will exist in any case in which the Board determines that:
(i) Executive has willfully refused or willfully failed to perform his obligations under this Agreement or the duties properly assigned to him in accordance with the terms of this Agreement and such refusal or failure is detrimental to the interests of the Company; provided, however, that Executive has failed to cure such breach within thirty (30) days following notice from the Company;
(ii) Executive has been convicted or admitted the commission of an indictable offense (whether or not in connection with the performance by Executive of his duties under this Agreement) which would have a material impact on the business of the Company; or
(iii) Executive has willfully breached his obligations under this Agreement; provided, however, that Executive has failed to cure such breach within thirty (30) days following notice from the Company.
(c) Constructive Termination shall mean:
(i) an involuntary material reduction in Base Salary and employment benefits to which the Executive is entitled under this Agreement unless such a reduction is a reduction of employment benefits, other than salary and bonuses, of general applicability to each senior executive officer of the Company;
(ii) any requirement that the employee move his principal work location to any location more than fifty (50) miles from the principal offices of the Company;
(iii) a material change to function or title; or
(iv) a material reduction in responsibilities and duties;
provided, however, that in each case the Company has failed to cure any of (i), (ii), (iii), or (iv) within thirty (30) days following notice from the Executive.
(a) In the event of any Termination for Cause, the Company shall immediately pay to Executive only the Base Salary otherwise payable to Executive through the date of termination, and the Company shall have no further obligations to Executive under this Agreement. Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(b) During any period that Executive fails to perform his duties hereunder due to Disability, Executive shall continue to receive his Base Salary during such period of Disability. In the event of Termination for Disability,
(i) the Company shall immediately pay to Executive the compensation and benefits otherwise payable to Executive under Section 3 through the date of termination;
(ii) for three (3) months after the termination of Executive's employment, the Company shall continue to pay Executive (A) his Base Salary at Executive's then-current salary, less applicable withholding taxes, payable on the Company's normal payroll dates during that period, and (B) shall continue his benefits under Section 3(d);
(iii) Executive shall be entitled to receive that portion of the Bonus that Executive has earned as of the date of termination; and
(iv) Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(c) In the event of Termination Upon Death, all obligations of the Company and Executive shall cease, except the Company shall immediately pay to Executive (or to Executive's estate) the Base Salary payable to Executive through the date of termination and Executive shall be entitled to receive that portion of the Bonus that
Executive has earned as of the date of termination. Executive's rights under the Company's benefit plans of general application shall be determined under the provisions of those plans.
(d) In the event of any Constructive Termination or Termination Without Cause,
(i) the Company shall immediately pay to Executive the compensation and benefits otherwise payable to Executive under Section 3 through the date of termination;
(ii) for three (3) months after the termination of Executive's employment, the Company shall continue to pay Executive (A) his salary under Section 3 above at Executive's then-current salary, less applicable withholding taxes, payable on the Company's normal payroll dates during that period, and (B) shall continue his benefits under Section 3(d); and
(iii) Executive shall be entitled to receive that portion of the Bonus that Executive has earned as of the date of termination.
(a) engaging anywhere within the United States in the business of software for application management and/or eSupport (the "Business");
(b) rendering services or advice pertaining to the Business to, or on behalf of, any person, firm, or corporation which is in competition with the Company or any of its affiliates during the Non-Compete Period; or
(c) engaging in, or entering into services or advice pertaining to, any other line of business (i) that the Company or any of its affiliates actively conducts or which Executive knows the Company or any of its affiliates is contemplating conducting and (ii) that competes with the Company or its affiliates in the same geographic area as such line of business is then conducted or is contemplated to be conducted.
(a) Executive represents and warrants to the Company that Executive is under no contractual or other restriction or obligation which would prevent the performance of his duties hereunder, or interfere with the rights of the Company hereunder.
(b) The Company represents and warrants to Executive that (i) it has all requisite power and authority to execute, deliver, and perform this Agreement, (ii) all necessary limited liability company proceedings of the Company have been duly taken to authorize the execution, delivery, and performance of this Agreement, and (iii) this Agreement has been duly authorized, executed, and delivered by the Company, is the legal, valid and binding obligation of the Company, and is enforceable against the Company in accordance with its terms.
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA. 94303
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
If to Executive:
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes and withholdings as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold have been satisfied.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.
TIOGA SYSTEMS, INC.
By: /s/ Radha R. Basu
-----------------
Radha Basu
|
CADIR LEE
/s/ Cadir Lee --------------- |
EXHIBIT 10.10
[LETTERHEAD]
Tioga Systems, Inc.
575 Broadway
Redwood City, CA 94063
Phone 650.556-9440
Fax 650.556-1195
Web www.tioga.com
September 27, 1999
PERSONAL & CONFIDENTIAL
Brian M. Beattie
63 Almendral Avenue
Atherton, CA 94027
(650) 299-9944
Dear Brian:
On behalf of Tioga Systems, Inc. (the "Company" or "Tioga") I am pleased to offer you the position of Chief Financial Officer of the Company. The terms of your employment relationship with the company are as set forth below and as approved by the Company's Board of Directors.
1. Position: You will be the Chief Financial Officer of the Company, reporting to the President and Chief Executive Officer. As such, you will have such responsibilities as determined by the President and Chief Executive Officer.
2. Base Salary and Performance Bonus: You will be paid a base salary of $15,000 per month Your salary will be payable in accordance with the Company's standard payroll policies (subject to normal required withholding). You will receive a vacation and benefit package similar to that provided for all other executive level employees. You will also be eligible to earn an annual bonus of up to 40% of your base salary if you achieve performance criteria mutually agreed upon by you and the President and Chief Executive Officer. For the Fiscal Year ended December 31, 1999, you will be guaranteed a bonus of 40% of your salary pro-rated for The remainder of that Fiscal year.
3. Stock Options: Subject to the approval of the Board of Directors of the Company, you will be granted an option to purchase 560,000 shares of Common Stock of the Company at an exercise price per share of $0.90. Your option will be granted under the Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement. These options will vest 25% at the end of your first year of employment and thereafter monthly at 1/48 per month of the total option amount so that at the end of your fourth year of employment you will be 100% vested in this incentive stock option grant.
4. At-Will Employment: You will be an employee-at-will, meaning that either you or the Company can terminate your employment relationship at any time, for any reason, with or without Cause, and with or without notice. You agree to devote substantially
2a) You will be entitled to a signing bonus of $15,000.
all of your business time and attention to the Company. Nevertheless, you shall be permitted to serve as a member of the board of directors of other boards of directors of for-profit and not-for-profit organizations as the Board may reasonable approve.***
5. Termination of Employment:
5.1 In the event your employment is terminated by the Company with or without Cause, as defined herein, or you resign with or without Good Reason as defined herein, you will be entitled to payment of (i) accrued salary, benefits and reimbursable expenses owing to you through the date of such termination, and (ii) the bonus you earned for the Fiscal Year preceding the date of your termination if it has not been paid as of the date of your termination.
5.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 5.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as
though you were still employed by the Company for a period of 6 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 6 months,
(iii) vesting of all stock options granted to you that would have vested by
the end of the month of your termination if your employment had not been
terminated, and (iv) bonus for the Fiscal year in which your employment is
terminated, pro rated on a monthly basis based upon your termination date,
if you achieved the performance criteria mutually agreed upon by you and
the Board for the Fiscal Year. The Company shall have the obligation to
make the payments and provide the benefits provided for in this section
regardless of your income or effects to mitigate, if any, however it shall
have the right to stop the payments and benefits in Section 5.2(i) and (ii)
if at any time prior to the expiration of six months after termination, you
become otherwise employed in another full time salaried position with
benefits. In order to receive this severance package, you will be required
to sign a release in a form acceptable to the Company, of any and all
claims that you may have against the Company.
5.3 "Cause" means a determination in the reasonable good faith of the Board that you have: (a) engaged in a material act in violation of the law, except that if with regard to the act, you are not subsequently convicted of a felony or do not enter a plea of guilty or nolo contendre to a felony (except for ordinary traffic violations); you will be entitled to receive the severance package provided for in Section 5.2 (i through iv), (b) materially breached your fiduciary duty to the Company, (c) unreasonably refused to perform the good faith, lawful policies or instructions of the Chief Executive Officer, or (d) failed to fully and faithfully perform your materially obligations under this Employment Agreement after having been given thirty days written notice of any such failure and an opportunity to cure. "Good Reason" means (i) you are assigned significant duties inconsistent with your position in the Company or your employment terms and responsibilities are materially diminished by the Company, (ii) you are required to relocate to a regular work location that is more than 50 miles from the Company's offices where you regularly work, without your
approval or (iii) a material breach by the Company of its obligations under the Employment Agreement. If you wish to resign your employment for Good Reason, you will be, required to give the Company 30 days written notice of resignation. The Company will have 30 days to clue the reason(s) for you, resignation. If the reason(s) for your resignation is/are not cured within 30 clays, the period of time you have to exercise your stock options shall begin to run following the expiration of the cure period.
6. Change of Ownership Event. For a period of twelve months following a "Change In Ownership Event" ("Change In Ownership Event" being defined as any sale of all or substantially all of the Company's assets or any merger, consolidation or stock sales which results in the holders of the Company's capital stock immediately prior to such transaction owning less than 50% of the voting power of the Company's capital stock immediately after such transaction), if (a) your employment is terminated by the Company or its successor for any reason other than for Cause (as defined in Section 5 of this Employment Agreement); or (b) you resign for Good Cause, you will be entitled to receive a severance package consisting of (i) vesting of 50% of any unvested stock options the were issued to you by the Company, (ii) 6 months of your base salary at that time, payable in a lump sum, subject to normal withholding requirements, (iii) continued participation in all benefit plans as an employee for a period of 6 months, and (iv) bonus for the fiscal year in which your employment is terminated, pro rated on a monthly basis based upon your termination date, if you achieved the performance criteria mutually agreed upon by you and the Board for that Fiscal Year. You shall have a period of 90 days following termination of your employment pursuant to Section 6(a) to exercise such options. If you wish to resign your employment pursuant to Section 6(b), you will be required to give the Company 30 days written notice of resignation. The Company will have 30 days to cure the reason(s) for your resignation. If the reason(s) for your resignation is not cured within 30 days, you shall have a period of 90 days following the cure period to exercise such options. In order to receive this severance package, you will be required to sign a release in a form acceptable to you and the Company, of any and all claims that you may have against the Company.
7. Representation and Warranty. You represent and warrant to the Company that the performance of your duties will not violate any agreements or trade secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with the Company's standard Employment, Confidential Information and Invention Assignment Agreement (the "Employee NDA") which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of proprietary information. Your employment will be contingent upon and not be deemed effective until you have executed and returned the Employee NDA to the Company. As provided in the Employee NDA, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration. In addition, you will
abide by the Company's strict policy that prohibits any employee from using or bringing with him or her from any pervious employer any confidential information, trade secrets, or proprietary materials or processes of such former employer. You also agree that, during the term of your employment with the Company, you will not actively engage in any other employment, occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
9. Start Date. This agreement is effective as of October 1, 1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your commencement date, or our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock Option Agreement, and your Confidentiality and Assignment of Inventions Agreement, which are incorporated by reference, constitutes the entire agreement between the parties and supersedes all other agreements or understandings. This Employment Agreement can only be changed in writing, signed by you and the Chairman of the Board of the Company.
Brian, on behalf of the Board, let me express how pleased I am to extend this offer, and how much I look forward to working with you. Please indicate your acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
TIOGA SYSTEMS, INC.
/s/ R. R. Basu
By:----------------------------------------------
President & CEO
Title:-------------------------------------------
|
The forgoing terms and conditions arc hereby accepted:
/s/ Brian Beattie
Signed:------------------------------------------
Brian Beattie
Print Name:--------------------------------------
Oct 1, 1999
Date:--------------------------------------------
|
EXHIBIT 10.11
December 7, 1999
PERSONAL & CONFIDENTIAL
Jim Hilbert
Dear Jim:
On behalf of Support.com, Inc. (the "Company" or "Support.com") I am pleased to offer you the position of Senior Vice President Sales and Business Development of the Company. The terms of your employment relationship with the company are as set forth below and as approved by the Company's Board of Directors.
1. Position. You will be the Senior Vice President of Sales and Business Development of the Company, reporting to the President and Chief Executive Officer. As such, you will have such responsibilities as determined by the President and Chief Executive Officer.
2. Base Salary and Performance Bonus. You will be paid a base salary of $12,500 per month. Your salary will be payable in accordance with the Company's standard payroll policies (subject to normal required withholding). You will receive a vacation and benefit package similar to that provided for all other executive level employees. You will also be eligible to cam incentive based compensation amounts based performance criteria mutually agreed upon by you and the President and Chief Executive Officer.
3. Stock Options. Subject to the approval of the Board of Directors of the Company, you will be granted an option to purchase 500,000 shares of Common Stock (TBD on base options and performance based options) of the Company at an exercise price per share of to be determined at the next board meeting. Your option will be granted under the Support.com, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement. These options will vest 25% at the end of your first year of employment and thereafter monthly at 1/48 per month of the total option amount so that at the end of your fourth year of employment you will be 100% vested in this incentive stock option grant.
4. At-Will Employment. You will be an employee-at-will, meaning that either you or the Company can terminate your employment relationship at any time, for any reason, with or without Cause, and with or without notice. You agree to devote substantially all of your business time and attention to the Company. Nevertheless, you shall be permitted to serve as a member of the board of directors of other boards of directors of for-profit and not-for-profit organizations as the Board may reasonable approve.
5. Termination of Employment:
5.1 In the event your employment is terminated by the Company with or without Cause, as defined herein, or you resign with or without Good Reason, as defined herein, you will be entitled to payment of (i) accrued salary, benefits and reimbursable expenses owing to you through the date of such termination, and (ii) the incentive based compensation earned for the Fiscal Year preceding the date of your termination if it has not been paid as of the date of your termination.
5.2 If your employment is terminated by the Company, for any reason other than for Cause, or is terminated by you for Good Reason, in addition to the payments provided for in Section 5.1, you will be entitled to receive a severance package consisting of (i) your base monthly salary, paid as though you were still employed by the Company for a period of 6 months in installments, subject to appropriate deductions, (ii) continued participation in all benefit plans as an employee for a period of 6 months, and (iii) vesting of all stock options granted to you that would have vested by the end of the month of your termination if your employment had not been terminated. The Company shall have the obligation to make the payments and provide the benefits provided for in this section regardless of your income or effects to mitigate, if any, however it shall have the right to stop the payments and benefits in Section 5.2(i) and (ii) if at any time prior to the expiration of six months after termination, you become otherwise employed in another full time salaried position with benefits. In order to receive this severance package, you will be required to sign a release in a form acceptable to the Company, of any and all claims that you may have against the Company.
5.3 "Cause" means a determination in the reasonable good faith of the Board that
you have: (a) engaged in a material act in violation of the law, except that
if with regard to the act, you are not subsequently convicted of a felony or
do not enter a plea of guilty or nolo contendre to a felony (except for
ordinary traffic violations); you will be entitled to receive the severance
package provided for in Section 5.2 (i through iv), (b) materially breached
your fiduciary duty to the Company; (c) unreasonable refused to perform the
good faith, lawful policies or instructions of the Chief Executive Officer;
or (d) failed to fully and faithfully perform your materially obligations
under this Employment Agreement after having been given thirty days written
notice of any such failure and an opportunity to cure. "Good Reason" means
(i) you are assigned significant duties inconsistent with your position in
the Company or your employment terms and responsibilities are materially
diminished by the Company, (ii) you are required to relocate to a regular
work location that is more than 50 miles from the Company's offices where
you regularly work, without your approval or (iii) a material breach by the
Company of its obligations under the Employment Agreement. If you wish to
resign your employment for Good Reason, you will be required to give the
Company 30 days written notice of resignation. The Company will have 30 days
to cure the reason(s) for your resignation. If the reason(s) for your
resignation is/are not cured within 30 days, the period of time you have to
exercise your stock options shall begin to run following the expiration of
the cure period.
6. Change in Ownership Event. For a period of six months following a "Change In Ownership Event" ("Change In Ownership Event" being defined as any sale of all or substantially all of the Company's assets or any merger, consolidation or stock sales which results in the holders of the Company's capital stock immediately prior to such transaction owning less than 50% of the voting power of the Company's capital stock immediately after such transaction), if (a) your employment is terminated by the Company or its successor for any reason other than for Cause (as defined in Section 5 of this Employment Agreement); or (b) you resign for Good Cause, you will be entitled to receive a severance package consisting of (i) vesting of 50% of any unvested stock options that were issued to you by the Company, (ii) 6 months of your base salary at that time, payable in a lump sum, subject to normal withholding requirements, (iii) continued participation in all benefit plans as an employee for a period of 6 months, and (iv) bonus for the fiscal year in which your employment is terminated, pro rated on a monthly basis based upon your termination date, if you achieved the performance criteria mutually agreed upon by you and the Board for that Fiscal Year. You shall have a period of 90 days following termination of your employment pursuant to Section 6(a) to exercise such options. If you wish to resign your employment pursuant to Section 6(b), you will be required to give the Company 30 days written notice of resignation. The Company will have 30 days to cure the reason(s) for your resignation. If the reason(s) for your resignation is not cured within 30 days, you shall have a period of 90 days following the cure period to exercise such options. In order to receive this severance package, you will be required to sign a release in a form acceptable to you and the Company, of any and all claims that you may have against the Company.
7. Representation and Warranty. You represent and warrant to the Company that the performance of your duties will not violate any agreements or trade secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with the Company's standard Employment, Confidential Information and Invention Assignment Agreement (the "Employee NDA") which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of proprietary information. Your employment will be contingent upon and not be deemed effective until you have executed and returned the Employee NDA to the Company. As provided in the Employee NDA, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration. In addition, you will abide by the Company's strict policy that prohibits any employee from using or bringing with him or her from any pervious employer any confidential information, trade secrets, or proprietary materials or processes of such former employer. You also agree that, during the term of your employment with the Company, you will not actively engage in any other employment, occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
9. Start Date. This agreement is effective as of December __, 1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your commencement date, or our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock Option Agreement, and your Confidentiality and Assignment of Inventions Agreement, which are incorporated by reference, constitutes the entire agreement between the parties and supersedes all other agreements or understandings. This Employment Agreement can only be changed in writing, signed by you and the Chairman of the Board of the Company.
Jim, on behalf of the Board, let me express how pleased I am to extend this offer, and how much I look forward to working with you. Please indicate your acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
SUPPORT.COM, INC.
By:___________________________________
Title:________________________________
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Jim R. Hilbert
-------------------------------
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Date: 12/7/99
Exhibit 10.12 January 18, 2000
PERSONAL & CONFIDENTIAL
Dear Lucy:
On behalf of Support.com, Inc. (the "Company" or "Support.com") I am pleased to offer you the position of Vice President of Operations of the Company. The terms of your employment relationship with the company are as set forth below and as approved by the Company's Board of Directors.
1. Position: You will be the Vice President of Operations of the Company, reporting to the President and Chief Executive Officer. As such, you will have such responsibilities as determined by the President and Chief Executive Officer.
2. Base Salary and Performance Bonus: You will be paid a base salary of $13,333.33 per month. Your salary will be payable in accordance with the Company's standard payroll policies (subject to normal required withholding). You will receive a vacation and benefit package similar to that provided for all other executive level employees. You will also be eligible to earn an annual bonus in your first year of up to $20,000 if you achieve performance criteria mutually agreed upon by you and the President and Chief Executive Officer.
3. Stock Options: Subject to the approval of the Board of Directors of the Company, you will be granted an option to purchase 300,000 shares of Common Stock of the Company at an exercise price per share to be determined at the next board meeting. Your option will be granted under the Support.com, Inc. 1998 Option Plan, in accordance with and subject to each term of the Company's standard form of option agreement. These options will vest 25% at the end of your first year of employment and thereafter monthly at 1/48 per month of the total option amount so that at the end of your fourth year of employment you will be 100% vested in this incentive stock option grant. You will also be eligible to receive an option grant of 50,000 shares at your one year anniversary date.
3. At -Will Employment: You will be an employee-at-will, meaning that either you or the Company can terminate your employment relationship at any time, for any reason, with or without Cause, and with or without notice. You agree to devote substantially all of your business time and attention to the Company. Nevertheless, you shall be permitted to serve as a member of the board of directors of other boards of directors of for-profit and not- for-profit organizations as the Board may reasonable approve.
4. Termination of Employment:
4.1 In the event your employment is terminated by the Company with or without Cause, as defined herein, or you resign with or without Good Reason, as defined herein, you will be entitled to payment of (i) accrued salary, benefits and reimbursable expenses owing to you through the date of such termination, and (ii) the bonus you earned for the Fiscal Year preceding the date of your termination if it has not been paid as of the date of your termination.
4.2 If your employment is terminated by the Company, for any reason other than for Cause, or is terminated by you for Good Reason, in addition to the payments provided for in Section 4.1, you will be entitled to receive a severance package consisting of (i) your base monthly salary, paid as though you were still employed by the Company for a period of 6 months in installments, subject to appropriate deductions, (ii) continued participation in all benefit plans as an employee for a period of 6 months, and (iii) vesting of all stock options granted to you that would have vested by the end of the month of your termination if your employment had not been terminated. The Company shall have the obligation to make the payments and provide the benefits provided for in this section regardless of your income or effects to mitigate, if any, however it shall have the right to stop the payments and benefits in Section 4.2(i) and (ii) if at any time prior to the expiration of six months after termination, you become otherwise employed in another full time salaried position with benefits. In order to receive this severance package, you will be required to sign a release in a form acceptable to the Company, of any and all claims that you may have against the Company.
4.3 "Cause" means a determination in the reasonable good faith of the Board
that you have: (a) engaged in a material act in violation of the law,
except that if with regard to the act, you are not subsequently convicted
of a felony or do not enter a plea of guilty or no lo contendre to a
felony (except for ordinary traffic violations); you will be entitled to
receive the severance package provided for in Section 4.2 (i through iii),
(b) materially breached your fiduciary duty to the Company; (c)
unreasonable refused to perform the good faith, lawful policies or
instructions of the Chief Executive Officer; or (d) failed to fully and
faithfully perform your material obligations under this Employment
Agreement after having been given thirty days written notice of any such
failure and an opportunity to cure. "Good Reason" means (i) you are
assigned significant duties inconsistent with your position in the Company
or your employment terms and responsibilities are materially diminished by
the Company, (ii) you are required to relocate to a regular work location
that is more than 50 miles from the Company's offices where you regularly
work, without your approval or (iii) a material breach by the Company of
its obligations under the Employment Agreement. If you wish to resign your
employment for Good Reason, you will be required to give the Company 30
days written notice of resignation. The Company will have 30 days to cure
the reason(s) for your resignation. If the reason(s) for your resignation
is/are not cured within 30 days, the period of time you have to exercise
your stock options shall begin to run following the expiration of the cure
period.
5. Change in Ownership Event: For a period of six months following a "Change In Ownership Event" ("Change In Ownership Event" being defined as any sale of all or substantially all of the Company's assets or any merger, consolidation or stock sales which results in the holders of the Company's capital stock immediately prior to such transaction owning less than 50% of the voting power of the Company's capital stock immediately after such transaction), if (a) your employment is terminated by the Company or its successor for any reason other than for Cause (as defined in Section 4 of this Employment Agreement); or (b) you resign for Good Cause, you will be entitled to receive a severance package consisting of (i) vesting of 50% of any unvested stock options that were issued to you by the Company, (ii) 6 months of your base salary at that time, payable in a lump sum, subject to normal withholding requirements, (iii) continued participation in all benefit plans as an employee for a period of 6 months, and (iv) bonus for the fiscal year in which your employment is terminated, pro rated on a monthly basis based upon your termination date, if you achieved the performance criteria mutually agreed upon by you and the Board for that Fiscal Year. You shall have a period of 90 days following termination of your employment pursuant to Section 5(a) to exercise such options. If you wish to resign your employment pursuant to Section 5(b), you will be required to give the Company 30 days written notice of resignation. The Company will have 30 days to cure the reason(s) for your resignation. If the reason(s) for your resignation is not cured within 30 days, you shall have a period of 90 days following the cure period to exercise such options. In order to receive this severance package, you will be required to sign a release in a form acceptable to you and the Company, of any and all claims that you may have against the Company.
6. Representation and Warranty: You represent and warrant to the Company that the performance of your duties will not violate any agreements or trade secrets of any other person or entity.
7. Standard Employee Agreements: You will be expected to sign and comply with the Company's standard Employment, Confidential Information and Invention Assignment Agreement (the "Employee NDA") which requires, among other provisions, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of proprietary information. Your employment will be contingent upon and not be deemed effective until you have executed and returned the Employee NDA to the Company. As provided in the Employee NDA, in the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration. In addition, you will abide by the Company's strict policy that prohibits any employee from using or bringing with him or her from any pervious employer any confidential information, trade secrets, or proprietary materials or processes of such former employer. You also agree that, during the term of your employment with the Company, you will not actively engage in any other employment, occupation, consulting or other business directly or indirectly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
8. Start Date: This agreement is effective as of February 1, 2000.
9. Federal Immigration Law: For purpose of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your commencement date, or our employment relationship you may be terminated.
10. Entire Agreement: This Employment Agreement, together with your Stock Option Agreement, and your Confidentiality and Assignment of Inventions Agreement, which are incorporated by reference, constitutes the entire agreement between the parties and supersedes all other agreements or understandings. This Employment Agreement can only be changed in writing, signed by you and the President and CEO of the Company.
Lucy, on behalf of the Board, let me express how pleased I am to extend this offer, and how much I look forward to working with you. Please indicate your acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
SUPPORT.COM, INC.
By: /s/ Radha R. Basu
---------------------------------
Radha R. Basu
Title:
------------------------------
President and CEO
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The forgoing terms and conditions are hereby accepted:
Signed: /s/ Lucille K. Hoger
--------------------------------
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Date: January 20, 2000
EXHIBIT 10.14
SUBLEASE
1. Parties:
This Sublease is made and entered into as of August 6,1999 by and between Excite, Inc. ("Sublandlord") and Tioga Systems, Inc., a Delaware Corporation, ("Subtenant") under the Master Lease dated March 14, 1997 as amended by the First Amendment To Lease dated October 1, 1997 (as amended, the "Master Lease") between Martin/Campus Associates, L.P., as "Lessor" and Sublandlord under this Sublease as "Lessee". A copy of the Master Lease is attached hereto as Attachment I and incorporated herein by this reference.
2. Provisions Constituting Sublease:
2.1 This Sublease is subject and subordinate to all of the terms and
conditions of the Master Lease. Subtenant hereby assumes and agrees to perform
all of the obligations of "Lessee" under the Master Lease to the extent said
obligations apply to the Subleased Premises and Subtenant's use of the Common
Areas, except as specifically set forth herein. Sublandlord hereby agrees to
use commercially reasonable efforts to cause Lessor to perform all of the
obligations of Lessor under the Master Lease to the extent said obligations
apply to the Subleased Premises and Subtenant's use of the Common Areas.
Subtenant shall not commit or permit to be committed on the Subleased Premises
or on any other portion of the Project any act or omission which violates any
term or condition of the Master Lease. Except to the extent waived or consented
to in writing by the other party or parties hereto who are affected thereby,
neither of the parties hereto will, by renegotiation of the Master Lease,
assignment, subletting, default or any other voluntary action, avoid or seek to
avoid the observance or performance of the terms to be observed or performed
hereunder by such party, but will at all times in good faith assist in carrying
out all the terms of this Sublease and in taking all such action as may be
necessary or appropriate to protect the rights of the other party or parties
hereto who are affected thereby against impairment. Nothing contained in this
Section 2.1 or elsewhere in this Sublease: (i) shall obligate Sublandlord to
exercise its option to extend the Term of the Master Lease; or (ii) shall
prevent or prohibit Sublandlord (a) from exercising its right to terminate the
Master Lease pursuant to paragraph 23 thereof or (b) from assigning its interest
in this Sublease or subletting the Premises to any other third party.
2.2 All of the terms and conditions contained in the Master Lease are incorporated herein, except as specifically provided below, and such terms and conditions, together with the terms and conditions specifically set forth in this Sublease, shall constitute the complete terms and conditions of this Sublease, except the following paragraphs of the Master Lease which shall remain solely the rights and obligations of Sublandlord: 1, 4, 5, 7, 9, 15, 16, 17, 35, Work Letter C, Exhibit D and E.
3. Subleased Premises and Rent:
4. Use:
Subtenant shall use the Subleased Premises only for those purposes permitted in the Master Lease, unless Sublandlord and Lessor consent in writing to other uses prior to the commencement thereof.
5. Sublease Term:
and conditions of this Sublease and Subtenant's obligation to pay Rent shall commence on the Commencement Date. In the event Sublandlord is unable to deliver possession of the Subleased Premises at the Early Occupation Date, Sublandlord shall not be liable for any damage caused thereby, nor shall this Sublease be void or voidable but Subtenant shall not be liable for Rent on or after the Commencement Date until such time as Sublandlord offers to deliver possession of the Subleased Premises to Subtenant. The Sublease Term shall not be extended by such delay. If Subtenant, with Sublandlord's consent, takes possession prior to commencement of the Sublease Term, Subtenant shall do so subject to all the covenants and conditions hereof and shall pay Rent for the period ending with the commencement of the Sublease Term at the same rental as that prescribed for the first month of the Sublease Term prorated at the rate of 1/30/th/ thereof per day. In the event Sublandlord has been unable to deliver possession of the Subleased Premises within thirty (30) days from the Commencement Date, Subtenant, at Subtenant's option, may terminate this Sublease by written notice to Sublandlord prior to delivery of the Subleased Premises.
6. Operating Expenses:
7. Personal Property:
8. Security and Telephones:
Sublandlord shall have absolutely no responsibility or liability with respect to the security of the Subleased Premises. Without limiting the generality of the foregoing: (a) with respect to the card-key system, Sublandlord shall leave the existing card-key system in place, and upon Subtenant's request, Sublandlord shall provide card-keys to Subtenant and shall program the card-key system to limit access to the Subleased Premises to Subtenant's employees; (b) Subtenant may perform whatever rekeying it may elect, all at its sole risk and cost, and Subtenant shall ensure that Sublandlord has operative keys to all areas of the Subleased Premises at all times; and (c) the fire alarm and burglar alarm systems shall be left in place for Subtenant's use if Subtenant so elects, but without any Sublandlord representation, warranty or other duty to Subtenant with respect thereto. Sublandlord shall provide reasonable access to Sublandlord's existing telephone and voice mail systems (as described in Exhibit B) for the use of Subtenant and Subtenant's employees in the conduct of their business, but all telephone service shall be the sole responsibility of Subtenant.
9. Sublandlord's Right to Enter Upon the Subleased Premises:
In accordance with paragraph 19 of the Master Lease, Subtenant shall permit Sublandlord and Sublandlord's Agents to enter the Subleased Premises at all reasonable times with reasonable notice except for emergencies in which case no notice shall be required.
10. Indemnity:
Except for claims arising from the gross negligence or willful misconduct of Sublandlord (against which Sublandlord shall indemnify and hold Subtenant harmless), Subtenant shall indemnify, defend and hold Sublandlord harmless from and against any and all claims, damages, losses, liabilities and costs (including without limitation reasonable attorneys' fees, costs and disbursements) relating in any manner, directly or indirectly, in whole or in part, to: (a) any failure by Subtenant to timely and properly perform each of its obligations under this Sublease; (b) any accident occurring or other circumstance existing on or about the Subleased Premises at any time during the period between the Early Occupation Date or Sublease Commencement Date, whichever is earlier, and the Termination Date (and any holdover period) due to any cause whatsoever; and (c) any negligence or willful misconduct on the part of Subtenant or any of its officers, directors, employees, guests, invitees, agents or contractors. Subtenant shall promptly assume its defense and indemnification obligations upon written notice from Sublandlord. Subtenant shall not settle any
claim without the consent of Sublandlord if Sublandlord would incur any liability for such claim under or following such a settlement, which consent shall not be unreasonably withheld.
11. Condition of the Subleased Premises:
The Subleased Premises shall be delivered in their "AS IS" condition. Sublandlord shall have no obligation to make any capital improvements, repairs or alterations to the Subleased Premises. By taking possession of the Subleased Premises, Subtenant shall be deemed to have accepted the Subleased Premises in its condition on the date of delivery of possession. Subtenant acknowledges that neither Sublandlord nor any agent of Sublandlord has made any representation or warranty with respect to the condition of the Subleased Premises, the parking and common areas surrounding the Subleased Premises, or with respect to the suitability of same for the conduct of Subtenant's business. Subtenant further acknowledges that Sublandlord shall have no obligation to construct or complete any additional alterations or improvements within or about the Subleased Premises. Subtenant shall not alter or improve the Subleased Premises without the consent of Sublandlord and Lessor, to the extent required under the Master Lease. Notwithstanding the foregoing, to Sublandlord's actual knowledge, the existing electrical and data communications equipment and associated wiring in the Subleased Premises is in good working condition and repair.
12. Sublandlord's Representations and Warranties:
Sublandlord represents and warrants to Subtenant that: (a) there are no amendments to the Master Lease other than the First Amendment To Lease dated October 1, 1997; (b) to Sublandlord's actual knowledge, neither Sublandlord nor Lessor is in default under the Master Lease; and (c) to Sublandlord's actual knowledge, there is no claim or threatened claim by Lessor that Sublandlord is in default under the Master Lease.
13. Notices:
All notices, demands, consents and approvals which may or are required to be given by either party to the other hereunder shall be given in the manner provided in the Master Lease, at the addresses shown on the signature page hereof. Sublandlord shall notify Subtenant of any default under the Master Lease, or of any other event of which Sublandlord has actual knowledge which will impair Subtenant's ability to conduct its normal business at the Subleased Premises, as soon as reasonably practicable following Sublandlord's receipt of notice from the Landlord of a default or actual knowledge of such impairment. If Sublandlord elects to terminate the Master Lease, Sublandlord shall so notify Subtenant by giving at least thirty (30) days notice prior to the effective date of such termination pursuant to paragraph 23 thereof.
14. Broker Fee:
Each party represents and warrants to the other that it has not had any contract or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any licensed real estate broker or other person who can claim a commission or finder's fee. In the event that any broker or finder asserts a claim for a commission or finder's fee based upon any contract, dealing or communications with either party, such party shall indemnify, defend and hold the other party harmless from all costs and expenses (including without limitation reasonable attorneys' fees and costs of defense at the trial and appellate levels) incurred in
connection with such claim. The provisions of this section shall survive any termination of this Sublease.
15. Subtenant Improvements/Compliance With Americans With Disabilities Act:
Subtenant shall be responsible for the installation and cost of any and all improvements, alterations or other work required on or to the Subleased Premises or to any other portion of the property and/or building of which the Subleased Premises are a part, required or reasonably necessary because of: (1) Subtenant's use of the Subleased Premises or any portion thereof; or (2) the use by a subtenant by reason of assignment or sublease. Compliance with the provisions of this Section 13 shall be a condition of Sublandlord granting its consent to any assignment or sublease of all or a portion of this Sublease and the Subleased Premises described in this Sublease. Sublandlord shall be responsible for the installation and cost of any and all improvements, alterations or other work required on or to the Subleased Premises or to any other portion of the property and/or building of which the Subleased Premises are a part, required or reasonably necessary under the Americans With Disabilities Act of 1990.
16. Toxic Contamination Disclosure:
Sublandlord and Subtenant each acknowledge that they have been advised that numerous federal, state, and/or local laws, ordinances and regulations ("Laws") affect the existence and removal, storage, disposal, leakage of and contamination by materials designated as hazardous or toxic ("Toxics"). Many materials, some utilized in everyday business activities and property maintenance, are designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by landowners, future landowners or former landowners without regard to whether the party required to pay for "clean up" caused the contamination, owned the property at the time the contamination occurred or even knew about the contamination. Some items, such as asbestos or PCBs, which were legal when installed, now are classified as Toxics, and are subject to removal requirements. Civil lawsuits for damages resulting from Toxics may be filed by third parties in certain circumstances.
Sublandlord and Subtenant each acknowledge that Sublandlord has made no representations or warranties with respect to environmental assessment or physical condition of the Subleased Premises, including, but not limited to, matters relating to: (i) problems which may be posed by the presence or disposal of hazardous or toxic substances on or from the Subleased Premises, (ii) problems which may be posed by the Subleased Premises being within the Special Studies Zone as designated under the Alquist-Priolo Special Studies Zone Act (Earthquake Zones), Section 2621-2630, inclusive of the California Public Resources Code, and (iii) problems which may be posed by the Subleased Premises being within a HUD Flood Zone as set forth in the U.S. Department of Housing and Urban Development "Special Flood Zone Area Maps," as applicable.
independent investigation or determination of the physical or environmental condition of the Subleased Premises, including, but not limited to, the existence or nonexistence of any underground tanks, sumps, piping, toxic or hazardous substances on the Subleased Premises. Subtenant agrees that it will rely solely upon its own investigation and/or the investigation of professionals retained by it.
17. Rent Abatement and Damages to Personal Property:
In the event Sublandlord, pursuant to the terms of the Master Lease, is entitled to and receives rent abatement, then to the extent such rent abatement affects the Subleased Premises, Subtenant shall be entitled to a corresponding rent abatement in an amount that the net rentable area of the Subleased Premises bears to the total net rentable area of the Master Lease, and only to the extent any such abatement applies to the Sublease Term. In addition, any amounts paid or credited to Sublandlord under the terms of the Master Lease for damage to Subtenant's personal property shall be credited to Subtenant, subject to the same limitations set forth above.
18. Sign Rights:
Subtenant shall be permitted to place its sign on the exterior of the Subleased Premises in accordance with paragraph 20 of the Master Lease. Sublandlord shall remove its signage within fifteen (15) days after the Sublease Commencement Date.
19. Entire Agreement:
This Sublease and the Exhibits attached hereto set forth the entire agreement between the parties with respect to the Sublease of the Subleased Premises. Except as specifically set forth herein, there are no agreements, representations, or warranties whatsoever between the parties as to any matter. Any prior agreements, conversations, or writings, are merged herein, superseded hereby and extinguished.
Exhibits to be attached include:
Exhibit A - Floor plan showing the improvements to the Premises
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Exhibit B - Inventory of Communications Equipment supplied by Sublandlord
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Exhibit C - Inventory list of all furniture, fixtures and other
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equipment supplied by Sublandlord
Exhibit D - Janitorial services specification or copy of Sublandlord's
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current janitorial services agreement
Sublandlord: EXCITE, INC. Address: 555 Broadway
Redwood City, CA 94063
By /s/ Elizabeth M. Berez Date: 8/6/99
------------------------------------ -----------------------------
Subtenant: TIOGA SYSTEMS, INC., a Address: 1816 Embarcadero Road
Delaware corporation Palo Alto, CA 94303
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CONSENT TO SUBLEASE
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DATE: ___________________ 1999
RE: BUILDING: MidPoint Technology Park, 575 Broadway, Redwood City, CA
SUBLET PREMISES: Approximately 23,216 rentable square feet
DATE OF MASTER LEASE: Lease dated March 14, 1997, ("Master Lease")
MASTER LESSOR: Martin/Campus Associates, L.P., a Delaware limited
partnership
MASTER TENANT: Excite, Inc., a Delaware corporation
SUBTENANT: Tioga Systems, Inc., a Delaware corporation
TERM OF SUBLETTING: August 15, 1999 through August 14, 2001
Mr. Robert Hood
Excite, Inc.
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Dear Mr. Hood:
Pursuant to the terms of the Master Lease covering the above-captioned premises ("Sublet Premises"), Excite has requested Landlord's consent to your subletting the Sublet Premises to the above-referenced Subtenant, hereinafter referred to as the "Sublease."
Landlord hereby grants consent to such Subletting upon the following express terms and conditions:
Such subletting is subject and subordinate to the Master Lease and to all of its terms, covenants, conditions, provisions and agreements.
1. The Subtenant shall perform faithfully and be bound by all of the applicable terms, covenants, conditions, provisions and agreements of the Master Lease, for the period of such subletting and to the extent of the Sublet Premises.
2. Neither such subletting nor this consent thereto shall:
(a) release or discharge you from any liability, whether past, present or future, under the Master Lease;
(b) operate as a consent or approval by us to or of any of the terms, covenants, conditions, provisions or agreements of the Sublease and we shall not be bound thereby;
(c) be construed to modify, waive or affect any of the terms, covenants, conditions provisions or agreements of the Master Lease, or to waive any breach thereof, or any of our rights as Landlord thereunder; or to enlarge or increase our obligations as Landlord thereunder, or
(d) be construed as a consent by us to any further subletting either by you or by the Subtenant or to any assignment by you of the Master Lease or assignment by the Subtenant of the Sublease, whether or not the Sublease purports to permit the same and, without limiting the generality of the foregoing, both you and the Subtenant agree that the Subtenant has no right whatsoever to assign, mortgage or encumber the Sublease nor to sublet any portion of the Sublet Premises or permit any portion of the Sublet Premises to be used or occupied by any other party; in connection herewith, both you and the Subtenant agree that an assignment by operation of law or a transfer of control of Subtenant (including but not limited to transfer of the controlling interest of the stock of Subtenant, if Subtenant is a corporation) shall be deemed to be a prohibited assignment hereunder, subject to our consent.
4. You shall not be released from any liability under the Master Lease because of our failure to give notice of default under or in respect of any of the terms, covenants, conditions, provisions or agreements of the Master Lease.
5. In the event of your default under the provisions of the Master Lease, the rent due from the Subtenant under the Sublease shall be deemed assigned to us and we shall have the right, under such default, at any time at our option, to give notice of such assignment to the Subtenant and to demand that Subtenant pay the rent and any other charges due under the Sublease directly to us. We shall credit you with any rent received by us under such assignment but the acceptance of any payment on account of rent from the Subtenant as the result of any such default shall in no manner whatsoever be deemed an attornment by the Subtenant to us, or serve to release you from liability under the terms, covenants, conditions and provisions of agreements under the Master Lease. Notwithstanding the foregoing, any other payment of rent from the Subtenant directly to us, regardless of the circumstances or reasons therefor, shall in no manner whatsoever be deemed an attornment by the Subtenant to us in the absence of a specific written agreement signed by us to such an effect.
6. Both you and the Subtenant shall be and continue to be liable for the payment of all bills rendered by us for charges incurred by the Subtenant for services and materials supplied to the Sublet Premises.
7. The term of the Sublease shall expire and come to an end on its natural expiration date or any premature termination date thereof or concurrently with any premature termination or expiration of the Master Lease (whether by consent or other right, now or hereafter agreed to by Landlord or Tenant under the Master Lease, or by operation of law or at Landlord's option in the event of default by tenant under the Master Lease).
8. This consent is not assignable, nor shall this consent be deemed a consent to any amendment, modification, extension or renewal of the Sublease, without our prior written consent.
9. You and the Subtenant covenant and agree that under no circumstances shall we be liable for any brokerage commission or other charge or expense in connection with the Sublease and you both agree to indemnify us against same and against any cost or expense (including but not limited to counsel fees) incurred by us in resisting any claim for any such brokerage commission.
10. Notwithstanding any provision of the Sublease or this Consent to the contrary, the Subtenant agrees that Master Landlord shall not be: (i) liable for any act or omission of the Master Tenant as Sublessor under the Sublease; (ii) subject to any offsets or defenses which the Subtenant may have against the Master Tenant as Sublessor; (iii) bound by any payment of rent or other sums made by the Subtenant for any advance period under the Sublease; (iv) bound by any security deposits which the Subtenant might have paid to the Master Tenant as Sublessor or any other party, or (v) bound by any amendment or modification of the Sublease made without Master Landlord's prior written consent, which may be withheld in the sole and absolute discretion of Master Landlord.
11. This Consent shall not be effective until executed by all the parties hereto.
12. Concurrent with the execution of this Consent, Master Tenant shall pay to Master Landlord an amount equal to $300.00, representing Master Landlord's attorney fees and costs incurred in connection with the review of the Sublease and the preparation of this Consent.
13. Master Landlord shall be named as an additional insured under all liability insurance required to be carried by the Subtenant pursuant to the Sublease, and Master Tenant shall furnish Master Landlord with a certificate of insurance before the commencement of the term of the Sublease.
14. Master Landlord hereby waives all rights under paragraph 15.D of the Lease during the term of the Sublease, including the ability to collect fifty percent (50%) of any excess of the Subrent over the Rent payable pursuant to the Lease and caused by this Consent to Sublease.
[SIGNATURES FOLLOW THIS PAGE]
The execution of a copy of this Consent by you (as Master Tenant) and by the Subtenant shall indicate your joint and several confirmation of the foregoing conditions and of your agreement to be bound thereby and shall constitute Subtenant's acknowledgment that it has received a copy of the Master Lease from you.
MASTER LESSOR:
Martin/Campus Associates., a Delaware limited partnership
By: Martin/Redwood Associates, L.P., a California limited partnership Its: General Partner
By: The Martin Group of Companies, Inc., a California corporation Its: General Partner
By: _____________________________________________ Name: ___________________________________________ Title: __________________________________________ Date: ___________________________________________
MASTER TENANT:
Excite, Inc., a Delaware corporation
By: /s/ Elizabeth M. Berez
------------------------------------------
Name: Elizabeth M. Berez
------------------------------------------
Title: VP, Finance
------------------------------------------
Date: August 6, 1999
------------------------------------------
|
SUBTENANT:
Tioga Systems, Inc., a Delaware corporation
By: /s/ Mark Vranesh
------------------------------------------
Name: Mark Vranesh
------------------------------------------
Title: Dir Fin/Corp. Sec
------------------------------------------
Date: 8/6/99
------------------------------------------
|
EXHIBIT 10.15
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
BEAR STEARNS & CO. INC.
ENTERPRISE LICENSE AGREEMENT
This Enterprise License Agreement ("Agreement") is dated this 27th day of May, 1999, by and between Bear Stearns & Co. Inc. ("Bear Stearns"), a Delaware corporation, having offices at 245 Park Avenue New York, NY 10167, and Tioga Systems, Inc., ("Tioga"), having offices at 1816 Embarcadero Road, Palo Alto, CA 94303.
Section 1: GRANT OF LICENSE
1.1 Tioga hereby grants to Bear Stearns, and Bear Stearns hereby accepts, a nonexclusive, nontransferable, perpetual license to install and use the Licensed Materials described on the Exhibit A. Bear Stearns may however assign this agreement to a successor in interest through merger or acquisition, to a parent or subsidiary, or to a purchaser of all or substantially all of the assets of the division that is to use the Licensed Material(s). Any assignment of Bear Stearns's interest, other than as described herein is prohibited without prior written consent of Tioga.
1.2 Bear Stearns is authorized to use the Licensed Materials on the number of network computers, workstations and servers specified on Exhibit A for Bear Stearns's own internal business purposes. Bear Stearns will not otherwise copy or reproduce the Licensed Materials; except for disaster recovery, back-up, archival or test purposes. Bear Stearns may use the Licensed Materials at other than the specified site at no charge and without penalty in the following circumstances: (i) if the specified site cannot be used because equipment or software is inoperable; however, Bear Stearns shall notify Tioga within five (5) business days after such relocation or, (ii) if use of the Licensed Materials is only for testing purposes.
1.3 Bear Stearns shall not, directly or indirectly, nor shall Bear Stearns permit others to: copy, duplicate or furnish to others any physical, magnetic or optical version of the Licensed Materials provided by Tioga; remove any copyright or other notice contained or included in the Licensed Materials or any material provided by Tioga; or change, modify, reverse engineer, decompile, disassemble or create derivative works from the Licensed Materials or any other material provided by Tioga: provide, lease, lend, use for timesharing, service bureau or hosting purposes or otherwise use or allow others to use the Licensed Materials to or for the benefit of third parties, modify, or, except to the extent expressly authorized herein, incorporate into or with other software or create a derivative work of any part of the License Materials, disseminate information or analysis (including, without limitation, benchmarks) regarding the quality or performance of the Licensed Materials from any source, and: use the output or other information generated by the Licensed Materials (including, without limitation, output describing the structure of a software program) for any purpose other than use by the Licensed Materials in accordance with its specifications. Notwithstanding anything else, Tioga retains all title to, and, except as expressly licensed herein, all rights to the Licensed Materials, all copies thereof and all related documentation and materials. Bear Stearns must reproduce and include the copyright notice and other proprietary notices that appear on the original Licensed Materials on any copies and any media thereof made in accordance with the terms of this Agreement.
1.4 More than one Exhibit A may be incorporated into this Agreement and each Exhibit A together with the terms and conditions of this Agreement shall constitute a separate Agreement which is independent from other Exhibit A as incorporated into this Agreement. Subsidiaries and affiliates of Bear Stearns shall have the right to incorporate Exhibit A under this Agreement provided the terms and conditions of the Agreement are strictly adhered to.
Section 2: CHARGES, FEES, PAYMENT AND INVOICING
2.1 License fees and service fees under this Agreement are specified on the Exhibit B. The prices and charges hereunder do not include any amount for taxes or duties. If any duty, sales, use, excise, or other tax, penalties or interest, except for taxes based upon Tioga's net income, is, or should ultimately be, assessed against or is required to be collected by Tioga or by any taxing authority in connection with their performance required hereunder, Bear Stearns agrees to pay an amount equal to any and all such charges, except where Bear Stearns is exempt by law and Bear Stearns provides a bonafide exemption certificate to Tioga.
2.2 Bear Stearns shall make all payments hereunder to Tioga, in accordance with instructions on the invoice which includes a due date of 30 days from the receipt of a proper and correct invoice. Any late payments under this Agreement shall be subject to a service charge amount equal to 1.5% of the amount due (calculated on a monthly basis) or the maximum amount allowed by law, whichever is less.
Section 3: DELIVERY AND INSTALLATION
3.1 Tioga shall deliver to Bear Stearns, the Licensed Materials within ten (10) business days from the execution of this Agreement or at a different date if agreed to by both parties. Accompanying the Licensed Materials will be one (1) copy of the related Documentation regularly furnished by Tioga.
3.2 Tioga shall provide the amount of training, instruction and consultation prepaid as set forth in Exhibit B at Tioga's the current rates for such services, when requested by Bear Stearns. Such services are to be used at a time to be mutually agreed upon by the parties and Bear Stearns shall, in addition to the amount set forth in Exhibit B, reimburse Tioga for all reasonable out-of-pocket expenses, including all transportation, lodging, meals and other expenditures related to providing such services.
Section 4: SUPPORT AND MAINTENANCE
Section 5: WARRANTIES
5.1 Tioga warrants to Bear Stearns that for a period of sixty (60) days from
the Effective Date, the Licensed Materials will achieve the functionality
described in the Documentation. Tioga does not warrant, however that Bear
Stearns use of the Licensed Materials will be uninterrupted or that the
operation of the Licenses Materials will be error-free. Tioga also warrants
that the media containing the Licensed Materials, if any, is free from
defects in material and workmanship and will so remain for ninety (90) days
from the date Bear Stearns acquired the Licensed Materials. Tioga's sole
liability (and Bear Stearns exclusive remedy) for any breach of this
warranty shall be, in Tioga's sole discretion, the use of commercially
reasonable efforts: (i) to replace Bear Stearns' media or Licensed
Materials; or (ii) to advise Bear Stearns how to achieve the same
functionality with the Licensed Materials as described in the Documentation
through a procedure different from that set forth in the Documentation; or
(iii) if the above remedies are impracticable, to refund the license fee
paid for the Licensed Materials and terminate this Agreement. Tioga shall
have no obligation with respect to a warranty claim unless notified of such
claim and provided evidence of the license purchase within the applicable
warranty period. Tioga will use reasonable commercial efforts to repair,
replace, advise or refund pursuant to the foregoing warranty within thirty
(30) days of being so notified.
5.2 Tioga warrants the Licensed Materials are free from computer viruses introduced as a result of the gross negligence or intentional acts of Tioga, its agents or employees and that Tioga, its agents or employees will not embed any device in the Licensed Materials or take any action to disrupt or terminate its operation of such Licensed Materials.
5.3 Tioga further warrants that it is the sole owner of, or that it has the right to license the use of, the Licensed Materials being used for Bear Stearns's purposes, and that it has the right to provide Bear Stearns with a nonexclusive license for the use of those Licensed Materials.
5.4 The Licensed Materials (i) is designed to be used prior to, during, and after the calendar year 2000 A.D.; (ii) will operate during each such time period without any error or interruption relating to, or the product of, data or input which includes an indication of or reference to a date ("Date Data") which represents or references different centuries or more than one century; (iii) will, under normal use and service, record, store, process and present calendar dates falling on or after September 9, 1999, January 1, 2000 and February 29, 2000, in the same manner, and with the same functionality, data integrity and performance, as the Licensed Materials records, stores, processes and presents calendar dates on or before September 8, 1999, December 1, 1999 and February 29, 1996; and (iv) recognizes the year 2000 as a leap year.
5.5 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE LICENSED MATERIALS OR THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING (WITHOUT LIMITATION) ANY WARRANTY OF NON INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 6: LIMITATIONS OF LIABILITY
EXCEPT AS STATED HEREIN, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT AND/OR CONSEQUENTIAL DAMAGES OF ANY KIND, RESULTING FROM EITHER PARTY'S PERFORMANCE OR FAILURE TO PERFORM PURSUANT TO THE TERMS OF THIS AGREEMENT OR ANY OF THE SCHEDULES OR ATTACHMENTS HERETO, OR RESULTING FROM THE FURNISHING, PERFORMANCE OR USE OR LOSS OF ANY LICENSED PRODUCTS OR OTHER MATERIALS DELIVERED TO BEAR STEARNS THEREUNDER, INCLUDING WITHOUT LIMITATION ANY INTERRUPTION OF BUSINESS, WHETHER RESULTING FROM BREACH OF CONTRACT OR BREACH OF WARRANTY, EVEN IF THE PARTIES HERETO HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Tioga's liability to Bear Stearns under any provision of this Agreement shall be limited to the amounts actually paid by Bear Stearns to Tioga pursuant to the Exhibit A and/or subsequent Exhibit A hereto. The existence of more than one claim shall not enlarge or extend the limit. Bear Stearns releases Tioga from all obligations, liability, claims or demands related to the Licensed Materials supplied by Tioga to Bear Stearns under this agreement in excess of the limitation provided for in this section.
The parties acknowledge that the limitations set forth in this section are integral to the amount of fees charged for the license granted under this Agreement and services provided in connection with the same, and recognize that were Tioga to assume any further liability beyond that set forth in this section, such fees would be substantially higher.
Section 7: DISCLOSURE
7.1 The Licensed Materials and Documentation received by Bear Stearns from
Tioga under this Agreement are and shall be treated as proprietary and
confidential information of Tioga. Any material or information relating to
the business policies, procedures, customs and forms of Bear Stearns
including information previously divulged or delivered to Tioga by Bear
Stearns regarding the aforementioned subject matter and all information and
data which are proprietary to a third party and which the Bear Stearns is
obligated to treat as confidential obtained by Tioga or its officers,
employees or agents, or disclosed to them in connection with the
performance by Tioga of its obligations under this Agreement, is hereby
designated as confidential and proprietary information of Bear Stearns.
The obligations of confidentiality contained in this Section 7 shall not
apply to information which: (i) is known to a party at the time of
disclosure as proven by written records of the receiving party; (ii) is
independently received by a party without obligations of confidentiality
from a third party which has the legal right to give such information; or
(iii) is generally known to third parties through no fault or action of the
receiving party.
7.2 The parties agree not to use or copy the other's confidential information unless such use or copying is approved by, and for the benefit of, the other party.
7.3 Using the Licensed Material and Documentation or any part of the data therein in original or remanipulated form for the purpose of creating any form of list, directory, reporting service whether for internal use or release to persons outside the Bear Stearns organization, is expressly prohibited.
7.4 Each party hereto will take all reasonable steps to assure that the confidential information of the other party shall not be disclosed by them to others, in whole or in part, without the prior written permission of the other party. Such prohibition on disclosures shall not apply to disclosures by Bear Stearns to its employees and agents, provided such disclosures are reasonably necessary to Bear Stearns's use of the Licensed Materials and provided further that Bear Stearns shall take all reasonable steps to insure that the Licensed Materials are not disclosed by such employees in contravention of this Agreement.
Section 8: TITLE
Tioga shall retain title to the Licensed Material and Documentation including all versions and embodiments thereof and all additions and modifications thereto. Tioga does not by this Agreement convey any proprietary interest therein to Bear Stearns. Bear Stearns agrees that the Licensed Materials' Documentation and any derivative works thereof, including all changes made thereto by anyone and any materials related thereto that are supplied by or developed by Tioga, are the valuable property of Tioga. Bear Stearns further agrees to treat the Licensed Materials and related materials accordingly and agrees diligently to preclude all access to the Licensed Materials except as provided herein, to keep the same confidential, by using the same care and discretion that Bear Stearns uses with respect to its own confidential property. Bear Stearns agrees to keep all property of Tioga free and clear of all claims, liens and encumbrances.
Section 9: INDEMNIFICATION
9.1 Tioga agrees to defend Bear Stearns and at Tioga's option, settle any action or proceeding of any kind or description based upon a third party's claim of copyright or trademark infringement asserted against Bear Stearns by such third party based upon the use of the Licensed Materials by Bear Stearns, provided: (i) the Licensed Materials are used as provided by Tioga; (ii) Tioga shall have received from Bear Stearns notice of said claim within ten (10) days of assertion thereof and, (iii) Tioga is given sole control to direct the investigation, defense and settlement of each such claim. The foregoing obligation of Tioga does not apply with respect to those portions of the Licensed Materials (i) which are modified after shipment by any party other than Tioga, if the alleged infringement relates to such modification, (ii) combined with any non-Tioga products, processes or materials where the alleged infringement relates to such combination, (iii) where the allegedly infringing activity continues after Tioga has notified Licensee thereof or after Tioga has informed Bear Stearns of modifications that would have avoided the alleged infringement, (iv) where Bear Stearns' use of the Licensed Materials is incident to an infringement not resulting primarily from the Licensed Materials, or (v) infringement based on use of version other
than the then current version of the Licensed Materials if such infringement could have been avoided by use of the then current version. Bear Stearns shall cooperate fully with Tioga in connection with the foregoing. If notified of said claim within ten (10) days of assertion thereof brought against Bear Stearns based on an allegation that Bear Stearns' use of the Licensed Materials constitutes infringement, Tioga will pay reasonable attorney fees, associated with resolving such claim and any amounts finally awarded in settlement, if any, provided that Tioga shall have sole control of the resolution of any such claim and all negotiations for its settlement. Any settlement made by Tioga under this Section 9 shall not adversely affect Bear Stearns' ability to exercise the license rights granted hereunder without Bear Stearns's prior written consent.
9.2 Should the Licensed Materials, become, or in Tioga's opinion are likely to become, the subject of a claim of infringement, Tioga shall have the right, at Tioga's option and expense, either: (i) to procure for the Bear Stearns the right to continue using the Licensed Materials; (ii) to replace or modify the same so that they become non-infringing; or, if after Tioga uses its commercially reasonable efforts to accomplish (i) and (ii) and is unable to do so, then; (iii) to grant the Bear Stearns a refund of the unused portion of the license fees.
9.3 Both parties agree to indemnify, defend and hold harmless the other party, its employees, agents and/or authorized representatives for any actual damages, liabilities, costs and expenses, including reasonable attorneys fees, due to claims alleging damage to the other parties property or injury or death to any persons, arising directly out of the other parties ', or the other parties employee's, agent's or subcontractor's negligence in performing the services contemplated under this Agreement.
Section 10: TERMINATION
10.1 In the event a party hereto materially defaults in the performance of any of its duties or obligations hereunder, which default shall not be substantially cured within thirty (30) days after notice is given to the defaulting party specifying the default, then the party not in default may, by giving notice thereof to the defaulting party specifying the default, terminate this Agreement for cause. Notwithstanding the foregoing, with respect to any such material default that cannot be reasonably cured within thirty (30) days, if the defaulting party in good faith promptly proceeds to commence curing said default and thereafter proceeds with all diligence substantially to cure the same, the defaulting party shall have up to another thirty (30) days (for a total of sixty (60) days) substantially to cure such default. If such material default is not substantially cured prior to the end of the second thirty (30) days, the party not in default may, by giving notice thereof, terminate this Agreement for cause as of a date specified in such notice of termination.
10.2 This agreement shall expire in the event Bear Stearns does not have any active support services pursuant to Section 4 above. Additionally, Either party hereto may have the right to terminate this Agreement and/or the license granted hereunder, in the event that the other party: (i) terminates or suspends its business, (ii) becomes subject to any bankruptcy or insolvency proceeding under Federal or state statute, (iii) becomes insolvent or becomes subject to direct control by a trustee, receiver or similar authority, (iv) has liquidated, voluntarily or otherwise, or (v) transfers, assigns or otherwise conveys control of itself, without the prior written consent of the other party hereto.
Section 11: PUBLICITY
Tioga agrees to submit to Bear Stearns all advertising, sales promotion and other publicity matter relating to this Agreement wherein Bear Stearns's name is mentioned or language is used from which the connection of Bear Stearns's name therewith may be inferred or implied; and Tioga further agrees not to publish or use such advertising, sales promotion, or publicity matter without the prior written consent of Bear Stearns.
Section 12: MONITORING
Tioga acknowledges that, as is the custom and practice in Bear Stearns's industry, from time to time Bear Stearns monitors and/or records certain telephone lines and other communications devices going into or out of Bear Stearns's premises, and to the extent that any such monitoring and/or recording occurs relating to any telephone call and other communication going into or out of Bear Stearns's premises involving Tioga or any of its employees, agents and sub-contractors, then Tioga, on behalf of its self and its employees, agents and sub-contractors, consents thereto or will ensure such other party consents thereto.
Section 13: EXPORT RESTRICTIONS
Bear Stearns understands and acknowledges that certain technology licensed hereunder may be subject to regulation by agencies of the U.S. government, including the U.S. Department of Commerce, which prohibit export or diversion of certain products and technology to certain countries. Bear Stearns warrants that it will comply in all respects with the export restrictions applicable to any materials or technology provided hereunder and will otherwise comply with the Export Administration Regulations or other United States laws and regulations in effect from time to time.
Section 14: MISCELLANEOUS
14.1 Any waiver, amendment or modification of any provisions of this Agreement and/or any Exhibits and Attachments (if any) hereto shall not be effective unless made in writing and signed by both parties. No failure or delay by either party with respect to exercising any of its rights hereunder shall operate as a waiver thereof.
14.2 If any provision of this Agreement is declared or found to be invalid, illegal, unenforceable or void, then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is invalid, illegal, unenforceable or void, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it valid, legal and enforceable while preserving its intent or, if that is not possible, by substituting therefor another provision that is valid, legal and enforceable and achieves the same objective. Each party agrees that it will perform its obligations hereunder in accordance with all applicable laws, rules and regulations now or hereafter in effect.
14.3 Headings are for reference purposes only.
14.4 Neither party shall be liable, or have recourse, in respect to any delay in delivery or failure to deliver the Licensed Materials or any other materials used in connection therewith provided by Tioga, or of the non- performance or delay in performance of any term or condition of this Agreement directly or indirectly resulting from any cause beyond the control of Tioga. Such causes shall include, but not be limited to, acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication failures, power failures, earthquakes or other disasters.
14.5 Tioga may, upon advance notice of at least ten (10) business days, conduct and audit during regular business hours to verify compliance with the terms of this Agreement, which shall be conducted at Tioga's expense unless the results establish that inaccuracies from the audit have resulted in underpayment to Tioga of more than 10% of the amount actually due, in which case Bear Stearns shall pay all amount due and bear the expense of the audit.
14.6 Any notices required or permitted to be sent hereunder shall be served personally or by registered or certified mail, return receipt requested or by facsimile with confirmation of receipt; to the addresses stated below:
Bear, Stearns & Co. Inc. Tioga Systems, Inc. 115 South Jefferson Road 1816 Embarcadero Road Whippany, NJ 07981 Palo Alto, CA 94303 Attn: IS-Contracts & Acquisitions Attn: Mark Vranesh |
14.7 The laws of the State of New York shall govern and the parties consent and submit to the jurisdiction and venue of the State or Federal Courts located in New York.
14.8 Both parties acknowledges that it has read this Agreement, its Exhibits and Attachments (if any), understands it and agrees to be bound by its terms, and further agrees that it is the complete and exclusive statement of the Agreement, which supersedes and merges all prior proposals, understandings and all other agreements, oral and/or written, between the parties relating to this Agreement. This Agreement may not be modified or altered except by a written instrument duly executed by both parties.
IN WITNESS WHEREOF, the parties, by their duly authorized representatives, have caused this Agreement to be duly executed and delivered as of the day and year first above written.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
--------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
|
Tioga Self-Healing System(TM) Version 1.2 in object code format.
Catalogue Number and Program Name Number of Authorized Copies
--------------------------------- ---------------------------
11-00001 Tioga/Desktop Agent See Scope Below
11-00002 Tioga/Mobile Agent See Scope Below
11-00006 Server Agent See Scope Below
11-00011 Tioga/Administration and One (1)
Healing Console - Enterprise
License
|
Scope: This is an Enterprise License deal with a term of three (3) years. Bear Stearns may deploy any mixture of Desktop, Mobil, and/or Server agents as long as the total number of authorized copies does not exceed [***] during the term of the agreement. At the end of the three years, Bear Stearns will have a perpetual right to use the number of licenses deployed during the term of this agreement.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
--------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
|
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
The Fees described in VI. below will become due and payable upon the earlier to occur of; (i) [***] by Bear Stearns of the initial rollout of the Company's software on approximately [***] desktops at Bear Stearns whereby Tioga will notify Bear Stearns in writing of the completion of the initial rollout and Bear Stearns will have 10 business days to notify Tioga in writing of [***] of the [***] or (ii) after [***] days from the Effective date. By mutual agreement, both Companies may extend the [***] day [***] described in (ii) above.
Item Fees ---- ---- Standard Technical Support (Year 1) $ [***] Standard Technical Support (Year 2) $ [***] Standard Technical Support (Year 3 - [***]%) $ [***] IV. Deployment and Implementation Fee Schedule ---------------------------------------------- V. Training ------------ |
All fees are due and payable net 30 days from receipt of invoice. Payments are
due according to the following schedule:
. $[***] due June 30, 1999.Includes- First installment payment on software
license fees and payment of six months of product maintenance for 1999.
. $[***] due September 30, 1999. Second installment payment on software
license fees and payment of second six-months product maintenance for the
remainder of 1999 through May 2000.
. $[***] Maintenance Fee due May 31, 2000
. $[***] Maintenance Fee due May 31, 2001
. Beginning May 31, 2002, Maintenance fee due annually in advance at a rate
of [***]% of license fees billed to date (increased annually based on the
percentage increase reflected in the CPI).
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
--------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
|
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
Support Hours
Tioga will provide support from 8AM to 6PM Pacific time, Monday through
Friday
Response Time
Tioga will respond to customer inquiries within 24 hours
Contact Methods
Tioga will provide a 1-800 number support line
Tioga will provide e-mail support
Contacts
Customer is allowed one named contact per TAC (Tioga Administration
Console) User License purchased
Customer receives a reasonable amount of phone and e-mail support for those
contacts
Software Maintenance for product purchased Customer will receive software patches and maintenance releases Customer will receive major releases that are generally made available by Tioga without charge
Product Information
Customer will receive quarterly product information updates
One day training course that includes the following:
Systems Administration Training
- Installation and configuration of Tioga Self-Healing System
- Configuration and administration of Tioga Servers
- Installation and configuration of Tioga Agents
HelpDesk Administration Training
- Tioga Self-Healing System Overview
- User issues and education
- Remote Diagnosis and Repair
Training to be provided at Bear Stearns facilities.
See exhibit B.
EXHIBIT 10.16
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
AMENDMENT NO. 1 TO Enterprise license agreement
Whereas, the parties desire to amend the Enterprise License Agreement by and between the parties dated as of May 27, 1999 (the "Agreement") as set forth in this Amendment;
NOW THEREFORE, in consideration of the mutual covenants set forth herein, the parties agree as follows:
1. Unless otherwise specifically defined herein, the capitalized terms in this Amendment have the definitions set forth in the Agreement.
2. Except as expressly amended by this Amendment, the terms and conditions of the Agreement remain in full force and effect.
3. The Agreement, as amended, and this Amendment together constitute the entire agreement between the parties concerning its subject matter, and supercede any prior or contemporaneous agreements whether written or oral. In the event of any conflict or inconsistency between the Agreement and this Amendment, this Amendment shall prevail and control.
4. The Agreement is hereby amended by adding an Exhibit E & F attached hereto.
5. This Amendment may be amended or modified only by a subsequent writing signed by both parties to this Amendment. If any provision of this Amendment is declared invalid, illegal or unenforceable, such provision shall be severed and all remaining provision shall continue in full force and effect. This Amendment may be executed in counterparts, each of which shall be an original as against any party whose signature appears on such counterpart and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute and deliver this Amendment as of the Effective Date set forth above.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------------- --------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
--------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
|
Latest Version of Tioga Self-Healing System in object code format.
Catalogue Number and Program Name Number of Authorized Copies
--------------------------------- ---------------------------
11-00001 Tioga/Desktop Agent See Scope below.
11-00002 Tioga/Mobile Agent See Scope below.
11-00006 Server Agent See Scope below.
11-00011 Tioga/Administration and Healing Console - Enterprise See Scope below.
License
11-00050 Support.com Portal See Scope below.
|
Scope: This is an [***] License deal with a term of three (3) years. Bear
Stearns may deploy any mixture of Desktop, Mobil, and/or Server agents to their
[***] customer machines during the term of the agreement. At the end of the
three years, Bear Stearns will have a perpetual right to use the number of
licenses deployed during the term of this agreement.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------------- --------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
--------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
|
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
The Fees described in VI. below will become due and payable on the following
terms; (i) payments tied to [***] will be due and payable net [***] days of the
date (ii) deployment and implementation fees related to the [***] Support
Portal ("Portal") will be due net [***] days after the [***]. The Portal will be
considered [***] when Tioga notifies Bear Stearns in writing of the [***], and
Bear Stearns does not, within [***] business days, notify Tioga in writing of
[***]. If Bear Stearns notifies Tioga of [***] within [***] days, Tioga will
have [***] business days to address the issues raised and [***]. This process
will continue until Bear Stearns does not notify Tioga within [***] business
days, in writing, of [***] of the [***], at which point the [***].
II. Software License Fees
-------------------------
Item Fees
---- ----
License Fees $[***]
III. Technical Support Fee Schedule
-----------------------------------
Item Fees
---- ----
Standard Technical Support (Year 1) [***]
Standard Technical Support (Year 2) $[***]
Standard Technical Support (Year 3 - [***]%) $[***]
IV. Deployment and Implementation Fee Schedule
----------------------------------------------
Item Fees
---- ----
Creation of Bear Stearns branded [***] Support $[***]
Portal, including web-based integration with Remedy.
Additional integration work and portal services
consulting to be mutually agreed upon.
V. Training
------------ Fees
----
Training Onsite at Bear Stearns Facilities [***]
|
Additional training for Bear personnel will be provided [***] to Bear (based on space available) for 3 years, provided Bear personnel attend training at Tioga's offices in Redwood City, CA.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
--------------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
--------------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
--------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
--------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
|
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 15, 2000, in the Registration Statement (Form S-1) and related Prospectus of Support.com, Inc. for the registration of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
February 17, 2000
|
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR | YEAR |
| FISCAL YEAR END | DEC 31 1998 | DEC 31 1999 |
| PERIOD START | DEC 07 1997 | JAN 01 1999 |
| PERIOD END | DEC 31 1998 | DEC 31 1999 |
| CASH | 2,807 | 4,023 |
| SECURITIES | 0 | 8,466 |
| RECEIVABLES | 75 | 3,490 |
| ALLOWANCES | (10) | (40) |
| INVENTORY | 0 | 0 |
| CURRENT ASSETS | 3,388 | 16,390 |
| PP&E | 279 | 1,198 |
| DEPRECIATION | (23) | (317) |
| TOTAL ASSETS | 3,672 | 17,525 |
| CURRENT LIABILITIES | 409 | 7,052 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 5,237 | 21,449 |
| PREFERRED | 1 | 1 |
| COMMON | 1 | 1 |
| OTHER SE | (2,425) | (13,255) |
| TOTAL LIABILITY AND EQUITY | 3,672 | 17,525 |
| SALES | 18 | 3,315 |
| TOTAL REVENUES | 18 | 3,315 |
| CGS | 0 | 969 |
| TOTAL COSTS | 2,822 | 17,779 |
| OTHER EXPENSES | 0 | 0 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | (51) | (331) |
| INCOME PRETAX | (2,750) | (14,294) |
| INCOME TAX | 0 | 0 |
| INCOME CONTINUING | (2,750) | (14,294) |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (2,750) | (14,294) |
| EPS BASIC | (0.57) | (2.31) |
| EPS DILUTED | (0.57) | (2.31) |