As filed with the Securities and Exchange Commission on July 22, 1999
Delaware 7372 77-0466366
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
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624 East Evelyn Avenue
Sunnyvale, California 94086
(408) 737-7400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
COPIES TO:
Stanley F. Pierson, Esq. Kenneth L. Guernsey
Davina K. Kaile, Esq. Karyn R. Smith
Jeffrey S. Harrell, Esq. Cooley Godward LLP
Pillsbury Madison & Sutro LLP One Maritime Plaza, 20th Floor
2550 Hanover Street San Francisco, CA 94111
Palo Alto, CA 94304 (415) 693-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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 (the "Securities Act"), check the following box. [_]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Class of Securities Proposed Maximum Aggregate Amount of
to be Registered Offering Price(1) Registration Fee
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Common Stock, $.001 par value........ $60,000,000 $16,680
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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.
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.
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+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement 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. + |
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SUBJECT TO COMPLETION, DATED JULY 22, 1999
[LOGO]
eGAIN COMMUNICATIONS CORPORATION
Shares
Common Stock
eGain Communications Corporation is offering shares of its common stock. This is eGain's initial public offering, and no public market currently exists for its shares. We have applied for approval for quotation on the Nasdaq National Market under the symbol "EGAN" for the shares we are offering. We anticipate that the initial public offering price will be between $ and $ per share.
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 6.
Per Share Total
--------- -----
Public Offering Price.................................... $ $
Underwriting Discounts and Commissions................... $ $
Proceeds to eGain........................................ $ $
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The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
eGain has granted the underwriters a 30-day option to purchase up to an additional shares of common stock to cover over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the shares of common stock to purchasers on , 1999.
BancBoston Robertson Stephens
Donaldson, Lufkin & Jenrette
Volpe Brown Whelan & Company
The date of this prospectus is , 1999.
[INSIDE FRONT COVER OF PROSPECTUS]
[Phrases appear in descending order with questions regarding online customer communication]
[Gatefold]
[Graphic depicting the alternative modes of deploying eGain's customer service solutions appears here]
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.
TABLE OF CONTENTS
Page
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Summary.................................................................. 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 33
Management............................................................... 48
Certain Transactions..................................................... 57
Principal Stockholders................................................... 58
Description of Capital Stock............................................. 59
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 65
Legal Matters............................................................ 68
Experts.................................................................. 68
Where You Can Find More Information...................................... 68
Index to Financial Statements............................................ F-1
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Until , 1999, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
SUMMARY
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully. This prospectus contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus. In this prospectus, the "Company," "eGain," "eGain Communications," "we," "us," and "our" refer to eGain Communications Corporation, a Delaware corporation.
eGain Communications
We are a leading provider of customer service infrastructure solutions for companies engaged in electronic commerce. Our products and services help businesses provide more effective Internet-based customer service, thereby improving customer satisfaction and converting a higher percentage of Web site visitors to buyers. We offer our solutions both as a Web-based hosted application service through our eGain Hosted Network and as installed software for in-house implementation. Approximately 50% of our current customers access our applications through the eGain Hosted Network. Our customers include both dedicated Internet companies, such as Go2Net, Snap.com and WebTV, and traditional companies engaged in eCommerce, such as Mazda USA and FCC National's Wingspan Bank.
Businesses use our applications to effectively manage high volumes of customer email as well as live Web-based interaction. Our email management system helps businesses route, track, analyze and respond to customer emails. Our Web collaboration system helps businesses provide live online assistance to visitors on their Web site. Our solutions are built on a scalable, Web-based architecture designed to meet the growth in Internet-based communications. Our products are built on standards-based technologies that are designed to integrate with existing customer databases and applications.
Superior customer service is critical to businesses competing in the eCommerce marketplace. Today, most online customer communication takes place through email. However, according to a recent Jupiter Communications study of 125 top eCommerce sites, 51% of the sites either refused to accept an email, never responded to an email, or took longer than five days to respond. Companies that fail to address their online customer service needs risk losing customers to eager competitors located a mouse click away. Traditional approaches to online customer service, such as trying to extend front office software packages that were designed for telephone-based interactions or developing homegrown solutions, have proved to be inadequate for many businesses. As a result, businesses are seeking dedicated, scalable applications to help them deliver superior Internet-based customer service. International Data Corporation estimates that worldwide license revenues for eCommerce customer service applications will grow from $42 million in 1998 to $1.6 billion in 2002.
We provide a flexible and scalable Web-based customer service platform for companies engaged in eCommerce. Our applications for email management and Web collaboration are designed to provide the following strategic and operating benefits:
. Strengthen customer relationships. Our applications allow companies to strengthen customer relationships by providing rapid, personalized and effective customer service.
. Convert Web site visitors to buyers. Our Web collaboration product enables live assistance for visitors on a Web site, thereby increasing the likelihood of converting them into customers.
. Scale to meet growing eCommerce demands. Our architecture allows companies to scale their customer service infrastructure to meet the growing volume and complexity of electronic customer communications.
. Rapidly deployable solution. Businesses can quickly deploy customer service capabilities as an application service through our eGain Hosted Network. Also, our applications can be rapidly customized through Web- based interfaces.
. Gain customer insight. Our solution enables companies to capture and analyze customer communications in order to understand the needs and preferences of their customers.
. Maximize productivity of customer service organizations. Our email management and workflow tools make customer service representatives and managers more efficient.
. Reduce costs and administrative burden. Customers using the eGain Hosted Network recognize cost efficiencies by eliminating the need to manage and administer in-house customer service applications.
. Integrate applications to provide comprehensive customer information. Our applications integrate with existing eCommerce platforms, call center systems and customer databases, providing customer service representatives with comprehensive customer information.
Our objective is to be the leading provider of customer service infrastructure solutions for businesses engaged in eCommerce. To achieve this objective, we intend to:
. Capitalize on our first mover advantage and extend our brand recognition. We intend to continue the momentum we have built as the first company to offer a multi-application platform for Web-based customer service in a hosted environment.
. Expand the eGain Hosted Network. We intend to expand the eGain Hosted Network, which we believe offers cost, administrative and performance benefits, by establishing additional hosting centers that leverage our partners' physical hosting infrastructure.
. Introduce value-added products. We intend to continue to add products that complement and enhance our existing online customer service platform to address the evolving needs of eCommerce businesses.
. Expand strategic relationships. We intend to enter into strategic relationships that benefit our marketing and distribution efforts to rapidly capture market share.
. Expand international presence. We intend to continue to expand our presence internationally into additional markets, including Europe and Asia.
The Offering
Common stock offered by eGain...................... shares
Common stock to be outstanding after the offering.. shares
For working capital and other general
Use of proceeds.................................... corporate purposes
Proposed Nasdaq National Market symbol............. EGAN
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The number of shares of common stock to be outstanding after this offering excludes 4,397,004 shares that could be issued under our stock plans and 2,658,548 shares that could be issued upon exercise of options and warrants outstanding as of June 30, 1999. The number of shares of common stock to be outstanding after this offering includes 394,139 shares issuable upon exercise of warrants that will expire upon completion of this offering and assumes no exercise of the underwriters' over-allotment option.
Summary Consolidated Financial Data
(in thousands, except per share data)
Please see Note 1 of the notes to the consolidated financial statements for an explanation of the determination of the number of shares used in computing per share data. The pro forma as adjusted consolidated balance sheet data summarized below reflects the net proceeds from the sale of shares of common stock offered by eGain at an assumed initial public offering price of $ per share, after deducting the underwriting discounts and commissions and our estimated offering expenses.
Period from
September 10, 1997 Year Ended
(Inception) June 30,
to June 30, 1998 1999
------------------ ----------
Consolidated Statement of Operations Data:
Revenue........................................... $ 2 $ 1,019
Costs and expenses................................ 884 12,319
Loss from operations.............................. (882) (11,300)
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Net loss.......................................... (938) (11,305)
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Pro forma net loss per share (unaudited):
Net loss per share--basic and diluted........... $ (0.93)
========
Weighted average shares--basic and diluted...... 12,153
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June 30, 1999
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Pro Forma
Actual as Adjusted
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Consolidated Balance Sheet Data:
Cash and cash equivalents ................................. $ 1,265
Working capital (deficit).................................. (755)
Total assets............................................... 24,461
Notes payable, less current portion........................ 221
Stockholders' equity....................................... 20,978
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Our headquarters are located at 624 East Evelyn Avenue, Sunnyvale, California 94086 and our telephone number is (408) 737-7400. Our Web site address is www.egain.com. The information on our Web site is not a part of this prospectus.
RISK FACTORS
This offering 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. Our business, operating results and financial condition could be harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You should also refer to the other information in this prospectus, including our financial statements and the related notes.
This prospectus also contains forward-looking statements that involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions, and the assumptions underlying or relating to any of these statements. These statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "will" and similar expressions. Our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed below and elsewhere in this prospectus.
Company Risks
Because we have a limited operating history, it is difficult to evaluate our business and our future prospects
We incorporated in September 1997, commenced operations in January 1998 and shipped our first product in September 1998. Therefore, we have only a limited operating history upon which you can evaluate our business and prospects. You should consider the risks, expenses and difficulties that we may encounter when making your investment decision. These risks include our ability to do the following:
. compete in the highly competitive eCommerce customer service market;
. expand our sales, marketing and customer support activities;
. create and maintain strategic relationships, including relationships with our hosting partners;
. expand our customer base;
. introduce new products and services;
. upgrade our systems and infrastructure; and
. recruit and retain key personnel.
We have a history of losses, expect continuing losses and may never achieve profitability
We incurred net losses of approximately $938,000 for the period from September 10, 1997 (inception) through June 30, 1998 and approximately $11.3 million for the year ended June 30, 1999. As of June 30, 1999, we had an accumulated deficit of approximately $12.2 million. We expect to continue to incur 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, customer support 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.
Our operating expenses may increase as we build our business and this increase may harm our operating results and financial condition
We have spent heavily on technology and infrastructure development. We expect to continue to spend substantial financial and other resources on developing and introducing product and service offerings, and expanding our sales, marketing and customer support organizations 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.
Due to our limited operating history and the emerging nature of the eCommerce customer service market, our future revenue is unpredictable and our quarterly operating results may fluctuate
Our quarterly revenue and operating results are difficult to predict because of our limited operating history and may fluctuate from quarter to quarter due to the emerging nature of the eCommerce customer service market.
A number of factors are likely to cause fluctuations in our operating results, including, but not limited to, the following:
. the growth rate of eCommerce;
. demand for eCommerce customer service applications;
. our ability to attract and retain customers and maintain customer satisfaction;
. our ability to upgrade, develop and maintain our systems and infrastructure;
. the amount and timing of operating costs and capital expenditures relating to expansion of our business and infrastructure;
. technical difficulties or system outages;
. our ability to attract and retain qualified personnel with Internet industry expertise, particularly sales and marketing personnel;
. the announcement or introduction of new or enhanced products and services by our competitors;
. changes in our pricing policies and those of our competitors;
. failure to increase our international sales; and
. governmental regulation surrounding the Internet and eCommerce in particular.
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. For example, our hosting agreements are typically for a period of one year and automatically renew unless terminated by either party with 60 days' prior notice. In addition, some of our hosting agreements give the customer the right to terminate the contract at any time. Period-to-period comparisons of our operating results are not a good indication of our future performance. It is likely that our operating results in some quarters will be below the expectations of securities analysts or investors. In this event, the market price of our common stock is likely to decline.
Our business is premised on a novel business model that is largely untested
Customer service historically has been provided primarily in person or over the telephone. Our business model assumes that companies engaged in eCommerce will continue to elect to provide customer service through the Internet rather than by telephone. Our business model also assumes that many companies recognize the benefits of a hosted delivery model and will seek to have their customer service applications hosted by eGain. If any of these assumptions is incorrect, our business will be seriously harmed.
Our success will depend on sales of the eGain EMS platform
In fiscal 1999, we derived substantially all of our revenue from sales of the eGain EMS platform and related services. Although we recently added eGain WCS to our product offerings, we expect to continue to derive a majority of our revenue from sales of the eGain EMS platform in the future. Implementation of our strategy depends upon the eGain EMS platform being able to solve the customer service needs of businesses engaging in eCommerce. In fiscal 1999, two of our eGain EMS customers, FCC National and WebTV, accounted for 15.7% and 10.8% of total revenue. If these or other current or future customers are not satisfied with the eGain EMS platform, our business and operating results will be seriously harmed.
We face a number of risks related to our recent acquisition of Sitebridge and may face similar risks if we acquire other businesses or technologies
We will face integration risks and record significant goodwill costs as a result of our acquisition of Sitebridge in April 1999. We may be unable to effectively integrate the operations, personnel and systems of Sitebridge with our other operations in a timely fashion, or at all. In addition, we may not achieve value from our acquisition of Sitebridge commensurate with the consideration paid. We have just begun to integrate Sitebridge with our operations and we expect this integration to place a significant burden on our management team. If we are unable to effectively integrate Sitebridge into our operations or to generate sufficient revenue from eGain WCS or our combined operations, our business and operating results are likely to suffer.
As a result of the Sitebridge acquisition, we have recorded a significant amount of goodwill that will adversely affect our operating results for the foreseeable future. As of June 30, 1999, we had goodwill and other purchased intangible assets of approximately $20.7 million, which we expect to amortize over three years from the date of the acquisition. If the amount of recorded goodwill or other intangible assets is increased or we have future losses and are unable to demonstrate our ability to recover the amount of goodwill, the amount of amortization could be increased or the period of amortization could be shortened. This would increase annual amortization charges or result in the write off of goodwill in a one-time non-cash charge, which could be significant and would likely harm our operating results.
We may review additional acquisition or investment prospects that would complement our current business or enhance our technological capabilities. 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 not be able 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.
We could incur additional non-cash charges associated with stock-based compensation arrangements
Our operating results may be impacted if we incur significant non-cash charges associated with stock-based compensation arrangements with employees and non-employees. We have issued options to non-employees which are subject to various vesting schedules of up to 48 months. For deferred compensation purposes, these options are required to be remeasured at each vesting date, which may require us to record additional non-cash accounting expenses. These expenses may result in us incurring net losses or increased net losses for a given period and this could seriously harm our operating results and stock price.
In addition, in connection with our acquisition of Sitebridge Corporation, we may face stock-based compensation charges related to Sitebridge's relationship with Ambrose, an independent professional employer organization, which provides payroll and employee benefits for Sitebridge employees. This arrangement will be terminated July 31, 1999. Based on a recent draft pronouncement by the Financial Accounting Standards Board, we may be required to recognize additional deferred stock-based compensation of approximately $7.0 milion.
If we fail to expand our sales, marketing and customer support activities, we may be unable to expand our business
The complexity of our eCommerce customer service platform and related products and services requires us to have highly trained sales, marketing and customer support personnel to educate prospective customers regarding the use and benefits of our services, and provide effective customer support. With our relatively brief operating history and our plans for expansion, we have considerable need to recruit, train, and retain qualified staff. Any delays or difficulties we encounter in these staffing efforts could impair our ability to attract new customers and enhance our relationships with existing customers. This in turn would adversely impact the timing and extent of our revenue. Because the majority of our sales, marketing and customer support personnel have recently joined us and have limited experience working together, our sales, marketing and customer support organizations may not be able to compete successfully against bigger and more experienced organizations of our competitors. If we do not successfully expand our sales, marketing and customer support activities, our business will suffer and our stock price could decline.
We must recruit and retain our key employees to expand our business
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. The loss of the services of any of our senior management or other key personnel, including our Chief Executive Officer and co-founder, Ashutosh Roy, and our President and co- founder, Gunjan Sinha, could harm our business. We do not have employment agreements with, or life insurance policies on, any of our key employees. These employees may terminate their employment with us at any time. Our success also will depend on our ability to recruit, retain and motivate other highly skilled engineering, sales, marketing and other personnel. Competition for
these personnel is intense, especially in the San Francisco Bay Area, and we have had difficulty hiring employees in the timeframe we desire. In particular, we may be unable to hire a sufficient number of qualified software engineers. If we fail to retain and recruit necessary engineering, sales and marketing, customer support or other personnel, our business and our ability to develop new products and services and to provide acceptable levels of customer service could suffer.
In addition, companies in the software industry whose employees accept positions with competitors frequently claim that competitors 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.
Our failure to expand third-party distribution channels would impede our revenue growth
To increase our revenue, we must increase the number of our marketing and distribution partners, including software and hardware vendors and resellers. Our existing or future marketing and distribution partners may choose to devote greater resources to marketing and supporting the products of competitors, which could also harm us.
Failure to expand our relationships with systems integrators would impede acceptance of our products and growth of our revenue
To increase our revenue and implementation capabilities, we must develop and
expand relationships with systems integrators. A failure to do so could harm
our business and operating results.
We rely on systems integrators to recommend our products to their customers and
to install and support our products for their customers. Systems integrators
may develop, market or recommend software applications that compete with our
products. Moreover, if these firms fail to implement our products successfully
for their customers, we may not have the resources to implement our products on
the schedule required by our customers.
Unknown software defects could disrupt our products and services, which could harm our business and reputation
Our product and service offerings depend on complex software, both internally developed and licensed from third parties. Complex software often contains defects, particularly when first introduced or when new versions are released. We may not discover software defects that affect our new or current services or enhancements until after they are deployed. It is possible that, despite testing by us, defects may occur in the software. These defects could result in:
. damage to our reputation;
. lost sales;
. 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.
We face risks associated with our management of sensitive customer information
Our applications manage sensitive customer information, and 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.
If our system security is breached, our business and reputation could suffer
A fundamental requirement for online communications and transactions is the secure transmission of confidential information over public networks. Third parties may attempt to breach our security or that of our customers. We may be liable to our customers for any breach in our security and any breach could harm our reputation. Although we have implemented network security measures, our servers 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 license encryption technology and additional technologies to protect against security breaches or to alleviate problems caused by any breach. Our failure to prevent security breaches may harm our business and operating results.
Due to the lengthy sales cycles of some of our products, the timing of our sales are difficult to predict and may cause us to miss our revenue expectations
Our sales cycle for our eCommerce customer service applications can be as long as three months or more and may vary substantially from customer to customer. While our customers are evaluating our products and before they may place an order with us, 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 are not realized in that quarter, we may incur significant expenses that are not offset by corresponding sales.
If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer
We intend to continue to expand into international markets and to spend significant financial and managerial resources to do so. For example, we have established a subsidiary in the United Kingdom. If our revenue from international operations does not exceed the expense associated with establishing and maintaining these operations, our business and operating results will suffer. We have limited experience in international operations and may not be able to compete effectively in international markets. We face various risks inherent in conducting business internationally, such as the following:
. unexpected changes in regulatory requirements;
. 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; and
. reduced protection for intellectual property rights in foreign countries.
Our recent growth has placed a strain on our resources and if we fail to manage our future growth, our business could suffer
We recently began to expand our operations rapidly and intend to continue this expansion. The number of our full-time employees increased from 20 at June 30, 1998 to 114 at June 30, 1999. This expansion has placed, and is expected to continue to place, a significant strain on our managerial, operational and financial resources. To manage any further growth, we will need to improve or replace our existing operational, customer support and financial systems, procedures and controls. Any failure by us to properly manage these system and procedural transitions could impair our ability to attract and service customers, and could cause us to incur higher operating costs and delays in the execution of our business plan. We will also need to continue the expansion of our operations and employee base. Our management may not be able to hire, train, retain, motivate and manage required personnel. In addition, our management may not be able to successfully identify, manage and exploit existing and potential market opportunities.
We need to upgrade our systems and the eGain Hosted Network to accommodate growth in eCommerce
We face risks related to ability of the eGain Hosted Network to operate with higher activity levels while maintaining expected performance. As the volume and complexity of eCommerce customer communications increases, we will need to expand our systems and hosted network infrastructure. The expansion and adaptation of our network infrastructure will require substantial financial, operational and management resources. Due to the limited deployment of our products and services to date, our ability to connect and manage a substantially larger number of customers is unknown.
Customer demand for our products and services could be greatly reduced if we fail to maintain high capacity data transmission. In addition, as we upgrade our network infrastructure, we are likely to encounter equipment or software incompatibility. We may not be able to expand or adapt our hosted network infrastructure to meet additional demand or our customers' changing requirements in a timely manner or at all.
Unplanned system interruptions and capacity constraints could reduce our ability to provide hosting services and could harm our business and our reputation
Our customers have in the past experienced some interruptions with our hosted network. We believe that these interruptions will continue to occur from time to time. These interruptions could be due to hardware and operating system failures. We expect a substantial portion of our revenue to be derived from customers who use our hosted network. As a result, our business will suffer if we experience frequent or long system interruptions that result in the unavailability or reduced performance of our hosted network or reduce our ability to provide remote management services. We expect to experience occasional temporary capacity constraints due to sharply increased traffic, which
may cause unanticipated system disruptions, slower response times, impaired quality and degradation in levels of customer service. If this were to continue to happen, our business and reputation could be seriously harmed.
Our success largely depends on the efficient and uninterrupted operation of our computer and communications hardware and network systems. Substantially all of our computer and communications systems are located in Santa Clara County, California. Our systems and operations are vulnerable to damage or interruption from fire, earthquake, power loss, telecommunications failure and similar events.
We have entered into service agreements with some of our customers that require minimum performance standards, including standards regarding the availability and response time of our remote management services. If we fail to meet these standards, our customers could terminate their relationships with us and we could be subject to contractual monetary penalties. Any unplanned interruption of services may harm our ability to attract and retain customers.
We rely on relationships with, and the system integrity of, hosting partners for our eGain Hosted Network
Our hosted network consists of virtual data centers co-located in the physical data centers of our hosting partners. Accordingly, we rely on the speed and reliability of the systems and networks of these hosting partners. If our hosting partners experience system interruptions or delays, or if we do not maintain or develop relationships with hosting partners, our business could suffer.
Problems arising from use of our products with other vendors' products could disrupt our business and harm our operating results
Our customers generally use our products together with products from other companies. As a result, when problems occur in the network, 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 and repair costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems.
We may be unable to protect our intellectual property and proprietary rights
We regard our copyrights, service marks, trademarks, trade secrets and similar intellectual property as critical to our success, and rely on trademark and copyright law, trade secret protection and confidentiality and/or license agreements with our employees, customers and partners to protect our proprietary rights. eGain is a registered trademark, and eGain Email Management System, eGain EMS, eGain Web Collaboration System, eGain WCS, eGain Hosted Network, eGain eCommerce Bridge, eGain Web Component Architecture and eGain WCS are trademarks, of eGain. 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.
In addition, 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 application pending in the United States, and we may seek additional patents in the future. We do not know if our patent application 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 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 may face intellectual property infringement claims that could be costly to defend
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 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 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 technology or license the proprietary rights on a timely basis would harm our business.
We may need to license third-party technologies and may be unable to do so
To the extent we need to license third-party technologies, we may be unable to do so on commercially reasonable terms or at all. In addition, we may fail to successfully integrate any licensed technology into our services. Third- party licenses may expose us to increased risks, including 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.
Industry Risks
We must compete successfully in the eCommerce customer service market
The eCommerce customer service market is new and intensely competitive. There are no substantial barriers to entry in this market, and established or new entities may enter this market in the near future. We compete with companies that develop and maintain internally developed email management systems. We also compete directly with companies that provide licensed software products for email management such as Brightware, Inc., Kana Communications, Inc., Mustang Software, Inc. and Silknet Software, Inc., as well as Web collaboration application companies such as WebLine Communications Corp. In addition, some of our competitors who currently offer licensed software products are now beginning to offer hosted approaches. We also face competition from larger, front office software companies such as Clarify, Inc., Oracle Corporation, Siebel Systems, Inc. and The Vantive Corporation. Furthermore, established enterprise software companies, including IBM, Hewlett-Packard Company, Microsoft Corporation and similar companies may leverage their existing relationships and capabilities to offer eCommerce customer service applications.
We believe competition will increase as our current competitors increase the sophistication of their offerings and as new participants enter the market. Many of our current and potential competitors have:
. longer operating histories;
. larger customer bases;
. greater brand recognition;
. more diversified lines of products and services; and
. significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships with larger, more established and better-financed companies. These competitors may be able to:
. undertake more extensive marketing campaigns;
. adopt more aggressive pricing policies; and
. make more attractive offers to businesses to induce them to use their products or services.
Further, any delays in the general market acceptance of the eCommerce customer service applications and our hosted delivery model would likely harm our competitive position. Any delay would allow our competitors additional time to approve their service or product offerings, and also provide time for new competitors to develop eCommerce customer service applications and solicit prospective customers within our target markets. Increased competition could result in pricing pressures, reduced operating margins and loss of market share.
We depend on broad market acceptance of Web-based eCommerce customer service applications
We depend on the widespread acceptance and use of Web-based customer service applications as an effective solution for businesses seeking to manage high volumes of customer communication over the Internet. We cannot estimate the size or growth rate of the potential market for our product and service offerings, and we do not know whether our products and services will achieve broad market acceptance. The market for Web-based eCommerce customer service is new and rapidly evolving, and concerns over the security and reliability of online transactions, the privacy of users and quality of service or other issues may inhibit the growth of the Internet and commercial online services. If the market for eCommerce customer service applications fails to grow or grows more slowly than we currently anticipate, our business will be seriously harmed.
We may be unable to develop or enhance products or services that address the changing needs of the eCommerce customer service market
The eCommerce customer service industry is characterized by rapid technological change, changes in customer requirements and preferences and the emergence of new industry standards and practices that could render our existing products, services, proprietary technology and systems obsolete. To be competitive, we must continually improve the performance, features and reliability of our products and services, including our existing eCommerce customer service applications, and develop new products, services, functionality and technology that address the increasingly sophisticated and varied needs of our prospective customers. If we cannot adapt or respond in a cost-effective and timely manner to changing industry standards, market conditions or customer requirements, our business and operating results would suffer.
If we do not adequately address Year 2000 issues, we may incur significant costs and our business could suffer
Many existing computer programs use only two digits to identify a year. These programs were designed and developed without addressing the impact of the upcoming change in the century. If not corrected, many computer software applications could fail or create erroneous results by, at or beyond 2000. As a result, the networks that incorporate our products and our own internal networks could fail, leading to disruptions in operations and business activities. As a result of the year 2000 problem, we believe that we face potential risks which could harm our business in the following areas:
. disruption in our customer relationships or in our sales efforts because of failures of our customers' networks which are correctly or incorrectly attributed to the non-compliance of our products;
. claims from our customers based on alleged breach of warranties concerning the Year 2000 compliance of our products;
. disruption of our business resulting from failure of systems we use to run our business;
. disruption of our business resulting from failure of systems used by our suppliers, customers and potential customers; and
. the potential reduced spending by companies on networking solutions as a result of significant information systems spending on Year 2000 remediation.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000 Issues."
We will only be able to execute our business plan if Internet usage continues to grow
Our business will be seriously harmed if Internet usage does not continue to grow or grows at significantly lower rates compared to current trends. The continued growth of the Internet depends on various factors, many of which are outside our control. These factors include the following:
. the Internet infrastructure may be unable to support the demands placed on it;
. the performance and reliability of the Internet may decline as usage grows;
. security and authentication concerns with respect to transmission over the Internet of confidential information, such as credit card numbers, and attempts by unauthorized computer users, so-called hackers, to penetrate online security systems; and
. privacy concerns, including those related to the ability of Web sites to gather user information without the user's knowledge or consent.
Because we provide our customer service applications to companies conducting business over the Internet, our business could suffer if efficient transmission of data over the Internet is interrupted
The recent growth in the use of the Internet has caused frequent interruptions and delays in accessing the Internet and transmitting data over the Internet. Because we provide Internet-based eCommerce customer service applications, interruptions or delays in Internet transmissions will harm our customers' ability to receive and respond to email messages. Therefore, our market depends on improvements being made to the entire Internet infrastructure to alleviate overloading and congestion.
Governmental regulation and legal uncertainties could impair the growth of the Internet and decrease demand for our services or increase our cost of doing business
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. Further, the growth and development of the market for commercial online transactions may prompt calls for more stringent consumer protection laws that may impose additional burdens on those companies engaged in eCommerce. The adoption of any additional laws or regulations may impair the growth of the Internet or commercial online services. This could decrease the demand for our products and services and increase our cost of doing business, or otherwise harm our business and operating results. 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.
We may be liable for activities of our customers or others using our hosted network
As a provider of eCommerce customer service applications, we face potential liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the actions of our customers or others using our hosted network. This liability could result from the nature and content of the communications transmitted by our customers through our hosted network. We do not and cannot screen all of the communications generated by our customers, and we could be exposed to liability with respect to this content. 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.
Offering Risks
Our stock has not been publicly traded before this offering and our stock price may be volatile
Our common stock has not been publicly traded, and an active trading market may not develop or be sustained after this offering. 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 services by us or our competitors;
. developments with respect to intellectual property rights;
. conditions and trends in the Internet and other technology industries; and
. general market conditions.
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.
Our directors, executive officers and principal stockholders will be able to exert significant influence over us
After this offering, our directors, executive officers and stockholders who currently own over 5% of our common stock will beneficially own approximately % of our outstanding common stock. These stockholders, if they vote together, will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in control of eGain.
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.
Future sales of our common stock may depress our stock price
After this offering, we will have shares of common stock outstanding. All the shares sold in this offering will be freely tradable. The remaining 20,907,178 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. Immediately after the 180 day lockup period, 16,073,242 shares which will be outstanding after the offering 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. Sales of a substantial number of shares of common stock in the public market after this offering or after the expiration of the lockup and holding periods could cause the market price of our common stock to decline.
Purchasers of our common stock will suffer immediate and substantial dilution
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. 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 public offering price of $ per share. Purchasers will also experience additional dilution upon the exercise of outstanding stock options and warrants.
Our certificate of incorporation and bylaws contain provisions which could delay or prevent a change in control
Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change in control of eGain. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. Some of these provisions:
. authorize the issuance of preferred stock that can be created and issued by the board of directors without prior stockholder approval, commonly referred to as "blank check" preferred stock, with rights senior to those of common stock; and
. prohibit stockholder action by written consent.
See "Description of Capital Stock" for additional discussion of these provisions.
If we do not use the proceeds in a manner beneficial to us, our business could suffer
We have no current specific plans for the net proceeds from this offering. We intend generally to use the net proceeds from this offering for working capital and general corporate purposes. 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 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 uses other than those described above. Our management will therefore have significant flexibility in applying the net proceeds of this offering. If the proceeds are not used in a manner beneficial to eGain, our business could suffer and our stock price could decline.
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares of common stock offered by us are estimated to be $ after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us and assuming a public offering price of $ per share.
The principal purposes of this offering are:
. to obtain additional capital;
. to create a public market for our common stock;
. to increase our visibility and credibility; and
. to facilitate future access to the public equity markets.
We intend to use the net proceeds of this offering for working capital and other general corporate purposes.
In addition, we may use a portion of the net proceeds of this offering to acquire or invest in businesses, products, services or technologies complementary to our current business, through mergers, acquisitions, joint ventures or otherwise. However, we have no specific agreements or commitments and are not currently engaged in any negotiations with respect to such transactions. Accordingly, our management will retain broad discretion as to the allocation of the net proceeds of this offering. We intend to invest the net proceeds of this offering in short-term, interest-bearing investment grade securities until they are used.
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 intend to retain our earnings, if any, for the development of our business. Furthermore, our bank line of credit agreement prohibits the payment of dividends.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of all outstanding shares of preferred stock into common stock and changes to our authorized capital stock upon completion of this offering; and
. on a pro forma as adjusted basis after giving 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.
This information should be read together with the consolidated financial statements and related notes included elsewhere in this prospectus.
June 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
(in thousands except share
data)
Notes payable, excluding current portion....... $ 221 $ 221 $
======== ======== =======
Stockholders' equity:
Convertible preferred stock: $0.001 par value;
10,035,887 shares authorized,
9,566,378 shares issued and outstanding,
actual; 10,035,887 shares authorized, no
shares issued and outstanding, pro forma ..... 16,987 --
Preferred stock: $.001 par value; 5,000,000
shares authorized, no shares issued and
outstanding, pro forma as adjusted............
Common stock: $0.001 par value; 25,000,000
shares authorized, 10,946,661 shares issued
and outstanding, actual; 20,513,039 shares
issued and outstanding,
pro forma; 50,000,000 shares authorized,
shares issued and outstanding, pro forma as
adjusted...................................... 7,289 20
Additional paid-in capital..................... 18,044 42,300
Notes receivable from stockholders............. (144) (144)
Deferred stock compensation.................... (8,956) (8,956)
Accumulated deficit and accumulated other
comprehensive income.......................... (12,242) (12,242)
-------- --------
Total stockholders' equity................... $ 20,978 $ 20,978
-------- --------
Total capitalization........................... $ 21,199 $ 21,199 $
======== ======== =======
|
The number of shares of common stock to be outstanding after this offering excludes 4,397,004 shares that could be issued under our stock plans and 2,658,548 shares that could be issued upon exercise of options and warrants outstanding as of June 30, 1999. The number of shares of common stock to be outstanding after this offering includes 394,139 shares issuable upon exercise of warrants that will expire upon completion of this offering and assumes no exercise of the underwriters' over-allotment option.
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was $ , or $ per share. Pro forma net tangible book value per share is determined by dividing the amount of our total tangible assets less total liabilities by the number of shares of common stock outstanding at that date, assuming conversion of all outstanding shares of preferred stock. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of common stock in this offering and the net tangible book value per share of common stock immediately after completion of this offering. After giving effect to the sale of the shares of common stock offered by eGain in this offering (at an assumed initial public offering price of $ per share and after deducting the underwriting discounts and commissions and our estimated offering expenses), our pro forma net tangible book value at June 30, 1999 would have been $ , 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 shares in this offering. If the public offering price is higher or lower, the dilution to the new investors will in turn be greater or less. The following table illustrates this per share dilution:
Assumed initial public offering price per share................ $
Pro forma net tangible book value per share as of June 30,
1999.......................................................... $
Increase per share attributable to this offering...............
-----
Pro forma net tangible book value per share after this
offering......................................................
-----
Dilution per share to new investors............................ $
=====
|
The following table summarizes, on a pro forma basis as of June 30, 1999, the total number of shares of common stock purchased from eGain, the total consideration paid to eGain and the average price per share paid by existing stockholders and by new investors purchasing shares in this offering (based upon an assumed initial public offering price of $ per share and before deducting the underwriting discounts and commissions and our estimated offering expenses):
Shares
Purchased Total Consideration
-------------- ---------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ---------- ---------- -------------
Existing stockholders... % $ % $
New investors........... $
---- ---- ---------- ---------
Total................. 100% $ 100%
==== ==== ========== =========
|
The foregoing table assumes (a) the exercise of outstanding warrants to purchase 394,139 shares of common stock that terminate upon completion of the offering and (b) no exercise of outstanding warrants that survive the offering or outstanding stock options. As of June 30, 1999, there were outstanding warrants to purchase an aggregate of 195,517 shares of common stock with a weighted average exercise price of $0.9212 per share that survive the offering and options to purchase an aggregate of 2,463,031 shares of common stock with a weighted average exercise price of $0.24 per share. To the extent any of these warrants or options are exercised, there will be further dilution to new investors.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data set forth below for the period from inception through June 30, 1998 and for the year ended June 30, 1999 and the selected consolidated balance sheet data as of June 30, 1998 and 1999 have been derived from our audited consolidated 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 consolidated financial statements and related notes included elsewhere in this prospectus.
Period from
September 10, 1997 Year Ended
(Inception) to June 30,
June 30, 1998 1999
------------------ ----------
(in thousands except
per share data)
Consolidated Statement of Operations Data:
Revenue:
Hosting....................................... $ -- $ 137
License fees.................................. -- 473
Service....................................... 2 409
------- --------
Total revenue............................... 2 1,019
Costs and expenses:
Cost of revenue............................... 39 1,772
Sales and marketing........................... 231 4,182
Research and development...................... 299 2,096
General and administrative.................... 257 1,235
Amortization of goodwill and other intangible
assets....................................... -- 1,217
Amortization of deferred compensation......... 58 1,817
------- --------
Total costs and expenses.................... 884 12,319
------- --------
Loss from operations............................ (882) (11,300)
Interest and other income (expense), net........ (56) (5)
------- --------
Net loss........................................ $ (938) $(11,305)
======= ========
Basic and diluted net loss per share............ $(17.78) $ (2.14)
======= ========
Shares used in computing basic and diluted net
loss per share(1).............................. 53 5,295
======= ========
Pro forma basic and diluted net loss per share
(unaudited)(2)................................. $ (0.93)
========
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)(1)(2)... 12,153
========
|
June 30,
-------------
1998 1999
------ ------
(in
thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents........................................ $3,831 $1,265
Working capital (deficit)........................................ 3,691 (755)
Total assets..................................................... 3,990 24,460
Notes payable less current portion............................... -- 221
Total stockholders' equity....................................... 3,801 20,978
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with the consolidated financial statements and related notes included 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 in "Risk Factors" and elsewhere in this prospectus.
Overview
Our company was founded in September 1997 to provide customer service infrastructure solutions to companies engaged in electronic commerce. From inception to September 1998, our operating activities related primarily to the planning and developing our proprietary technological solution, recruiting personnel, raising capital and purchasing operating assets. In September 1998, we commenced commercial shipment of our eGain Email Management System, or eGain EMS, an application that helps companies route, track and respond to high volumes of customer email and Web form inquiries. On April 30, 1999, we acquired Sitebridge Corporation and added its primary product to our customer service platform. The product, now called eGain Web Collaboration System, or eGain WCS, is an application that allows customer service representatives to interact online with customers on the Web. We began selling eGain WCS in May 1999. Our products and services are designed to enable businesses to deliver effective customer service, improve customer satisfaction and convert Web site visitors to buyers. Our products are designed to be highly scalable and to integrate with a company's existing infrastructure to allow the company to consolidate customer data from other applications in order to have access to comprehensive customer information. We offer our customers the flexibility to access our solution from an external hosted environment or to purchase and implement our solution directly in-house.
Our revenue consists of hosting revenue, license fees and service revenue associated with our eGain EMS and eGain WCS applications.
. Hosting Revenue. We derive hosting revenue when our customers choose to have our applications provided through our eGain Hosted Network, which is a network of service centers and hosting partners linked by high speed Internet connections. Our contracts with hosted customers generally provide for the payment of hosting fees on a monthly basis. Hosting revenue is recognized monthly as the services are performed.
. License Fees. We derive revenue from license fees when our customers choose to license our software for in-house installation. Revenue from license fees is recognized after a license agreement has been executed or a definitive purchase order has been received, the product has been delivered, the license fee has become fixed and determinable and collection of the fee is considered probable.
. Service Revenue. We derive service revenue from support and maintenance contracts on software licenses and professional services and training. Substantially all of our customers that purchase software licenses also purchase annual support and maintenance, which is paid in advance on an annual basis and initially recorded as deferred revenue. Revenue from support and maintenance contracts is recognized ratably over the term of the support and maintenance period. Professional services revenue is primarily related to deployment and customization services and is recognized on upon completion of specific contractual milestone events, or based on an estimated percentage of completion as work progresses.
We expect to make significant investments in product development and technology 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. In particular, we intend to expand our strategic distribution, hosting and solution relationships to add capabilities to our current product offerings and to help market our products to new customers.
We have incurred significant losses since our inception, and as of June 30, 1999, had an accumulated deficit of approximately $12.2 million. We expect to continue to incur substantial operating losses for the foreseeable future. In view of the rapidly evolving nature of our business and our limited operating history, we believe that period-to-period comparisons of our revenue and operating results are not meaningful and should not be relied upon as indications of future performance.
Acquisition of Sitebridge
We acquired Sitebridge in April 1999. In connection with the acquisition, we issued 1,609,793 shares of Series C convertible preferred stock, 1,455,514 shares of common stock, options and warrants to acquire 1,012,871 shares of common stock and warrants to acquire 121,006 shares of Series C preferred stock in exchange for all the outstanding preferred stock, common stock, and options and warrants to purchase shares of Sitebridge stock. The acquisition was accounted for as a purchase, and accordingly the results of operations of Sitebridge have been included in the consolidated financial statements since the date of acquisition. The fair market value of the securities issued in the acquisition was approximately $20.6 million.
Goodwill and Other Non-Cash Charges
We recorded goodwill and other purchased intangible assets of approximately $21.9 million associated with our acquisition of Sitebridge. Goodwill and other purchased intangible assets are being amortized on a straight-line basis over the estimated useful lives of three years. We currently expect to record amortization of goodwill and other intangible assets of approximately $7.3 million in fiscal 2000, $7.3 million in fiscal 2001 and $6.1 million in fiscal 2002.
In connection with the grant of stock options to employees and consultants, we recorded deferred stock compensation totaling approximately $390,000 in fiscal 1998 and $10.4 million in fiscal 1999, representing the difference between the deemed fair value of our common stock on the date these options were granted and the exercise price. These amounts were initially recorded through stockholders' equity and are being amortized by charges to operations. We recorded amortization of deferred stock compensation of approximately $58,000 in fiscal 1998 and $1.8 million in fiscal 1999. We anticipate recording additional deferred compensation in July 1999 amounting to $7.6 million. We expect to record amortization expense relating to deferred stock compensation approximately as follows: $9.2 million in fiscal 2000, $4.4 million in fiscal 2001, $2.2 million in fiscal 2002 and $820,000 in fiscal 2003. The amortization expense relates to options awarded to employees in all operating expense categories. See Note 6 of Notes to Financial Statements.
Sitebridge outsources its payroll processing and other aspects of its employee benefits programs under a co-employment arrangement with Ambrose, an independent professional employer organization. On March 31, 1999, the Financial Accounting Standards Board ("FASB") issued an Exposure Draft of a FASB Interpretation, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. This FASB Exposure Draft, if adopted in its current form, could be interpreted to indicate that employees subject to co-employment arrangements would not be considered employees for purposes of applying APB No. 25. In July 1999, we gave notice of termination of this co-employment arrangement effective July 31, 1999. If additional clarification regarding the definition of an employee is not provided in the final FASB pronouncement, we may be required to establish a new measurement date for stock options granted by Sitebridge after December 15, 1998 to these employees for the purpose of accounting for stock options under APB No. 25. If a new measurement date is required to be established, we would recognize the deferred stock-based compensation, which would be amortized over the remaining vesting periods of the options. We estimate that this charge would be approximately $7.0 million. This amortization could have a material adverse effect on our operating results.
Results of Operations
We were incorporated in September 1997 but did not commence significant operations until January 1998. Data for September 1997 through June 30, 1998 (the inception period) are not comparable to those for fiscal 1999 due to the acceleration of our activities and related expenses during fiscal 1999 and the different duration of the periods.
Revenue
Revenue for fiscal 1999 was $1.0 million, 60.7% of which was recognized in the quarter ended June 30, 1999. In fiscal 1999, FCC National accounted for 15.7% of total revenue and WebTV accounted for 10.8% of total revenue. In fiscal 1999, hosting revenue represented 13.5% of total revenue, license fees represented 46.4% of total revenue and service revenue represented 40.1% of total revenue.
Costs and Expenses
Cost of revenue. Cost of revenue consists primarily of costs incurred for customer support, hosting and professional services. Cost of revenue includes depreciation of capital equipment used in our hosted network, personnel costs, cost of third-party products and lease costs paid to remote co-location centers. In fiscal 1999, cost of revenue was $1.8 million. From July 1, 1998 to June 30, 1999, the number of customer support and professional services personnel increased from 2 to 37.
Sales and marketing. Sales and marketing expenses consist primarily of compensation and benefits of our sales, marketing and business development personnel, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead. Sales and marketing expenses were $4.2 million in fiscal 1999. From July 1, 1998 to June 30, 1999, the number of our sales and marketing personnel increased from 6 to 29.
Research and development. Research and development expenses consist primarily of compensation and benefits of our engineering and quality assurance personnel and, to a lesser extent, occupancy costs and related overhead. Research and development expenses are expensed as incurred. Research and development expenses were $2.1 million in fiscal 1999. From July 1, 1998 to June 30, 1999, the number of our research and development personnel increased from 7 to 33.
General and administrative. General and administrative expenses consist primarily of compensation and benefits for our finance, human resources, administrative and legal services
personnel, fees for outside professional services and, to a lesser extent, occupancy costs and related overhead. General and administrative expenses were $1.2 million in fiscal 1999. From July 1, 1998 to June 30, 1999, the number of our general and administrative personnel increased from 5 to 15.
Interest income and expense. Interest income consists of interest earned on our cash and cash equivalents. Interest income was $111,000 in fiscal 1999. To date, we have incurred interest expense on a working capital line of credit and notes payable for equipment financing. In fiscal 1999, interest expense was $116,000.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statement of operations data for the six quarters ended June 30, 1999. This information has been derived from our unaudited consolidated 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. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1998 1998 1998 1998 1999 1999
-------- -------- --------- -------- -------- --------
(in thousands)
Statement of Operations
Data:
Revenue
Hosting............... $ -- $ -- $ -- $ 3 $ 18 $ 116
License fees.......... -- -- -- 79 201 193
Service............... -- -- -- 65 34 310
----- ----- ------- ------- ------- -------
Total revenue....... -- -- -- 147 253 619
Costs and expenses
Cost of revenue....... 4 46 143 296 460 873
Sales and marketing... 61 176 508 929 1,078 1,667
Research and
development.......... 107 189 214 355 584 943
General and
administrative....... 70 134 225 205 296 509
Amortization of
goodwill and other
intangible assets.... -- -- -- -- -- 1,217
Amortization of
deferred
compensation......... -- 58 89 190 387 1,151
----- ----- ------- ------- ------- -------
Total costs and
expenses........... 242 603 1,179 1,975 2,805 6,360
----- ----- ------- ------- ------- -------
Loss from operations.... (242) (603) (1,179) (1,828) (2,552) (5,741)
Interest income
(expense), net......... (19) (19) 24 2 (18) (13)
----- ----- ------- ------- ------- -------
Net loss................ $(261) $(622) $(1,155) $(1,826) $(2,570) $(5,754)
===== ===== ======= ======= ======= =======
|
Fluctuations in Quarterly Results
Revenue increased substantially in the quarter ended June 30, 1999, primarily due to the increase in the number of hosting customers and an increase in consulting services. Cost of revenue increased each quarter primarily due to the development of the eGain Hosted Network and increased personnel costs. Sales and marketing expenses increased substantially during the quarters ended March 31, 1999 and June 30, 1999 due to marketing programs related to the launch of eGain EMS and the increase in sales personnel costs. The amortization of goodwill and other intangible assets recorded in the quarter ended June 30, 1999 is associated with our acquisition of Sitebridge in April 1999.
We have incurred operating losses since inception, and we may never achieve profitability in the future. 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. These factors may include our ability to do the following:
. compete in a highly competitive eCommerce customer service market;
. expand our sales, marketing and customer support activities;
. create and maintain strategic relationships, including relationships with our hosting partners;
. expand our customer base;
. introduce new products and services;
. upgrade our systems and infrastructure;
. reduce service interruptions; and
. recruit and retain key personnel.
Liquidity and Capital Resources
Since our inception in September 1997, we have financed our operations primarily through the private placement of our preferred stock and, to a lesser extent, through bank borrowings and capital equipment lease financing. As of June 30, 1999, we had $1.3 million in cash and cash equivalents and $1.2 million of borrowings available under an equipment financing line of credit. Net cash provided by financing activities was $6.4 million in fiscal 1999 and was primarily attributable to net proceeds from the issuance of stock.
Net cash used in operating activities was $7.8 million in fiscal 1999. Cash used in operating activities was primarily the result of net operating losses (exclusive of non-cash charges) and increases in accounts receivable and prepaid assets, partially offset by increases in accrued expenses and accounts payable.
Net cash used in investing activities was $1.2 million in fiscal 1999. Cash used in investing activities was primarily related to purchases of property and equipment.
As of June 30, 1999, our principal commitments consisted of obligations outstanding under 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.
During fiscal 1999, we obtained a line of credit with a bank for equipment purchases and working capital financing in the amount of $1.0 million and an equipment line of credit with a leasing company in the amount of $1.5 million. As of June 30, 1999, approximately $1.0 million was outstanding under the bank line of credit and approximately $342,000 was outstanding under the equipment credit facility. In addition, in connection with the acquisition of Sitebridge, we assumed two promissory notes in the total principal amount of $380,000.
Our capital requirements depend on numerous factors, including market acceptance of our services, the resources we allocate to our hosted network, sales, marketing and customer support services, and other factors. We have experienced substantial increases in our expenditures since our inception consistent with growth in our operations and personnel, and we anticipate that our expenditures will continue to increase for the foreseeable future.
We believe that the net proceeds from the sale of common stock offered hereby, together with our current cash balances and cash available under our lines of credit, 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 or 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. We may also need to raise additional funds, however, in order to fund more rapid expansion, including significant increases in personnel and office facilities, to develop new or enhance existing services or products or respond to competitive pressures. In addition, in order to meet our long term liquidity needs, we may need to raise additional funds, establish a credit facility or seek other financing arrangements. Additional funding may not be available on favorable terms, if at all.
Disclosure About Market Risk
Our exposure to market risk is principally confined to our cash and cash equivalents, which have short maturities and, therefore, minimal market risk.
Year 2000 Issues
Background
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, including, among other things, a temporary inability to process transactions, send invoices or engage in normal business activities. As a result, many companies' computer systems may need to be upgraded or replaced in order to avoid "Year 2000" issues.
State of Readiness
We initiated a Year 2000 compliance program in April 1999. Our quality assurance group is directing the program for our internally developed products, and our information technology group is directing the program for all other operational areas. We are a comparatively new enterprise, and, accordingly, the software and hardware we use to manage our business has all been purchased or developed by us within the last 24 months. While this fact pattern does not completely protect us against Year 2000 exposure, we believe we gain some mitigation from the fact that the information technology we use to manage our business is not based upon older hardware and software systems developed when there was less awareness of Year 2000 issues.
Our Product Testing
Our quality assurance team has tested the most current versions of eGain EMS and eGain WCS generally for Year 2000 compliance, and we believe that, when running on Year 2000 compliant hardware and operating systems, they are Year 2000 compliant according to the following definition:
. they can process, calculate, manipulate, sort, store and transfer date data without material error or material performance degradation, while taking into account century boundaries and leap years where required and
. they can operate between year 1999 and year 2000 without producing date- related errors.
Because our products obtain and process all date information (such as
creation dates, modification dates, and time/date stamps) from the underlying
operating system, the foregoing statement applies only if (1) the other
software, hardware, networks and systems with which our applications interface
are themselves Year 2000 compliant according to the above definition, and
(2) our applications are used in accordance with applicable documentation and
any other operating instructions provided by eGain.
Our Internal System
The scope of our plan covers all computing and network resources within the eGain enterprise. We have completed the risk assessment and testing phase of our plan and have outlined the following remediation plan, which is scheduled for completion by the end of September 1999:
. all hardware in the enterprise will be physically checked against identified Year 2000 compliance issues;
. operating systems on all devices will be evaluated and the appropriate
software patches applied;
. software applications will be upgraded to Year 2000 compliant levels; and
. we will obtain Year 2000 certification for all new hardware and software
added to the enterprise.
Risk Assessment and Testing Scope of Year 2000 Assessment
All of the testing we have completed has been performed by our own personnel. We have not retained any outside service or consultants to test or review our systems for Year 2000 compliance. We are in the process of obtaining assurances from our key suppliers of hardware and networking equipment for our data centers that such hardware and networking equipment is Year 2000 compliant. Additionally, we have received assurances from the providers of key software applications for our internal operations that their software is Year 2000 compliant. Based upon an initial evaluation of our broader list of software and hardware providers, we are aware that most of these providers are in the process of reviewing and implementing their own Year 2000 compliance programs, and we continue to seek assurances from them that their products are Year 2000 compliant. In addition, we rely on third party network infrastructure providers to gain access to the Internet. If these providers experience business interruptions as a result of their failure to achieve Year 2000 compliance, our ability to provide Internet connectivity could be impaired, which could harm our business and operating results. We are also vulnerable to external forces that generally affect industry and commerce, such as utility company Year 2000 compliance, failures and related service interruptions.
Budget
We have not incurred any significant expenses to date, and we do not anticipate any future costs associated with our Year 2000 remediation efforts will exceed $100,000. Expenses associated with our Year 2000 remediation efforts will be funded from available cash reserves. If we, our customers, our providers of hardware and software, or our third-party network providers fail to remedy any Year 2000 issues, the worst-case scenario would be the interruption of our services, which in turn could result in the incurrence of material costs or loss of revenue. Presently, we believe we are unable to reasonably estimate the duration and extent of any such interruption, or quantify the effect it may have on our future revenue.
Contingency Plans
We expect our Year 2000 compliance program to be substantially completed by September 1999. If we encounter delays or are unable to meet this schedule, we will analyze non-compliant areas and develop a comprehensive contingency plan to address the issues by October 1999.
See "Risk Factors--If we do not adequately address Year 2000 issues, we may incur significant costs and our business could suffer."
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") No. 98-1. "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. We are required to adopt SOP No. 98-1 effective July 1, 1999. We do not expect that the adoption of SOP No. 98-1 will have a material impact on our financial statements.
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" ("SFAS 133") 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.
BUSINESS
Company Overview
We are a leading provider of customer service infrastructure solutions for companies engaged in eCommerce. Our products and services help businesses provide more effective Internet-based customer service, thereby improving customer satisfaction and converting a higher percentage of Web site visitors to buyers. We offer our solutions both as a Web-based hosted application service through our eGain Hosted Network and as installed software for in-house implementation. Approximately 50% of our current customers access our applications through our eGain Hosted Network. Our customers include both dedicated Internet companies, such as Go2Net, Snap.com and WebTV, and traditional companies engaged in eCommerce, such as Mazda USA and FCC National's Wingspan Bank.
Industry Background
Customer Service Is Critical to eCommerce
In a short period of time, the Internet has evolved from primarily an information source to a new platform for commerce. International Data Corporation, or IDC, estimates that the number of customers buying goods and services over the Internet worldwide will grow from approximately 28 million in 1998 to 128 million in 2002, and that the total value of goods and services purchased over the Internet will increase from approximately $32 billion in 1998 to over $425 billion by 2002.
This growth has increased competitive pressures in online markets. To maintain or gain market share, many businesses engaged in eCommerce are focusing on the quality of customer service as a key competitive differentiator. Providing high quality customer service may be even more important on the Internet than it is in the physical world. Unlike a traditional commercial setting where customers can talk to a customer service representative either in person or by phone, customers on the Internet cannot easily contact agents with their inquiries. Whether to ask about product features, check the status of an order or get help with a loan application, online consumers have traditional service needs, and they want to be assured that these needs will be met before conducting a transaction. In the increasingly competitive eCommerce environment, companies that fail to address these customer service needs may lose sales to competitors located a mouse click away.
The Need for eCommerce Customer Service Applications
Today, most online customer communication takes place through email. Forrester Research estimates that the average online consumer will participate in eight to ten commerce-related email exchanges per week by 2001, and the Gartner Group estimates that, by 2001, businesses will receive at least 25% of all customer inquiries over the Internet. As email volume is rising, the content within email messages is also becoming more complex. However, many companies have not taken adequate steps to effectively address this increase in email volume and complexity. According to a recent survey by Jupiter Communications of 125 top eCommerce sites, 51% of the sites either refused to accept an email message, never responded to the message or took longer than five days to respond. These survey results suggest that online customers are not receiving the level of service they demand.
Businesses engaged in eCommerce that provide poor customer service risk losing customers. According to a June 1999 survey of 25 top eCommerce sites conducted by Net Effect Systems, two-thirds of all online commercial transactions that are initiated are abandoned before a sale is consummated. By improving responsiveness to email and providing real-time customer
communication, companies can convert more of these potential buyers into actual customers. Moreover, by analyzing captured customer communications, companies can gain insight into customer preferences to create new revenue opportunities.
To help address online customer service shortcomings, companies are beginning to adopt technologies to help them manage email and other forms of online customer communication. The market for these products is growing rapidly. IDC estimates that worldwide license revenues for eCommerce customer service applications will grow from $42 million in 1998 to $1.6 billion by 2002.
Existing Customer Service Approaches Are Insufficient
The market for online customer service software applications has developed mainly because existing approaches to online customer service are typically unable to effectively handle large volumes of email. Traditional client-server customer service systems were designed primarily to manage telephone call center operations and are typically expensive and difficult to deploy and maintain. Recognizing this, many companies engaged in eCommerce, particularly companies that came early to the Internet, have developed in-house solutions for customer service email management. These internally developed approaches, while customized to fit a company's needs, can also be expensive and time- consuming to develop and maintain. Furthermore, many in-house systems have difficulty scaling to keep pace with the rapid expansion of eCommerce.
More recently, several vendors have developed point solutions, or software packages to handle specific online customer service needs, such as email management, real-time Web collaboration or self-service. However, these point solutions often do not work well with each other or integrate easily with a company's existing legacy system. This lack of integration makes them expensive to implement and maintain. As a result, there is an increasing need for an online customer service platform that offers applications that can handle multiple channels of communication, scale to meet growing Internet-based communication needs and integrate easily with a company's existing legacy systems.
The Trend Toward Hosted Customer Service Applications
As the number of software business applications grows and their technological complexity increases, many companies are recognizing the benefits of the hosted application service model. Under a typical application hosting arrangement, a company can enjoy the business benefits of an application without having to devote the resources to install, maintain and continually upgrade it. These functions are performed instead by the application hosting provider. The recent evolution of the Internet into a relatively secure and reliable network has increased the demand for hosted applications. Also, there is a new generation of software applications that has been designed specifically to run in a Web- based environment. Finally, the recent emergence of global physical hosting providers has created the connectivity and co-location facilities required to support these applications. The convergence of these trends has led to the growing appeal of the hosted model today. According to a recent Yankee Group study, the market for all hosted applications, including customer service applications, is projected to grow from $3 billion in 1999 to $11 billion in 2002.
The Web-based application hosted model is appropriate for customer service applications for several reasons. The hosted option allows businesses engaged in eCommerce to deploy a customer service solution rapidly without using valuable internal resources. In addition, many companies doing
business over the Internet rely on geographically dispersed customer service departments to meet their rapidly growing, 24-hours, 7-days a week customer needs. The hosted model provides the network security and ease of maintenance that are crucial to these companies. Finally, many of these companies prefer to outsource the management and maintenance of customer service applications and instead focus on developing proprietary customer service processes and content. For these reasons, we believe that hosting is becoming a preferred delivery model for eCommerce customer service applications.
The eGain Solution
We provide our customers with a Web-based customer service platform that can be delivered either as a hosted application service or as in-house software. Our solution helps companies route, track and respond to high volumes of customer email and Web form inquiries and allows customer service representatives to provide real-time online assistance to these customers. Our applications work together with a company's existing customer service and database software to provide customer service representatives with comprehensive information about each customer. We provide our solutions to businesses seeking to use their customer support capabilities as a competitive tool to convert Web site visitors to buyers, build lasting customer relationships and generate incremental revenue. Our customers realize both strategic and operating benefits of our solution.
Strategic Benefits
Strengthen Customer Relationships. Our eGain Email Management System, or eGain EMS, is a software application that allows our customers to respond rapidly and effectively to large volumes of email. Based on business rules set by our customers, eGain EMS can automatically respond to customer emails or route each inquiry to an appropriate customer service representative for personalized attention. The combination of a timely, automated response and personalized attention improves customer satisfaction and helps build lasting customer relationships.
Convert Web Site Visitors to Buyers. Our eGain Web Collaboration System, or eGain WCS, facilitates real-time online communication between the customer and a company's customer service organization. Online visitors can interact directly with a company's customer service representative and inquire about a potential purchase. This personalized and immediate interaction increases the likelihood that a Web site visitor will complete a purchase.
Scale to Meet Growing eCommerce Demands. Many companies find that their customer service infrastructure is unable to handle the higher volume and complexity of customer communication. Our architecture allows us to incrementally add hardware capacity to address increased customer communication volume. Whether provided through our hosted network or deployed in-house, our products provide a customizable solution to the growing business needs of our customers.
Rapidly Deployable Solution. Our platform is designed to allow business to quickly deploy customer service capabilities as an application service through our eGain Hosted Network. Also, our applications can be rapidly customized through Web-based interfaces.
Gain Customer Insight. Our solution enables companies to capture and analyze customer communications in order to understand the needs and preferences of their customers. This understanding can provide a company with a competitive advantage when targeting customers for
future promotions and cross-selling opportunities. In addition, comprehensive knowledge of a customer's needs and preferences can be used strategically to enhance a company's product offerings.
Operating Benefits
Maximize Productivity of Customer Service Organization. By using the productivity tools on our platform, customer service representatives can respond rapidly to complex customer inquiries. Our tracking and workload reporting features enable supervisors to monitor service levels and agent productivity. Our customizable workflow capability allows managers to improve team performance by intelligently distributing workload.
Reduce Cost and Administrative Burden. Customers using the eGain Hosted Network recognize cost efficiencies by eliminating the need to manage and administer in-house customer service applications. Moreover, by increasing productivity, our applications enable companies to reduce personnel costs associated with their customer service functions.
Integrate Applications to Provide Comprehensive Customer Information. Our applications are based on open standards and can be integrated easily with leading eCommerce platforms, call center systems and customer databases. This integration enables customer service representatives to combine information from multiple applications to provide customer service representatives with comprehensive customer information.
The eGain Strategy
Our objective is to be the leading provider of customer service infrastructure solutions for businesses engaged in eCommerce. Our strategy for achieving this objective includes the following elements:
Capitalize on First Mover Advantage and Extend Brand Recognition. We were the first company to offer a platform for Internet-based customer service both as a hosted application service and as installed software. In addition, we were the first to offer a customer service platform incorporating both email management and Web-based collaboration. Having invested early in advertising our solution and building our brand, we intend to capitalize on our first mover advantage and extend our brand recognition to become the de facto standard for Internet- based customer service solutions.
Expand the eGain Hosted Network. We believe that the benefits of the eGain Hosted Network offer compelling advantages over competing alternatives. These advantages include the ability to leverage eGain's expertise, easy scalability, low up-front costs, fast deployment, system security and 24-hour, 7 days-a-week support. We plan to expand hosting centers in California and add centers in New York, London and other cities to meet customer needs.
Introduce Value-Added Products. We intend to differentiate ourselves in the customer service market by adding new products to our platform. For example, we recently added the eGain WCS, which allows businesses to offer personalized live online assistance to visitors on their Web site. In the future, we intend to enhance our platform by leveraging new technologies, such as voice over Internet Protocol, or voice over IP, which enables voice communications to take place over the Internet.
Expand Strategic Relationships. We intend to enter into strategic relationships that can assist us in marketing and distributing our products. We plan to expand existing and enter into new strategic relationships with external hosting partners, front office software companies, outsourced call center companies and systems integrators focused on eCommerce.
Expand Our International Presence. In addition to expanding our domestic marketing efforts, we intend to expand internationally. We have recently formed a subsidiary in the United Kingdom. We have also commenced product localization efforts for some European and Asian languages. We intend to capture international market share by marketing overseas, establishing additional sales offices and developing strategic relationships.
Products and Services
We provide customer service infrastructure solutions for companies engaged in eCommerce. Our solutions are built on a scalable, Web-based architecture designed to meet the growth in Internet-based communications. Our products are built on standards-based technologies that are designed to integrate with existing customer databases and applications.
Our two primary Web-based applications, eGain EMS and eGain WCS, are designed to manage the high volume and complexity of online customer communication, including email and live interactions on the Web. Our applications are available to our customers both as a hosted application service and as installed software. Although each application may be purchased separately, our applications are designed to work closely with one another and to integrate into a company's existing software architecture.
Product and Service Offerings
. eGain Email Management System (eGain EMS) -- an application that helps companies route, track and respond to high volumes of customer email and Web form inquiries.
. eGain Web Collaboration System (eGain WCS) -- an application that allows customer service representatives to provide live assistance to customers through real-time Web interaction.
. eGain eCommerce Bridge -- an application-linking module that enables rapid integration of eGain EMS with external eCommerce platforms, call centers and customer databases.
. Professional Services -- includes application management services, security services and customer support services.
Flexible Deployment
. eGain Hosted Network -- a company may access our solution through the eGain Hosted Network, a network of eGain service centers and hosting partners linked by high speed Internet connections designed to host our customer service applications.
. In-house installation -- a company may implement our solution in-house and either maintain the application internally or outsource management of the application to eGain.
[A graphic depicting the various components of the eGain product and service offerings appears here. At the top of the graphic is a horizontal cloud representing the Internet, with an arrow pointing down and another arrow pointing up. The arrow down contains the words "Email," "Web forms," and "Real-time inquiries." The arrow pointing up contains the words "Automatic responses," "Email replies," and "Live CSR assistance." Directly below the cloud are two boxes, one containing the words "eGain Email Management System," and the other, the words "eGain Web Collaboration System." Directly below these two boxes is a horizontal rectangular box labeled "eGain Hosted Network." Immediately to the right of these two boxes is a vertical rectangular box labeled "eCommerce Bridge." To the right of this vertical box are three smaller boxes labeled "Call center systems," "eCommerce platforms," and "Customer databases."]
eGain Application Platform
eGain EMS
eGain EMS is a Web-based application that enables customer service departments to route, track and respond to high volumes of customer email and Web form inquiries. Using eGain EMS, companies can maintain a comprehensive customer communication history and improve customer satisfaction with prompt and effective responses. eGain EMS is designed to scale to the customer service needs of any company engaging in eCommerce, regardless of size.
Companies using eGain EMS receive emails and Web form inquires from their email servers or Web sites. Based on business rules selected by the company, these emails are categorized using a form of artificial intelligence technology called statistical vector analysis. Once categorized, eGain EMS will send an automated response or route the email to the appropriate customer service representative with suggested responses. The customer service representative can use our productivity tools to access relevant customer-related information and prepare an effective response. Supervisors use our Web-based monitoring capability to set performance levels and track service levels. Managers use our flexible, Web-based reporting system to monitor workload, analyze trends in customer communications and forecast resource needs. Finally, businesses can use customer information captured in our system using our direct mail manager, a system that helps create and target personalized mailings based on customer attributes. This proactive, targeted customer communication helps strengthen customer relationships and provides new revenue opportunities.
Feature Description Benefits |
Email Processing . Tracks all inbound and . Maintains complete
and outbound email customer
Categorization . Develops Web forms to link communication history
to email . Increases effectiveness
. Categorizes communications of responses to customer
using inquiries
predetermined instructions
--------------------------------------------------------------------------------
eGain Artificial . Uses statistical vector . Enables routing and
Intelligence analysis, a robust automatic response by
artificial intelligence reading incoming email
technology, to "read" and
determine the substance of
incoming emails
--------------------------------------------------------------------------------
Powerful Workflow. Specifies instructions for . Routes each inquiry to
email routing appropriate CSR
. Pre-built instruction . Enables better workflow
library for various call decisions based on
center functions, including enhanced knowledge about
load-balancing, skill-based customers
routing, shift management
and quality of service
management
--------------------------------------------------------------------------------
Knowledge . Searchable knowledge base . Continually gathers,
Database . Content can be dynamically reviews and disseminates
constructed from foreign knowledge efficiently
data sources . Allows CSRs to use the
. Real-time system-wide most current information
knowledge update to respond to issues
|
Customer Service . Customizable high-speed Web . Increases CSR
Representative interface productivity
(CSR) . Provides suggested . Improves customer
Productivity responses, response satisfaction with prompt
Tools templates, group email and effective responses
reply, multiple-issue
emails, customer search
capability and audit trails
|
System Monitoring. Web-based interface for all . Enables supervisors to
and system monitoring customize, set
Administration and administration performance levels and
. Monitors system load, agent monitor with "point-and-
productivity and service click" ease
levels
--------------------------------------------------------------------------------
Enterprise . Real-time and historical . Allows administrators to
Management reports plan system capacity
Reporting . Preconfigured and using workload reports
customizable reports . Enables company to
. Archived reports for analyze trends in
analysis and forecasting customer communication
. Scheduled report delivery
through email
--------------------------------------------------------------------------------
Direct Mail . Creates personalized content . Enables companies to
Manager and targets email based on conduct targeted
customer attributes promotions, proactively
. Captures responses and links address customer concerns
to mailings to monitor and survey customer
efficacy satisfaction
|
eGain WCS
eGain WCS enables customer service representatives to answer customer questions and provide interactive assistance over the Web using browser sharing, text chat and assisted form-filling technology. Through eGain WCS, a user is able to communicate with a customer service representative by simply clicking a hyperlink on a company's Web site, which in turn prompts a customer service representative to reply. Once connected, the customer service representative and the customer can engage in a real-time online conversation. The agent has access to comprehensive information about the customer's past activity and browsing patterns. eGain WCS integrates with leading eCommerce platforms, call center systems, computer telephony integration software, customer databases and customer relationship management systems. eGain WCS is designed to allow customer service representatives to handle multiple customer interactions simultaneously, thereby reducing costs associated with traditional call centers while delivering personalized service.
Feature Description Benefits
Real-Time . Presents a real-time . Provides valuable
Collaboration interface optimized for the information to help close a
customer's specific platform sale
. CSR console displays the . Enables CSR to escort the
customer's profile along with customer through pre- or post-
a tracking summary of the sales situations
customer's activity on the Web
site
-----------------------------------------------------------------------------------
Queuing and . Tracks customers as they . Queuing helps company route
Profiling interact with specific pages the inquiries to appropriate
. Displays the hyperlinks to CSRs
pages visited by customer . Profiling collects customer
information before a CSR
addresses an inquiry
-----------------------------------------------------------------------------------
Monitoring, . Generates a summary screen . Enables managers to run
Reporting & at the end of a WCS session reports on customers and
Administration . Emails customer a transcript access customer profiles and
of the session, including all session transcripts
text chat and hyperlinks . Enables managers to audit
shared agent performance and
. Stores session information establish effective staffing
into a database policies
-----------------------------------------------------------------------------------
WorksEverywhere . Patent-pending technology . Does not require downloading
that matches customers or installation of software
browsing platforms with
appropriate real-time
interaction method
. Works on browsers and . Offers live customer service
through firewalls and proxy to a broad customer base
servers
|
eGain eCommerce Bridge
The eGain eCommerce Bridge allows eGain EMS to be easily linked with leading eCommerce platforms, call center systems and customer databases. This allows customer service representatives to get a complete profile of the customer by pulling information from other systems, enabling them to formulate an informed, personalized response by drawing on prior interactions with the customer. In addition, the eCommerce Bridge can be used to update existing customer databases with relevant customer information extracted from eGain EMS. We are in the process of enhancing the eGain eCommerce Bridge to interface with eGain WCS. We intend to enable remote application integration by implementing XML- based interfaces. This remote integration capability would allow our hosted customers to access their valuable customer information residing in in-house applications behind corporate firewalls.
We offer several pre-built adaptors that connect into our eCommerce Bridge to link eGain applications with a variety of eCommerce platforms, call center systems and relational databases.
These adaptors minimize the need for custom programming to integrate eGain applications with other enterprise software. We currently offer adaptors for Microsoft Site Server (Commerce Edition) and Remedy Action Response System, Siebel Systems Siebel 99, Intershop 3, Oracle relational databases and ODBC- compliant databases. In the future, we intend to continue to develop, as well as enable our partners to develop, adaptors to other leading enterprise applications and call center solutions.
Professional Services
As of June 30, 1999, we had 37 professionals dedicated to providing a wide range of professional services for application management, solution development and system deployment.
Our operations group provides application management services that offer a 24-hour, 7-days-a-week application response monitoring service. We also provide database services to maintain and enhance the performance, availability and reliability of production systems. Finally, we offer network security services to prioritize, assess and address the security concerns of customers at different levels based on their needs.
Our consulting group offers solution development and system integration services. The team works with our customers to understand their specific requirements, analyze their business needs and implement an integrated solution based on the eGain customer service platform. The eGain eCommerce Bridge and our industry expertise allow us to integrate enterprise-wide systems with our customer service solutions. We provide these services ourselves or in partnership with system integrators who have built consulting expertise on our platform and can implement complete solutions for our clients.
Our deployment group offers deployment services based on a rapid implementation methodology designed to have a customer up and running quickly. The deployment teams are involved in client engagement, needs assessment, infrastructure setup, EMS configuration, training and activation.
Flexible Deployment
We offer our customer service solutions both as a Web-based hosted service through our eGain Hosted Network and as a licensed software product that can be implemented and maintained in-house.
eGain Hosted Network
Through a network of eGain service centers and hosting partners linked by high-speed Internet connections, we provide our customers with multiple redundant paths to access their hosted customer service applications. We remotely manage these applications which reside on server machines co-located at our hosting partners' facilities. We believe the eGain Hosted Network provides a compelling alternative for companies engaged in eCommerce that seek to quickly deploy and efficiently scale their customer service capabilities. We have strategically located eGain service centers in Sunnyvale (Silicon Valley), London and New York. We select our co-location partners with a view to providing high bandwidth availability, peering arrangements with other Internet service providers and global presence. As part of our eGain Hosted Network, we offer value-added services for application management, database maintenance, mail hosting and anti-virus protection.
We have invested early to build a scalable hosted network, and have recruited experienced operations personnel to maintain the system effectively. For example, our service centers are linked through dedicated high-speed connections to the co-location centers to provide our customers with
multiple redundant paths to access their hosted customer service applications. In the event one of these links fails, user traffic can be quickly rerouted for continued operations. We have also developed proprietary Web-based hosted service management systems, enabling our service professionals to efficiently administer and manage large numbers of hosted customer applications. For example, we have developed Web-based software tools to monitor application response and system health.
[Graphic depicting architecture of the eGain Hosted Network appears here. On the left side of the graphic there is a box labeled "eCommerce Company". Moving to the right across the page, there are two two-way arrows passing through a cloud representing the Internet. Each arrow connects to a different circle labeled "eGain Hosting Center." These circles each contain a cylinder labeled "eGain Customer Applications." There is a two-way arrow connecting these "eGain Hosting Center" circles to a box to the right labeled "eGain Remote Application Management Center."]
Sales and Marketing
Sales Strategy
We sell our customer service solutions either as a subscription-based hosted service or as a licensed software product for installation in-house. We sell primarily through a worldwide direct sales organization and target our sales to companies seeking to improve customer relations and increase their eCommerce activities.
During our sales process, we typically approach the head of customer service of the organization. In smaller companies, our sales personnel, working closely with the sales engineers, make product demonstrations and presentations to address a customer's needs. In larger accounts, we often engage our professional services team, and in some cases, strategic partners to create customer-specific demonstrations, presentations and proposals.
As prospective customers proceed towards selecting our products and services, our professional services team manages the project and may work with outside system integrators to facilitate timely deployment. Our services team delivers customer and partner training through lectures, demonstrations, discussions and hands-on use of our solutions. Following implementation, our account managers work with the customers to identify and serve their ongoing needs, freeing up our sales professionals to focus on new business opportunities.
Marketing Strategy
Our marketing strategy is to continue to build brand awareness of eGain as a leading provider of customer service infrastructure solutions for eCommerce. We focus our marketing efforts on dedicated Internet companies as well as traditional companies seeking to take advantage of the commercial opportunities presented by eCommerce.
We rely on a range of available marketing avenues to pursue our objectives, including print advertisements, email newsletters, Internet advertisements, billboards, telemarketing, targeted direct mailing and a variety of trade shows, seminars and interest groups.
Our marketing group assists our sales team by providing them with product collateral materials, customer case studies, market surveys and customer profiles. In addition, our marketing group helps identify and develop key partnership opportunities and channel distribution relationships.
As of June 30, 1999, we had 29 sales and marketing professionals, including sales engineers, major account representatives and channel/partner salespeople. Our sales personnel are located in New York City, Washington DC, Minneapolis, Toronto, Dallas, Los Angeles, Denver, Seattle and Sunnyvale. We plan to open new sales offices and expand our direct sales force.
Customers
Our customers include both dedicated Internet companies and Fortune 1000 companies that have established a commercial Web site. The following is a representative list of companies that have entered into agreements to install eGain EMS or eGain WCS as of June 30, 1999:
Computer Technology and Networking Internet Searching and Auctions
Microsoft WebTV DoughNET
RealNetworks eGuard
Transition Networks FairMarket
USWeb/CKS Go2Net
Looksmart
Consumer e-Retail MediaRing.com
Chapters.ca Talk City
Cooking.com ONElist
Digital Chef Six Degrees
HMV Canada Snap.com
Internet Shopping Network Winebid.com
KB Toys
Shopping.com
Tucows Financial Services
Consumer Financial Network
i-Escrow
Customer Service Centers Nova Information Systems
Brigade Solutions Quote.com
PanAmerican Call Centers Wingspan Bank
Sykes Enterprises
Manufacturing
Mazda USA
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Customer Support
We provide customer support to our hosted customers on a 24-hour, 7-days-a- week basis as part of the basic monthly hosting license fee. In addition, we offer customers that license our applications and deploy them in-house the option of purchasing customer support services for an annual fee. Our customer support professionals refer complex customer issues as needed to our internal technical support group, to diagnose and solve. Our customer support representatives use the eGain EMS applications to manage telephone- and email- based customer inquiries.
Strategic Relationships
Developing strategic relationships with other companies has been and will continue to be an important part of our business strategy. We look for appropriate partners to add capabilities to our current product offering as well as help market our products to new customers. Specifically, we seek to establish relationships with distribution, hosting and solution providers.
Distribution. To date, we have worked with companies such as USWeb/CKS, Viant Corporation, Inference, SRA International, Inc. and Pandesic LLC to help us identify and close new customer opportunities. In the future, we plan to enter into value-added reseller agreements and joint marketing arrangements with companies, both domestic and international, to expand market share. We intend to develop partnerships with call center providers that require assistance in handling email and other Internet-based customer inquiries for their clients. We also intend to distribute our products in partnership with leading systems integrators and front office software companies.
Solution. We have strategic relationships with companies whose products or services enhance our product offerings. We will continue to add partners when appropriate to meet customer needs. We have also worked with companies such as Inference, Microsoft, Oracle, Remedy Corporation and Siebel Systems to ensure that our products can be integrated easily with the database servers, front office software applications, and other products they provide.
Hosting. The eGain Hosted Network is enabled by relationships with various hosting providers that supply the database and connectivity hardware that supports our applications. We currently have arrangements with AboveNet Communications and Frontier GlobalCenter, two leading providers of managed co- location and Internet connectivity. These hosting partners serve as data centers that, in conjunction with eGain's information systems specialists, guarantee redundant network and server infrastructure for continuous, 24-hour, 7-days-a-week availability of our applications to our hosted customers.
Competition
The market for eCommerce customer service solutions is relatively new and growing rapidly. We expect the level of competition in this evolving market to intensify in the future, as new and existing competitors seek to provide products and services for our market.
Our current principal competitors for our licensed software products include Brightware, Inc., Kana Communications, Inc., Mustang Software, Inc., Silknet Software, Inc. and Webline Communications Corp. While we were the first company to offer a customer service applications platform in a hosted environment, some of our competitors for licensed software products are now beginning to offer hosted approaches. We also face competition from larger, front office software companies such as Clarify, Inc., Oracle Corporation, Siebel Systems, Inc. and The Vantive Corporation. In the future, we may face competition from established software companies such as IBM, Hewlett-Packard, Microsoft and others that may seek to enter the market for eCommerce customer service solutions.
We believe that the principal competitive factors affecting our market are product features; product performance, including scalability, flexibility and availability, price, quality of support and service and brand reputation. We believe that our products currently compete favorably with respect
to these factors; however, our market is evolving rapidly, and we expect to face increased competition for our product offerings. Some of our competitors have, and our future competitors may have, longer operating histories, larger customer base, greater brand recognition and significantly greater financial, marketing, technical, support and other resources. Some of these competitors may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies or devote substantially greater resources to product development.
We may not be able to compete successfully against our current and future competitors. See "Risk Factors--We Must Compete Successfully in the eCommerce Customer Service Market."
Technology
All of our software products are built on a standards-based, scalable architecture designed to address the evolving needs of companies engaged in eCommerce. Specifically, our software is based on our proprietary eGain Web Component Architecture, or eGain WCA, an open, scalable framework for software design that builds upon three industry trends:
. widespread availability of reliable Internet connectivity to businesses, which is enabling the delivery and management of hosted applications over the Internet;
. investment in Internet technologies, which is driving development of new Web applications that natively incorporate powerful and flexible protocols; and
. the success of component-based software development models which provide the tools for developing robust distributed software applications.
Our eGain WCA is a more scalable approach to application design compared to traditional client-server or three-tier architectures. For example, in contrast to client-server or three-tier architectures that require the download and maintenance of dedicated client-side software, our eGain WCA does not require the download of any client software. This allows use of the application from anywhere across the Internet through a standard Web browser. In contrast to traditional monolithic server-side applications where scalability meant buying the fastest server machines with maximum memory, the eGain WCA adopts a divide- and-conquer approach by using distributed processing in a modular hardware environment.
The component-based software model of our eGain WCA makes it more fault- resilient and flexible than traditional architectures. Each component can be diagnosed and monitored independently, and the overall system does not stop if there is a problem with an individual component. Moreover, each independent software component can be readily swapped out or augmented to meet the specific needs of customers.
Our eGain WCA organizes software into logical layers: Presentation, Application, Service, Object and Data. Each layer consists of software components that implement specific tasks, and each component offers a well- defined external programming interface. In addition, each layer includes as an option a management service that oversees the activities of the components within that layer. This modular approach facilitates customization and provides flexibility for future enhancements.
. Presentation Layer. The Presentation Layer localizes the look and feel logic of the user interface so that customization of the user interface can be easily managed. Our user interface can be accessed through standard browsers.
. Application Layer. The design of the Application Layer offers high reliability and scalable performance by balancing and allocating workload across multiple application servers.
. Service Layer. The Service Layer comprises the core set of independent services that receive, parse, route and dispatch emails. The eGain service manager monitors all the service instances in real-time, alerting the system administrator of any performance bottlenecks.
. Object Layer. The Object Layer allows new types of business objects to be added as needed to handle richer customer service models. This layer presents to the Application and Service Layers a logical view to system data in the form of business objects such as a ticket, user, customer and message.
. Data Layer. The Data Layer allows for greater database portability by insulating the objects from vendor specific difference across databases. This layer manages the data access across various data sources and maintains connection pools for efficiency.
Intellectual Property
We regard our copyrights, service marks, trademarks and similar intellectual property as critical to our success. We rely on patent, trademark, copyright, trade secret and other laws to protect the proprietary aspects of our technology and business. We have no patents or registered trademarks to date. We presently have one patent pending for our WorkEverywhere technology that matches customers' browsing platform with appropriate real-time interaction method. We also have several trademark applications pending. eGain is a registered trademark, and eGain Email Management System, eGain EMS, eGain Web Collaboration System, eGain WCS, eGain Hosted Network, eGain eCommerce Bridge, eGain WCA and eGain Web Component Architecture, are trademarks, of eGain. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects of our technology 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 and trademarks.
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, technology, or business plans. In addition, we require employees to agree to surrender to eGain 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 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 technology or license the proprietary rights on a timely basis would harm our business.
Employees
As of June 30, 1999, we had 114 full-time employees, including 33 in research and development, 37 in services, 29 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 Sunnyvale, California, where we lease approximately 11,000 square feet under a five-year lease expiring September 2004. We currently expect to enter into a lease for an additional 46,000 square feet in Sunnyvale, California in the next few months, and are exploring our options with respect to our current lease. We also maintain a direct operating presence through offices in New York City, and London, England. We believe that, with the additional 46,000 square feet, our facilities will be adequate to meet our requirements for at least the next 12 months.
MANAGEMENT
Directors, Executive Officers and Key Employees
Our directors, executive officers and key employees and their ages as of June 30, 1999 are as follows:
Name Age Position ---- --- -------- Ashutosh Roy(1)......... 33 Chief Executive Officer and Chairman Gunjan Sinha(2)......... 32 President and Director Robert Apollo........... 44 Vice President and General Manager of European Operations Ravinder Grewal......... 37 Vice President of Services Ram Kedlaya............. 40 Vice President of Products Stephen E. Klann........ 55 Vice President of Sales Wendell W. Lansford..... 30 Vice President of New Business Initiatives Prakash Mishra.......... 30 Vice President of Technology Ryan M. Rosenberg....... 38 Vice President of Marketing Eric N. Smit............ 37 Vice President of Finance Mark A. Wolfson(1)(2)... 46 Director |
Ashutosh Roy co-founded eGain and has served as Chief Executive Officer and a director of eGain since September 1997. From May 1995 through April 1997, Mr. Roy served as Chairman of WhoWhere? Inc., an Internet-service company co- founded by Mr. Roy. From June 1994 to April 1995, Mr. Roy co-founded Parsec Technologies, a call center company based in New Delhi, India. From August 1988, to August 1992, Mr. Roy worked as Software Engineer at Digital Equipment Corp. Mr. Roy holds a B.S. in Computer Science from the Indian Institute of Technology, New Delhi, a Masters degree in Computer Science from Johns Hopkins University and an MBA from Stanford University.
Gunjan Sinha co-founded eGain and served as a director of eGain since inception in September 1997 and as President of eGain since January 1, 1998. From May 1995 through April 1997, Mr. Sinha served as President of WhoWhere? Inc., an Internet-services company co-founded by Mr. Sinha. Prior to co- founding WhoWhere? Inc., Mr. Sinha was a developer of hardware for multiprocessor servers at Olivetti Advanced Technology Center. In June 1994, Mr. Sinha co-founded Parsec Technologies. Mr. Sinha holds a degree in Computer Science from the Indian Institute of Technology, New Delhi, a Masters degree in Computer Science from UC Santa Cruz, and a Masters degree in Engineering Management from Stanford University.
Robert Apollo has served as Vice President and General Manager of European Operations of eGain since June 1999. From July 1998 to May 1999, Mr. Apollo served as Vice President, European Operations of Sterling Commerce, an eCommerce software and services provider. From June 1996 to July 1998, Mr. Apollo served as Vice President and Managing Director, International, of XcelleNet Limited, a remote and mobile systems management vendor. From February 1990 until March 1996, Mr. Apollo held various positions at Santa Cruz Operations and most recently served as Vice President of Marketing for Europe, Middle East and Africa of Santa Cruz Operations. Mr. Apollo holds a B.A. in Business Studies from Thames Valley University (formerly known as Ealing College of Higher Education).
Ravinder Grewal has served as Vice President, Worldwide Professional Services since March 1999. From January 1998 to February 1999, Mr. Grewal served as a director of Documentum, an enterprise document management software company. From February 1997 to January 1998, Mr. Grewal served as Vice President, Consulting for Workgroup Management, Inc., a knowledge management consulting firm that was accquired by Documentum in January 1998. From May 1995 to February 1997, Mr. Grewal served as Senior Project Director of MCI Systemhouse, a telecommunications company. From January 1994 to May 1995, Mr. Grewal served as Director of KPMG/Kanbay Resources (HK) Ltd., a management consulting company. Mr. Grewal holds a B.S. in Computer Science from the University of California, Berkeley.
Ram Kedlaya has served as Vice President, Products, of eGain since December 1998. From August 1992 to March 1998, Mr. Kedlaya was a co-founder of NUKO Information Systems, a provider of networking products and solutions for broadband network service providers. Mr. Kedlaya served in several positions at NUKO, most recently as a Vice President, Strategic Planning. Mr. Kedlaya holds an M.S. in electrical engineering from the University of Texas, at Austin and a B.S. in electrical engineering from the Indian Institute of Technology, Madras.
Stephen E. Klann has served as Vice President of Sales of eGain since May 1998. Prior to joining eGain, Mr. Klann spent 13 years with Honeywell Information Systems and 3 years with Wang Labs in various sales management positions. He then spent 5 years as Vice President of Sales for Interleaf, 3 years as Vice President of Sales and Marketing for Frame Technology and 2 years as President and CEO of IXI Software Corporation. Over the past 5 years and just prior to joining eGain, Mr. Klann has been serving in long-term Vice President capacities as a consultant from State of the Art, Open Text, Thinking Tools and ShareData.
Wendell W. Lansford has served as Vice President of New Business Initiatives of eGain since May 1999. From September 1996 to May 1999, Mr. Lansford served as President and Chief Executive Officer of Sitebridge Corporation, an ECommerce customer service software company which was acquired by eGain. From March 1995 to September 1996, Mr. Lansford served as Director of Technology of CondeNet, the Internet division of Conde Nast Publications. From September 1994 to March 1995, Mr. Lansford served as Partner of Lancomp, a systems integration and consulting firm. From May 1991 to September 1994, Mr. Lansford served as Member of Technical Staff of Bellcore, a telecommunications research firm which was recently renamed Telcordia. Mr. Lansford holds a Masters degree in Information Networking from Carnegie-Mellon University, and a B.S. in Electrical Engineering from the University of Tulsa.
Prakash Mishra has served as Vice President of Technology of eGain since May 1999. From September 1996 to May 1999, Mr. Mishra served as Chief Technology Officer and Executive Vice President of SiteBridge Corporation, an eCommerce customer service software company. From August 1994 to September 1996, Mr. Mishra served as Associate in Fixed Income Research at Goldman, Sachs & Co. From January 1994 to August 1994, Mr. Mishra served as Principal of Internet Consulting Corporation, a New York-based Internet business consultancy. Mr. Mishra holds a Masters degree in Information Networking from Carnegie-Mellon University, and a B.S. in Computer Engineering from Rensselaer Polytechnic Institute.
Ryan M. Rosenberg has served as Vice President of Marketing of eGain since June 1998. From June 1996 to June 1998, Mr. Rosenberg served as Director of Product Marketing for Symantec Corporation, a business and personal software company. From November 1993 to June 1996,
Mr. Rosenberg served as a Product and Senior Product Manager for Symantec. Mr. Rosenberg holds a B.S. in Computer Science from Michigan State University, and an M.B.A. in Marketing from the University of California, Los Angeles.
Eric N. Smit has served as Vice President, Finance and Administration of eGain since June 1999. From June 1998 to June 1999, Mr. Smit served as Director of Finance of eGain. From December 1996 to May 1998, Mr. Smit served as Director of Finance for WhoWhere? Inc., an Internet services company. From April 1993 to November 1996, Mr. Smit served as Vice President of Operations and Chief Financial Officer of Velocity Incorporated, a software game developer and publisher company. Mr. Smit holds a Bachelor of Commerce in accounting from Rhodes University, South Africa.
Mark A. Wolfson has served as a director of eGain since June 1998. Since October 1998, Mr. Wolfson has served as a managing partner of Oak Hill Capital Management, Inc. Prior to October 1998, Mr. Wolfson served as a principal of Arbor Investors, L.L.C. Since 1997, Mr. Wolfson has held the position of professor at the Stanford University Graduate School of Business. Mr. Wolfson holds a Ph.D. and a Masters degree from the University of Texas, at Austin and a B.S. from the University of Illinois.
Board Composition
We currently have authorized three (3) directors. All directors are elected to hold office until the next annual meeting of stockholders of eGain and until their successors have been elected. Officers are elected at the first board of directors meeting following the stockholders' meeting at which the directors are elected and serve at the discretion of our board of directors. There are no family relationships among any of our directors or executive officers.
Executive Compensation
The following table provides summary information concerning compensation earned by or paid to our chief executive officer and to each of our four other most highly compensated executive officers whose total annual salary and bonus exceeded $100,000, for services rendered in all capacities to eGain during the fiscal year ended June 30, 1999. These individuals are referred to as the "named executive officers."
Summary Compensation Table
Annual Long-Term
Compensation Compensation
--------------- ------------
Security
Underlying
Name and Principal Position Salary Bonus Options (#)
--------------------------- -------- ------ ------------
Ashutosh Roy....................................... $100,008 $ -- --
Chief Executive Officer and Chairman
Gunjan Sinha....................................... 100,008 -- --
President
Stephen E. Klann................................... 194,000 8,600 34,271
Vice President of Sales
Ryan M. Rosenberg.................................. 135,000 -- 145,000
Vice President of Marketing
Eric N. Smit ...................................... 105,381 -- 125,000
Vice President of Finance
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Option Grants in Last Fiscal Year
The percentage of total options granted is based on an aggregate of 2,666,101 options granted in fiscal 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 eGain'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 June 30, 1999 and the exercise prices of the options. Solely for purposes of determining the value of the options at June 30, 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.
Potential Realizable
Value at Assumed
Percentage of Annual Rates of Stock
Total Options Exercise Price Appreciation for
Granted to or Base Option Term
Options Employees in Price Expiration -----------------------
Name Granted Fiscal 1999 ($/Share) Date 5% 10%
---- ------- ------------- --------- ---------- ----------- -----------
Ashutosh Roy............ -- --% $ -- -- -- --
Gunjan Sinha............ -- -- -- -- -- --
Stephen E. Klann(1)..... 8,671 0.3 .10 10/9/08
8,400 0.3 .20 1/29/09
3,200 0.1 .20 3/19/09
10,400 0.4 .40 5/20/09
3,600 0.1 .50 6/18/09
Ryan M. Rosenberg(2).... 125,000 4.7 .10 7/31/08
20,000 0.8 .20 1/29/09
Eric N. Smit(2)(3)...... 75,000 2.8 .10 10/9/08
50,000 1.9 .50 6/18/09
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Shares Year-End Fiscal Year-End
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(2) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
Ashutosh Roy............ -- -- --/-- --/--
Gunjan Sinha............ -- -- --/-- --/--
Stephen E. Klann........ 48,000 10,400/-- --/--
8,671 3,600/-- --/--
8,400
3,200
Ryan M. Rosenberg....... 125,000(1) --/-- --/--
20,000(1)
Eric N. Smit............ 11,500 50,000/-- --/--
75,000(1)
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Director Compensation
We do not currently compensate our directors for their services as directors. Directors who are employees of eGain are eligible to participate in our 1998 Stock Plan. We also reimburse each member of our board of directors for out-of- pocket expenses incurred in connection with attending board meetings.
Board Committees
Our board of directors has a compensation comittee and an audit comittee. The compensation committee is responsible for determining salaries, incentives and other forms of compensation for directors, officers and other employees of eGain and administering various incentive compensation and benefit plans. Mark Wolfson and Gunjan Sinha are currently members of the compensation committee. Prior to completion of this offering, Mr. Sinha will resign from the compensation committee, and the committee will consist of Mr. Wolfson and a second outside director. Ashutosh Roy, our chief executive officer, will participate in all discussions and decisions regarding salaries and incentive compensation for all employees and consultants of eGain, except that he will be excluded from decisions regarding his own salary and incentive compensation.
The audit committee reviews our annual audit and meets with our independent auditors to review our internal controls and financial management practices. Mr. Wolfson and Mr. Roy are currently members of the audit committee. Prior to completion of this offering, Mr. Roy will resign from the audit committee, and the audit committee will consist of Mr. Wolfson and a second outside director.
Compensation Committee Interlocks and Insider Participation
The members of our compensation committee are currentlyMark Wolfson and Gunjan Sinha. 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 Plan
Our 1998 Stock Plan was adopted by the board of directors in June 1998 and
will be amended and restated effective upon completion of this offering. Our
1998 Stock 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 and stock purchase rights to employees, non-employee
directors and consultants. A total of 3,500,000 shares of common stock has been
reserved for issuance under our 1998 Stock Plan as of June 30, 1999. In July
1999 an additional 3,000,000 shares of common stock were reserved for issuance
under our 1998 Stock Plan.
Our 1998 Stock Plan is administered by our compensation committee and our non-insider option committee. 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 Plan as desired without further action by eGain's stockholders except as required by applicable law. Our 1998 Stock 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 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 eGain, 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 eGain.
As of June 30, 1999,
. 1,447,396 shares of common stock have been issued upon the exercise of options; and
. 647,004 shares were available for future awards.
Sitebridge 1997 Stock Plan
Upon the closing of our acquisition of Sitebridge Corporation, we assumed outstanding options to purchase shares of common stock of Sitebridge Corporation that became exercisable for 1,234,666 shares of eGain common stock. As of June 30, 1999, options to purchase 982,431 shares of common stock were outstanding under this plan.
1999 Employee Stock Purchase Plan
The board of directors adopted our 1999 Employee Stock Purchase Plan in July 1999, to be effective upon completion of this offering. A total of 750,000 shares of common stock have been reserved for issuance under our employee stock purchase plan. Our 1999 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 eGain 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 1999 Employee Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed 15% of an employee's compensation.
The board of directors will establish participation periods for our 1999 Employee Stock Purchase Plan, none of which will exceed 6 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 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 1999 Employee Stock Purchase Plan ends automatically on termination of employment with eGain. 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 1999 Employee Stock Purchase Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation. Our 1999 Employee Stock Purchase Plan will terminate in July 2009, unless sooner terminated by the board of directors.
401(k) Plan
We intend to establish a tax-qualified employee savings and retirement plan (the "401(k) Plan") for which eGain'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, eGain 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 eGain, if any, will be deductible by eGain when made.
Employment Agreements and Change in Control Arrangements
We do not currently have any employment contracts with any of our named executive officers. The shares of common stock issued to Ashutosh Roy and Gunjan Sinha vest over a period of time, which vesting is accelerated in the event of a change of control of eGain.
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 its 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
In December 1997, we sold 4,000,000 shares of common stock to each of Ashutosh Roy, a founder and our Chief Executive Officer, and Gunjan Sinha, a founder and our President, at a purchase price of $0.005 per share.
Between June 1998 and March 1999, we sold and issued 7,956,585 shares of our preferred stock for an aggregate consideration of $9,455,004. We sold 5,406,585 shares of Series A preferred stock in June 1998 at a price of $0.8055 per share and 2,550,000 shares of Series B preferred stock between December 1998 and March 1999 at a price of $2.00 per share. Each share of Series A preferred stock and Series B preferred stock converts into one share of common stock.
The following table summarizes purchases, valued in excess of $60,000, of shares of preferred stock by our directors, executive officers and 5% stockholders:
Number of Shares
------------------
Series A Series B
--------- --------
Directors and Executive Officers
Ashutosh Roy................................................. -- 750,000
Gunjan Sinha................................................. -- 750,000
5% Stockholders
FW Ventures I, L.P........................................... 3,103,663 574,052
Fayez Sarofim Investment Partnership No. 5, L.P. ............ 869,026 160,735
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Business Relationships
In May 1999, we issued FW Ventures I, L.P. a warrant to purchase 175,000 shares of common stock at a price of $0.20 per share in connection with financial advisory services rendered in connection with our acquisition of Sitebridge. Mark Wolfson, a director of eGain, is a limited partner of FW Ventures I, L.P.
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 independent directors, are on terms no less favorable to us than could be obtained from unaffiliated parties and are reasonably expected to benefit us.
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 June 30, 1999, and as adjusted to reflect the sale of shares of common stock in this offering, by:
. each person or entity known to us to own beneficially more than 5% of our common stock;
. each of our directors;
. each of the named executive officers; and
. all executive officers and directors as a group.
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 June 30, 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 such stockholder's name.
Unless otherwise indicated, the address for the following stockholders is c/o eGain Communications Corporation, 624 East Evelyn Avenue, Sunnyvale, California 94086.
Percentage Owned(1)
Total Shares ------------------------------
Name and Address of Beneficial Beneficially
Owner Owned Before Offering After Offering
------------------------------ ------------ --------------- --------------
5% Stockholders:
FW Ventures I, L.P............... 3,852,715 18.4%
201 Main Street, Suite 2600
Ft. Worth, TX 76011
Fayez Sarofim Investment
Partnership No. 5, L.P. ........ 1,079,419 5.2
Two Houston Center #2907
Houston, TX 77010
Directors and Executive Officers:
Ashutosh Roy..................... 4,305,556 20.6
Gunjan Sinha..................... 4,305,556 20.6
Stephen E. Klann................. 82,271 *
Ryan M. Rosenberg (2)............ 145,000 *
Eric N. Smit(3).................. 136,500 *
Mark A. Wolfson(4)............... -- *
All directors and executive
officers as a group
(6 persons)(5).................. 8,974,883 42.9%
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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 50,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of preferred stock, $.001 par value.
Common Stock
As of June 30, 1999, there were 20,907,178 shares of common stock outstanding, held by approximately 92 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. 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 eGain, 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 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 eGain. We have no current plans to issue any shares of preferred stock.
Warrants
In August 1998 and October 1998, we issued warrants to purchase an aggregate of 74,511 shares of our Series A preferred stock at an exercise price of $0.805 per share. These warrants expire between August 2005 and five years after the closing of this offering. In May 1999, we assumed warrants exercisable for the Series A preferred stock of Sitebridge Corporation in connection with our acquisition
of Sitebridge Corporation. These warrants became exercisable for an aggregate of 121,006 shares of our Series C preferred stock at an exercise price of $0.9916 per share. Upon completion of this offering, all of our warrants to purchase preferred stock will convert into the right to purchase the equivalent number of shares of common stock at the same exercise price per share.
In 1998, we also issued warrants to purchase 188,699 shares of Series A Preferred Stock at an exercise price of $0.8055 per share. In April 1999, we assumed a warrant to purchase common stock of Sitebridge Corporation that is exercisable for 30,440 shares of our common stock at an exercise price of $0.2754 per share. Each of these warrants will expire upon the closing of this offering.
Registration Rights
Upon completion of this offering, the holders of 9,950,594 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. Six months after this offering, the holders of a majority of the common stock issued upon conversion of Series A, B or C preferred stock may request that we register their shares with respect to all or part of their registrable securities having aggregate proceeds of at least $10,000,000.
. 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.
. S-3 Registration Rights. The holders of at least thirty percent (30%) of registrable securities have the right to request registrations on Form S-3 if we are eligible to use Form S-3, 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.
Holders of an additional 7,111,112 shares of common stock have the piggyback registration rights and S-3 registration rights described above.
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."
eGain will pay all registration expenses, other underwriting discounts and commissions in connection with any registration. The registration rights terminate 5 years following the closing 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 of the Securities Act.
Delaware Anti-Takeover Law and Certain Charter Provisions
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law ("Section 203"), 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.
Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested stockholder;
. 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.
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.
Certificate of Incorporation and Bylaws
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 eGain;
. 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.
Our bylaws provide that:
. all stockholder action be taken at a stockholders' meeting; and
. special meetings of stockholders may only be called by the chairman of the board, the chief executive officer or the board of directors.
The provisions described above, together with the ability of the board of directors to issue preferred stock may have the effect of deterring a hostile takeover or delaying a change in control or management of eGain.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is .
Listing
We have applied to have our common stock quoted on the Nasdaq National Market under the symbol "EGAN."
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 21,104,510 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 20,907,178 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.
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 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, 16,073,242 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 1997 Stock Option Plan, 1998 Stock Plan and our 1999 Employee Stock Purchase Plan. Based on the number of shares subject to outstanding options at June 30, 1999, and currently reserved for issuance under these plans, this registration statement would cover approximately 8,429,808 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. Also beginning 180 days after the date of this prospectus, holders of 9,952,409 shares of common stock will be entitled to registration rights. See "Description of Capital Stock--Registration Rights."
UNDERWRITING
The underwriters named below, acting through their representatives, BancBoston Robertson Stephens Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Volpe Brown Whelan & Company, LLC, have severally agreed with us, subject to the terms and conditions of the underwriting agreement, to purchase from us the number of shares of common stock set forth opposite their names below. The underwriters are committed to purchase and pay for all such shares if any are purchased.
Number of
Underwriter Shares
----------- ---------
BancBoston Robertson Stephens Inc................................
Donaldson, Lufkin & Jenrette Securities Corporation..............
Volpe Brown Whelan & Company, LLC................................
---------
Total..........................................................
=========
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We have been advised by the representatives that the underwriters propose to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at such price less a concession of not more than $ per share, of which $ may be reallowed to other dealers. After the initial public offering, the public offering price, concession and reallowance to dealers may be reduced by the representatives. No such reduction shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The common stock is offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part.
The underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority.
Over-allotment Option. We have granted to the underwriters an option, exercisable during the 30-day period after the date of this prospectus, to purchase up to additional shares of common stock at the initial public offering price per share as we will receive for the shares that the underwriters have agreed to purchase. To the extent that the underwriters exercise this option, each of the underwriters will have a firm commitment to purchase approximately the same percentage of these additional shares that the number of shares of common stock to be purchased by it shown in the above table represents as a percentage of the shares offered hereby. If purchased, these additional shares will be sold by the underwriters on the same terms as those on which the shares are being sold. We will be obligated, pursuant to the option, to sell shares to the extent the option is exercised. The underwriters may exercise this option only to cover over- allotments made in connection with the sale of the shares of common stock offered in this offering. If this option is exercised in full, the total public offering price, underwriting discounts and commissions and proceeds to us will be $ , $ and $ , respectively.
The following table summarizes the compensation to be paid to the underwriters by us:
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
Underwriting discounts and commissions payable
by us.......................................... $ $ $
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We estimate that expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $ .
Indemnity. The underwriting agreement contains covenants of indemnity among the underwriters and us against certain civil liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement.
Lock-up Agreements. Each of our officers, directors and stockholders has agreed, for a period of 180 days after the date of this prospectus, that, subject to exceptions, they will not offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant any rights with respect to any shares of common stock, any options or warrants to purchase any shares of common stock, or any securities convertible into or exchangeable for shares of common stock owned as of the date of this prospectus or, with certain exceptions, thereafter acquired directly by such holders or with respect to which they have or hereafter acquire the power of disposition, without the prior written consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to the lock-up agreements. There are no agreements between the representatives and any of our stockholders providing consent by the representatives to the sale of shares prior to the expiration of the lock-up period.
Future Sales. In addition, we have agreed that until 180 days after the date of this prospectus, we will not, subject to certain exceptions, without the prior written consent of BancBoston Robertson Stephens Inc.:
. consent to the disposition of any shares held by stockholders prior to the expiration of the lock-up period or
. issue, sell, contract to sell or otherwise dispose of any shares of common stock, any options or warrants to purchase any shares of common stock or any securities convertible into, exercisable for or exchangeable for shares of common stock other than (1) the sale of shares in this offering, (2) the issuance of common stock upon the exercise of outstanding warrants and options, and (3) the issuance of options under existing stock option and incentive plans. See "Shares Eligible for Future Sale."
Listing. We have applied for quotation on the Nasdaq National Market under the symbol "EGAN."
No Prior Public Market. Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price for the common stock offered hereby will be determined through negotiations between us and the representatives. Among the factors to be considered in such negotiations are prevailing market conditions, certain of our financial information, market valuations of other companies that we and the representatives believe to be comparable to us,
estimates of our business potential, our present state of development and other factors deemed relevant.
Stabilization. The representatives have advised us that, pursuant to Regulation M under the Securities Act, certain persons participating in this offering may engage in transactions, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids, that may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of the common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A "syndicate covering transaction" is the bid for or the purchase of the common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with this offering. A "penalty bid" is an arrangement permitting the representatives to reclaim the selling concession otherwise accruing to an underwriter or syndicate member in connection with this offering if the common stock originally sold by such underwriter or syndicate member is purchased by the representatives in a syndicate covering transaction and has therefore not been effectively placed by such underwriter or syndicate member. The representatives have advised us that these transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.
Directed Share Program. At our request, the underwriters have reserved up to shares of common stock to be issued by us and offered hereby for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons of eGain. The number of shares of common stock available for sale to the general public will be reduced to the extent such individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby.
LEGAL MATTERS
Selected legal matters with respect to the validity of the common stock offered by this prospectus are being passed upon for eGain by Pillsbury Madison & Sutro LLP, Palo Alto, California. Certain partners of Pillsbury Madison & Sutro LLP beneficially own an aggregate of 51,490 shares of eGain common stock. Legal matters in connection with this offering will be passed upon for the underwriters by Cooley Godward LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated financial statements at June 30, 1998 and 1999, for the period from September 30, 1997 (inception) through June 30, 1998, and for the year ended June 30, 1999 as set forth in their report. We have included our consolidated financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given upon the authority of such firm as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial statements of Sitebridge Corporation (a development stage company) at December 31, 1997 and 1998, for the period from September 10, 1996 (inception) through December 31, 1997 and for the year ended December 31, 1998 and for the period from September 10, 1996 (inception) through December 31, 1998 as set forth in their report. The financial statements of Sitebridge Corporation (a development stage company) are included in the prospectus in reliance on Ernst & Young LLP's report, given upon the authority of such firm 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 eGain 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.
eGAIN COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF eGAIN COMMUNICATIONS CORPORATION
Page
----
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
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Consolidated Balance Sheets................................................. F-3 Consolidated Statements of Operations....................................... F-4 Consolidated Statement of Stockholders' Equity.............................. F-5 Consolidated Statements of Cash Flows....................................... F-6 Notes to Consolidated Financial Statements.................................. F-7 |
AUDITED FINANCIAL STATEMENTS OF SITEBRIDGE CORPORATION
Report of Ernst & Young LLP, Independent Auditors.......................... F-20 Balance Sheets............................................................. F-21 Statements of Operations................................................... F-22 Statement of Stockholders' Equity (Net Capital Deficiency)................. F-23 Statements of Cash Flows................................................... F-24 Notes to Financial Statements.............................................. F-25 |
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF eGAIN COMMUNICATIONS CORPORATION AND SITEBRIDGE CORPORATION..................... F-33 |
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders eGain Communications Corporation
We have audited the accompanying consolidated balance sheets of eGain Communications Corporation as of June 30, 1998 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the period from inception (September 10, 1997) to June 30, 1998 and for the year ended June 30, 1999. These financial statements are the responsibility of eGain Communications Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of eGain Communications Corporation at June 30, 1998 and 1999, and the consolidated results of its operations and its cash flows for the period from inception (September 10, 1997) to June 30, 1998 and for the year ended June 30, 1999, in conformity with generally accepted accounting principles.
/s/ Ernst & Young llp
Palo Alto, California
July 16, 1999
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eGAIN COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
Pro forma
stockholders'
June 30, equity at
------------------------ June 30,
1998 1999 1999
---------- ------------ -------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents............ $3,830,692 $ 1,265,147
Accounts receivable.................. -- 705,488
Prepaid and other current assets..... 49,164 512,896
---------- ------------
Total current assets............... 3,879,856 2,483,531
Property and equipment, net............ 110,134 1,132,651
Goodwill and other purchased intangible
assets, net........................... -- 20,689,972
Other assets........................... -- 153,884
---------- ------------
$3,989,990 $ 24,460,038
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings--line of credit...... $ -- $ 1,000,000
Accounts payable..................... 188,651 683,761
Accrued compensation................. -- 343,471
Accrued liabilities.................. -- 474,757
Deferred revenue..................... -- 302,119
Current portion of notes payable..... -- 434,762
---------- ------------
Total current liabilities.......... 188,651 3,238,870
Notes payable, net of current portion.. -- 221,093
Other long-term liabilities............ -- 21,791
Commitments
Stockholders' Equity:
Convertible preferred stock, $0.001
par value, 10,035,887 shares
authorized, issuable in series:
5,406,585 and 9,566,378 shares
issued and outstanding at June 30,
1998 and 1999; no shares issued, or
outstanding pro forma (aggregate
liquidation preference of $7,172,056
at June 30, 1999)................... 4,329,264 16,986,961 $ --
Common stock, $0.001 par value,
25,000,000 shares authorized,
8,000,000 and 10,946,661 shares
issued and outstanding at June 30,
1998 and 1999; 20,513,039 shares
issued and outstanding pro forma.... 295,000 7,288,859 20,513
Additional paid-in capital........... 446,947 18,044,416 42,299,723
Notes receivable from stockholders... -- (143,653) (143,653)
Deferred stock compensation.......... (331,434) (8,956,117) (8,956,117)
Accumulated other comprehensive
income.............................. -- 757 757
Accumulated deficit.................. (938,438) (12,242,939) (12,242,939)
---------- ------------ ------------
Total stockholders' equity......... 3,801,339 20,978,284 $ 20,978,284
---------- ------------ ============
$3,989,990 $ 24,460,038
========== ============
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See accompanying notes.
eGAIN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
inception
(September 10,
1997) to Year ended
June 30, June 30,
1998 1999
-------------- ------------
Revenue:
Hosting........................................ $ -- $ 137,385
License fees................................... -- 473,450
Service........................................ 2,000 408,508
--------- ------------
Total revenue................................ 2,000 1,019,343
Costs and expenses:
Cost of revenue................................ 52,481 1,772,159
Sales and marketing............................ 245,553 4,181,816
Research and development....................... 313,894 2,095,784
General and administrative..................... 214,052 1,234,865
Amortization of goodwill and other intangible
assets........................................ -- 1,217,057
Amortization of deferred compensation.......... 58,258 1,817,266
--------- ------------
Total costs and expenses..................... 884,238 12,318,947
--------- ------------
Loss from operations............................. (882,238) (11,299,604)
Interest income.................................. 1,509 111,360
Interest and other expenses...................... (57,709) (116,257)
--------- ------------
Net loss......................................... $(938,438) $(11,304,501)
========= ============
Basic and diluted net loss per share............. $ (17.78) $ (2.14)
========= ============
Shares used in computing basic and diluted net
loss per share.................................. 52,778 5,294,736
========= ============
Proforma basic and diluted net loss per share
(unaudited)..................................... $ (0.93)
============
Shares used in computing proforma basic and
diluted net loss per share (unaudited).......... 12,153,444
============
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See accompanying notes.
eGAIN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Convertible Notes Accumulated
Preferred Stock Common Stock Additional Receivable Deferred Other
--------------------- --------------------- Paid-In From Stock Comprehensive Accumulated
Shares Amount Shares Amount Capital Stockholders Compensation Income Deficit
--------- ----------- ---------- ---------- ----------- ------------ ------------ ------------- ------------
Issuance of
common stock to
founders........ -- $ -- 8,000,000 $ 295,000 -- $ -- $ -- $ -- $ --
Issuance of
Series A
convertible
preferred stock
for cash and
converion of
notes, net of
issuance costs
of $25,740...... 5,406,585 4,329,264 -- -- -- -- -- -- --
Issuance of
warrant......... -- -- -- -- 57,255 -- -- -- --
Deferred stock
compensation.... -- -- -- -- 389,692 -- (389,692) -- --
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- 58,258 -- --
Net loss........ -- -- -- -- -- -- -- -- (938,438)
--------- ----------- ---------- ---------- ----------- --------- ------------ ---- ------------
BALANCE AT JUNE
30, 1998........ 5,406,585 4,329,264 8,000,000 295,000 446,947 -- (331,434) -- (938,438)
Issuance of
Series B
convertible
preferred stock
for cash, net of
issuance costs
of $24,494...... 2,550,000 5,075,506 -- -- -- -- -- -- --
Issuance of
common stock
upon exercise of
employee stock
options and
other issuances
under the 1998
Stock Plan...... -- -- 1,491,147 167,500 -- (143,653) -- -- --
Issuance of
Series C
preferred and
common stock in
exchange for
SiteBridge
preferred and
common stock.... 1,609,793 7,582,191 1,455,514 6,826,359 7,098,225 -- -- -- --
Issuance of
options to
consultants for
services........ -- -- -- -- 21,295 -- -- -- --
Issuance of
warrants........ -- -- -- -- 36,000 -- -- -- --
Deferred stock
compensation.... -- -- -- -- 10,441,949 -- (10,441,949) -- --
Amortization of
deferred stock
compensation.... -- -- -- -- -- -- 1,817,266 -- --
Comprehensive
loss:
Net loss........ -- -- -- -- -- -- -- -- (11,304,501)
Foreign currency
translation
adjustment...... -- -- -- -- -- -- -- 757 --
Total
comprehensive
loss............ -- -- -- -- -- -- -- -- --
--------- ----------- ---------- ---------- ----------- --------- ------------ ---- ------------
BALANCE AT JUNE
30, 1999........ 9,566,378 $16,986,961 10,946,661 $7,288,859 $18,044,416 $(143,653) $ (8,956,117) $757 $(12,242,939)
========= =========== ========== ========== =========== ========= ============ ==== ============
Stockholders'
Equity
--------------
Issuance of
common stock to
founders........ $ 295,000
Issuance of
Series A
convertible
preferred stock
for cash and
converion of
notes, net of
issuance costs
of $25,740...... 4,329,264
Issuance of
warrant......... 57,255
Deferred stock
compensation.... --
Amortization of
deferred stock
compensation.... 58,258
Net loss........ (938,438)
--------------
BALANCE AT JUNE
30, 1998........ 3,801,339
Issuance of
Series B
convertible
preferred stock
for cash, net of
issuance costs
of $24,494...... 5,075,506
Issuance of
common stock
upon exercise of
employee stock
options and
other issuances
under the 1998
Stock Plan...... 23,847
Issuance of
Series C
preferred and
common stock in
exchange for
SiteBridge
preferred and
common stock.... 21,506,775
Issuance of
options to
consultants for
services........ 21,295
Issuance of
warrants........ 36,000
Deferred stock
compensation.... --
Amortization of
deferred stock
compensation.... 1,817,266
Comprehensive
loss:
Net loss........ (11,304,501)
Foreign currency
translation
adjustment...... 757
--------------
Total
comprehensive
loss............ (11,303,744)
--------------
BALANCE AT JUNE
30, 1999........ $ 20,978,284
==============
|
See accompanying notes.
eGAIN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
inception
(September 10,
1997) to Year ended
June 30, June 30,
1998 1999
-------------- ------------
Operating activities
Net loss....................................... $ (938,438) $(11,304,501)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................. 7,000 279,400
Amortization of goodwill and other intangible
assets...................................... -- 1,217,057
Amortization of deferred compensation........ 58,258 1,817,266
Compensation related to consultant options... -- 21,295
Amortization of loan discount associated with
warrants.................................... 57,255 14,000
Changes in operating assets and liabilities:
Accounts receivable........................ -- (653,988)
Prepaid and other current assets........... (49,164) (456,307)
Other assets............................... -- (136,384)
Accounts payable........................... 187,982 417,894
Accrued compensation....................... 670 267,800
Other accrued liabilities.................. -- 409,645
Deferred revenue........................... -- 302,119
Other liabilities.......................... -- 21,791
---------- ------------
Net cash used in operating activities.... (676,437) (7,782,913)
---------- ------------
Investing activities
Purchases of property and equipment............ (117,134) (1,258,162)
Cash assumed in Sitebridge acquisition......... -- 78,321
---------- ------------
Net cash used in investing activities.... (117,134) (1,179,841)
---------- ------------
Financing activities
Proceeds from loans............................ -- 1,297,855
Net proceeds from issuance of preferred stock.. 4,329,263 5,075,507
Proceeds from issuance of common stock ........ 295,000 23,847
---------- ------------
Net cash provided by financing
activities.............................. 4,624,263 6,397,209
---------- ------------
Net increase (decrease) in cash and cash
equivalents..................................... 3,830,692 (2,565,545)
Cash and cash equivalents at beginning of
period.......................................... -- 3,830,692
---------- ------------
Cash and cash equivalents at end of period....... $3,830,692 $ 1,265,147
========== ============
Supplemental disclosure of cash flow information
Interest paid.................................. $ -- $ 111,146
========== ============
Conversion of promissory notes to preferred
stock........................................... $ 800,000 $ --
========== ============
Issuance of warrants in exchange for services in
connection with the Sitebridge acquisition...... $ -- $ 789,250
========== ============
|
See accompanying notes.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
eGain Communications Corporation ("eGain"), formerly known as Parsec Communications Corporation, is a developer of customer service infrastructure solutions for companies engaged in eCommerce. Businesses use eGain's applications to effectively manage high volumes of customer email as well as live Web-based interaction. eGain's email management system helps businesses route, track, analyze and respond to customer emails. eGain was incorporated in Delaware on September 10, 1997.
During fiscal 1999, eGain commenced shipment of its principal products and emerged from the development stage. Although eGain is no longer in the development stage, eGain continues to be subject to many of the risks and challenges associated with companies in a comparable stage of development, including dependence on key individuals, competition from substitute products and from larger companies, successful marketing of its products and acceptance of its technology, successful development of product enhancements on a continuing basis and the need for adequate financing to support anticipated future growth.
eGain has incurred cumulative losses totaling approximately $12,243,000 since its incorporation and expects to incur additional losses for the foreseeable future. eGain's current operating plan shows that eGain will continue to require additional capital to fund its operations and market its products. To date, eGain has financed its operations with the net proceeds from private sales of convertible preferred stock, bank borrowings and capital equipment financing. eGain plans to seek additional funding through public or private financing or other arrangements with third parties. If the financing arrangements contemplated by management are not consummated, eGain may have to seek other sources of capital or adjust its operating plan to delay or reduce the Company's expenditures and the scope of its operations.
Principles of Consolidation
The consolidated financial statements include the accounts of eGain and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.
Revenue Recognition
Revenue from hosting services is recognized ratably over the period of the agreement as services are provided. Hosting agreements are typically for a period of one year and automatically renew unless either party cancels the agreement.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue from license fees and from sales of software products is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant eGain obligations remain, the fee is fixed or determinable, and collectibility is probable.
Service revenue is primarily comprised of revenue from consulting fees, maintenance agreements, and training. Service revenue from consulting and training billed on a time and materials basis is recognized as performed. Service revenue on fixed price service arrangements is recognized upon completion of specific contractual milestone events, or based on an estimated percentage of completion as work progresses. Maintenance agreements include the right to software updates on an if-and-when-available basis. Maintenance revenue is deferred and recognized on a straight-line basis as service 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.
eGain has 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"). SOP 97- 2 and SOP 98-4 provide guidance for recognizing revenue on software transactions and supersedes SOP 91-1. The adoption of SOP 97-2 and SOP 98-4 did not have a material impact on eGain's financial results.
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. eGain believes that the adoption of SOP 98-9 will not have a material effect on results of operations or financial condition.
Cash and Cash Equivalents
eGain considers all highly liquid investments with a maturity from date of purchase of three months or less to be cash equivalents. Cash equivalents consist primarily of money market accounts.
Concentration of Credit Risk and Significant Customers
Financial instruments that subject eGain to concentrations of credit risk consist principally of cash investments and trade accounts receivable. eGain invests cash which is not required for immediate operating needs principally in money market funds, which bear minimal risk.
eGain's customers are currently concentrated in the United States. eGain performs ongoing credit evaluations and generally does not require collateral.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the year ended June 30, 1999, two customers accounted for 15.6% and 10.8% of revenue. One customer represented all of the revenue for the period from inception (September 10, 1997) to June 30, 1998.
Property and Equipment
Property and equipment are stated at cost, net of accumulated amortization and depreciation. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, typically three years.
Goodwill and Purchased Intangible Assets
Goodwill represents the excess of the purchase price over the estimated fair market value of tangible and intangible net assets acquired in a business combination. Goodwill and other purchased intangible assets are amortized on a straight-line basis over three years from the date of acquisition.
Advertising Costs
Advertising costs are accounted for as expenses in the period in which they are incurred. Advertising expense for the period from inception (September 10, 1997) to June 30, 1998 and the year ended June 30, 1999 were approximately zero and $210,000, respectively.
Software Development Costs
Software development costs are included in research and development and are expensed as incurred until the technological feasibility of the product is achieved. To date, the period between achieving technological feasibility and general availability of software has been short and software development costs qualifying for capitalization have been insignificant. Accordingly, eGain has not capitalized any software development costs.
Stock-Based Compensation
eGain accounts for its stock-based compensation arrangements with employees using the intrinsic value method. Deferred stock-based compensation is recorded on the date of grant when the deemed fair value of the underlying common stock exceeds the exercise price for stock options.
Comprehensive Loss
eGain adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), at June 30, 1999. Under SFAS 130, eGain 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 income (loss). Total comprehensive loss (including foreign currency translation effects) is shown in the statement of stockholders' equity.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Segment Information
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), effective for financial statements for periods beginning after December 15, 1997. SFAS 131 establishes standards for the way that public business enterprises report financial and descriptive information about reportable operating segments in annual financial statements and interim financial reports issued to stockholders. eGain adopted SFAS 131 effective July 1, 1998. eGain operates in one segment. Operating losses generated by the foreign operations of eGain and their corresponding identifiable assets were not material in any period presented. eGain's export revenue has not been material in any period presented.
Net Loss Per Share
Basic and diluted net loss per share are presented in accordance with SFAS No. 128, "Earnings per Share" ("SFAS 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 eGain'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, eGain 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 eGain 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 511,000 and 2,699,928 shares, prior to the application of the treasury stock method, for the period from inception (September 10, 1997) to June 30, 1998 and the year ended June 30, 1999. Such shares have been excluded because they are antidilutive for all periods presented. Shares of convertible preferred stock have been excluded from the computation.
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 eGain's convertible preferred stock into shares of common stock, effective upon the closing of eGain's initial public offering as if such conversion occurred at the date of original issuance.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of shares used in the calculation of basic and diluted and pro forma net loss per share follows:
Period from
inception
(September 10, Year ended
1997) to June 30,
June 30, 1998 1999
-------------- ------------
Net loss.......................................... $(938,438) $(11,304,501)
--------- ------------
Basic and diluted:
Weighted-average shares of common stock
outstanding.................................... 153,846 8,757,398
Less weighted-average shares subject to
repurchase..................................... (101,068) (3,462,662)
--------- ------------
Shares used in computing basic and diluted net
loss per share................................. 52,778 5,294,736
========= ============
Basic and diluted net loss per share.............. $ (17.78) $ (2.14)
========= ============
Pro forma:
Shares used above............................... 5,294,736
Pro forma adjustment to reflect weighted effect
of assumed conversion of convertible preferred
stock (unaudited).............................. 6,858,708
------------
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)......... 12,153,444
============
Pro forma basic and diluted net loss per share
(unaudited).................................... $ (0.93)
============
|
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which will be effective for the year ending June 30, 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. eGain 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.
In March 1998, the American Institute of Certified Public Accounts issued Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires that entities capitalize certain costs related to internal use software once certain criteria have been met. eGain is required to adopt SOP No. 98-1 effective July 1, 1999. eGain believes that the adoption of SOP No. 98-1 will not have a material impact on its financial statements.
2. ACQUISITION OF SITEBRIDGE CORPORATION
Effective April 30, 1999, eGain acquired Sitebridge Corporation ("Sitebridge"). In connection with the acquisition, eGain issued 1,609,793 shares of Series C convertible preferred stock, 1,455,514 shares of common stock, warrants to acquire 121,006 shares of preferred stock and stock options and
EGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
warrants to acquire 1,012,871 shares of common stock in exchange for all the outstanding preferred stock, common stock, and options and warrants to purchase shares of Sitebridge common and preferred stock. The acquisition was accounted for as a purchase and, accordingly, the results of operations of Sitebridge have been included in the consolidated financial statements since the date of acquisition. Based on an independent appraisal, the fair market value of the equity securities issued in the acquisition was approximately $20,643,000. Transaction costs associated with the acquisition were approximately $864,000.
The purchase price was allocated to the assets acquired based on their estimated fair values. The excess of the purchase price over the fair value of the net tangible and intangible assets acquired (goodwill) was approximately $20,457,000 and is being amortized on a straight-line basis over three years.
In connection with the acquisition, net assets acquired were as follows (in thousands):
Purchased intangible assets (including goodwill).................... $21,907
Cash, receivables, and other assets................................. 155
Property and equipment.............................................. 43
Liabilities assumed................................................. (598)
-------
Net assets acquired............................................... $21,507
=======
|
Goodwill and purchased intangible assets include the following (in thousands):
1999
-------
Goodwill............................................................ $20,457
Developed technology................................................ 1,050
Workforce........................................................... 350
Customer base....................................................... 50
-------
21,907
Less accumulated amortization....................................... (1,217)
-------
$20,690
=======
|
The following table presents the unaudited pro forma results assuming that eGain had merged with Sitebridge at the beginning of fiscal 1999. These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of goodwill. They do not purport to be indicative of the results of operations that actually would have resulted had the combination occurred on July 1, 1998, or of future results of operations of the consolidated entities.
Year ended
June 30,
1999
-----------
Revenue........................................................ $ 1,076,877
Net loss....................................................... $19,126,753
Basic and diluted net loss per share........................... $ (3.07)
|
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
June 30,
--------------------
1998 1999
-------- ----------
Computers and equipment................................ $107,850 $1,215,244
Furniture and fixtures................................. 9,284 188,807
Leasehold improvements................................. -- 15,000
-------- ----------
117,134 1,419,051
Less accumulated depreciation.......................... (7,000) (286,400)
-------- ----------
Property and equipment, net............................ $110,134 $1,132,651
======== ==========
|
4. NOTES PAYABLE
In August 1998, eGain obtained a $1,000,000 line of credit from a bank for equipment purchases and working capital financing. Borrowings under the line of credit are collateralized by all of eGain's assets and bear interest at the bank's prime rate plus 0.25%. At June 30, 1999, $1,000,000 was outstanding under this agreement. The entire balance is due on February 6, 2000.
In October 1998, eGain obtained a $1,500,000 credit facility with a leasing company for equipment purchases. Borrowings under the credit facility are collateralized by certain fixed assets and bear an imputed interest rate of 13.68%. At June 30, 1999, eGain had borrowed approximately $342,000 under the credit facility, of which $297,855 was outstanding. Monthly payments of approximately $9,400 are due under existing borrowings through July 2002.
In conjunction with the line of credit and equipment credit facilities, eGain issued warrants to purchase 74,511 shares of its Series A preferred stock at $0.8055 per share (see Note 6).
In connection with the acquisition of Sitebridge, eGain assumed two promissory notes for a total amount of $380,000. The notes accrue interest at 5% per year and are payable on December 31, 2000.
Long-term debt repayments are due as follows (in thousands):
2000................................................................ $434,762
2001................................................................ 110,547
2002................................................................ 110,546
--------
$655,855
========
|
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. COMMITMENTS
Operating Lease Commitments
eGain leases its facilities under noncancelable operating leases expiring in September 2003. Rent expense for facilities under operating leases was approximately $80,000 and $362,000 for the period from inception (September 10, 1997) to June 30, 1998 and the year ended June 30, 1999. Future minimal rental commitments under operating leases at June 30, 1999 are as follows:
2000.............................................................. $1,049,578
2001.............................................................. 1,360,782
2002.............................................................. 647,197
2003.............................................................. 397,252
2004.............................................................. 85,244
----------
$3,540,053
==========
|
6. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Convertible preferred stock as of June 30, 1999 consisted of the following:
Noncumulative Liquidation
Shares Shares Dividend Preference
Authorized Outstanding Per Share Per Share
---------- ----------- ------------- -----------
Series A.................... 5,707,043 5,406,585 $0.06 $0.8055
Series B.................... 2,600,000 2,550,000 $0.16 $2.00
Series C.................... 1,728,844 1,609,793 $0.08 $1.00
---------- ---------
10,035,887 9,566,378
========== =========
|
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Each share of Series A, B, and C preferred stock is convertible, at the option of the holder, into a share of common stock, on a one-for-one basis, subject to adjustments for dilution, if any, resulting from future stock issuances. Additionally, the preferred shares automatically convert into common stock concurrent with the closing of an underwritten public offering of common stock under the Securities Act of 1933 in which eGain receives at least $10,000,000 in gross proceeds and the price per share is at least $5.00 (subject to adjustment for a recapitalization or certain other stock adjustments). Each share of Series A, B, and C preferred stock has voting rights equal to one share common stock on an as-if-converted basis.
No dividends have been declared or paid through June 30, 1999. Under the terms of the bank line of credit, eGain is prohibited from paying a dividend.
The Series A, B, and C preferred stockholders are entitled to receive, upon liquidation, a distribution of $0.8055, $2.00, and $1.00 per share (subject to adjustment for a recapitalization) plus all declared but unpaid dividends. The Series A and B stockholders are entitled to receive liquidation preferences prior to any distribution to the Series C stockholders. Thereafter, the remaining assets and funds, if any, shall be distributed ratably on a per-share basis among the common stockholders and the Series A, B, and C preferred stockholders until the Series A, B, and C preferred stockholders have received an aggregate amount of $2.81925, $6.00, and $2.00 per share.
Common Stock
eGain has issued shares of common stock to founders which are subject to eGain's right to repurchase upon termination of employment. The repurchase rights lapse ratably over a period of two years from the date of issuance. At June 30, 1998 and 1999, 5,333,334 and 2,666,666 shares were subject to repurchase.
At June 30, 1999, common stock was reserved for issuance as follows:
Conversion of preferred stock................................... 9,566,378
Exercise of outstanding stock options........................... 2,524,928
Shares of common stock available for grant under the 1998 Stock
Plan........................................................... 567,004
Exercise of preferred and common stock warrants outstanding..... 591,471
----------
13,249,781
==========
|
Certain option holders have exercised options to purchase shares of restricted common stock in exchange for five-year, full recourse promissory notes. The notes bear interest ranging from 4.5% to 5.5% and expire at various dates through June 2004. eGain has the right to repurchase all unvested shares at the original exercise price upon employee termination. The number of shares subject to this repurchase right decreases as the shares vest under the original option terms, generally four years. As of June 30, 1999, there were shares 1,149,813 subject to repurchase.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
eGain effected a two-for-one stock split of its common stock on June 23, 1998. All share and per share amounts have been adjusted to reflect the stock split.
Warrants
Warrants to purchase 188,699 shares of Series A preferred stock for a price of $0.8055 per share were issued in connection with the issuance of convertible promissory notes in fiscal year 1998. The convertible promissory notes were subsequently converted into Series A preferred stock. The warrants expire within two to three years from the date of issuance or upon the closing of a public offering by eGain. The fair value was appraised at the date of issuance and additional interest expense of approximately $57,000 was recorded.
Warrants to purchase 74,511 shares of Series A preferred stock for a price of $0.8055 per share were issued in connection with the line of credit and equipment credit facilities entered into during fiscal year 1999. The warrants expire seven years from the date of issuance. The warrants were appraised at the date of issuance and additional interest expense of $36,000 is being amortized to interest expense over the term of the loans. During the year ended June 30, 1999, $14,000 of the additional interest expense was amortized.
A warrant to purchase 175,000 shares of common stock at a price of $0.20 per share was issued to FW Ventures I, L.P. in connection with financial advisory services rendered in connection with the acquisition of Sitebridge. Mark Wolfson, a director of eGain, is a limited partner of FW Ventures I, L.P. The warrant expires in July 2002 and is exercisable at any time prior to the closing of a public offering by eGain. The fair value was appraised at the date of issuance as $789,250 and has been included in the acquisition costs (see Note 2).
Warrants to purchase 121,006 shares of Series C preferred stock for a price of $0.9916 per share and 30,440 shares of common stock for a price of $0.2754 per share were assumed by eGain in connection with its acquisition of Sitebridge. The warrants expire at various dates through May 2003. The fair value of the warrants was appraised at the date of issuance and an amount of $1,100,000 was included as part of the purchase consideration for Sitebridge (see Note 2).
1998 Stock Plan
In June 1998, the board of directors adopted the 1998 Stock Plan (the "Plan"), which provides for issuance to purchase options of common stock to eligible participants. Options granted under the Plan may be either incentive stock options or nonstatutory stock options. Incentive stock options may be granted to employees with exercise prices of no less than the fair value and nonstatutory options may be granted to eligible participants at exercise prices of no less than 85% of the fair value of the common stock on the grant date as determined by the board of directors. Options are generally exercisable upon grant, subject to repurchase rights by eGain until vested.
Pro forma information regarding net loss is required by SFAS 123, and has been determined as if eGain had accounted for its employee stock options under the fair value method as specified by SFAS 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: no dividends; an expected life of 3.5 years; and a risk-free interest rate of approximately 5.65% and 5.72% for the periods ended June 30, 1998 and 1999.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Options generally vest ratably over a period of four years. Options may be granted with different vesting terms at the discretion of the board of directors. Options are generally exercisable for a term of ten years after the date of grant.
The effect of applying the FASB statement's minimum value method to eGain's stock options granted did not result in pro forma net loss amounts that are materially different from the reported historical amounts. Therefore, such pro forma information is not separately presented herein. Future pro forma net income (loss) results may be materially different from actual amounts reported.
A summary of activity under eGain's stock option plan was as follows:
Weighted-
Shares Average
Available Exercise
for Grant Options Price
---------- ---------- ---------
Shares authorized for issuance................ 2,000,000
Options granted............................. (511,000) 511,000 $0.05
---------- ----------
Balance at June 30, 1998...................... 1,489,000 511,000 $0.05
Additional authorization.................... 1,500,000 --
Options granted............................. (2,666,101) 2,666,101 $0.24
Options exercised........................... -- (1,447,396) $0.12
Options cancellations....................... 249,105 (249,105) $0.08
Repurchases................................. 75,000 --
---------- ----------
Balance at June 30, 1999...................... 647,004 1,480,600 $0.24
========== ==========
|
In connection with the acquisition of Sitebridge, eGain assumed options to purchase 1,119,328 shares of common stock, of which 982,431 are outstanding at June 30, 1999.
Options Outstanding Options Exercisable
----------------------------------------- ---------------------------
Weighted-
Average Weighted- Options Weighted-
Remaining Average Exercisable Average
Exercise At June Contractual Exercise at June 30, Exercise
Price Range 30, 1999 Life Price 1999 Price
----------- --------- ----------- --------- ----------- ---------
(In years)
$0.02-$0.05 246,544 8.04 $0.02 116,877 $0.02
$0.10-$0.20 1,371,237 8.47 $0.14 590,809 $0.14
$0.25-$0.50 845,250 9.94 $0.46 23,167 $0.45
--------- -------
2,463,031 8.92 $0.24 730,853 $0.23
========= =======
|
The weighted-average fair value of options granted during the period from inception (September 10, 1997) to June 30, 1998 was $0.01. It was $0.06 per share for options granted during the fiscal year ended June 30, 1999.
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock Compensation
The Company recorded deferred compensation of $389,692 and $10,441,949 during the periods ended June 30, 1998 and 1999, respectively, for the difference between the exercise price and the deemed fair value of certain stock options granted by eGain. These amounts are being amortized by charges to operations on a graded vesting method over the vesting periods of the individual stock options. Such amortization amounted to $58,258 and $1,817,266 for the periods ended June 30, 1998 and 1999, respectively.
7. INCOME TAXES
Due to operating losses and the inability to recognize the benefits from the resulting net operating losses, there is no provision for income taxes for the period from inception (September 10, 1997) to June 30, 1998 or for the year ended June 30, 1999.
As of June 30, 1999, eGain had federal net operating loss carryforwards of approximately $11,000,000. eGain also had federal research and development credit carryforwards of approximately $100,000. The net operating loss and credit carryforwards will expire at various dates beginning in 2011 through 2019, if not utilized.
Utilization of the net operating losses and credits may be subject to a substantial limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.
Deferred tax assets and liabilities reflect the net tax effects of net operating loss and credit carryforwards and of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of eGain's deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):
As of June 30,
----------------
1998 1999
------- --------
Deferred tax assets:
Net operating loss carryforwards......................... $ 300 $ 4,300
Research credits......................................... -- 100
Deferred compensation.................................... -- 900
Other individually immaterial items...................... -- 100
------ --------
Total deferred tax assets.............................. 300 5,400
Valuation allowance for deferred tax assets............ (300) (4,900)
------ --------
Net deferred tax assets.................................... $ -- $ 500
Deferred tax liabilities:
Other intangibles.......................................... -- (500)
------ --------
$ -- $ --
====== ========
|
eGAIN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
SFAS 109 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 eGain's historical operating performance and the reported cumulative net losses through June 30, 1999, eGain has provided a full valuation allowance against its net deferred tax assets.
The net valuation allowance increased by $300,000 during the year ended June 30, 1998.
8. SUBSEQUENT EVENTS (UNAUDITED)
Initial Public Offering
In July 1999, 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 consolidated balance sheet at June 30, 1999.
1999 Employee Stock Purchase Plan
The Company's 1999 Employee Stock Purchase Plan was adopted by the Board of Directors and approved by the stockholders in July 1999 to be effective upon the completion of the Company's initial public offering of its common stock. The Company has reserved a total of 750,000 shares of common stock for issuance under the plan. Eligible employees may purchase common stock at 85% of the lesser of the fair market value of the Company's common stock on the first and last days of the applicable six month offering period.
Increase in Option Pool
In July 1999, the board of directors authorized and the stockholders approved an increase of 3,000,000 shares for issuance under eGain's stock option plan and granted approximately 773,000 options to purchase common stock to employees and consultants.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Sitebridge Corporation
We have audited the accompanying balance sheets of Sitebridge Corporation (a development stage company) as of December 31, 1997 and 1998, and the related statements of operations, stockholders' equity (net capital deficiency), and cash flows for the period from inception (September 10, 1996) to December 31, 1997, the year ended December 31, 1998, and the period from inception (September 10, 1996) to December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sitebridge Corporation (a development stage company) at December 31, 1997 and 1998, and the results of its operations and its cash flows for the period from inception (September 10, 1996) to December 31, 1997, the year ended December 31, 1998, and the period from inception (September 10, 1996) to December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
July 16, 1999
|
SITEBRIDGE CORPORATION
(a development stage company)
BALANCE SHEETS
December 31,
----------------------
1997 1998
--------- -----------
Assets
Current assets:
Cash and cash equivalents............................ $ 71,695 $ 141,191
Accounts receivable.................................. -- 26,122
Other current assets................................. 1,500 22,547
--------- -----------
Total current assets................................... 73,195 189,860
Property and equipment, net............................ 5,040 47,354
Other long-term assets................................. -- 10,500
--------- -----------
$ 78,235 $ 247,714
========= ===========
Liabilities and stockholders' equity (net capital
deficiency)
Current liabilities:
Accounts payable and accrued liabilities............. $ 9,824 $ 33,112
Deferred revenue..................................... -- 37,045
Payable to stockholder............................... 10,500 --
--------- -----------
Total current liabilities.............................. 20,324 70,157
Notes payable.......................................... 348,305 430,000
Commitments
Stockholders' equity (net capital deficiency):
Convertible preferred stock, $0.001 par value,
1,200,000 shares authorized, issuable in series;
822,600 shares issued and outstanding at December
31, 1998 (aggregate liquidation preference of
$1,480,680 at December 31, 1998).................... -- 1,456,573
Common stock, $0.001 par value, 4,000,000 shares
authorized, 777,900 and 801,900 shares issued and
outstanding at December 31, 1997 and 1998........... 15,195 21,195
Additional paid-in capital........................... -- 60,000
Accumulated deficit.................................. (305,589) (1,790,211)
--------- -----------
Stockholders' equity (net capital deficiency).......... (290,394) (252,443)
--------- -----------
$ 78,235 $ 247,714
========= ===========
|
See accompanying notes.
SITEBRIDGE CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
Period from inception Period from inception
(September 10, 1996) Year ended (September 10, 1996)
to December 31, December 31, to December 31,
1997 1998 1998
--------------------- ------------ ---------------------
Revenue:
License............... $ -- $ 59,800 $ 59,800
Service............... -- 50,612 50,612
--------- ----------- -----------
Total revenue....... -- 110,412 110,412
--------- ----------- -----------
Costs and expenses:
Cost of revenues...... -- 144,073 144,073
Research and
development.......... 181,994 792,404 974,398
Sales, general and
administrative....... 113,175 588,463 701,638
--------- ----------- -----------
Total costs and
expenses........... 295,169 1,524,940 (1,820,109)
--------- ----------- -----------
Loss from operations.... (295,169) (1,414,528) (1,709,697)
Interest and other
expense, net........... (10,420) (70,094) (80,514)
--------- ----------- -----------
Net loss................ $(305,589) $(1,484,622) $(1,790,211)
========= =========== ===========
Basic and diluted net
loss per share......... $ (1.06) $ (1.88)
========= ===========
Weighted-average shares
outstanding............ 289,168 788,701
========= ===========
|
See accompanying notes.
SITEBRIDGE CORPORATION
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Total
Stockholders'
Convertible Preferred Stock Common Stock Additional Equity (Net
--------------------------- --------------- Paid-In Accumulated Capital
Shares Amount Shares Amount Capital Deficit Deficiency)
--------------------------- ------- ------- ---------- ------------ -------------
Issuance of common stock
to founders for
technology and cash in
October 1996............ -- $ -- 720,000 $ 6,000 $ -- $ -- $ 6,000
Issuance of common stock
for cash in January
through October 1997 at
per share prices of
$0.03 and $0.25......... -- -- 57,900 9,195 -- -- 9,195
Net loss and
comprehensive loss...... -- -- -- -- -- (305,589) (305,589)
----------- --------------- ------- ------- ------- ------------ ----------
Balance at December 31,
1997.................... -- -- 777,900 15,195 -- (305,589) (290,394)
Issuance of Series A
preferred stock at $1.80
per share in May 1998,
net of issuance costs of
$24,131................. 822,600 1,456,573 -- -- -- -- 1,456,573
Issuance of warrant in
May 1998................ -- -- -- -- 60,000 -- 60,000
Issuance of common stock
for cash in January
through June 1998 at per
share price of $0.25.... -- -- 24,000 6,000 -- -- 6,000
Net loss and
comprehensive loss...... -- -- -- -- -- (1,484,622) (1,484,622)
----------- --------------- ------- ------- ------- ------------ ----------
Balance at December 31,
1998.................... 822,600 $ 1,456,573 801,900 $21,195 $60,000 $ (1,790,211) $ (252,443)
=========== =============== ======= ======= ======= ============ ==========
|
See accompanying notes.
SITEBRIDGE CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
Period from Period from
inception inception
(September 10, (September 10,
1996) to Year ended 1996) to
December 31, December 31, December 31,
1997 1998 1998
-------------- ------------ --------------
Operating activities:
Net loss.......................... $ (305,589) $ (1,484,622) $ (1,790,211)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation.................... 3,960 7,630 11,590
Accrued interest converted to
preferred stock................ -- 19,602 19,602
Warrant amortization............ -- 60,000 60,000
Changes in operating assets and
liabilities:
Accounts receivable........... -- (26,122) (26,122)
Other assets.................. (1,500) (31,547) (33,047)
Accounts payable and accrued
liabilities.................. 9,824 23,288 33,112
Deferred revenue.............. -- 37,045 37,045
---------- ------------ ------------
Net cash used in operating
activities................. (293,305) (1,394,726) (1,688,031)
---------- ------------ ------------
Investing activities:
Purchases of property and
equipment...................... (9,000) (49,944) (58,944)
---------- ------------ ------------
Net cash used in investing
activities................. (9,000) (49,944) (58,944)
---------- ------------ ------------
Financing activities:
Proceeds from issuance of
preferred stock................ -- 1,088,666 1,088,666
Proceeds from issuance of common
stock.......................... 15,195 6,000 21,195
Proceeds from issuance of notes
payable........................ 348,305 430,000 778,305
Loan from stockholder........... 10,500 (10,500) --
---------- ------------ ------------
Net cash provided by
financing activities....... 374,000 1,514,166 1,888,166
---------- ------------ ------------
Net increase in cash and cash
equivalents...................... 71,695 69,496 141,191
Cash and cash equivalents at
beginning of period.............. -- 71,695 --
---------- ------------ ------------
Cash and cash equivalents at end
of period........................ $ 71,695 $ 141,191 $ 141,191
========== ============ ============
Supplemental disclosure of cash
flow information
Promissory notes and accrued
interest converted into preferred
stock............................ $ -- $ 561,184 $ 561,184
========== ============ ============
Issuance of warrant............... $ -- $ 60,000 $ 60,000
========== ============ ============
|
See accompanying notes.
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Sitebridge Corporation ("Sitebridge"), formerly known as Social Science, Inc., develops and deploys mission-critical, Internet-based, front-office applications for sales and service organizations and was incorporated in Delaware on September 10, 1996. The operating results for the period from inception to December 31, 1996 were not material. Sitebridge conducts its business within one industry segment and all operations through December 31, 1998 were based in the United States.
Since inception, Sitebridge has been engaged primarily in research and development activities in connection with the development of its products. Other activities have included raising capital, recruiting managerial and technical personnel, and establishment of business development and marketing organizations. Accordingly, Sitebridge was classified as a development stage enterprise at December 31, 1998.
On April 30, 1999, eGain Communications Corporation ("eGain"), acquired Sitebridge (see Note 5). To date, Sitebridge has financed its operations with the net proceeds from private placements of its equity securities. Additional financing through eGain will be required to fund Sitebridge's operations and market its products.
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.
Cash and Cash Equivalents
Sitebridge considers all highly liquid investments with a maturity from date of purchase of three months or less to be cash equivalents.
Concentration of Credit Risk and Significant Customers
Financial instruments that subject Sitebridge to concentrations of credit risk consist principally of cash investments and accounts receivable. Sitebridge invests cash which is not required for immediate operating needs principally in money market funds, which bear minimal risk.
At December 31, 1998, 3 customers represented 84% of the total balance of accounts receivable. For the year ended December 31, 1998, 3 customers accounted for 27%, 15%, and 9% of total revenue.
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost, net of accumulated amortization and depreciation. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, typically three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated life of the asset or the remaining term of the lease.
Revenue Recognition
Revenue from license fees and from sales of software products is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, no significant Sitebridge obligations with regard to implementation remain, the fee is fixed or determinable, and collectibility is probable. Revenue is deferred in cases where the license arrangement calls for future delivery of products or services for which Sitebridge does not have vendor- specific objective evidence to allocate a portion of the total fee to the undelivered element. In such cases, revenue is recognized when the undelivered elements are delivered or vendor-specific objective evidence of the undelivered elements becomes available.
Service revenue consists of consulting services, training, and maintenance, which includes product updates and technical support. Consulting service and training revenue is generally recognized as services are performed. Maintenance revenue is recognized ratably over the term of the agreement. In instances where software license agreements include a combination of consulting services, training, and maintenance, these separate elements are unbundled from the arrangement based on the element's relative fair value.
Software Development Costs
Software development costs are included in research and development and are expensed as incurred until technological feasibility is achieved. To date, the period between achieving technological feasibility and general availability of software has been short and software development costs qualifying for capitalization have been insignificant. Accordingly, Sitebridge has not capitalized any software development costs.
Stock-Based Compensation
Sitebridge accounts for its stock-based compensation arrangements with employees using the intrinsic value method. Deferred stock-based compensation is recorded on the date of grant when the deemed fair value of the underlying common stock exceeds the exercise price for stock options.
Comprehensive Loss
SiteBridge has no material components of other comprehensive loss and, accordingly, the comprehensive loss is the same as net loss for all periods presented.
Net Loss Per Share
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 Sitebridge been in a net income
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
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 outstanding options and warrants to purchase an additional 291,035 and 586,806 shares, prior to the application of the treasury stock method, for the period from inception (September 10, 1996) to December 31, 1997 and the year ended December 31, 1998. Such shares have been excluded because they are antidilutive for all periods presented. Shares of convertible preferred stock have been excluded from the computation.
A reconciliation of shares used in the calculation of basic and diluted net loss per share follows:
Period from
inception
(September 10,
1996) to Year ended
December 31, December 31,
1997 1998
-------------- ------------
Net loss....................................... $(305,589) $(1,484,622)
--------- -----------
Basic and diluted:
Weighted-average shares of common stock
outstanding................................. 851,668 1,171,201
Less weighted-average shares subject to
repurchase.................................. (562,500) (382,500)
--------- -----------
Shares used in computing basic and diluted
net loss per share.......................... 289,168 788,701
========= ===========
Basic and diluted net loss per share........... $ (1.06) $ (1.88)
========= ===========
|
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which will be effective for the year ending December 31, 2000.
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. Sitebridge 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.
In March 1998, the American Institute of Certified Public Accountants issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires that entities capitalize certain costs related to internal use software once certain criteria have been met. Sitebridge is required to implement SOP 98-1 for the year ending December 31, 2000. Adoption of SOP 98-1 is expected to have no material impact on SiteBridge's financial condition or results of operations.
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31,
--------------
1997 1998
------ -------
Furniture and equipment...................................... $9,000 $43,944
Leasehold improvements....................................... -- 15,000
------ -------
9,000 58,944
Less accumulated depreciation................................ 3,960 11,590
------ -------
Property and equipment, net.................................. $5,040 $47,354
====== =======
|
3. CONVERTIBLE BRIDGE NOTES
In 1997 and 1998, Sitebridge issued convertible bridge notes to investors. The convertible notes accrued interest at a rate of 5.63% per year and were convertible into preferred stock at the Company's option. In May 1998, convertible notes in the amount of $541,582 plus accrued interest of $19,602 were exchanged for 311,769 shares of Series A convertible preferred stock at a price of $1.80 per share.
In October 1998, Sitebridge issued a convertible bridge note in the amount of $250,000 which was outstanding at December 31, 1998. The convertible note accrued interest at 5.06% per year and was convertible into preferred stock at a price of $4.00 per share. The principle and accrued interest related to the note was converted into 64,302 shares of Series A convertible preferred stock in April 1999.
In December 1998, Sitebridge issued a promissory note in the amount of $180,000 which was outstanding at December 31, 1998. The note accrues interest at 5.0% per year and is payable on January 31, 2000, as amended.
In connection with the issuance of the convertible notes, Sitebridge issued warrants to purchase both preferred and common stock (see Note 5).
4. COMMITMENTS
Operating Lease Commitments
Sitebridge leases its facilities under noncancelable operating leases expiring in March 2003. Rent expense for facilities under operating leases was $13,859 and $45,660 for the period from inception (September 10, 1996) to December 31, 1997 and the year ended December 31, 1998. Future minimal rental commitments under operating leases at December 31, 1998 are as follows:
1999................................................................ $ 67,500
2000................................................................ 70,500
2001................................................................ 76,500
2002................................................................ 78,000
2003................................................................ 19,500
--------
$312,000
========
|
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Sitebridge's Certificate of Incorporation provides for the issuance of up to 1,200,000 shares of convertible preferred stock, 889,667 shares of which have been designated as Series A.
Each share of Series A preferred stock is convertible, at the option of the holder, into a share of common stock, on a one-for-one basis, subject to certain adjustments for dilution, if any, resulting from future stock issuances. Additionally, the preferred shares automatically convert into common stock concurrent with the closing of an underwritten public offering of common stock under the Securities Act of 1933 in which Sitebridge receives at least $15,000,000 in net proceeds and the price per share is at least $1.80 (subject to adjustment for a recapitalization or certain other stock adjustments).
Series A preferred stockholders are entitled to annual noncumulative dividends, before and in preference to any dividends paid on common stock, when and as declared by the board of directors. No dividends have been declared through December 31, 1998.
The Series A preferred stockholders are entitled to receive, upon liquidation or merger, a distribution of $1.80 per share (subject to adjustment for a recapitalization) plus all declared but unpaid dividends. Thereafter, the remaining assets and funds, if any, shall be distributed ratably on a per-share basis among the common stockholders and the Series A preferred stockholders.
The Series A preferred stockholders have voting rights equal to the common shares they would own upon conversion.
As of December 31, 1998, Sitebridge has reserved 960,102 shares of common stock for issuance upon conversion of its Series A preferred stock.
Common Stock
In October 1996, Sitebridge issued 720,000 shares of common stock to founders for technology and cash. The common stock is subject to repurchase upon termination of employment. Sitebridge's repurchase right lapses ratably over four years with respect to such shares. At December 31, 1998, approximately 315,000 shares were subject to repurchase.
Warrants
Sitebridge had the following warrants to purchase shares of preferred and common stock outstanding at December 31, 1998:
Number of Exercise Price Expiration of Shares Stock Type Per Share Date Issued Warrants --------- ------------------------ -------------- ------------ ------------- 66,667 Series A preferred stock $1.80 May 1998 May 2003 16,771 Common stock $0.50 October 1998 October 2001 |
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Outstanding warrants are exercisable immediately prior to the close of business on the date of its surrender. The warrants were appraised at the date of issuance or the date when all terms were fixed, and additional interest expense of $60,000 was recorded during 1998.
Warrants to purchase 36,109 shares of Series A preferred stock were exercised in 1998 as part of the Series A preferred stock financing.
1997 Stock Plan
In May 1997, the board of directors adopted the 1997 Stock Plan (the "Plan") for issuance of options of common stock to eligible participants. Options granted may be either incentive stock options or nonstatutory stock options. Incentive stock options may be granted to employees with exercise prices of no less than the fair value and nonstatutory options may be granted to eligible participants at exercise prices as determined by the plan administrator. Options are generally exercisable upon grant, subject to repurchase rights by Sitebridge until vested. Options generally vest at the rate of 25% after one year from the date of grant, with the remaining balance vesting monthly over the next four years with a term of 10 years. Sitebridge has reserved 650,000 shares of common stock for the grant of options under the Plan.
Pro forma information regarding net loss is required by SFAS 123, and has been determined as if Sitebridge had accounted for its employee stock options under the fair value method as specified by SFAS 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: no dividends; an expected life of five years; and a risk-free interest rate of approximately 5.5% for the periods ended December 31, 1997 and 1998.
The effect of applying the FASB statement's minimum value method to Sitebridge's stock options granted did not result in pro forma net loss amounts that are materially different from the reported historical amounts. Therefore, such pro forma information is not separately presented herein. Future pro forma net income (loss) results may be materially different from actual amounts reported.
A summary of activity under Sitebridge's stock plan was as follows:
Weighted-
Shares Available Average
for Grant Options Exercise Price
---------------- ------- --------------
Shares authorized for issuance.... 220,000 --
Additional authorization........ 150,000 --
Options granted................. (296,035) 296,035 $0.17
Options canceled................ 5,000 (5,000) $0.25
-------- -------
Balance at December 31, 1997...... 78,965 291,035 $0.17
Additional authorization........ 280,000 --
Options granted................. (347,597) 347,597 $0.25
Options canceled................ 68,542 (68,542) $0.25
-------- -------
Balance at December 31, 1998...... 79,910 570,090 $0.21
======== =======
|
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Options Outstanding
-------------------------------- Weighted-
Options Average Options
Exercise Outstanding at Remaining Exercisable at
Price December 31, Contractual December 31,
Range 1998 Life 1998
-------- -------------- ----------- --------------
(In years)
$0.03 102,774 7.62 --
$0.25 467,316 9.19 63,170
|
The weighted-average fair value of options granted during the period ended December 31, 1997 was $0.03. It was $0.04 per share for options granted during the year ended December 31, 1998.
6. INCOME TAXES
As of December 31, 1998, Sitebridge had federal net operating loss carryforwards of approximately $1,700,000. The net operating loss and credit carryforwards will expire at various dates beginning in 2011 through 2018, if not utilized.
Utilization of the net operating losses may be subject to a substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.
As of December 31, 1997 and 1998, Sitebridge had deferred tax assets of approximately $100,000 and $900,000. The net deferred tax assets have been fully offset by a valuation allowance. The net valuation allowance increased by $800,000 during the year ended December 31, 1998. Deferred tax assets relate primarily to net operating loss carryforwards, and deferred compensation not currently deductible.
SFAS 109 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 Sitebridge's historical operating performance and the reported cumulative net losses through December 31, 1998, Sitebridge has provided a full valuation allowance against its net deferred tax assets.
SITEBRIDGE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. SUBSEQUENT EVENTS (UNAUDITED)
Borrowings
During 1999, Sitebridge issued a promissory note in the amount of $200,000, which accrues interest at 5% per year and is payable on January 31, 2000.
Acquisition
On April 30, 1999, eGain acquired all the outstanding shares of Sitebridge's common and preferred stock. Outstanding options and warrants to purchase Sitebridge's common and preferred stock have been assumed by eGain.
eGAIN COMMUNICATIONS CORPORATION AND SITEBRIDGE CORPORATION
UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
On April 30, 1999, eGain Communications Corporation ("eGain") completed the acquisition of Sitebridge Corporation ("Sitebridge"). The acquisition of Sitebridge has been accounted for as a purchase. Accordingly, the results of operations of Sitebridge have been included in the consolidated statement of operations of eGain commencing on the date of acquisition.
The accompanying pro forma condensed combined statement of operations for eGain's year ended June 30, 1999 assumes that the acquisition took place as of the beginning of fiscal 1999 and combined Sitebridge's statement of operations for the ten months ended April 30, 1999 with eGain's consolidated statement of operations for the fiscal year ended June 30, 1999.
The unaudited pro forma condensed combined information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have actually occurred if the acquisition had been consummated as of the date indicated, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are based on the information available at the time of the printing of this prospectus.
eGAIN COMMUNICATIONS CORPORATION AND SITEBRIDGE CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Year Ended Ten Months
June 30, Ended
1999 April 30, 1999
------------ --------------
Pro Forma Pro Forma
eGain Sitebridge Adjustments Combined
------------ -------------- ----------- ------------
Revenue................. $ 1,019,343 $ 57,534 $ -- $ 1,076,877
Costs and expenses:
Cost of revenue........ 1,772,159 126,060 -- 1,898,219
Research and
development........... 2,095,784 982,549 -- 3,078,333
Sales, general and
administrative........ 5,416,681 678,006 -- 6,094,687
Amortization........... 3,034,323 -- 6,085,286 (A) 9,119,609
------------ ----------- ----------- ------------
Total costs and
expenses............. 12,318,947 1,786,615 6,085,286 20,190,848
------------ ----------- ----------- ------------
Loss from operations.. (11,299,604) (1,729,081) (6,085,286) (19,113,971)
Interest and other
expenses, net......... (4,897) (7,885) (12,782)
------------ ----------- ----------- ------------
Net loss.............. $(11,304,501) $(1,736,966) $(6,085,286) $(19,126,753)
============ =========== =========== ============
Basic and diluted net
loss per share......... $ (2.14) $ (3.07)(B)
============ ============
Shares used in computing
basic and diluted net
loss per share......... 5,294,736 6,239,366 (B)
============ ============
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See accompanying notes
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
The total estimated purchase price of the acquisition has been allocated to acquired assets and liabilities based on estimates of their fair values. The excess of the purchase price over the fair value of the tangible and intangible net assets acquired has been allocated to goodwill.
The adjustments to the unaudited pro forma condensed combined statement of operations for the year ended June 30, 1999, assume the acquisition occurred as of July 1, 1998 and are as follows:
(A) To reflect the amortization of goodwill and other intangible assets resulting from the acquisition. The goodwill and other intangible assets are being amortized over three years.
(B) Basic and diluted net loss per share excludes the preferred shares of eGain issued in the acquisition as their inclusion would be antidilutive.
In connection with the acquisition, eGain issued Series C convertible preferred stock, common stock, and options and warrants to purchase preferred and common stock in exchange for all of the outstanding preferred stock, common stock and options and warrants to purchase preferred and common stock of Sitebridge. The acquisition was accounted for as a purchase and, accordingly, the results of operations for Sitebridge have been included in the consolidated financial statements commencing on the date of acquisition. The fair market value of the equity securities issued in the acquisition was approximately $20.6 million. Goodwill and purchased intangible assets of approximately $21.9 million were recorded and are being amortized on a straight-line basis over the useful lives of three years.
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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, the National Association of Securities Dealers, Inc. filing fee and the Nasdaq National Market listing fee.
Amount
--------
SEC registration fee............................................... $ 16,680
National Association of Securities Dealers, Inc. filing fee ....... 6,500
Nasdaq National Marketing listing fee.............................. 95,000
Blue Sky fees and expenses......................................... 5,000
Accounting fees and expenses....................................... *
Legal fees and expenses............................................ *
Printing and engraving expenses.................................... 150,000
Registrar and Transfer Agent fees.................................. *
Miscellaneous fees and expenses.................................... *
--------
Total............................................................ $ *
========
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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 VI of the Registrant's Amended and Restated Certificate of Incorporation (Exhibit 3.2 hereto) and Article XII of the Registrant's Amended and Restated Bylaws (Exhibit 3.4 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.
Item 15. Recent Sales of Unregistered Securities
Since inception in September 1997, we have issued and sold the following unregistered securities:
1. From September 1997 to June 30, 1999, the Registrant issued and sold 8,558,508 shares of common stock to employees, directors and consultants at prices ranging from $0.005 to $0.50 per share.
II-1
2. From April 1998 to June 1998, the Registrant issued warrants that became exercisable for an aggregate of 188,699 shares of Registrant's Series A preferred stock at a purchase price of $0.8055 per share, in connection with certain loans made to the Registrant.
3. In June 1998, the Registrant issued and sold 5,406,585 shares of Series A preferred stock to 11 investors for an aggregate purchase price of $4,355,004.21.
4. From August 1998 to October 1998, the Registrant issued warrants to purchase an aggregate of 74,511 shares of Registrant's Series A preferred stock at a purchase price between $0.8050 and $0.8055 per share, in connection with certain equipment financing.
5. From December 1998 to February 1999, the Registrant issued and sold 2,550,000 shares of Series B preferred stock to a total of 14 investors for an aggregate purchase price of $5,100,000.00.
6. In May 1999, the Registrant issued an aggregate of 1,455,514 shares of common stock and 1,609,793 shares of Series C preferred stock to 28 holders of capital stock of Sitebridge Corporation in connection with the Registrant's acquisition of Sitebridge Corporation. The Registrant also assumed (a) warrants to purchase the capital stock of Sitebridge Corporation which became exercisable for 121,006 shares of the Registrant's Series C preferred stock at a purchase price per share of $0.9916 and 30,440 shares of the Registrant's common stock at a purchase price per share of $0.2754 and (b) options to purchase common stock of Sitebridge Corporation, which became exercisable for 1,001,182 shares of the Registrant's common stock.
7. In June 1999, the Registrant issued a warrant to purchase an aggregate of 175,000 shares of Registrant's common stock at a purchase price of $0.20 per share in connection with certain financial advisory services rendered to Registrant.
The issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance on section 4(2) of such Securities Act as transactions by an issuer not involving any public offering. In addition, certain issuances were deemed exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under the Securities Act. The recipients of securities in each such transaction represented their intentions 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 warrants issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
See exhibits listed on the Exhibit Index following the signature page of this Form S-1, which is incorporated herein by reference.
(b) Financial Statement Schedules
Schedules 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.
II-2
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-3
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 Sunnyvale, State of California, on the 22nd day of July, 1999.
eGAIN COMMUNICATIONS CORPORATION
/s/ Ashutosh Roy
By: _________________________________
Ashutosh Roy
Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ashutosh Roy, Gunjan Sinha, William McGrath and Eric Smit, and each of them, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, 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/ Ashutosh Roy Chief Executive Officer and July 22, 1999
______________________________________ Director (Principal Executive
Ashutosh Roy Officer)
/s/ Gunjan Sinha President and Director July 22, 1999
______________________________________
Gunjan Sinha
/s/ Eric N. Smit Vice President--Finance and July 22, 1999
______________________________________ Administration (Principal
Eric N. Smit Financial and Accounting
Officer)
/s/ Mark A. Wolfson Director July 22, 1999
______________________________________
Mark A. Wolfson
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II-4
EXHIBIT INDEX
Exhibit
Number Description of Document
------- -----------------------
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization among Registrant, Sitebridge
Corporation, ECC Acquisition Corporation, Wendell Lansford, Prakash
Mishra and Chelsea M.C. LLC.
3.1 Restated Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation to be
effective upon completion of this offering.
3.3 Bylaws of the Registrant, as amended.
3.4 Form of Amended and Restated Bylaws of the Registrant to be effective
upon completion of this offering.
4.1* Form of Common Stock Certificate.
4.2 Amended and Restated Investors' Rights Agreement dated as of April 30,
1999.
4.3 Warrant to purchase Common stock dated as of August 7, 1998 issued by
the Registrant to Imperial Bank.
4.4 Warrant to purchase shares of Series A preferred stock dated as of
October 15, 1998 issued to Phoenix Leasing Incorporated.
4.5 Warrant to purchase Series A Convertible Preferred Stock of Sitebridge
Corporation dated as of May 5, 1998 issued to Chelsea Capital Partners
LLC (assumed by Registrant in connection with Sitebridge acquisition).
4.6 Warrant to purchase Series A Convertible Preferred Stock of Sitebridge
Corporation dated as of May 5, 1998 issued to Amir Bahhtiar (assumed
by Registrant in connection with Sitebridge acquisition).
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1 Form of Indemnification Agreement.
10.2 Social Science, Inc. 1997 Stock Option Plan (assumed by registrant in
connection with Sitebridge acquisition).
10.3 Amended and Restated 1998 Stock Plan and forms of stock option
agreements thereunder.
10.4 1999 Employee Stock Purchase Plan.
10.5 Golden Gate Commercial Lease Agreement dated as of July 21, 1998
between Registrant and Golden Gate Commercial Company.
10.6 Starter Kit Loan and Security Agreement dated as of August 7, 1998
between Registrant and Imperial Bank.
10.7 Senior Loan and Security Agreement No. 6194 dated as of October 15,
1998 between Registrant and Phoenix Leasing Incorporated.
10.8 Amendment to Common Stock Purchase Agreement dated as of June 24, 1998
between Registrant and Ashutosh Roy.
10.9 Amendment to Common Stock Purchase Agreement dated as of June 24, 1998
between Registrant and Gunjan Sinha.
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Exhibit Number Description of Document ------- ----------------------- 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1). 24.1 Power of Attorney (see Page II-4). 27.1 Financial Data Schedule. |
omitted will be furnished supplementally to the Commission upon request.
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
EGAIN COMMUNICATIONS CORPORATION,
SITEBRIDGE CORPORATION,
ECC ACQUISITION CORPORATION
WENDELL LANSFORD,
PRAKASH MISHRA
and
CHELSEA M.C. LLC
April 30, 1999
Page
----
ARTICLE 1 DEFINITIONS..................................................................... 2
ARTICLE 2 PLAN OF REORGANIZATION; CLOSING................................................. 2
2.1 The Merger............................................................... 2
2.2 Effective Time........................................................... 2
2.3 Effect of the Merger..................................................... 2
2.4 Certificate of Incorporation and Bylaws.................................. 2
2.5 Directors and Officers................................................... 3
2.6 Effect on Capital Stock.................................................. 3
2.7 Dissenting Shares........................................................ 6
2.8 No Further Ownership Rights in Shares.................................... 6
2.9 Lost, Stolen or Destroyed Certificates................................... 7
2.10 Taking of Necessary Action; Further Action............................... 7
2.11 Reorganization........................................................... 7
2.12 Closing Date............................................................. 7
2.13 Escrow for Merger Consideration.......................................... 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SITEBRIDGE AND THE SELLING STOCKHOLDERS....... 8
3.1 Organization; Good Standing; Qualification............................... 8
3.2 Authorization............................................................ 8
3.3 Capital Structure; Title to Shares; Selling Stockholders Authority....... 8
3.4 Obligations With Respect to Capital Stock................................ 9
3.5 Subsidiaries............................................................. 9
3.6 Permits.................................................................. 9
3.7 Financial Statements..................................................... 10
3.8 Changes.................................................................. 10
3.9 Title to Property and Assets; Leases..................................... 11
3.10 Accounts Receivable; Notes Receivable.................................... 11
3.11 Accounts Payable......................................................... 12
3.12 Liabilities.............................................................. 12
3.13 Taxes.................................................................... 12
3.14 Employees; Compensation.................................................. 13
3.15 Compliance With Other Instruments........................................ 14
3.16 Litigation............................................................... 14
3.17 Contracts................................................................ 14
3.18 No Default............................................................... 15
3.19 Business and Customers................................................... 16
3.20 Intellectual Property.................................................... 16
3.21 Insurance................................................................ 16
3.22 Bank Accounts............................................................ 16
3.23 Brokers or Finders....................................................... 17
3.24 Related-Party Transactions............................................... 17
3.25 Governmental Consents.................................................... 17
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* Exhibit A - List of Investors
Page
----
3.26 Labor Agreements and Actions................................ 17
3.27 ERISA....................................................... 18
3.28 Minute Books................................................ 19
3.29 Full Disclosure............................................. 19
3.30 Restricted Securities....................................... 19
3.31 Confidentiality and Assignment of Inventions Agreements..... 19
3.32 Environmental and Safety Laws............................... 19
3.33 Registration Rights......................................... 20
3.34 Year 2000 Issues............................................ 20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF eGAIN............................ 20
4.1 Organization; Good Standing; Qualification.................. 20
4.2 Authorization............................................... 20
4.3 Valid Issuance of Preferred and Common Stock................ 21
4.4 Governmental Consents....................................... 21
4.5 Capitalization and Voting Rights............................ 22
4.6 Subsidiaries................................................ 23
4.7 Contracts and Other Commitments; Indebtedness............... 23
4.8 Agreements; Action.......................................... 23
4.9 Related-Party Transactions.................................. 23
4.10 Registration Rights......................................... 24
4.11 Permits..................................................... 24
4.12 Compliance With Other Instruments........................... 24
4.13 Litigation.................................................. 24
4.14 Title to Property and Assets; Leases........................ 24
4.15 Financial Statements........................................ 25
4.16 Changes..................................................... 25
4.17 Patents and Trademarks...................................... 26
4.18 Employees; Employee Compensation............................ 27
4.19 Confidentiality and Assignment of Inventions Agreements..... 27
4.20 Tax Returns, Payments and Elections......................... 27
4.21 Employee Benefit Plans...................................... 27
4.22 Insurance................................................... 27
4.23 Labor Agreements and Actions................................ 27
4.24 Environmental and Safety Laws............................... 28
4.25 Minute Books................................................ 28
4.26 Full Disclosure............................................. 28
4.27 Business and Customers...................................... 28
4.28 Year 2000 Issues............................................ 28
4.29 Acquisition Sub............................................. 28
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS.......................... 29
5.1 Conduct of Business in Normal Course........................ 29
5.2 Preservation of Business and Relationships.................. 29
5.3 Maintenance of Insurance.................................... 29
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Page
----
5.4 Employees and Compensation.................................................. 29
5.5 Dividends; Changes in Stock................................................. 29
5.6 Issuance of Securities...................................................... 29
5.7 Governing Documents......................................................... 29
5.8 No Other Bids............................................................... 30
5.9 No Acquisitions............................................................. 30
5.10 No Acquisitions............................................................. 30
5.11 No Dispositions............................................................. 30
5.12 Indebtedness................................................................ 30
ARTICLE 6 ADDITIONAL AGREEMENTS.............................................................. 30
6.1 Access to Information....................................................... 30
6.2 Legal Conditions............................................................ 31
6.3 Good Faith.................................................................. 31
6.4 Legend; Stop Transfer Instructions.......................................... 32
6.5 Continued Employment of Sitebridge Employees................................ 32
6.6 Indemnification............................................................. 32
6.7 Sitebridge Stockholders' Representations Regarding Securities Law Matters... 32
6.8 Blue Sky Laws............................................................... 33
6.9 Information Statement....................................................... 33
ARTICLE 7 CONDITIONS PRECEDENT............................................................... 33
7.1 Conditions to Obligations of eGain and the Sitebridge Parties............... 33
7.2 Conditions to Obligations of eGain.......................................... 34
7.3 Conditions to Obligations of the Sitebridge Parties......................... 35
7.4 Best Efforts................................................................ 36
ARTICLE 8 INDEMNIFICATION AND ESCROW......................................................... 36
8.1 Indemnification by Sitebridge and the Selling Stockholders.................. 36
8.2 Escrow Fund................................................................. 37
8.3 Escrow Period............................................................... 38
8.4 Distributions; Voting....................................................... 38
8.5 Claims Upon Escrow Fund..................................................... 38
8.6 Objections to Claims........................................................ 38
8.7 Resolution of Conflicts; Arbitration........................................ 39
8.8 Distribution upon Termination of Escrow Period.............................. 39
8.9 Indemnification by eGain.................................................... 40
8.10 Indemnification Procedure................................................... 40
8.11 Survival.................................................................... 41
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER.................................................. 41
9.1 Termination................................................................. 41
9.2 Amendment................................................................... 41
9.3 Extension; Waiver........................................................... 42
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Page
----
ARTICLE 10 GENERAL..................................................... 42
10.1 Notices............................................... 42
10.2 Headings.............................................. 43
10.3 Entire Understanding.................................. 43
10.4 Counterparts.......................................... 43
10.5 Binding Nature........................................ 43
10.6 Applicable Law........................................ 43
10.7 Attorneys' Fees....................................... 43
10.8 Payment of Expenses................................... 43
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Exhibits
--------
Exhibit A Certificate of Merger
Exhibit B Sitebridge Schedule of Exceptions
Exhibit C eGain Schedule of Exceptions
Exhibit D Form of Amended Rights Agreement
Exhibit E Reserved
Exhibit F Form of Escrow Agreement
Exhibit G Reserved
Exhibit H Form of Amended and Restated Certificate of Incorporation of
eGain
Exhibit I Form of Employment Agreement
Exhibit J Form of Founders' Agreement
Exhibit K Form of Investor's Certificate
Schedules
---------
Schedule 3.3 Sitebridge Stockholders
Schedule 3.7 Sitebridge Financial Statements
Schedule 3.9 Fixed Assets; Properties
Schedule 3.10 Accounts Receivable; Notes Receivable
Schedule 3.11 Accounts Payable
Schedule 3.12 Liabilities (Sitebridge)
Schedule 3.13(c) Taxes
Schedule 3.14 Compensation
Schedule 3.17 Contracts
Schedule 3.19 Customers
Schedule 3.20 Proprietary Rights
Schedule 3.21 Insurance
Schedule 3.22 Bank Accounts
Schedule 3.27 Benefit Plans
Schedule 4.27 Business and Customers
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THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), made and entered into as of the 30th day of April, 1999 by and among EGAIN COMMUNICATIONS CORPORATION, a Delaware corporation ("eGain"), SITEBRIDGE CORPORATION, a Delaware corporation ("Sitebridge"), ECC ACQUISITION CORPORATION, a Delaware Corporation ("Acquisition Sub"), WENDELL LANSFORD ("Lansford"), PRAKASH MISHRA ("Mishra" and together with Lansford, the "Founders") and CHELSEA M.C. LLC, a Delaware limited liability company ("Chelsea," and together with the Founders, the "Selling Stockholders"),
W I T N E S S E T H:
WHEREAS, the Boards of Directors of eGain, Sitebridge and Acquisition Sub have each determined that it is in the best interests of their respective stockholders for eGain to acquire Sitebridge and have approved the merger of Acquisition Sub with and into Sitebridge (the "Merger"), with Sitebridge surviving as a wholly-owned subsidiary of eGain following the Merger; and
WHEREAS, the Merger and the consummation of the transactions contemplated by this Agreement require the vote of at least a majority of the outstanding shares of Sitebridge common stock, par value $0.001 per share (the "Sitebridge Common Stock") voting separately as a class, and at least a majority of the outstanding shares of Sitebridge preferred stock, par value $0.001 per share (the "Sitebridge Preferred Stock" and with the Sitebridge Common Stock, the "Shares") voting separately as a class, for the approval thereof (the "Sitebridge Stockholder Approval"); and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding shares of Sitebridge Preferred Stock will be converted into eGain Series C Preferred Stock, par value $0.001 per share (the "eGain Series C Preferred Stock"); and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding shares of Sitebridge Common Stock will be converted into eGain common stock, par value $0.001 per share (the "eGain Common Stock"); and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding warrants to purchase Sitebridge Series A Preferred Stock will be converted into warrants to purchase eGain Series C Preferred Stock; and
WHEREAS, upon the effectiveness of the Merger, all of the outstanding options and warrants to purchase Sitebridge Common Stock will be converted into options and warrants to purchase eGain Common Stock; and
WHEREAS, a portion of the Merger Consideration (as defined in Section 2.6(a) below) otherwise issuable by eGain in connection with the Merger shall be placed into escrow by eGain, the release of which amount shall be contingent upon certain events and conditions, all as set forth in Article 8 hereof; and
WHEREAS, the Merger is intended to be treated as a tax-free reorganization pursuant to the provisions of section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the provisions of section 368(a)(2)(E) of the Code:
NOW, THEREFORE, in consideration of the promises and of the mutual provisions, agreements and covenants herein contained, eGain, Sitebridge and the Selling Stockholders agree as follows:
The terms defined in this Agreement shall have their respective defined meanings whenever such terms are used in this Agreement.
(a) At the Effective Time, the Certificate of Incorporation of Acquisition Sub, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation (except that Article FIRST shall be amended and restated to read in its entirety "The name of the Corporation is Sitebridge Corporation") unless otherwise determined by eGain prior to the Effective Time.
(b) The Bylaws of Acquisition Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by the DGCL, the Certificate of Incorporation of Sitebridge and the Bylaws of Sitebridge.
share exercise price for the shares of eGain Common Stock issuable upon exercise of such assumed Common Option shall be equal to the quotient determined by dividing the exercise price per share of Sitebridge Common Stock at which such Common Option was exercisable immediately prior to the Effective Time by 1.81509 (rounded up to the nearest whole cent); and
The eGain Series C Preferred Stock and eGain Common Stock received by the Sitebridge Stockholders (as defined in Section 3.3 hereof) pursuant to Sections 2.6(a)(i) and (ii) shall be the "Merger Consideration."
As soon as practicable after the Effective Time, eGain shall mail to each holder of record (other than holders of Dissenting Shares (as defined in Section 2.7(a)) of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Sitebridge Common Stock or Sitebridge Preferred Stock (collectively, the "Certificates") (i) a form letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to eGain) and (ii) instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to eGain, together with such letter of transmittal, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated herein, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration with respect to the shares of Sitebridge Common Stock or Sitebridge Preferred Stock formerly represented thereby.
After six (6) months from the Effective Time, holders of Certificates shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to the Merger Consideration that any such holder was entitled to upon due surrender of any Certificates held by them. Notwithstanding the foregoing, neither eGain nor the Surviving Corporation shall be liable to any holder of a Certificate for any Merger Consideration delivered to a public official pursuant to any abandoned property, escheat or similar law.
If the Merger Consideration is to be received by any person other than that in which the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person making such request shall pay any transfer or other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable.
After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Sitebridge Common Stock or Sitebridge Preferred Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger Consideration as set forth in this Article.
Certificates representing the Merger Consideration shall include an appropriate securities law legend, providing, among other things, that the stock evidenced by the certificates are being
acquired for investment purposes and are restricted securities, as set forth in
Section 6.5(a) hereof. Fifteen percent (15%) of the Merger Consideration will be
held by the escrow agent pursuant to the terms of Article 8 hereof.
It is the intention of the parties that the Common Options assumed by eGain shall qualify following the Effective Time as incentive stock options as defined in Section 422 of the Code to the same extent as the Common Options qualified as incentive stock options immediately prior to the Effective Time and the provisions of this Section 2.6 shall be applied consistent with this intent. Promptly following the Effective Time, eGain will issue to each holder of an unexpired and unexercised Common Option, Preferred Warrant and Common Warrant an instrument evidencing the assumption of such Preferred Option, Common Option, Preferred Warrant and Common Warrant by eGain.
(a) Notwithstanding any provision of this Agreement to the contrary, any Shares held by a holder who has demanded and perfected appraisal rights for such Shares in accordance with the DGCL and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting Shares") shall not be converted into or represent a right to receive eGain Preferred Stock or eGain Common Stock, as applicable, pursuant to Section 2.6, but the holder thereof shall only be entitled to such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of subsection (a) above, if any holder
of Shares who demands appraisal of such shares under the DGCL shall effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal, then, as of the later of (i) the Effective Time or (ii) the
occurrence of such event, such holder's shares shall automatically be converted
into and represent only the right to receive Merger Consideration as provided in
Section 2.6, if any, without interest thereon, upon surrender of the certificate
representing such shares.
satisfaction of all rights pertaining to such Shares. There shall be no further registration of transfers on the record of Sitebridge of Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates evidencing Shares are presented to Sitebridge or eGain for any reason, such Shares shall be deemed void and canceled.
Section 2.6(a) of this Agreement will be placed in escrow, as described in Article 8 hereof, as security for indemnification as provided in Article 8 hereof until one (1) year after the Effective Time. On such date eGain, shall instruct the Escrow Agent to promptly deliver any share certificates to the Sitebridge Stockholders in proper proportion.
Sitebridge, and with respect to Sections 3.3, 3.4, 3.12, 3.20 and 3.30, the Founders, hereby represent and warrant eGain that, except as set forth on a Schedule of Exceptions furnished to eGain and attached hereto as Exhibit B (the "Sitebridge Schedule of Exceptions"), specifically identifying the relevant subsection(s) hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder and shall be deemed disclosed under and incorporated into any other subsection of the Agreement where such disclosure would be appropriate:
(a) The authorized capital stock of Sitebridge (the "Sitebridge Capital Stock") consists of one million two hundred thousand (1,200,000) shares of Sitebridge Preferred Stock and two million eight hundred thousand (2,800,000) shares of Sitebridge Common Stock. As of the date hereof, eight hundred one thousand nine hundred (801,900) shares of Sitebridge
Common Stock and eight hundred eighty-six thousand nine hundred two (886,902)
shares of Sitebridge Series A Preferred Stock are issued and outstanding. The
names and addresses of all of the holders of capital stock, options, warrants or
any other rights to acquire the securities of Sitebridge are listed in Schedule
3.3 (the "Sitebridge Stockholders").
(b) All of the outstanding Sitebridge Capital Stock was issued in compliance with applicable federal and state securities laws and regulations. All of the outstanding shares of Sitebridge Capital Stock are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, Sitebridge's Certificate of Incorporation or Bylaws, or any agreement to which Sitebridge or the Selling Stockholders is a party.
(c) Each Selling Stockholder has, and on the Closing Date will have, good and valid record title to, and beneficial ownership of, the shares of Sitebridge Capital Stock proposed to be sold by such Selling Stockholder and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver such shares of Sitebridge Capital Stock hereunder, free and clear of all voting trust arrangements, liens, encumbrances, equities, security interests, restrictions and claims whatsoever; and upon delivery of and payment for such shares of Sitebridge Capital Stock hereunder, eGain will acquire good and valid record title thereto, free and clear of all liens, encumbrances, equities, claims, restrictions, security interests, voting trusts or other defects of title whatsoever.
(a) any change in the assets, liabilities, financial condition or operating results of Sitebridge from that reflected in the Sitebridge Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse to Sitebridge;
(b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, or financial condition of Sitebridge;
(c) any waiver or compromise by Sitebridge of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge or any lien, claim, or encumbrance or payment of any obligation by Sitebridge, except in the ordinary course of business and that is not material to the business, properties, prospects or financial condition of Sitebridge;
(e) any material change to a material contract or agreement by which Sitebridge or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(g) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or key employee of Sitebridge; and Sitebridge, is not aware of any impending resignation or termination of employment of any such officer or key employee;
(i) any mortgage, pledge, transfer of a security interest in, or lien, created by Sitebridge, with respect to any of its material properties or assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by Sitebridge to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution in respect to any of Sitebridge's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock by Sitebridge;
(l) any arrangement or commitment by Sitebridge to do any of the things described in this Section 3.8; or
(m) the incurrence or guarantee of any indebtedness (other than trade payables incurred in the ordinary course of business) of $10,000 or more individually or in the aggregate.
(a) For purposes of this Agreement, the following terms have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any and all taxes, including without limitation (i) any income, profits, alternative or add-on minimum tax, gross receipts, sales, use, value-added, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, net worth, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such tax (domestic or foreign) (a "Taxing Authority"), (ii) any liability for the payment of any amounts of the type described in clause (i) above as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period or as the result of being a transferee or successor thereof, and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) above as a result of any express or implied obligation to indemnify any other person.
(b) All Tax returns, statements, reports and forms (including estimated Tax returns and reports and information returns and reports) required to be filed with any Taxing Authority with respect to any Taxable period ending on or before the Effective Time, by or on behalf of Sitebridge (collectively, the "Sitebridge Returns"), have been or will be filed when due (including any extensions of such due date), and all amounts shown to be due thereon on or before the Effective Time have been or will be paid on or before such date. The Sitebridge Financial Statements fully accrue all actual and contingent liabilities for Taxes with respect to all periods through the dates thereof in accordance with GAAP. The Sitebridge Financial Statements fully accrue in accordance with GAAP all actual and contingent liabilities for Taxes with respect to all periods (or portions of periods) through March 31, 1999. All information set forth in the notes to the Sitebridge Financial Statements relating to Tax matters is true, complete and accurate in all material respects.
(c) No Tax liability with respect to any period since March 31, 1999 has been incurred other than in the ordinary course of business. Sitebridge has withheld and paid to the
applicable financial institution or Taxing Authority all amounts required to be withheld. Sitebridge has not granted any extension or waiver of the limitation period applicable to any Sitebridge Returns.
(d) There is no claim, audit, action, suit, proceeding or investigation now pending or, to the best knowledge of Sitebridge, threatened against or with respect to Sitebridge in respect of any Tax or assessment. There are no liabilities for Taxes with respect to any notice of deficiency or similar document of any Tax Authority received by Sitebridge which have not been satisfied in full (including liabilities for interest, additions to tax and penalties thereon and related expenses). Neither Sitebridge nor any person on behalf of Sitebridge has entered into or will enter into any agreement or consent pursuant to section 341(f) of the Code. There are no liens for Taxes upon the assets of Sitebridge except liens for current Taxes not yet due. Except as may be required as a result of the Merger, Sitebridge has not been and will not be required to include any adjustment in Taxable income for any Tax period (or portion thereof) pursuant to section 481 or 263A of the Code or any comparable provision under state, local or foreign Tax laws as a result of transactions, events or accounting methods employed prior to the Effective Time.
(e) There is no contract, agreement, plan or arrangement, including without limitation the provisions of this Agreement, covering any employee or independent contractor or former employee or independent contractor of Sitebridge that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to section 280G or section 162 of the Code (as determined without regard to section 280G(b)(4)). Other than pursuant to this Agreement, Sitebridge is not a party to or bound by (and will not prior to the Effective Time become a party to or bound by) any tax indemnity, tax sharing or tax allocation agreement (whether written, unwritten or arising under operation of federal law as a result of being a member of a group filing consolidated tax returns, under operation of certain state laws as a result of being a member of a unitary group, or under comparable laws of other states or foreign jurisdictions) which includes a party other than Sitebridge. Sitebridge has not participated in (and prior to the Effective Time Sitebridge will not participate in) an international boycott within the meaning of section 999 of the Code. Sitebridge has previously provided or made available to eGain true and correct copies of all Sitebridge Returns, and, as reasonably requested by eGain, prior to or following the date hereof, presently existing information statements, reports, work papers, Tax opinions and memoranda and other Tax data and documents.
(a) Sitebridge has provided in Schedule 3.14 a full and complete list of
(a) all directors, officers, employees or consultants of Sitebridge as of the
date set forth thereon, specifying their names and job designations, their dates
of hire, the total amount paid or payable as wages, salaries or other forms of
direct compensation, the basis of such compensation, whether fixed or commission
or a combination thereof, and (b) except as set forth on Schedule 3.27, all
employee profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement. Since March 31,
1999, Sitebridge has not paid or committed itself to pay to or for the benefit
of any of its directors, officers, employees or
stockholders any compensation of any kind other than wages, salaries and
benefits at the times and rates in effect on Schedule 3.14, nor has it effected
or agreed to effect any amendment or supplement to any employee profit sharing,
stock option, stock purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any other employee
benefit plan or arrangement except as set forth on Schedule 3.14 or Schedule
3.27. Sitebridge does not have any bonus plan or obligations with respect to any
bonus plan, except as set forth in Schedule 3.14.
(b) Each of Sitebridge's employees and consultants is fully authorized to work in the United States without limitation as to time or place. Except as set forth on Schedule 3.14, the employment of each of Sitebridge's employees is "at will" employment. Sitebridge does not have any obligation (i) to provide any particular form or period of notice prior to termination, or (ii) to pay any of such employees any severance benefits in connection with his or her termination of employment or service. Except as set forth on Schedule 3.14, Sitebridge has not entered into any consulting agreements with any employee or consultant who owes services to or is owed compensation by Sitebridge for services provided in excess of $25,000.
(a) Except as provided herein, Sitebridge has provided eGain with a complete list in Schedule 3.17 of each executory contract and agreement in the following categories to which Sitebridge is a party, or by which it is bound in any respect: (a) agreements for the purchase, sale,
lease or other disposition of equipment, goods, materials, research and
development, supplies, studies or capital assets, or for the performance of
services, in any case involving more than Ten Thousand Dollars ($10,000); (b)
contracts or agreements for the joint performance of work or services, and all
other joint venture agreements; (c) management or employment contracts,
consulting contracts, collective bargaining contracts, termination and severance
agreements; (d) notes, mortgages, deeds of trust, loan agreements, security
guarantees, debentures, indentures, credit agreements and other evidences of
indebtedness (other than ordinary course trade credit); (e) pension, retirement,
profit-sharing, deferred compensation, bonus, incentive, life insurance,
hospitalization or other employee benefit plans or arrangements (including,
without limitation, any contracts or agreements with trustees, insurance
companies or others relating to any such employee benefit plan or arrangement);
(f) stock option, stock purchase, warrant, repurchase or other contracts or
agreements relating to any share of capital stock of Sitebridge; (g) contracts
or agreements with agents, brokers, consignees, sales representatives or
distributors; (h) contracts or agreements with any director, officer, employee,
consultant or stockholder; (i) powers of attorney or similar authorizations
granted by Sitebridge to third parties; (j) licenses, sublicenses, royalty
agreements and other contracts or agreements to which Sitebridge is a party, or
otherwise subject, relating to technical assistance or to Proprietary Rights (as
set forth in Section 3.21 hereof); and (k) other material contracts.
(b) Sitebridge has not entered into any contract or agreement containing covenants limiting the right of Sitebridge or the Selling Stockholders to compete in any business or with any person. As used in this Agreement, the terms "contract" and "agreement" include every contract, agreement, commitment, understanding and promise, whether written or oral.
(a) Each of the contracts, agreements or other instruments referred to in
Section 3.14 hereof is a legal, binding and enforceable obligation by or against
Sitebridge, subject only to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
rights of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
To Sitebridge's and the Founders' knowledge, no party with whom Sitebridge has
an agreement or contract is in default thereunder or has breached any term or
provision thereof which is material to the conduct of Sitebridge's business.
(b) Sitebridge has performed, or is now performing, the obligations of, and Sitebridge is not in material default (or would by the lapse of time and/or the giving of notice be in material default) in respect of, any contract, agreement or commitment binding upon it or its assets or properties and material to the conduct of its business. No third party has raised any claim, dispute or controversy with respect to any of the executory contracts of Sitebridge referred to in Section 3.14(a), nor has Sitebridge received written notice or warning of alleged nonperformance, delay in delivery or other noncompliance by Sitebridge with respect to its obligations under any of the contracts referred to in Section 3.15(a), nor are there any facts which
exist indicating that any of those contracts may be totally or partially terminated or suspended by the other parties thereto.
special deposits required to be held by such state governmental departments with the nature of such account and the names of all persons authorized to draw on or give instructions with respect to such accounts or deposits, or to have access thereto, and the names and addresses of all persons, if any, holding a power-of- attorney on behalf of Sitebridge. All cash in such accounts is held in demand deposits and is not subject to any restriction or limitation as to withdrawal.
(a) Sitebridge is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of Sitebridge, has sought to represent any of the employees, representatives or agents of Sitebridge. There is no strike or other labor dispute involving Sitebridge pending, or the knowledge of Sitebridge threatened, which could have a material adverse effect on the assets, properties, financial condition, operating results, or its employees.
(b) To the best of Sitebridge's and the Founders' knowledge, Sitebridge has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment.
(a) Schedule 3.27 hereto lists all employee pension benefit plans and employee welfare benefit plans (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) covering active, former or retired employees of Sitebridge. Sitebridge has furnished to eGain copies or descriptions of each employment, severance or other similar contract, arrangement or policy and each plan, agreement, policy or arrangement (written or oral) providing for insurance coverage (including any self-insured arrangements), vacation benefits, severance benefits, disability benefits, early retirement benefits, death benefits, hospitalization benefits, 401(k) plans, retirement benefits, deferred compensation, profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of compensation or post-retirement benefits.
(b) Except as set forth in Schedule 3.27, Sitebridge and the Founders represent as follows:
(A) Each benefit plan is in substantial compliance with all
applicable laws and regulatory requirements, and has been administered
substantially in accordance with its terms. Sitebridge and the Founders
know of no circumstances likely to result in the denial or revocation of
tax-qualification of any benefit plan intended to be tax-qualified under
Section 401(a) of the Code. No material liabilities, other than for
payment of benefits in the ordinary course, have been incurred nor, to the
knowledge of Sitebridge or the Founders, do any facts exist which are
reasonably likely to result in any material liability (whether or not
asserted as of the date hereof) of Sitebridge arising by virtue of any
event, act or omission occurring prior to the Closing Date with respect to
any benefit plan.
(B) Sitebridge nor any ERISA affiliated group (as defined under Section 414(b), (c) or (m) of the Code) sponsors or ever has sponsored a benefit plan subject to Title IV of ERISA, Part 3 of Title I of ERISA or Section 412 of the Code or sponsors or ever has sponsored or contributed to or been required to contribute to a multi employer pension plan (as defined in Section 3(37) of ERISA).
administered so as to comply with applicable laws except where the failure to so comply would not have a material adverse effect.
(v) No Liens. Neither Sitebridge nor any of the assets of Sitebridge are subject to any lien under ERISA or the Code.
safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.
eGain, and with respect to Sections 4.1, 4.2(b), 4.4, 4.7, 4.11, 4.12, 4.13, 4.21 and 4.25, Acquisition Sub, hereby represent and warrant to Sitebridge and the Selling Stockholders that, except as set forth on a Schedule of Exceptions furnished to Sitebridge and the Selling Stockholders and attached hereto as Exhibit C (the "eGain Schedule of Exceptions"), specifically identifying the relevant subsection(s) hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder and shall be deemed disclosed under and incorporated into any other subsection of the Agreement where such disclosure would be appropriate:
(a) All corporate action on the part of eGain, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Amended
Rights Agreement, the performance of all obligations of eGain hereunder and thereunder at the Closing, the authorization, issuance (or reservation for issuance) and delivery of the Merger Consideration and the eGain Common Stock issuable upon conversion of the eGain Series C Preferred Stock and the authorization of the assumption by eGain of the Common Options, the Preferred Warrants and the Common Warrants in accordance with Section 2.6, has been taken or will be taken prior to the Closing, and this Agreement and the Amended Rights Agreement, when executed and delivered, will constitute valid and legally binding obligations of eGain, enforceable against eGain in accordance with their respective terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (c) to the extent the indemnification provisions contained in the Amended Rights Agreement may be limited by applicable laws.
(b) All corporate action on the part of Acquisition Sub, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of Acquisition Sub hereunder has been taken or will be taken prior to the Closing, and this Agreement, when executed and delivered, will constitute valid and legally binding obligations of Acquisition Sub, enforceable against Acquisition Sub in accordance with their respective terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
the part of eGain or Acquisition Sub in connection with eGain's and Acquisition Sub's valid execution, delivery or performance of this Agreement, the issuance of the Merger Consideration by eGain or the issuance of eGain Common Stock upon conversion of the eGain Series C Preferred Stock, except (a) the filing of the Certificate of Merger, (b) the filing of the Restated Certificate with the Secretary of State of the State of Delaware, and (c) such filings as have been made prior to the Closing, except any notices of sale required to be filed with applicable federal and state agencies, which will be timely filed within the applicable periods therefor.
(c) All of the outstanding shares of eGain Common Stock and eGain Preferred Stock have been duly authorized and validly issued, are fully paid and nonassessable and were issued in accordance with the registration or qualification provisions of the Securities Act of 1933, as amended (the "Securities Act") and any relevant state securities laws or pursuant to valid exemptions therefrom.
(d) eGain has reserved 5,707,043 shares of Common Stock for issuance upon conversion of the outstanding shares of eGain Series A Preferred Stock and the exercise and conversion of outstanding warrants to purchase eGain Series A Preferred Stock, 2,550,000 shares of eGain Common Stock for issuance upon conversion of the eGain Series B Preferred Stock and 1,728,844 shares of eGain Common Stock for issuance upon conversion of the eGain Series C Preferred Stock. Except for (i) the conversion privileges of the eGain Preferred Stock, (ii) the rights provided in the Amended Rights Agreement, (iii) warrants to purchase 188,703 shares of Series A Preferred Stock of eGain, (iv) a warrant to purchase 74,488 shares of eGain Series A Preferred Stock, issued to Phoenix Leasing Incorporated, and (v) a warrant to purchase 37,267 shares of eGain Series A Preferred Stock, issued to Imperial Bank, there are not outstanding any options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements for the purchase or acquisition from eGain, or to eGain's knowledge, from any holders of its securities, of any shares of its capital stock. eGain has reserved an aggregate of 2,750,000 shares of its Common Stock for issuance under its 1998 Stock Plan (the "Plan"), of which, options to purchase 1,147,450 shares of Common Stock have been issued and are outstanding, and options to purchase 662,254 shares remain available for future grant under the Plan. eGain is not a party or subject to any agreement or understanding, and, to the best of
eGain's knowledge, there is no agreement or understanding between any persons that affects or relates to the voting or giving of written consents with respect to any security or the voting by a director of eGain.
(b) Since March 31, 1999, neither eGain nor any of its subsidiaries has
(i) declared or paid any dividends, or authorized or made any distribution upon
or with respect to any class or series of its capital stock, (ii) made any loans
or advances to any person, other than ordinary advances for travel expenses, or
(iii) sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of business.
material contract with eGain. eGain is not a guarantor or indemnitor of any person, firm, or corporation.
With respect to the property and assets it leases or licenses, eGain is, to the best of its knowledge, in compliance with such leases or licenses and, to the best of its knowledge, holds a valid leasehold interest or license free of any liens, claims or encumbrances, subject to clauses (a)-(d) above .
(a) any change in the assets, liabilities, financial condition or operating results of eGain from that reflected in the eGain Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties or financial condition of eGain;
(c) any waiver or compromise by eGain of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge or any lien, claim, or encumbrance or payment of any obligation by eGain, except in the ordinary course of business and that is not material to the business, properties, prospects or financial condition of eGain;
(e) any material change to a material contract or agreement by which eGain or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(g) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer or key employee of eGain; and eGain, is not aware of any impending resignation or termination of employment of any such officer or key employee;
(i) any mortgage, pledge, transfer of a security interest in, or lien, created by eGain, with respect to any of its material properties or assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by eGain to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
(k) any declaration, setting aside or payment or other distribution in respect to any of eGain's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock by eGain;
(l) any arrangement or commitment by eGain to do any of the things described in this Section 4.16; or
(m) the incurrence or guarantee of any indebtedness of $50,000 or more individually or in the aggregate.
persons it currently intends to hire) made prior to their employment by eGain, other than those which have been assigned to eGain.
(a) To its knowledge, eGain has complied in all material respects with all applicable state and federal equal opportunity and other laws related to employment. To eGain's knowledge, no employee of eGain is or will be in violation of any judgment, decree or order, or any term of any employment contract, patent disclosure agreement, or other contract or agreement relating to the relationship of any such employee with eGain or any other party because of the nature of the business conducted or to be conducted by eGain or to the use by the employee of his or her best efforts with respect to such business. Except as set forth on the eGain Schedule of Exceptions, eGain is not a party to or bound by any currently effective employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement, or other employee compensation agreement.
(b) Each of eGain's employees and consultants is fully authorized to work in the United States without limitation as to time or place. The employment of each of eGain's employees is "at will" employment. eGain does not have any obligation (i) to provide any particular form or period of notice prior to termination, or (ii) to pay any of such employees any severance benefits in connection with his or her termination of employment or service. eGain has not entered into any consulting agreements with any employee or consultant who owes services to or is owed compensation by eGain for services provided in excess of $50,000.
knowledge of eGain, has sought to represent any of the employees, representatives or agents of eGain. There is no strike or other labor dispute involving eGain pending, or the knowledge of eGain threatened, which could have a material adverse effect on the assets, properties, financial condition, operating results, or its employees. To its knowledge, eGain has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment.
ARTICLE 5
During the period from the date hereof, and continuing until the Closing Date, unless earlier terminated in accordance with Section 9.1 hereof, Sitebridge covenants, and agrees with eGain that:
ARTICLE 6
papers and other records of Sitebridge's accountants. During such period, Sitebridge shall use reasonable efforts to furnish promptly to eGain (a) a copy of each report, schedule and other document filed or received by Sitebridge during such period pursuant to the requirements of federal and state securities laws and (b) all other information concerning the business, properties and personnel of Sitebridge as eGain may reasonably request. eGain will not use such information for purposes other than this Agreement and will otherwise hold such information in confidence (and eGain will cause its consultants and advisors also to hold such information in confidence). From and after the Closing Date, eGain will provide Sitebridge and the Selling Stockholders reasonable access to the books and records to the extent necessary for such persons to respond to a tax audit or in the event of any governmental action or the defense or prosecution of any litigation.
(b) eGain shall afford to Sitebridge and shall cause its accountants to afford to Sitebridge, and its accountants, counsel and other representatives, reasonable access during normal business hours during the period prior to the Closing Date to eGain's properties, books, contracts, commitments and records and to the independent accountants reasonable access to the audit work papers and other records of eGain's accountants. During such period, eGain shall use reasonable efforts to furnish promptly to Sitebridge (a) a copy of each report, schedule and other document filed or received by eGain during such period pursuant to the requirements of federal and state securities laws and (b) all other information concerning the business, properties and personnel of eGain as Sitebridge may reasonably request. Sitebridge will not use such information for purposes other than this Agreement and will otherwise hold such information in confidence (and Sitebridge will cause its consultants and advisors also to hold such information in confidence). From and after the Closing Date, Sitebridge will provide eGain and the Selling Stockholders reasonable access to the books and records to the extent necessary for such persons to respond to a tax audit or in the event of any governmental action or the defense or prosecution of any litigation.
with respect to the Merger (which actions shall include furnishing all information in connection with approvals of or filings with any governmental entity, including Tax filings) and shall promptly cooperate with and furnish information to other in connection with any such requirements imposed upon any of them in connection with the Merger. In addition, the Selling Stockholders agree to use their commercially reasonable efforts to take, or cause to be taken, any actions requested by eGain in connection with the Merger, including but not limited to using their commercially reasonable efforts to obtain the assistance of the former independent accountants of Sitebridge in connection with an audit of the financial statements of Sitebridge if requested by eGain. eGain shall reimburse the Selling Stockholders for any out of pocket expenses incurred by them for any such actions taken at eGain's request.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF EGAIN IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO EGAIN THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
(a) The Selling Stockholders will not offer, sell or otherwise dispose of any shares of eGain Series C Preferred Stock and eGain Common Stock except in compliance with the Securities Act and the rules and regulations thereunder and applicable state law.
(b) The Selling Stockholders will not sell, transfer or otherwise dispose of any shares of the eGain Series C Preferred Stock and eGain Common Stock unless in the opinion of
counsel, reasonably satisfactory to eGain and its counsel, an exemption from registration under the Securities Act is available with respect to any such proposed sale, transfer, or other disposition of the eGain Series C Preferred Stock and eGain Common Stock, or the offer and sale of the shares of eGain Series C Preferred Stock or eGain Common stock is registered under the Securities Act.
issuance of such an order or injunction, shall be pending which, in the good faith judgment of Sitebridge or eGain has a reasonable probability of resulting in such order, injunction or damages.
(a) Sitebridge and the Selling Stockholders, after the Closing, and subject to the limitations set forth in this Article 8, agree to defend and indemnify eGain and their respective affiliates, directors, officers and stockholders, and their respective successors and assigns (collectively, the "eGain Indemnitees"), against and hold each of them harmless from any and all losses, liabilities, taxes, claims, suits, proceedings, demands, judgments, damages, expenses and costs, including, without limitation, reasonable counsel fees, costs and expenses incurred in the investigation, defense or settlement of any claims covered by this indemnity (in this Section 8.1 collectively, the "Indemnifiable Damages") which any such indemnified person may suffer or incur by reason of (i) the inaccuracy, breach or nonfulfillment of any of the representations, warranties, covenants or obligations of Sitebridge or the Founders contained in this Agreement or any documents, certificate or agreement delivered pursuant hereto; or (ii) any claim by any person under any provision of any federal or state securities law relating to any transaction, event, act or omission of or by Sitebridge or the Selling Stockholders occurring before the Closing Date; provided, however, that the total indemnity hereunder shall be limited to the Escrow Fund (as defined in Section 8.2(a) below). Nothing herein shall limit in any way eGain's remedies in the event of breach by Sitebridge or the Founders of any of their covenants or agreements hereunder which are not also a representation or warranty or for willful fraud or
intentionally deceptive material misrepresentation or omission by Sitebridge or the Selling Stockholders in connection herewith or with the transactions contemplated hereby.
(b) The Sitebridge and the Selling Stockholders will have no liability for indemnification with respect to this Section 8.1 until the total of all Indemnifiable Damages with respect to such matters exceeds Fifty Thousand Dollars ($50,000). However, this Section 8.1(b) will not apply to (i) any breach of any of Sitebridge's or the Selling Stockholders' representations and warranties which either Sitebridge or the Founders had knowledge of or reason to know of at any time prior to the date on which such representations and warranties were made or (ii) any intentional breach by the Sitebridge or the Selling Stockholders of any representation or warranty. The Sitebridge and the Selling Stockholders will be jointly and severally liable for all Indemnifiable Damages with respect to such breaches
(c) eGain shall be entitled to recover payment from the Escrow Fund of sixty percent (60%) of any Indemnifiable Damages determined pursuant to Section 8.1(a) and otherwise recoverable pursuant to Section 8.1(b) ("Recoverable Indemnifiable Damages"). For example, should eGain suffer aggregate Indemnifiable Damages of Sixty-Five Thousand Dollars ($65,000), eGain's Recoverable Indemnifiable Damages would equal Thirty-Nine Thousand Dollars ($39,000). Should eGain suffer aggregate Indemnifiable Damages of Forty-Five Thousand Dollars ($45,000), eGain's Recoverable Indemnifiable Damages would equal zero (0). Notwithstanding the foregoing, if Indemnifiable Damages arise from fraud or intentionally deceptive material misrepresentation or omission by Sitebridge or the Selling Stockholders, Recoverable Indemnifiable Damages shall represent one hundred percent (100%) of such Indemnifiable Damages.
(a) As security for the indemnity provided for in Section 8.1 hereof, a total of fifteen percent (15%) of the Merger Consideration shall be deposited with US Bank, National Association (or other institution selected by eGain with the reasonable consent of the Selling Stockholders) as escrow agent (the "Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow Fund") to be governed by the terms set forth herein and in the Escrow Agreement to be signed by all parties thereto, the form of which is attached as Exhibit F. In the event of any conflict between the terms of this Agreement and the Escrow Agreement, the terms of the Escrow Agreement shall govern. eGain shall pay all costs and fees of the Escrow Agent for establishing and administering the Escrow Fund. Upon compliance with the terms hereof, eGain shall be entitled to obtain indemnity from the Escrow Fund for all Indemnifiable Damages covered by the indemnity provided for in Section 8.1 hereof.
(b) The shares of eGain Series C Preferred Stock and eGain Common Stock
deposited into the Escrow Fund pursuant to Section 8.2(a) shall be aggregated
for the purposes of the indemnification of the eGain Indemnitees provided for in
Section 8.1 hereof (each aggregate unit an "eGain Unit"). Each eGain Unit shall
consist of 5.25165 shares of eGain Series C Preferred Stock and 4.74834 shares
of eGain Common Stock. No fractional shares of eGain Series C Preferred Stock
or eGain Common Stock shall be distributed from the Escrow Fund pursuant to
this Article 8. All distributions made from the Escrow Fund shall be in whole shares of eGain Preferred Stock or eGain Common Stock rounded to the nearest whole share after an aggregation of each fraction of a share that a recipient would otherwise be entitled to receive.
(a) Any dividends payable in securities or other distributions of any kind (including any shares received upon a stock split, stock dividend or recapitalization) made in respect of any securities in the Escrow Fund shall be held in the Escrow Fund subject to the rights of eGain. Cash dividends, if any, shall be distributed to the Selling Stockholders.
(b) The Selling Stockholders, as representatives, shall have voting rights with respect to the shares of stock in the Escrow Fund so long as such stock or other voting securities are held in the Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last day of the Escrow Period of a certificate signed by any officer of eGain (an "Officer's Certificate") stating that eGain has paid or properly accrued Recoverable Indemnifiable Damages in an aggregate stated amount to which such party is entitled to indemnity pursuant to this Agreement, and specifying in reasonable detail the individual items of Recoverable Indemnifiable Damages included in the amount so stated, the date each such item was paid or properly accrued, and the nature of the misrepresentation, breach of warranty or claim to which such item is related, the Escrow Agent shall, subject to the provisions of Section 8.6 hereof, deliver to eGain out of the Escrow Fund, as promptly as practicable, the number of eGain Units or amount of other assets held in the Escrow Fund to indemnify eGain against such Recoverable Indemnifiable Damages.
(b) For the purpose of indemnity pursuant to this Agreement, each eGain Unit in the Escrow Fund shall be valued at an amount equal to Twelve Dollars ($12.00).
the expiration of such thirty (30) day period. The Spokesperson shall not be liable in any respect for any act done or omitted hereunder as Spokesperson while acting in good faith and in the exercise of reasonable judgment.
8.7 Resolution of Conflicts; Arbitration.
(a) If the Spokesperson shall object in writing to the indemnity of the eGain Indemnitees in respect of any claim or claims made in any Officer's Certificate, the Spokesperson and eGain shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims. If the Spokesperson and eGain should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and distribute the eGain Units or other property from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith negotiation within sixty (60) days after objection by either the Spokesperson or eGain, either eGain or the Spokesperson may demand arbitration of the matter and the matter shall be settled by arbitration conducted by three arbitrators. eGain and the Spokesperson shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators so selected as to the validity and amount of any claim in such Officer's Certificate or by Sitebridge and the Selling Stockholders shall be final and binding and conclusive upon the parties to this Agreement, and, notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Escrow Fund in accordance therewith, if applicable.
(c) Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. Any such arbitration shall be held in the City of San Jose, California under the rules then in effect of the American Arbitration Association. A claimant shall be deemed to be the non-prevailing party in the event that the arbitrators award such claimant less than one-half (1/2) of the amount claimed by it; otherwise, the other party shall be deemed to be the non- prevailing party. The non-prevailing party to an arbitration shall pay its own expenses, the fees of each arbitrator, the administrative fee of the American Arbitration Association, and the reasonable attorneys' fees and costs incurred by the other party to the arbitration as well as the amount of any Indemnifiable Damages awarded and in addition interest thereon from the date of actual loss or expenditure until the date paid at ten percent (10%) per annum, or at the maximum rate permitted by applicable law if less than ten percent (10%) per annum .
Remaining eGain Units shall be delivered to the Sitebridge Stockholders upon the termination of the Escrow Period as follows:
(i) the eGain Series C Preferred Stock shall be distributed pro rata to the Sitebridge Stockholders in proportion to which such Sitebridge Stockholders held shares, or options or warrants to purchase shares, of Sitebridge Preferred Stock immediately prior to the consummation of the transactions contemplated in this Agreement.
(ii) the eGain Common Stock shall be distributed to the Sitebridge Stockholders in proportion to which such Sitebridge Stockholders held shares, or options or warrants to purchase shares, of Sitebridge Common Stock immediately prior to the consummation of the transactions contemplated in this Agreement.
eGain shall reimburse the Selling Stockholders for any Indemnifiable Damages to which this Section 8.9 relates only if a claim for indemnification is made by the Selling Stockholders within one (1) year from the Closing Date. Any dispute as to indemnification shall be resolved by arbitration in accordance with Section 8.7 hereof.
or claim. During such period, the Indemnitee shall take all necessary steps to protect the interests of itself and the Indemnitor, including the filing of any necessary responsive pleadings, the seeking of emergency relief or other action necessary to maintain the status quo, subject to reimbursement from the Indemnitor of its expenses in doing so. The Indemnitor shall (with, if necessary, reservation of rights) defend such action or proceeding at its expense, using counsel selected by the insurance company insuring against any such claim and undertaking to defend such claim, or by other counsel selected by it and approved by the Indemnitee, which approval shall not be unreasonably withheld or delayed. The Indemnitor shall keep the Indemnitee fully apprised at all times of the status of the defense and shall consult with the Indemnitee prior to the settlement of any indemnified matter. Indemnitee agrees to use reasonable efforts to cooperate with Indemnitor in connection with its defense of indemnifiable claims. In the event the Indemnitee has a claim or claims against any third party growing out of or connected with the indemnified matter, then upon receipt of indemnification, the Indemnitee shall fully assign to the Indemnitor the entire claim or claims to the extent of the indemnification actually paid by the Indemnitor and the Indemnitor shall thereupon be subrogated with respect to such claim or claims of the Indemnitee.
ARTICLE 9
(a) by mutual written consent of Sitebridge, the Selling Stockholders and eGain;
(b) by either eGain, on the one hand, or Sitebridge and the Selling Stockholders, on the other hand, by delivery of written notice to such effect to each party to this Agreement, if there has been a material breach of any material representation, warranty, covenant or agreement contained in this Agreement on the part of the other party to this Agreement and, if such breach is curable, such breach has not been cured within ten (10) days after written notice of such breach;
(c) by either eGain, on the one hand, or Sitebridge and the Selling Stockholders, on the other hand, by delivery of written notice to such effect to each party to this Agreement, if the Closing shall not have occurred by May 31, 1999; provided that the failure to have effected the Closing is not due to a material breach on the part of the party requesting termination.
ARTICLE 10
eGain Communications Corporation
624 East Evelyn Avenue
Sunnyvale, CA 94086
Attention: Ashutosh Roy
Fax: (408) 737-7800
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Attention: Stanley F. Pierson
Fax: (650) 233-4545
And Sitebridge Corporation
164 West 25th Street
12th Floor
New York, NY 10001
Attention: Wendell Lansford
Fax: (212) 645-1191
with a copy to: Brobeck, Phlegher & Harrison LLP
1633 Broadway
47th Floor
New York, NY 10019
Attention: Eric Simonson
Fax: (212) 586-7878
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or to such other persons as may be designated in writing by the parties, by a notice given as aforesaid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, all as of the date first above written.
EGAIN COMMUNICATIONS CORPORATION,
a Delaware corporation
By /s/ Ashutosh Roy -------------------------------- Title Chief Executive Officer -------------------------------- |
SITEBRIDGE CORPORATION,
a Delaware corporation
By /s/ Wendell Lansford
-------------------------------------
Title President and CEO
-----------------------------
|
ECC ACQUISITION CORPORATION,
a Delaware corporation
By /s/ Ashutosh Roy
---------------------------------
Title Chief Executive Officer
------------------------------
|
SELLING STOCKHOLDERS
/s/ Wendell Lansford
------------------------------------
Wendell Landsford
/s/ Prakash Mishra
------------------------------------
Prakash Mishra
|
CHELSEA MC. LCC
By /s/ James N. Gellert
----------------------------------
Title Managing Member
--------------------------------
|
BENEFIT PLANS
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
eGAIN COMMUNICATIONS CORPORATION
eGAIN COMMUNICATIONS CORPORATION, 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 September 10, 1997.
SECOND: A Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on December 24, 1998 and February 8, 1999.
THIRD: The Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of sections 245 and 242 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation.
FOURTH: The Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated herein by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the Chief Executive Officer and the Secretary this 8th day of May, 1999.
eGAIN COMMUNICATIONS CORPORATION
By /s/ Ashutosh Roy
------------------------------------
Ashutosh Roy
Chief Executive Officer
ATTEST:
By /s/ Stanley F. Pierson
------------------------
Stanley F. Pierson
Secretary
|
RESTATED CERTIFICATE OF INCORPORATION
OF
eGAIN COMMUNICATIONS CORPORATION
FIRST: The name of the corporation (hereinafter called the "Corporation")
is eGAIN COMMUNICATIONS CORPORATION.
SECOND: The address of the registered office of the Corporation 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.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH:
A. This Corporation is authorized to issue two classes of shares to be designated respectively Preferred Stock ("Preferred Stock") and Common Stock ("Common Stock"). The total number of shares of capital stock that the Corporation is authorized to issue is thirty-five million thirty-five thousand eight hundred eighty-seven (35,035,887). The total number of shares of Preferred Stock this Corporation shall have authority to issue is ten million thirty-five thousand eight hundred eighty-seven (10,035,887). The total number of shares of Common Stock this Corporation shall have authority to issue is twenty-five million (25,000,000). The Preferred Stock shall have a par value of $.001 per share and the Common Stock shall have a par value of $.001 per share.
B. The Preferred Stock shall be divided into series. The first series shall consist of 5,707,043 shares and is designated "Series A Preferred Stock." The second series shall consist of 2,600,000 shares and is designated "Series B Preferred Stock." The third series shall consist of 1,728,844 shares and is designated "Series C Preferred Stock."
C. The powers, preferences, rights, restrictions, and other matters relating to the Preferred Stock are as follows:
(a) The holders of the Series A Preferred Stock shall be entitled to receive dividends at the rate of $0.06444 per share of Series A Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum (the "Series A Dividend") payable out of funds legally available therefor. The holders of the Series B Preferred Stock shall be entitled to receive dividends at the rate of $0.16 per share of Series B Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum (the "Series B Dividend") payable out of funds legally available therefore. The holders of the Series C Preferred Stock shall be entitled to receive dividends at the rate of $0.08 per share of
Series C Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) per annum (the "Series C Dividend") payable out of funds legally available therefore. Dividends on Preferred Stock shall be payable only when, as, and if declared by the Board of Directors and shall be noncumulative and shall be paid pari passu with respect to each series of Preferred Stock.
(b) No dividends (other than those payable solely in the Common Stock of the Corporation) shall be paid on any Common Stock of the Corporation during any fiscal year of the Corporation until dividends in the total amount of the Series A Dividend per share on the Series A Preferred Stock, the Series B Dividend per share on the Series B Preferred Stock and the Series C Dividend per share on the Series C Preferred Stock shall have been paid or declared and set apart during that fiscal year, and no dividends shall be paid on any share of Common Stock unless a dividend (including the amount of any dividends paid pursuant to the above provisions of this Section C.1) is paid with respect to all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock in an amount for each such share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock equal to or greater than the aggregate amount of such dividends for all shares of Common Stock into which each such share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock could then be converted.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (i) the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock by reason of their ownership thereof, the amount of $0.8055 per share, adjusted for any stock dividends, combinations or splits with respect to such shares (the "Original Series A Issue Price"), plus all declared but unpaid dividends on each such share then held by them and (ii) the holders of the Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock by reason of their ownership thereof, the amount of $2.00 per share, adjusted for any stock dividends, combinations or splits with respect to such shares (the "Original Series B Issue Price"), plus all declared but unpaid dividends on each such share then held by them. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.
(b) After payment to the holders of the Series A Preferred Stock and Series B Preferred Stock of the amounts set forth in Section C.2(a) above, the holders of the Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of the Common Stock and any further distribution of any of the assets or surplus funds of the Corporation to the holders of the Series A Preferred Stock or Series B Preferred Stock, by reason of their ownership thereof, the amount of $1.00 per share, adjusted for any stock dividends, combinations or splits with respect
to such shares (the "Original Series C Issue Price"), plus all declared but unpaid dividends on each such share then held by them.
(c) After payment to the holders of the Preferred Stock of the amounts set forth in Sections C.2(a) and C.2(b) above, the entire remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed ratably among the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and the Common Stock in proportion to the shares of Common Stock then held by each (assuming conversion of all such Series A Preferred Stock and Series B Preferred Stock) until (i) the holders of the Series A Preferred Stock shall have received an aggregate amount of $2.81925 per share, adjusted for any stock dividends, combinations or splits with respect to such shares (including amounts paid pursuant to Section 2(a) above), (ii) the holders of the Series B Preferred Stock shall have received an aggregate amount of $6.00 per share, adjusted for any stock dividends, combinations or splits with respect to such shares (including amounts paid pursuant to Section 2(a) above) and (iii) the holders of the Series C Preferred Stock shall have received an aggregate amount of $2.00 per share, adjusted for any stock dividends, combinations or splits with respect to such shares (including amounts paid pursuant to Section 2(a) above); thereafter, if assets remain in the Corporation, the holders of the Common Stock of the Corporation shall receive all of the remaining assets of the Corporation based on the number of shares of Common Stock held.
(d) For purposes of this Section C.2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a merger effected primarily for the purpose of
changing the domicile of the corporation) that results in the transfer of fifty
percent (50%) or more of the outstanding voting power of the Corporation; or
(ii) a sale of all or substantially all of the assets of the Corporation, shall
be treated as a liquidation, dissolution or winding up of the Corporation and
shall entitle the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Common Stock to receive at the closing in cash,
securities or other property (valued as provided in Section C.2(e) below)
amounts as specified in Sections C.2(a), C.2(b) and C.2(c) above.
(e) In any of the events specified in (d) above, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other similar restrictions on free marketability:
(A) If traded on a securities exchange or the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter but not on the Nasdaq National Market, the value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the thirty
(30) day period ending three (3) days prior to the closing; and
(C) If there is no active public market, the value shall be the fair market value thereof, as mutually determined in good faith by the Board of Directors of the Corporation and the holders of at least a majority of all then outstanding shares of Preferred Stock.
(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined in good faith by the Board of Directors of the Corporation and the holders of at least a majority of all then outstanding shares of Preferred Stock.
(g) In the event the requirements of Section 2(d), (e) and (f) are not complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 2(f) hereof.
any stockholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock held.
Preferred Stock and the Original Series C Issue Price for the Series C Preferred Stock by the Conversion Price applicable to such series of Preferred Stock, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share of the Series A Preferred Stock (the "Series A Conversion Price") shall be the Original Series A Issue Price, the initial Conversion Price per share of Series B Preferred Stock (the "Series B Conversion Price") shall be the Original Series B Issue Price and the initial Conversion Price per share of Series C Preferred Stock (the "Series C Conversion Price") shall be the Original Series C Issue Price; provided, however, that the Conversion Price for each series of Preferred Stock shall be subject to adjustment as hereinafter provided.
(i) Before any holder of Preferred Stock shall be entitled voluntarily to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such stock, and shall give written notice to the Corporation at such office of election to convert the same and shall state therein the number of shares to be converted and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, 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. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Preferred Stock to be converted, 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.
(ii) If the conversion is in connection with an underwritten offering of securities pursuant to the Securities Act, the conversion may, at the option of any holder tendering shares of Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities.
(A) "Options" shall mean rights, options, or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities (defined below).
(B) "Original Issue Date" shall mean the date on which a share of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, was first issued.
(C) "Convertible Securities" shall mean any evidences of indebtedness, shares (other than Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock) or other securities convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section C.4(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable:
(1) upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock;
(2) To employees, directors, consultants or advisors under stock option, stock bonus or stock purchase plans or agreements or similar plans or agreements approved by the Board of Directors or an authorized committee thereof;
(3) as a dividend or distribution on Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock; or
(4) for which adjustment of the Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price is made pursuant to
Section C.4(e).
Stock, as the case may be, in effect on the date of, and immediately prior to, such issue. No adjustment to the Series A Conversion Price or Series B Conversion Price shall occur by reason of the Corporation's issuance of Series C Preferred Stock or Common Stock pursuant to transactions contemplated by that certain Agreement and Plan of Reorganization by and among the Corporation, Sitebridge Corporation, ECC Acquisition Corporation, Wendell Lansford, Prakash Mishra and Chelsea Capital Partners LLC.
(A) no further adjustments in the Conversion Price of a series of Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or decrease or increase in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price of each of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities (provided, however, that no such adjustment of the Conversion Price of a series of Preferred Stock shall affect Common Stock previously issued upon conversion of such Preferred Stock);
(C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or Options for Common Stock the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange and
(2) in the case of Options for Convertible Securities only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section C.4(d)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Conversion Price for a series of Preferred Stock to an amount which exceeds the lower of (a) the Conversion Price for such series of Preferred Stock on the original adjustment date, or (b) the Conversion Price for such series of Preferred Stock that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date.
(E) in the case of any Options which expire by their terms not more than thirty (30) days after the date of issue thereof, no adjustment of the Conversion Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the same manner provided in clause (C) above.
shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued. For the purpose of the above calculation, the number of shares of Common Stock outstanding immediately prior to such issue shall be calculated on a fully diluted basis, as if all shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and all Convertible Securities had been fully converted into shares of Common Stock immediately prior to such issuance and any outstanding warrants, options or other rights for the purchase of shares of stock or convertible securities had been fully exercised immediately prior to such issuance (and the resulting securities fully converted into shares of Common Stock, if so convertible) as of such date, but not including in such calculation any additional shares of Common Stock issuable with respect to shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Convertible Securities, or outstanding options, warrants or other rights for the purchase of shares of stock or convertible securities, solely as a result of the adjustment of the Conversion Price for such series (or other conversion ratios) resulting from the issuance of Additional Shares of Common Stock causing such adjustment.
(1) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends;
(2) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as mutually determined in good faith by the Board and the holders of at least a majority of all then outstanding shares of Preferred Stock; and
(3) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses
(1) and (2) above, as mutually determined in good faith by the Board
and the holders of at least a majority of all then outstanding
shares of Preferred Stock.
(1) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against dilution) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by
(2) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein designed to protect against the dilution) issuable upon the exercise of such Options or conversion or exchange of such Convertible Securities.
tion, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section C.4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Preferred Stock against impairment.
(A) 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, if any, in respect of the matters referred to in (iii) and (iv) above; and
(B) in the case of the matters referred to in (iii) and (iv) 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).
(a) So long as at least 1,000,000 shares of Preferred Stock remain outstanding, the Corporation shall not, without first obtaining the approval by vote or written consent, in the manner provided by law, of the holders of at least sixty-six and two-thirds percent (662/3%) of the shares of Preferred Stock outstanding, voting as a class:
(i) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment;
(ii) sell, convey or otherwise dispose of all or substantially all of the Corporation's property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any
similar transaction or series of related transactions that results in the transfer or disposition of more than fifty percent (50%) of the outstanding voting power of the Corporation;
(iii) pay any dividend on the Common Stock;
(iv) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security, having a preference over, or on a parity with, the Preferred Stock with respect to dividends, liquidation, conversion, redemption or voting; or
(v) dissolve, liquidate or wind up the Corporation.
(b) So long as any shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock remain outstanding, the Corporation shall not, without first obtaining the approval by vote or written consent, in the manner provided by law, of at least a majority of the holders of the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock outstanding, as applicable, voting separately as a class:
(i) amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or Bylaws, if such action would alter or change materially and adversely the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, such series of Preferred Stock; or
(ii) increase or decrease the authorized number of shares of such series of Preferred Stock.
FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors shall have the power, subject to the provisions of Section C.5 of Article FOURTH both before and after receipt of any payment for any of the Corporation's capital stock, to adopt, amend, repeal or otherwise alter the Bylaws of the Corporation without any action on the part of the stockholders; provided, however, that the grant of such power to the Board of Directors shall not divest the stockholders of nor limit their power, subject to the provisions of Section C.5 of Article FOURTH, to adopt, amend, repeal or otherwise alter the Bylaws.
SIXTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
SEVENTH: Subject to the provisions of Section C.5 of Article FOURTH, the Corporation reserves the right to adopt, repeal, rescind or amend in any respect any provisions contained in this Restated Certificate of Incorporation in the manner now or hereafter prescribed by applicable law, and all rights conferred on stockholders herein are granted subject to this reservation; provided, however, that the grant of such power to the Board of Directors shall not divest the stockholders of nor limit their power.
EIGHTH: A director of the Corporation shall, to the full extent permitted by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Neither any amendment nor repeal of this Article EIGHTH nor the adoption of any provision of this Restated Certificate of Incorporation inconsistent with this Article EIGHTH, shall eliminate or reduce the effect of this Article EIGHTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article EIGHTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
eGAIN COMMUNICATIONS CORPORATION
eGAIN COMMUNICATIONS CORPORATION, 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 September 10, 1997 under the name of Parsec Communications Corporation.
SECOND: A Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on December 24, 1998, February 8, 1999 and May 8, 1999.
THIRD: The Amended and Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of sections 245 and 242 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by the Chief Executive Officer and the Secretary this ___ day of ______, 1999.
eGAIN COMMUNICATIONS CORPORATION
By________________________________
Ashutosh Roy
Chief Executive Officer
ATTEST:
By________________________
Stanley F. Pierson
Secretary
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
eGAIN COMMUNICATIONS CORPORATION
ARTICLE I
The name of this corporation is eGAIN COMMUNICATIONS CORPORATION (the "Corporation").
ARTICLE II
The registered agent and the address of the registered office in the State of Delaware are:
CorpAmerica, Inc. 30 Old Rudnick Lane Dover, Delaware 19901 County of Kent
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law.
ARTICLE IV
A. The Corporation is authorized to issue two classes of stock to be designated respectively Preferred Stock ("Preferred Stock") and Common Stock ("Common Stock"). The total number of shares of capital stock this Corporation is authorized to issue _____________ million (___________). The total number of shares of Preferred Stock this Corporation shall have authority to issue is five million (5,000,000). The total number of shares of Common Stock this Corporation shall have authority to issue is __________ million (__________). The Preferred Stock shall have a par value of $.001 per share and the Common Stock shall have a par value of $.001 per share.
B. The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the remaining shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such shares (a "Preferred Stock Designation") and as may be permitted by the General Corporation Law of the State of Delaware. The Board of Directors is also expressly authorized to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
ARTICLE V
A. No action shall be taken by the stockholders of the Corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws and following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering the offer and sale of Common Stock to the public (the "Initial Public Offering") no action shall be taken by the stockholders by written consent.
B. Special meetings of the stockholders of the Corporation may only be called in the manner provided in the Bylaws of the Corporation.
C. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
ARTICLE VI
To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as director, except (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If
the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. 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 suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee 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 indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation.
ARTICLE VII
A. Subject to the provisions of Article VI, Section (g), the Corporation reserves the right to adopt, repeal, rescind or amend in any respect any provisions contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by applicable law, and all rights conferred on stockholders herein are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or not vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least a majority of the voting power of all of the then- outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI or VII.
Exhibit 3.3
BYLAWS
OF
eGAIN COMMUNICATIONS CORPORATION
(a Delaware corporation)
Page
----
ARTICLE 1 Offices............................................................. 1
1.1 Principal Office.................................................... 1
1.2 Additional Offices.................................................. 1
ARTICLE 2 Meeting of Stockholders............................................. 1
2.1 Place of Meeting.................................................... 1
2.2 Annual Meeting...................................................... 1
2.3 Special Meetings.................................................... 1
2.4 Notice of Meetings.................................................. 2
2.5 Business Matter of a Special Meeting................................ 2
2.6 List of Stockholders................................................ 2
2.7 Organization and Conduct of Business................................ 2
2.8 Quorum and Adjournments............................................. 3
2.9 Voting Rights....................................................... 3
2.10 Majority Vote....................................................... 3
2.11 Record Date for Stockholder Notice and Voting....................... 3
2.12 Proxies............................................................. 4
2.13 Inspectors of Election.............................................. 4
2.14 Action Without Meeting by Written Consent........................... 4
ARTICLE 3 Directors........................................................... 5
3.1 Number; Qualifications.............................................. 5
3.2 Resignation and Vacancies........................................... 5
3.3 Removal of Directors................................................ 5
3.4 Powers.............................................................. 5
3.5 Place of Meetings................................................... 7
3.6 Annual Meetings..................................................... 7
3.7 Regular Meetings.................................................... 7
3.8 Special Meetings.................................................... 7
3.9 Quorum and Adjournments............................................. 7
3.10 Action Without Meeting.............................................. 7
3.11 Telephone Meetings.................................................. 7
3.12 Waiver of Notice.................................................... 7
3.13 Fees and Compensation of Directors.................................. 8
3.14 Rights of Inspection................................................ 8
ARTICLE 4 Committees of Directors............................................. 8
4.1 Selection........................................................... 8
4.2 Power............................................................... 8
4.3 Committee Minutes................................................... 9
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ARTICLE 5 Officers............................................................ 9
5.1 Officers Designated................................................. 9
5.2 Appointment of Officers............................................. 9
5.3 Subordinate Officers................................................ 9
5.4 Removal and Resignation of Officers................................. 9
5.5 Vacancies in Offices................................................ 10
5.6 Compensation........................................................ 10
5.7 The Chairman of the Board........................................... 10
5.8 The President....................................................... 10
5.9 The Vice President.................................................. 10
5.10 The Secretary....................................................... 11
5.11 The Assistant Secretary............................................. 11
5.12 The Treasurer....................................................... 11
5.13 The Assistant Treasurer............................................. 11
ARTICLE 6 Indemnification of Directors, Officers, Employees and Other Agents.. 12
6.1 Indemnification of Directors And Officers........................... 12
6.2 Indemnification of Others........................................... 12
6.3 Payment Of Expenses In Advance...................................... 12
6.4 Indemnity Not Exclusive............................................. 13
6.5 Insurance........................................................... 13
6.6 Conflicts........................................................... 13
ARTICLE 7 Stock Certificates.................................................. 13
7.1 Certificates for Shares............................................. 13
7.2 Signatures on Certificates.......................................... 14
7.3 Transfer of Stock................................................... 14
7.4 Registered Stockholders............................................. 14
7.5 Record Date......................................................... 14
7.6 Lost, Stolen or Destroyed Certificates.............................. 15
ARTICLE 8. Notices............................................................. 15
8.1 Notice.............................................................. 15
8.2 Waiver.............................................................. 15
ARTICLE 9 General Provisions.................................................. 15
9.1 Dividends........................................................... 15
9.2 Dividend Reserve.................................................... 16
9.3 Annual Statement.................................................... 16
9.4 Checks.............................................................. 16
9.5 Corporate Seal...................................................... 16
9.6 Execution of Corporate Contracts and Instruments.................... 16
ARTICLE 10 Amendments.......................................................... 16
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(a Delaware corporation)
special meeting of stockholders, the person forthwith shall cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, such time not to be less than thirty-five (35) nor more than sixty (60) days after receipt of the request. Such request shall state the purpose or purposes of the proposed meeting.
When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
The Chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her in order.
If the Board does not so fix a record date, 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 business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.
it, before the vote pursuant to that proxy, by a writing delivered to the Corporation stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven months from the date of the proxy, unless otherwise provided in the proxy.
or vacancies not filled by the directors. If the Board accepts the resignation of a director tendered to take effect at a future time, the Board shall have power to elect a successor to take office when the resignation is to become effective. If there are no directors in office, then an election of directors may be held in the manner provided by statute.
Without prejudice to these general powers, and subject to the same limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of the Corporation; prescribe any powers and duties for them that are consistent with law, with the Certificate of Incorporation, and with these Bylaws; fix their compensation; and require from them security for faithful service;
(b) Confer upon any office the power to appoint, remove and suspend subordinate officers, employees and agents;
(c) Change the principal executive office or the principal business office in the State of California or any other state from one location to another; cause the Corporation to be qualified to do business in any other state, territory, dependency or country and conduct business within or without the State of California; and designate any place within or without the State of California for the holding of any stockholders meeting, or meetings, including annual meetings;
(d) Adopt, make, and use a corporate seal; prescribe the forms of certificates of stock; and alter the form of the seal and certificates;
(e) Authorize the issuance of shares of stock of the Corporation on any lawful terms, in consideration of money paid, labor done, services actually rendered, debts or securities canceled, tangible or intangible property actually received;
(f) Borrow money and incur indebtedness on behalf of the Corporation, and cause to be executed and delivered for the Corporation's purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecation and other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with law;
(h) Adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and
(i) Adopt from time to time regulations not inconsistent with these Bylaws for the management of the Corporation's business and affairs.
similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending the Bylaws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board.
Any officer may resign at any time by giving written notice to the Corporation. Any
resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.
ARTICLE 6
corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
(a) That it would be inconsistent with a provision of the certificate of incorporation, these Bylaws. a resolution of the stockholders or an agreement in effect at the time of the
accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
Within a reasonable time after the issuance or transfer of uncertified stock, the Corporation shall send to the registered owner thereof a written notice containing the information required by the General Corporation Law of the State of Delaware or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
or the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
In addition to the right of the stockholders of the corporation to make, alter, amend, change, add to or repeal the bylaws of the corporation, the Board of Directors shall have the power (without the assent or vote of the stockholders) to make, alter, amend, change, add to or repeal the bylaws of the corporation.
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of eGain Communications Corporation, a Delaware corporation; and
2. That the foregoing Bylaws, comprising 15 pages, constitute the Bylaws of such corporation as duly adopted by action of the directors of such corporation pursuant to written consent dated September 25, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 25th day of September, 1997.
/s/ Stanley Pierson ------------------------------- Stanley F. Pierson Secretary |
EXHIBIT 3.4
Amended and Restated
B Y L A W S
OF
eGAIN COMMUNICATIONS CORPORATION
(a Delaware corporation)
Adopted July __, 1999
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................................................... 3
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................... 4
Section 5. Powers................................................... 5
Section 6. Resignation of Directors................................. 5
Section 7. Compensation of Directors................................ 5
ARTICLE IV Meeting of the Board of Directors................................. 5
Section 1. Place.................................................... 5
Section 2. Regular Meetings......................................... 5
Section 3. Special Meetings......................................... 5
Section 4. Quorum................................................... 6
Section 5. Adjourned Meetings....................................... 6
Section 6. Written Consent.......................................... 6
Section 7. Communications Equipment................................. 6
Section 8. Waiver of Notice......................................... 6
ARTICLE V Committees of the Board............................................ 6
Section 1. Designation, Power, Alternate Members and Term of Office. 6
Section 2. Meetings, Notices and Records............................ 7
Section 3. Quorum and Manner of Acting.............................. 7
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Page
----
Section 4. Resignations............................................. 7
Section 5. Removal.................................................. 8
Section 6. Vacancies................................................ 8
Section 7. Compensation............................................. 8
ARTICLE VI Officers.......................................................... 8
Section 1. Officers................................................. 8
Section 2. Duties................................................... 8
Section 3. Resignations............................................. 8
Section 4. Removal.................................................. 8
Section 5. Vacancies................................................ 8
Section 6. Chairman of the Board.................................... 9
Section 7. Chief Executive Officer.................................. 9
Section 8. President................................................ 9
Section 9. Vice President........................................... 9
Section 10. Secretary................................................ 9
Section 11. Assistant Secretaries.................................... 10
Section 12. Chief Financial Officer and Treasurer.................... 10
Section 13. Assistant Treasurers..................................... 10
Section 14. 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...................................... 11
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...................................... 12
Section 1. Borrowing................................................ 12
Section 2. Deposits................................................. 12
Section 3. Checks, Drafts, Etc...................................... 13
ARTICLE IX Record Dates...................................................... 13
ARTICLE X Dividends.......................................................... 13
ARTICLE XI Fiscal Year....................................................... 13
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Page
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ARTICLE XII Indemnification.................................................. 14
Section 1. Right to Indemnification................................. 14
Section 2. Right of Claimant to Bring Suit.......................... 14
Section 3. Non-Exclusivity of Rights................................ 15
Section 4. Insurance................................................ 15
Section 5. Severability............................................. 15
Section 6. Intent of Article........................................ 15
ARTICLE XIII Corporate Seal.................................................. 15
ARTICLE XIV Amendments....................................................... 16
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B Y L A W S
OF
eGAIN COMMUNICATIONS CORPORATION
(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 2.1 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.
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.
which he or she has been elected expires and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal.
meeting, or shall be sent to him or her at such place by telegram, radiogram or cablegram, or other electronic means, or delivered to him or her personally, not later than four (4) hours before the time the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these Bylaws.
alternate members of any committee who, in the order specified by the Board of Directors, may replace any absent or disqualified member at any meeting of the committee. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these Bylaws; provided, however, that any committee member who ceases to be a member of the Board of Directors shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation.
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.
of the Corporation under its seal shall have been duly authorized; (v) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (vi) have charge of the stock record and stock transfer books of the Corporation, and exhibit such stock books at all reasonable times to such persons as are entitled by statute to have access thereto; (vii) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing capital 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 Secretary 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, the Chairman of the Board, Chief Executive Officer or the President.
the Chief Financial Officer and Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the Chief Financial Officer and Treasurer.
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.
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 the claimant 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 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 least a majority 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 Bylaws of the corporation, 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 Certificate of Incorporation of the Corporation, the affirmative vote of the holders of at least a majority 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.
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of eGAIN COMMUNICATIONS CORPORATION, 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 __________, 1999.
Dated: __________, 1999.
Exhibit 4.2
eGAIN COMMUNICATIONS CORPORATION
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
Page
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Section 1 Registration Rights.......................................... 1
1.1 Certain Definitions................................... 1
1.2 Requested Registration................................ 3
1.3 Company Registration.................................. 6
1.4 Expenses of Registration.............................. 7
1.5 Registration on Form S-3.............................. 7
1.6 Registration Procedures............................... 8
1.7 Indemnification....................................... 9
1.8 Information by Holder................................. 11
1.9 Limitations on Registration of Issues of Securities... 11
1.10 Rule 144 Reporting.................................... 11
1.11 Transfer or Assignment of Registration Rights......... 12
1.12 "Market Stand-Off" Agreement.......................... 12
1.13 Delay of Registration................................. 13
1.14 Termination of Registration Rights.................... 13
Section 2 Covenants of the Company..................................... 13
2.1 Financial Information................................. 13
2.2 Inspection............................................ 14
2.3 Right of First Offer.................................. 14
2.4 Chief Executive Officer............................... 16
2.5 Termination of Covenants.............................. 16
2.6 Stock Plan............................................ 16
2.7 Protective Provisions................................. 17
Section 3 Miscellaneous................................................ 17
3.1 Governing Law......................................... 17
3.2 Successors and Assigns................................ 17
3.3 Entire Agreement; Amendment; Waiver................... 17
3.4 Notices, etc.......................................... 17
3.5 Delays or Omissions................................... 18
3.6 Rights; Separability.................................. 18
3.7 Waiver of Right of First Offer........................ 18
3.8 Information Confidential.............................. 18
3.9 Titles and Subtitles.................................. 18
3.10 Counterparts.......................................... 18
3.11 Amendment of Investors' Rights Agreement.............. 18
3.12 Aggregation of Stock.................................. 19
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*Exhibit A - List of Investors
eGAIN COMMUNICATIONS CORPORATION
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
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and GUNJAN SINHA (the "Founders").
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RECITALS:
A. The Company has granted the holders of its Series A Preferred Stock and warrants to purchase Series A Preferred Stock (the "Series A Holders"), Series B Preferred Stock (the "Series B Holders") and Founders registration rights and certain other rights under that certain Amended and Restated Investors' Rights Agreement dated February 18, 1999 (the "Investors' Rights Agreement").
B. The Company proposes to issue shares of its Series C Preferred Stock to certain of the Investors (the "Series C Investors") pursuant to the terms of that certain Agreement and Plan of Reorganization dated as of the date hereof, by and among the Company, ECC Acquisition Corporation, Sitebridge Corporation, Wendell Lansford, Prakash Mishra and Chelsea M.C. LLC (the "Reorganization Agreement").
C. The execution and delivery of this Agreement is a condition precedent to the closing of the transactions contemplated by the Reorganization Agreement and the issuance of Series C Preferred Stock pursuant thereto.
D. The Company, the Founders, the Series A Holders and the Series B Holders intend that this Agreement replace and supercede the Investors' Rights Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows:
(a) "Closing" shall mean the date of the issuance of shares of the Company's Series C Preferred Stock pursuant to the Reorganization Agreement.
(b) "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(d) "Holder" shall mean any person or entity who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 1.11 hereof.
(e) "Initiating Holders" shall mean any Holder or Holders who in the aggregate hold at least fifty percent (50%) of the outstanding Registrable Securities.
(f) "Major Investor" shall mean a person or entity which, together with its affiliates holds at least 120,000 shares (subject to appropriate adjustments for stock splits, stock dividends, combinations and other recapitalizations) of Series A Preferred Stock and/or Series B Preferred Stock (including shares issuable upon conversion thereof). A Major Investor includes any general partners and affiliates of a Major Investor (including in the case of a venture capital fund, partners and funds affiliated with such fund).
(g) "Registrable Securities" shall mean (i) shares of Common Stock issued
to Investors or issued or issuable pursuant to the conversion of the Shares;
(ii) any Common Stock issued as a dividend or other distribution with respect to
or in exchange for or in replacement of the shares referenced in (i) above,
provided, however, that Registrable Securities shall not include any shares of
Common Stock which have previously been registered or which have been sold to
the public; and (iii) shares of Common Stock of the Company held by the Founders
("Founders Stock"); provided, however, that such Founders Stock shall not be
deemed "Registrable Securities" for purposes of Section 1.2 hereof.
(h) The terms "register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.
(i) "Registration Expenses" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, fees and disbursements of one special counsel for the selling Holders, blue sky fees and expenses, accounting fees and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses and fees and disbursements of additional counsel for the Holders. Registration expenses do not include the compensation of regular employees of the Company, which shall be paid in any event by the Company.
(j) "Rule 144" shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(k) "Rule 145" shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(l) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(m) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).
(n) "Shares" shall mean the Company's Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.
(i) promptly give written notice of the proposed registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such registration (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered.
The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities Act;
(B) After the Company has initiated two such registrations pursuant to this Section 1.2(a) (counting for these purposes only registrations which have been declared or ordered effective and pursuant to which securities have been sold and registrations which have been withdrawn by the Holders as to which the Holders have not elected to bear the Registration Expenses pursuant to Section 1.4 hereof and would, absent such election, have been required to bear such expenses); provided, however, that if at the time of such withdrawal, the Investors have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Investors at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Investors shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2.
(C) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company- initiated registration; provided that (i) the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective and (ii) that such initial delay of registration relating to a request of Initiating Holders pursuant to Section 1.2 shall be deemed the one time delay allowed per demand registration as set forth in Section 1.2(b);
(D) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.5 hereof;
(b) Subject to the foregoing clauses (A) through (D) (except in the case of a request that is subject to Section 1.5(b), in which case (B) and (D) above shall not apply), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders; provided, however, that if (i) in the good faith judgment of the Board of Directors of the Company, such registration would be seriously detrimental to the Company and the Board of Directors of the Company concludes, as a result, that it is essential to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to such Holders 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 for such registration statement to be filed in the near future and that it is, therefore, essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for the period during which such disclosure would be seriously detrimental, provided that (except as provided in clause (C) above) the Company may not defer the filing for a period of more than one hundred eighty (180) days after receipt of the request of the Initiating Holders, and, provided further, that the Company shall not defer its obligation in this manner more than once in any twelve (12) month period.
The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Section 1.2(d) hereof, include other securities of the Company, with respect to which registration rights have been granted, and may include securities of the Company being sold for the account of the Company.
If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders. The securities so excluded shall also be withdrawn from registration. Any Registrable Securities or other securities excluded shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 1.2(d), then the Company shall offer to all holders who have retained rights to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights (other than pursuant to
Section 1.2 or 1.5 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 1.3(b) below, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by any Holder and received by the Company within twenty (20) days after the written notice from the Company described in clause (i) above is mailed or delivered by the Company. Such written request may specify all or a part of a Holder's Registrable Securities.
Notwithstanding any other provision of this Section 1.3, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting, provided that the number of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities proposed to be registered by shareholders of the Company are first entirely excluded from the underwriting. If the registration is the first Company-initiated registered offering of the Company's securities to the general public, the Company may limit, to the extent so advised by the underwriters, the amount of securities (including Registrable Securities) to be included in the registration by the Company's shareholders (including the Holders), and such securities shall be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling stockholder, or the Company may exclude, to the extent so advised by the underwriters, such underwritten securities entirely from such registration; provided, however, that the number of Registrable Securities to be included in such registration shall not be reduced unless all other securities proposed to be registered are first
excluded from the underwriting. If such registration is the second or any subsequent Company-initiated registered offering of the Company's securities to the general public, the Company may limit, to the extent so advised by the underwriters, the amount of securities to be included in the registration by the Company's shareholders (including the Holders); provided, however, that the aggregate value of Registrable Securities to be included in such registration may not be so reduced to less than twenty-five percent (25%) of the total value of all securities included in such registration, to be apportioned pro rata among the holders of Registrable Securities according to the total amount of securities entitled to be included therein owned by each holder of Registrable Securities; provided, however, that the number of Registrable Securities to be included in such registration shall not be reduced unless all other securities proposed to be registered are first excluded from the underwriting. If any person does not agree to the terms of any such underwriting, he shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn.
(a) After its initial public offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 1,
the holders of at least thirty percent (30%) of Registrable Securities shall
have the right to request registrations on Form S-3 (such requests shall be in
writing and shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders), provided, however, that the Company shall not be obligated
to effect any such registration if (i) the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) on
Form S-3 at an aggregate price to the public of less than $1,000,000, or (ii) in
the event the Company shall furnish the certification described in paragraph
1.2(b)(ii) (but subject to the limitations set forth therein), or (iii) the
Company has, within the six (6) month period preceding the date of such
request already effected one registration on Form S-3 for the Holders pursuant to this Section 1.5.
(b) If a request complying with the requirements of Section 1.5(a) hereof
is delivered to the Company, the provisions of Sections 1.2(a)(i) and (ii) and
Section 1.2(b) hereof shall apply to such registration. If the registration is
for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d)
hereof shall apply to such registration. Notwithstanding the foregoing
provisions of this Section 1.5, Registrable Securities held by the Founders
shall not be counted for purposes of requesting a registration on Form S-3;
however, if such a registration is requested all Registrable Securities,
including those held by Founders, are entitled to inclusion in such registration
and provided further that any limitation or cutback in the number of shares
proposed to be registered shall be applied to shares of Registrable Securities
held by Founders prior to any limitation or cutback on shares of Registrable
Securities held by other Holders.
(a) Keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such one hundred twenty (120) day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such one hundred twenty
(120) day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Securities Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment that (A) includes
any prospectus required by section 10(a)(3) of the Securities Act or (B)
reflects facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (A) and (B) above to be
contained in periodic reports filed pursuant to section 13 or 15(d) of the
Exchange Act in the registration statement;
(b) Prepare and file with the Commission 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 such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller 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 or incomplete in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and
(g) In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 1.2 hereof, the Company will enter into an underwriting agreement reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains customary underwriting provisions and provided further that if the underwriter so requests the underwriting agreement will contain customary contribution provisions.
(a) The Company will indemnify each Holder, each of its officers, directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of section 15 of the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 1, and each underwriter, if any, and each person who controls within the meaning of section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular, or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any 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 any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification, or compliance, and will reimburse each such Holder, each of its officers, directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter, and each person who controls any such underwriter, as incurred, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action, provided that the Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. It is agreed that the indemnity agreement contained in this Section 1.7(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 has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are included in the securities as to which such registration, qualification, or compliance is being effected, indemnify, to the extent of the net proceeds from the sale of Registrable Securities by such Holder in the registration, qualification or compliance (provided that such limitation shall not apply in the case of fraud or gross negligence by the Holder in providing information to the Company for use by the Company in the preparation of such registration, qualification or compliance) the Company, each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of section 15 of the Securities Act, and each other such Holder, and each of their officers, directors, and partners, and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular, or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, directors, officers, partners, legal counsel, and accountants, persons, underwriters, or control persons, as incurred, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(a) Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after ninety (90) days following the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;
(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration;
(d) Take such action, including the voluntary registration of its Common Stock under section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective.
(a) such one hundred eighty (180) day "market stand-off" agreement shall only apply to the first such registration statement of the Company, including securities to be sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company enter into similar agreements.
The obligations described in this Section 1.12 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop- transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of such applicable one hundred eighty (180) or one hundred twenty (120) day period.
The Company hereby covenants and agrees, so long as any Holder owns any Registrable Shares, as follows:
(a) The Company will furnish the following reports to each Holder:
As soon as practicable after the end of each fiscal year of the Company, and in any event within one hundred twenty (120) days thereafter, an audited consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year, and audited consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by independent public accountants of recognized national standing selected by the Company.
(b) The Company shall deliver to each Major Investor and to each Holder of at least 120,000 shares of Series C Preferred Stock (including shares of Common Stock issued upon
conversion thereof) as soon as practicable after the end of the first, second, and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, and unaudited consolidated statements of income of the Company and its subsidiaries for such period and for the current fiscal year to date, prepared in accordance with generally accepted accounting principles consistently applied, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by generally accepted accounting principles.
(c) The Company shall deliver to each Major Investor within thirty (30) days of the end of each month, an unaudited income statement and balance sheet for and as of the end of such month, in reasonable detail.
(a) "New Securities" shall mean any capital stock (including Common Stock
and/or Preferred Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities of
any type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not include (i) securities
purchased under the Series A Preferred Stock Purchase Agreement dated as of June
25, 1998 or Series B Preferred Stock Purchase Agreement dated as of December 24,
1998 and amended as of February 18, 1999; (ii) securities issued pursuant to the
Reorganization Agreement; (iii) securities issued upon conversion of the Shares;
(iii) securities issued pursuant to the acquisition of another business entity
or business segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company will
own more than fifty percent (50%) of the voting power of such business entity or
business segment of any such entity; (iv) any borrowings, direct or indirect,
from financial
institutions or other persons by the Company, whether or not presently authorized, including any type of loan or payment evidenced by any type of debt instrument, provided such borrowings do not have any equity features including warrants, options or other rights to purchase capital stock and are not convertible into capital stock of the Company; (v) securities issued to employees, consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board of Directors; (vi) securities issued to a corporate partner or to lessors, vendors, customers, suppliers, original equipment manufacturers or other persons in similar commercial situations with the Company if such issuance is approved by the Board of Directors; (vii) securities issued to financial institutions in connection with obtaining lease or loan financing, whether issued to a lessor, guarantor or other person; (viii) securities issued in a public offering pursuant to a registration under the Securities Act which would trigger an automatic conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock into Common Stock pursuant to the Company's Amended and Restated Certificate of Incorporation; (ix) securities issued in connection with any stock split, stock dividend or recapitalization of the Company; and (x) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (ix) above.
(b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Major Investor written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Major Investor shall have fifteen (15) days after any such notice is mailed or delivered to agree to purchase such Major Investor's pro rata share of such New Securities for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Major Investors fail to exercise fully the right of
first refusal within such fifteen (15) day period, the Company shall have ninety
(90) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within sixty
(60) days from the date of such agreement) to sell the New Securities respecting
which the Major Investors' right of first refusal option set forth in this
Section 2.3 was not exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's notice to Major Investors
pursuant to Section 2.3(b). In the event the Company has not sold within such
ninety (90) day period or entered into an agreement to sell the New Securities
in accordance with the foregoing within sixty (60) days from the date of such
agreement, the Company shall not thereafter issue or sell any New Securities,
without first again offering such securities to the Holders in the manner
provided in Section 2.3(b) above.
(d) The right of first offer granted under this Agreement shall expire upon, and shall not be applicable to, the first sale of Common Stock of the Company to the public effected pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission (the "Commission") under the Securities Act, which such registration would trigger an automatic conversion of the Series A Preferred Stock and Series B Preferred Stock and Series C Preferred Stock into Common Stock pursuant to the Company's Amended and Restated Certificate of Incorporation.
(e) The right of first refusal set forth in this Section 2.3 may not be assigned or transferred, except that (i) such right is assignable by each Major Investor to any wholly owned subsidiary or parent of, or to any corporation or entity, or any partner, former partner, general partner, limited partner, or related partnership that is, within the meaning of the Securities Act, controlling, controlled by or under common control with, any such Major Investor, and (ii) such right is assignable between and among any of the Major Investors.
(f) Upon the execution of this Agreement, Section 6 of the Company's Stock Purchase Agreements with each of Ashutosh Roy and Gunjan Sinha, each dated December 16, 1997, is of no further force and effect and shall be superseded by the provision of this Section 2.3.
(a) the Company will not issue shares or options to purchase shares of Common Stock beyond the 2,750,000 shares of Common Stock reserved for issuance under the Company's 1998 Stock Plan;
(b) such shares will vest at the rate of twenty-five percent (25%) of the shares after one (1) year from the first anniversary of the vesting commencement date and 1/48 of the shares shall vest each month thereafter;
(c) such shares issued under the Stock Plan may not be transferred prior to vesting, and the Company shall have a right of first refusal prior to an Initial Public Offering with respect to the sale of all such shares that have vested (subject to customary exclusions for transfers to trusts and family members);
(d) in the event that an employee is terminated by the Company, the Company shall have a right to repurchase at cost any unvested shares of Common Stock issued under the Stock Plan held by such employee; and
(e) such shares issued under the Stock Plan shall not be transferable for one hundred eighty (180) days following the effective date of an Initial Public Offering.
(a) amend or repeal any provisions of, or add any provision to, the Company's Certificate of Incorporation or Bylaws, if such action would alter or change materially and adversely the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock; or
(b) increase or decrease the authorized number of shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
by ten (10) days advance written notice to the other parties hereto. Notices to the Company will be marked "Attention: President."
party shall be liable or bound to any other party in any manner by any warranties, representations or covenants relating to such subject matter, except as specifically set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.
eGAIN COMMUNICATIONS CORPORATION
By /s/ Ashutosh Roy
-------------------------------
Ashutosh Roy
Chief Executive Officer
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FW VENTURES I, L.P.
By /s/ Mark A. Wolfson
-------------------------------
Title VP, GP
----------------------------
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Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
CHARTER VENTURES III, LLC
By__________________________________
Title_______________________________
FAYEZ SAROFIM INVESTMENT
PARTNERSHIP NO. 5 L.P.
By__________________________________
Title_______________________________
RICHARD P. & AMY C. MAGNUSON,
TRUSTEES OF THE MAGNUSON REVOCABLE
TRUST DATED JANUARY 14, 1994
By__________________________________
Richard P. Magnuson, Trustee
By__________________________________
Amy C. Magnuson, Trustee
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
PM&S VENTURE FUND II, LLC
By___________________________________
Title________________________________
IMPERIAL BANK
By___________________________________
Title________________________________
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
PHOENIX LEASING INCORPORATED
By__________________________________
Title_______________________________
INCENTIVE INVESTMENT
By__________________________________
Title_______________________________
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
WINDCREST PARTNERS
By__________________________________
Title_______________________________
WW READE STREET CORP.
By__________________________________
Title_______________________________
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
WINDCREST PARTNERS
By___________________________________
Title________________________________
Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
LINKS VENTURES, LLC
By__________________________________
Title_______________________________
/s/ Ashutosh Roy
------------------------------------
Ashutosh Roy
/s/ Gunjan Sinha
------------------------------------
Gunjan Sinha
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Counterpart Signature Page to eGain Communication Corporation Investors Rights Agreement
Exhibit 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933), AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: eGain Communications Corporation, a Delaware Number of Shares: 37,267 Class of Stock: Series A Preferred Initial Exercise Price: $0.805 per share Issue Date: August 7, 1998 Expiration Date: August 7, 2005 (Subject to Article 4.1) |
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for other good and valuable consideration, IMPERIAL BANK or registered assignee ("Holder") is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the "Shares") of the corporation (the "Company") at the initial exercise price per Share (the "Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth of this Warrant.
Company, but shall at all times in good faith assist in carrying out all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under this Article against impairment. If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder's r1uhts under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
and (3) 'In the case of the matter referred to in (e) above, the sarne notice as is given to the holders of such registration rights.
ARTICLE 4. MISCELLANEOUS.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
eGain Communications Corporation
By: /s/ Ashutosh Roy
----------------------------
Name: Ashutosh Roy
--------------------------
Title: Chief Executive Officer
-------------------------
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EXHIBIT 4.4
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR HOLDER, REASONABLY SATISFACTORY TO COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THIS WARRANT.
WARRANT
TO PURCHASE SHARES OF SERIES A PREFERRED STOCK
Dated October 15, 1998
This certifies that for value received, PHOENIX LEASING INCORPORATED, or registered assigns, is entitled as of October 1, 1998 (the "Closing Date"), subject to the terms set forth herein, to purchase from eGAIN COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), up to Thirty-Seven Thousand Two Hundred Forty-Four (37,244) fully paid and non-assessable shares of Company's Series A Preferred Stock (the "Initial Number"), at the price of $0.8055 per share; provided, however, that the Initial Number of shares of Series A Preferred Stock purchasable hereunder shall be increased by the Additional Number, as defined herein, without any action by the Company or the Holder, as of the date (the "Share Increase Date") that the Company has borrowed in excess of Seven Hundred Fifty Thousand Dollars ($750,000) pursuant to the Senior Loan and Security Agreement, dated as of the date hereof, between Phoenix Leasing Incorporated and the Company. The Additional Number is Thirty-Seven Thousand Two Hundred Forty-Four (37,244); provided, however, that if any adjustments to the Initial Number have occurred on or prior to the Share Increase Date pursuant to Article IV hereof, then the Additional Number shall be correspondingly adjusted, as though the Holder could have acquired the Additional Number of shares of Series A Preferred Stock commencing on the Closing Date. The initial exercise price of $0.8055 per share, and the number of shares purchasable hereunder, are subject to adjustment in certain events, all as more fully set forth under Article IV herein.
(i) If shares of Series A Preferred Stock or Common Stock, as the case may be, are being sold pursuant to a Registration and Fair Market Value is being determined as of the closing of the public offering, the "price to public" specified for such shares in the final prospectus for such public offering;
(ii) If shares of Series A Preferred Stock or Common Stock, as the case may be, are then listed or admitted to trading on any national securities exchange or traded on any national market system and Fair Market Value is not being determined as of the date described in clause (i) of this definition, the average of the daily closing prices for the thirty (30) trading days before such date, excluding any trades which are not bona fide, arm's length transactions. The closing price for each day shall be the last sale price on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange or national market system on which such shares are then listed, admitted to trading or traded;
(iii) If no shares of Series A Preferred Stock or Common Stock, as the case may be, are then listed or admitted to trading on any national securities exchange or traded on any national market system or being offered to the public pursuant to a Registration, the average of the reported closing bid and asked prices thereof on such date in the over-the-counter market as shown by the National Association of Securities Dealers automated quotation system or, if such shares are not then quoted
in such system, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by Holder;
(iv) If no shares of Series A Preferred Stock or Common Stock, as the case may be, are then listed or admitted to trading on any national exchange or traded on any national market system, if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market and if no such shares are being offered to the public pursuant to a Registration, the Fair Market Value of a share of Series A Preferred Stock or Common Stock, as the case may be, shall be as determined in good faith by Company's Board of Directors.
Series A Preferred Stock or Common Stock which Holder would otherwise be entitled to purchase from Company upon such exercise or conversion, Company shall purchase from Holder such fractional share at a price equal to an amount calculated by multiplying such fractional share (calculated to the nearest 1/100th of a share) by the fair market value of a share of Series A Preferred Stock or Common Stock, as applicable, on the date of the Notice of Exercise or the Conversion Date, as applicable, as determined in good faith by Company's Board of Directors. Payment of such amount shall be made in cash or by check payable to the order of Holder at the time of delivery of any certificate or certificates arising upon such exercise or conversion.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT
(i) AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (ii)
AN OPINION OF COUNSEL FOR HOLDER, REASONABLY SATISFACTORY TO
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT
OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF ARTICLE III OF THE WARRANT UNDER WHICH THIS SECURITY WAS ISSUED.
Preferred Stock shall cease when (i) a registration statement covering all
shares of Common Stock issued or issuable upon conversion of the Series A
Preferred Stock becomes effective under the Securities Act, (ii) Company is
presented with an opinion of counsel reasonably satisfactory to Company that
such restrictions are no longer required in order to insure compliance with the
Securities Act or with a Commission "no-action" letter stating that future
transfers of such securities by the transferor or the contemplated transferee
would be exempt from registration under the Securities Act, or (iii) such
securities may be transferred in accordance with Rule 144(k). When such
restrictions terminate, Company shall, or shall instruct its transfer agent to,
promptly, and without expense to Holder or the Shareholder, as the case may be,
issue new securities in the name of Holder and/or the Shareholder, as the case
may be, not bearing the legends required under subsection (b) of this Section
3.2. In addition, new securities shall be issued without such legends if such
legends may be properly removed under the terms of Rule 144(k).
the cases referred to in of Section 4.4 hereof), (2) Company's consolidation or merger with or into another corporation in which Company is not the surviving entity, or a reverse triangular merger in which Company is the surviving entity but the shares of Company's capital stock outstanding immediately prior to the merger are converted, by virtue of the merger, into other property, whether in the form of securities, cash or otherwise, or (3) the sale or transfer of Company's property as an entirety or substantially as an entirety, then, as part of such reorganization, reclassification, recapitalization, merger, consolidation, sale or transfer, lawful provision shall be made so that there shall thereafter be deliverable upon the exercise of this Warrant or any portion thereof (in lieu of or in addition to the number of shares of Series A Preferred Stock theretofore deliverable, as appropriate), and without payment of any additional consideration, the number of shares of stock or other securities or property to which the holder of the number of shares of Series A Preferred Stock which would otherwise have been deliverable upon the exercise of this Warrant or any portion thereof at the time of such reorganization, reclassification, recapitalization, consolidation, merger, sale or transfer would have been entitled to receive in such reorganization, reclassification, recapitalization, consolidation, merger, sale or transfer. Alternatively, the Company shall have the option to purchase this Warrant on the closing date of such event for cash in an amount per Warrant Share equal to the greater of (x) three (3) times the Exercise Price, less the Exercise Price, or (y) the excess (if any) of the Market Value of a Warrant Share over the Exercise Price; provided however that such option shall not be exercisable to the extent that the Holder exercises this Warrant in connection with such merger or asset sale; provided further however that such option shall not be exercisable if in connection with such merger or asset sale all other warrants to acquire securities of the Company will not expire and/or terminate, whether by their terms, complete exercise by the holders thereof or the exercise of purchase rights by the Company. The Market Value of each Warrant Share shall be determined by dividing the total consideration to be received by the Company or its shareholders in connection with such event by the number of shares of Common Stock then outstanding (assuming that all convertible securities of the Company have been converted into Common Stock). Any securities to be delivered to the Company or its shareholders shall be valued as follows:
(a) Securities not subject to investment letter or other similar restrictions on free marketability;
(i) If traded on a securities exchange or the Nasdaq National
Market, the value shall be deemed to be the average of the closing prices
of the securities on such exchange over the thirty-day period ending three
(3) days prior to the closing;
(ii) If actively traded over-the-counter but not on the Nasdaq National Market, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as mutually determined in good faith by the Board of Directors of the Corporation and the holders of at least a majority of all then outstanding shares of Preferred Stock.
(b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i) (A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined in good faith by the Board of Directors of the Corporation and the holders of at least a majority of all then outstanding shares of Preferred Stock.
This Section 4.2 shall apply to successive reorganizations, reclassifications, recapitalizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to Holder for shares of Series A Preferred Stock in connection with any transaction described in this Section 4.2 is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by Company's Board of Directors.
such dissolution, liquidation or winding up. If any such dissolution, liquidation or winding up results in any cash distribution to Holder in excess of the aggregate Exercise Price for the shares of Series A Preferred Stock for which this Warrant is exercised, then Holder may, at its option, exercise this Warrant without making payment of such aggregate Exercise Price and, in such case, Company shall, upon distribution to Holder, consider such aggregate Exercise Price to have been paid in full, and in making such settlement to Holder, shall deduct an amount equal to such aggregate Exercise Price from the amount payable to Holder.
holders of Series A Preferred Stock or Common Stock, as appropriate, entitled to receive securities and/or other property in connection with such action.
this Warrant (for purposes of determining compliance with this covenant, the shares of Series A Preferred Stock issuable upon exercise of all other options and warrants shall be deemed issued and outstanding), and a sufficient number of shares of Common Stock to provide for the conversion into Common Stock of all the shares of Series A Preferred Stock issued and issuable upon the exercise of this Warrant but theretofore unconverted (for purposes of determining compliance with this covenant, the shares of Common Stock issuable upon exercise of all options and warrants to acquire Common Stock and upon conversion of all instruments convertible into Common Stock shall be deemed issued and outstanding);
such purpose or (b) Company at its Principal Executive Office. Holder, the Shareholders and Company may each designate a different address by notice to the other pursuant to this section. A notice shall be deemed effective upon the earlier of (i) receipt or (ii) the third day after mailing in accordance with the terms of this Section 7.4.
IN WITNESS WHEREOF, Company has caused this Warrant to be executed by its duly authorized officer as of October 15, 1998.
eGAIN COMMUNICATIONS CORPORATION
By: /s/ Ashutosh Roy
------------------------------
Name: Ashutosh Roy
----------------------------
Title: CEO
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EXHIBIT 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SERIES A CONVERTIBLE PREFERRED STOCK
OF
SITEBRIDGE CORPORATION
No. WA-1 Date of Issuance - May 5, 1998
This certifies that, for value received, CHELSEA CAPITAL PARTNERS LLC, a New York limited liability company, or its registered assigns ("Holder") is entitled, subject to the terms set forth below, to purchase from SITEBRIDGE CORPORATION, a Delaware corporation (the "Company"), Sixty-Five Thousand Six Hundred Sixty-Seven (65,667) shares of the Series A Convertible Preferred Stock of the Company (the "Series A Preferred Stock"), as constituted on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the principal office of the Company referred to below, with the Notice of Exercise form attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States at the Exercise Price as set forth in Section 2 below. The number, character and Exercise Price of such shares of Series A Preferred Stock are subject to adjustment as provided below. The term "Warrant" as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein.
(b) This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Series A Preferred Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.
Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.
(1) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Series A Preferred Stock
or Common Stock so purchased are being acquired solely for the Holder's own account arid not as a nominee for any other party, for investment, and not with a view toward distribution or resale, except under circumstances that will not result in a violation of the Act or any state securities laws.
(2) The Holder of this Warrant, by acceptance hereof, acknowledges that the shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof will not be offered, sold, or otherwise disposed of except in compliance with the terms and conditions of the Investors' Rights Agreement.
(3) This Warrant and all shares of Series A Preferred Stock or Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
THE SHARES OF STOCK UNDERLYING THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS RESTRICTIONS UPON THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ENCUMBRANCE OF THE SHARES AS SET FORTH IN A INVESTORS' RIGHTS AGREEMENT, AS AMENDED, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SHARES REPRESENTED BY THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR ENCUMBERED, EXCEPT IN CONFORMITY WITH THE TERMS OF SUCH INVESTORS RIGHTS' AGREEMENT.
(a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Treasurer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant as provided in Section 12.1 hereof.
(b) In case
(1) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or
(2) the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or
(3) of any voluntary dissolution, liquidation of winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Series A Preferred Stock or Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Series A Preferred Stock or Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten business (10) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third (3) business day following the date of such mailing
(a) Any term of this Warrant may be amended with the written consent of the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
(a) If at any time, while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a
merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of substantially all of the Company's properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 11. The foregoing provisions of this Section 11.2 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation which are at the time receivable upon the exercise of this Warrant. If the per share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, 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 with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.
subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the sarne class, the number of shares of such securities available for purchase in effect immediately prior to such subdivision, combination, or dividend or other distribution and the Exercise Price per share for such securities shall be proportionately adjusted. Adjustments set forth herein shall be readjusted in the same manner for any successive event or events described herein.
herein will be delivered in person or sent by first class mail, postage prepaid, and will be deemed to have been given when so delivered or sent.
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IN WITNESS WHEREOF, SITEBRIDGE CORPORATION caused this Warrant to be executed by its officers thereunto duly authorized.
Dated: May 5, 1998
SITEBRIDGE CORPORATION
By: /s/ Wendell Lansford
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Wendell Lansford
President
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HOLDER:
/s/ James H. Gellert
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CHELSEA CAPITAL PARTNERS
Name: James H. Gellert
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Title: Managing Member
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FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Series A Preferred Stock (or Common Stock) set forth below:
and does hereby irrevocably constitute and appoint ______________ ___________ Attorney to make such transfer on the books of SITEBRIDGE CORPORATION maintained for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.
Dated: ______________________
EXHIBIT 4.6
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SERIES A CONVERTIBLE PREFERRED STOCK
OF
SITEBRIDGE CORPORATION
No. WA-3 Date of Issuance - May 5, 1998
This certifies that, for value received, Mr. Amir Bakhtiar or his registered assigns ("Holder") is entitled, subject to the terms set forth below, to purchase from SITEBRlDGE CORPORATION, a Delaware corporation (the "Company"), One Thousand (1,000) shares of the Series A Convertible Preferred Stock of the Company (the "Series A Preferred Stock"), as constituted on the date hereof (the "Warrant Issue Date"), upon surrender hereof, at the principal office of the Company referred to below, with the Notice of Exercise form attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States at the Exercise Price as set forth in Section 2 below. The number, character and Exercise Price of such shares of Series A Preferred Stock are subject to adjustment as provided below. The term "Warrant" as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein.
(a) The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, but not for less than five thousand (5,000) shares at a time (or such lesser number of shares which may then constitute the maximum number purchasable; such number
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Series A
Preferred Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As promptly as practicable on or after such date and in any event within ten
(10) days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Warrant
is exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
(1) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Series A Preferred Stock or Common Stock so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale, except under circumstances that will not result in a violation of the Act or any state securities laws.
(2) The Holder of this Warrant, by acceptance hereof, acknowledges that the shares of Series A Preferred Stock or Common Stock to be issued upon exercise hereof or conversion thereof will not be offered, sold, or otherwise disposed of except in compliance with the terms and conditions of the Investors' Rights Agreement.
(3) This Warrant and all shares of Series A Preferred Stock or Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN; THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
THE SHARES OF STOCK UNDERLYING THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS RESTRICTIONS UPON THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ENCUMBRANCE OF THE SHARES AS SET FORTH IN AN INVESTORS' RIGHTS AGREEMENT, AS AMENDED, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SHARES REPRESENTED BY THIS WARRANT MAY NOT BE SOLD ASSIGNED, TRANSFERRED, PLEDGED OR ENCUMBERED, EXCEPT IN CONFORMITY WITH THE TERMS OF SUCH INVESTORS RIGHTS' AGREEMENT.
shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Series A Preferred Stock upon the exercise of this Warrant.
(a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Treasurer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant as provided in Section 12.1 hereof.
(b) In case
(1) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or
(2) the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or
(3) of any voluntary dissolution, liquidation of winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Series A Preferred Stock or Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Series A Preferred Stock or Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten business (10) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third (3) business day following the date of such mailing.
(a) Any term of this Warrant may be amended with the written consent of the Company and the Holder.
(b) No waivers of or exceptions to any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
(a) If at any time, while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of substantially all of the Company's properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer which a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 11. The foregoing provisions of this Section 11.2 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers
and to the stock or securities of any other corporation which are at the time receivable upon the exercise of this Warrant. If the per share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, 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 with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.
holder of record of the security receivable upon exercise of this Warrant on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 11.
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IN WITNESS WHEREOF, SITEBRIDGE CORPORATION caused this Warrant to be executed by its officers thereunto duly authorized.
Dated: May 5, 1998
SITEBRIDGE CORPORATION
By: /s/ Wendell Lansford
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Wendell Lansford
President
HOLDER:
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Name: ___________________________
Title: __________________________
To: SITEBRIDGE CORPORATION
(1) The undersigned hereby elects to purchase shares of Series A Preferred Stock of SITEBRIDGE CORPORATION pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of Series A Preferred Stock or the Common Stock to be issued upon conversion thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell, or otherwise dispose of any such shares of Series A Preferred Stock or 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.
(3) Please issue a certificate or certificates representing said shares of Series A Preferred Stock in the name of the undersigned or in such other name as is specified below:
(4) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Series A Preferred Stock (or Common Stock) set forth below:
and does hereby irrevocably constitute and appoint ____________________________ Attorney to make such transfer on the books of SITEBRIDGE CORPORATION maintained for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward distribution or resale.
DATED: ___________________
Exhibit 10.1
(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 shareholders.
(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.
other legal representatives.
(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 shareholder) 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 shareholders) 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.
at the request of, for the convenience of, or to represent the interests of such predecessor corporation.
Company's rights, it will relieve the Company from liability only to the extent of such prejudice; nor will such omission, in any event, relieve the Company from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof:
(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: eGAIN COMMUNICATIONS CORPORATION
624 East Evelyn Avenue
Sunnyvale, California 94086
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Attention: President
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
eGAIN COMMUNICATIONS
CORPORATION, a Delaware corporation
Exhibit 10.2
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
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. 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 181st 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.
(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 shall be determined in good faith by the Administrator.
disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a committee designated by the Board to administer the Plan, which committee shall be constituted to comply with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made.
(i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(l) 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 of Common Stock 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, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms and conditions may include, but are not limited to, the exercise price, the time or times when Options may be exercised, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option may be settled in cash under Section 9(e) 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, and the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect to the continuation of the Optionee's employment or consulting relationship with the Company, nor shall it
interfere in any way with the Optionee's right or the Company's right to terminate the Optionee's employment or consulting relationship at any time, with or without cause.
(a) The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, 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 the grant of such Incentive Stock 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 Employee other than an Employee described in the preceding paragraph, 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, the per share exercise price shall be determined by the Administrator.
(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) and may consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares which (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 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 (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) of the Plan.
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 or receive dividends or any
other rights as a shareholder 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 will 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 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares which 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.
to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in status from Consultant to Employee or Employee to Consultant, an Optionee's Continuous Status as an Employee or Consultant shall not automatically terminate solely as a result of such change in status. However, in such event, an 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 three months and one day following such change of status.
if such consideration received in the merger was not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option for each Share of Optioned Stock subject to the Option to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger.
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.
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
NOTICE OF GRANT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice of Grant.
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, as follows:
Grant Number ____________________ Date of Grant ____________________ Vesting Commencement Date ____________________ Exercise Price per Share $___________________ |
Total Number of Shares Granted ____________________
Total Exercise Price $____________________
Type of Option: ____ Incentive Stock Option
____ Nonstatutory Stock Option
Term/Expiration Date: _____________________________
|
Twenty-five percent (25%) of the Shares subject to this Option shall vest twelve (12) months after the Vesting Commencement Date, and one forty-eighth (1/48th) of the Shares subject to the Option shall vest each month thereafter.
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
OPTION AGREEMENT
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
(a) This Option may not be exercised for a fraction of a Share.
(b) In the event of Optionee's death, disability or other termination of the Optionee's Continuous Status as an Employee or Consultant, the exercisability of the Option is governed by Sections 6, 7 and 8 below, subject to the limitation contained in subsection 2(i)(c).
(c) 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 will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock
exchange or national market system upon which the Common Stock is then 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 authorized by the Company, 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.
Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation.
SOCIALSCIENCE, INC.
By: ____________________________________
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 1997 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, and hereby accepts this Option subject to all of the terms and provisions thereof. 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: ____________________ ____________________________________________
Optionee
Residence Address:
_____________________________________________
_____________________________________________
|
The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In consideration of the Company's granting his or her spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement.
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
EXERCISE NOTICE
SocialScience, Inc.
Address:_______
Attention: Secretary
Optionee shall enjoy rights as a shareholder 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.
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR THE ISSUER OF THE SHARES (THE "ISSUER") HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL 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 THE SHARES REPRESENTED HEREBY.
Submitted by: Accepted by:
OPTIONEE: SOCIALSCIENCE, INC.
By:_______________________________
Its:______________________________
___________________________
(Signature)
Address: Address:
------- -------
___________________________
___________________________
|
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE : COMPANY : SOCIALSCIENCE, INC. SECURITY : COMMON STOCK AMOUNT : |
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 then applicable state or federal 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, as amended (the "Exchange Act") 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 Exchange Act); 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 two years 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 three 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 under the Securities Act, 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:
Date:____________________________, 19____
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
PLAN AMENDMENT
The SocialScience 1997 Stock Option Plan is hereby amended, effective April 15, 1997, as follows:
1. Section 11 (c) is hereby amended in its entirety to read as follows:
Upon an Involuntary Termination of an Optionee's Service within twelve (12) months following a Change in Control in which the Option is assumed, the exercisability of the Option shall accelerate so that the Option shall become exercisable with respect to fifty percent (50%) of the Optioned Stock for which the Option is at the time not exercisable so that the Option shall immediately became exercisable for such fifty percent (50%) of the Optioned Stock as fully- vested shares. The Option shall remain so exercisable until the earlier of (i) the expiration date or (ii) the expiration of the one (1) year period measured from the date of the Involuntary Termination. For purposes of the Plan an "Involuntary Termination" shall mean the termination of an Optionee's Service by reason of: (i) the Optionee's involuntary dismissal or discharge by the Company for reasons other than for misconduct, or (ii) the Optionee's voluntary resignation following (A) a change in Optionee's position with the Company (or Parent or Subsidiary employing Optionee)which materially reduces Optionee's duties and responsibilities, (B) a reduction in
Optionee's level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance based incentive programs) by more than fifteen percent (15%) or (C) a relocation of Optionee's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Company without Optionee's consent.
For purposes of the Plan, a "Change in Control" shall mean either of the following stockholder approved transactions to which the Company is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Company's assets in complete liquidation or dissolution of the Company.
2. Section 9 (b) is hereby amended in its entirety to read as follows:
Notwithstanding the above, in the event of an Optionee's change in status from Consultant to Employee or Employee to Consultant, an Optionee's Continuous Status as an Employee or Consultant shall not automatically terminate solely as a result of such change in status. However, in such event, an 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 three months and one day following such change of status.
3. Except as modified by this Plan Amendment, all the terms and provisions of the Plan as in effect on the date hereof shall continue in full force and effect.
SOCIALSCIENCE, INC.
1997 STOCK OPTION PLAN
PLAN AMENDMENT NO. 2
The SocialScience 1997 Stock Option Plan is hereby amended, effective December 12, 1997, as follows:
1. Section 3. is hereby amended in its entirety to read as follows:
2. Except as modified by this Plan Amendment No. 2, all the terms and provisions of the Plan as in effect on the date hereof shall continue in full force and effect.
SITEBRIDGE CORPORATION
1997 STOCK OPTION PLAN
PLAN AMENDMENT NO. 3
The 1997 Stock Option Plan is hereby amended, effective May 20, 1998, as follows:
1. Section 3. is hereby amended in its entirety to read as follows:
2. Except as modified by this Plan Amendment No. 3, all the terms and provisions of the Plan as in effect on the date hereof shall continue in full force and effect.
SITEBRIDGE CORPORATION
1997 STOCK OPTION PLAN
PLAN AMENDMENT NO. 4
The 1997 Stock Option Plan is hereby amended, effective December 4, 1998, as follows:
1. Section 3. is hereby amended in its entirety to read as follows:
2. Except as modified by this Plan Amendment No. 4, all the terms and provisions of the Plan as in effect on the date hereof shall continue in full
force and effect.
EXHIBIT 10.3
eGain Communications Corporation
1998 STOCK PLAN
(As amended and restated effective July 20, 1999)
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on June 19, 1998 and amended and restated effective July 20, 1999. 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 shall be governed by, and construed in accordance with, the laws of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 Committee Composition. The Plan shall be administered by the Committee. The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code.
2.2 Committee Responsibilities. The Committee shall (a) select the Employees, Outside Directors and Consultants who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) interpret the Plan and (d) make all other decisions relating to the operation of the Plan. The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons.
2.3 Committee for Non-Officer Grants. The Board may also appoint a secondary committee of the Board, which shall be composed of one or more directors of the Company who need not satisfy the requirements of Section 2.1. Such secondary committee may administer the Plan with respect to Employees and Consultants who are not considered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this Section 2.3, any reference in the Plan to the Committee shall include such secondary committee.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 Basic Limitation. Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares. The aggregate number of Options and Restricted Shares awarded under the Plan shall not exceed (a) 6,500,000 plus (b) the additional Shares described in Section 3.2. The limitation of this Section 3.1 shall be subject to adjustment pursuant to Article 9.
3.2 Additional Shares. If Options are forfeited or terminate for any other reason before being exercised, then the corresponding Shares shall again become available for the grant of Options or Restricted Shares under the Plan. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become available for the grant of NSOs and Restricted Shares under the Plan. The aggregate number of Shares that may be issued under the Plan upon the exercise of ISOs shall not be increased when Restricted Shares or other Shares are forfeited.
ARTICLE 4. ELIGIBILITY.
4.1 Nonstatutory Stock Options and Restricted Shares. Only Employees, Outside Directors and Consultants shall be eligible for the grant of NSOs and Restricted Shares.
4.2 Incentive Stock Options. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in Section 422(c)(6) of the Code are satisfied.
ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a reduction
in the Optionee's other compensation. A Stock Option Agreement may provide that
a new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.
5.2 Number of Shares. Each Stock Option Agreement shall specify the number of Shares subject to the Option and shall provide for the adjustment of such number in accordance with Article 9. Options granted to any Optionee in a single fiscal year of the Company shall not cover more than _______ Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 9.
5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise Price under an ISO shall in no event be less than 100% of the Fair Market
Value of a Share on the date of grant. In the case of an NSO, a Stock Option Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the NSO is outstanding.
5.4 Exercisability and Term. Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant. 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.
5.5 Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a change in control occurs with respect to the Company.
5.6 Modification or Assumption of Options. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair his or her rights under such Option.
5.7 Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept payment in any form(s) described in this Article 6.
6.2 Surrender of Stock. To the extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Optionee shall not surrender, or
attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.
6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to pledge all or part of the Shares being purchased under the Plan to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.
6.5 Promissory Note. To the extent that this Section 6.5 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) a full-recourse promissory note. However, the par value of the Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules.
ARTICLE 7. AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS.
7.1 Initial Grants. Each Outside Director who first becomes a member of the Board after the date of the Company's initial public offering shall receive a one-time grant of an NSO covering 5,000 Shares (subject to adjustment under Article 9). Such NSO shall be granted on the date when such Outside Director first joins the Board and shall be fully vested and exercisable on the date of grant. An Outside Director who is a member of the Board on the date of the Company's initial public offering shall receive a one-time grant of an NSO covering 5,000 Shares (subject to adjustment under Article 9) on such date. Such NSO shall be fully vested and exercisable on the date of grant.
7.2 Annual Grants. Upon the conclusion of each regular annual meeting of the Company's stockholders held in the year 2000 or thereafter, each Outside Director who will continue serving as a member of the Board thereafter shall receive an NSO covering 5,000 Shares (subject to adjustment under Article 9), except that such NSO shall not be granted in the calendar year in which the same Outside Director received the NSO described in Section 7.1. NSOs granted under this Section 7.2 shall become exercisable in full on the first anniversary of the date of grant.
7.4 Exercise Price. The Exercise Price under all NSOs granted to an Outside Director under this Article 7 shall be equal to 100% of the Fair Market Value of a Share on the date of grant, payable in one of the forms described in Sections 6.1, 6.2, 6.3 and 6.4.
7.5 Term. All NSOs granted to an Outside Director under this Article 7 shall terminate on the earliest of (a) the 10th anniversary of the date of grant, (b) the date 12 months after the termination of such Outside Director's service for any reason.
ARTICLE 8. RESTRICTED SHARES.
8.1 Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical.
8.2 Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full- recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine.
8.3 Vesting Conditions. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant's death, disability or retirement or other events, including a change in control with respect to the Company.
8.4 Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company's other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.
ARTICLE 9. PROTECTION AGAINST DILUTION.
9.1 Adjustments. In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of:
(a) The number of Options and Restricted Shares available for future Awards under Article 3;
(b) The limitations set forth in Section 5.2;
(c) The number of NSOs to be granted to Outside Directors under Article 7;
(d) The number of Shares covered by each outstanding Option; or
(e) The Exercise Price under each outstanding Option.
Except as provided in this Article 9, 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.
9.2 Dissolution or Liquidation. To the extent not previously exercised, Options shall terminate immediately prior to the dissolution or liquidation of the Company.
9.3 Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Options and Restricted Shares shall be subject to the agreement of merger or reorganization. Such agreement shall provide for:
(a) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation;
(b) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;
(c) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards;
(d) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or
(e) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.
ARTICLE 10. DEFERRAL OF DELIVERY OF SHARES.
The Committee (in its sole discretion) may permit or require an Optionee to have Shares that otherwise would be delivered to such Optionee as a result of the exercise of an Option converted into amounts credited to a deferred compensation account established for such Optionee 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 Shares as of the date when they otherwise would have been
delivered to such Optionee. A deferred compensation account established under this Article 10 may be credited with interest or other forms of investment return, as determined by the Committee. An Optionee 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 Optionee and the Company. If the conversion of Options is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such conversion, including (without limitation) the settlement of deferred compensation accounts established under this Article 10.
ARTICLE 11. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan like Restricted Shares and shall, when issued, reduce the number of Shares available under Article 3.
ARTICLE 12. LIMITATION ON RIGHTS.
12.1 Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Company's certificate of incorporation and by-laws and a written employment agreement (if any).
12.2 Stockholders' Rights. A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Shares covered by his or her Award prior to the time when a stock certificate for such Shares is issued or, in the case of an Option, the time when he or she becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan.
12.3 Regulatory Requirements. Any other provision of the Plan notwithstanding, the obligation of the Company to issue Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.
ARTICLE 13. WITHHOLDING TAXES.
13.1 General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.
13.2 Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash.
ARTICLE 14. FUTURE OF THE PLAN.
14.1 Term of the Plan. The Plan shall remain in effect until it is terminated under Section 14.2, except that no ISOs shall be granted on or after the 10th anniversary of the later of (a) the date when the Board adopted the Plan or (b) the date when the Board adopted the most recent increase in the number of Shares available under Article 3 which was approved by the Company's stockholders.
14.2 Amendment or Termination. The Board may, at any time and for any reason, amend or terminate the Plan. An amendment of the Plan shall be subject to the approval of the Company's stockholders only to the extent required by applicable laws, regulations or rules. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan.
ARTICLE 15. DEFINITIONS.
15.1 "Affiliate" means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.
15.2 "Award" means any award of an Option or a Restricted Share under the Plan.
15.3 "Board" means the Company's Board of Directors, as constituted from time to time.
15.4 "Code" means the Internal Revenue Code of 1986, as amended. 15.5 "Committee" means a committee of the Board, as described in Article 2. 15.7 "Company" means eGain Communications Corporation, a Delaware corporation. 15.8 "Consultant" means a consultant or adviser who provides bona fide services |
to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.2.
15.9 "Employee" means a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.
15.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
15.11 "Exercise Price" means the amount for which one Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.
15.12 "Fair Market Value" means the market price of Shares, determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in the Wall Street Journal. Such determination shall be conclusive and binding on all persons.
15.13 "ISO" means an incentive stock option described in Section 422(b) of the Code. 15.14 "NSO" means a stock option not described in Sections 422 or 423 of the Code. 15.15 "Option" means an ISO or NSO granted under the Plan and entitling the |
holder to purchase Shares.
15.16 "Optionee" means an individual or estate who holds an Option.
15.17 "Outside Director" shall mean a member of the Board who is not an Employee. Service as an Outside Director shall be considered employment for all purposes of the Plan, except as provided in Section 4.2.
15.18 "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
15.19 "Participant" means an individual or estate who holds an Award.
15.22 "Plan" means this eGain Communications Corporation 1998 Stock Plan, as amended from time to time.
15.21 "Restricted Share" means a Share awarded under the Plan.
15.22 "Restricted Stock Agreement" means the agreement between the Company and the recipient of a Restricted Share that contains the terms, conditions and restrictions pertaining to such Restricted Share.
15.23 "Share" means one share of the common stock of the Company.
15.2 "Stock Option Agreement" means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his or her Option.
15.25 "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
ARTICLE 16. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its duly authorized officer to execute this document in the name of the Company.
eGain Communications Corporation
By:____________________
eGAIN COMMUNICATIONS CORPORATION
1998 STOCK PLAN
STOCK OPTION AGREEMENT
eGain Communications Corporation, a Delaware corporation (the "Company"), hereby grants an option to purchase its Common Stock to the optionee named below. The terms and conditions of the option are set forth in this Stock Option Agreement and in the Company's 1998 Stock Plan (the "Plan").
I. GRANT INFORMATION
Grant Date: _________________________________
Optionee Name: _________________________________
Optionee's Social Security Number: _______________________
Type of Option: _____ Incentive ("ISO")
____ Nonstatutory ("NSO")
Number of Shares of Common Stock: ______________________
Exercise Price per Share: ______________________
Vesting Start Date: ______________________
Vesting Schedule: Subject to attached Terms and Conditions,
the option shall vest as to 25% of the
shares on the first anniversary of the
Vesting Start Date and 1/48/th/ of the
shares each full month thereafter.
|
By signing below, you agree to all of the terms and conditions described in this Stock Option Agreement, including the attached Terms and Conditions, Notice of Exercise and Plan.
Optionee: ________________________________________________________
(Signature)
Company: _________________________________________________________
(Signature)
Title: ___________________________________________________________
II. TERMS AND CONDITIONS
1. Vesting. Your option vests during your Service on the dates specified in the first page of this Stock Option Agreement. Vesting will cease if your Service terminates for any reason.
2. Service; Leaves of Absence. Your Service shall cease when you cease to be actively employed by, or a consultant or adviser to, the Company (or any subsidiary) as determined in the sole discretion of the Board. For purposes of your option, your Service does not terminate when you go on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining whether your option is entitled to ISO status, your Service will be treated as terminating ninety (90) days after you went on leave, unless your right to return to active work is guaranteed by law or by a contract. Your Service terminates in any event when the approved leave ends, unless you immediately return to active work. The Company determines which leaves count toward Service, and when your Service terminates for all purposes under the Plan.
3. Term of Option. Your option expires on the day before the 10/th/ anniversary of the Grant Date, and will expire earlier if your Service terminates as follows:
(a) Regular Termination. If your Service terminates for any reason except death or Disability, then your option will expire at the close of business at Company headquarters on the 90/th/ day after your termination date.
(b) Death. If you die while in Service, then your option will expire at the close of business at Company headquarters on the date six (6) months after the date of death. During that six (6) month period, your estate or heirs may exercise the vested portion of your option.
(c) Disability. If your Service terminates because of your Disability, then your option will expire at the close of business at Company headquarters on the date six (6) months after your termination date. Disability shall have the meaning set forth in section 22(e)(3) of the Code.
4. Exercise of Option.
(a) Legal Restrictions. The Company will not permit you to exercise your option if the issuance of Common Stock at that time would violate any law or regulation. If the sale of Common Stock under the Plan is not registered under the Securities Act but an exemption is available which requires an investment representation or other representation, you shall represent and agree at the time of exercise to make such representations as are deemed necessary or appropriate by the Company and its counsel.
(b) Method of Exercise. To exercise your option, you must complete and file the Company's "Notice of Exercise" form at the address given on the form, together with full payment. The Notice of Exercise will be effective when it is received by the Company. If someone else wants to exercise your option after your death, that person must prove to the Company's satisfaction that he or she is entitled to do so.
(c) Form of Payment. When you submit a Notice of Exercise, you must include payment of the aggregate Exercise Price for the Common Stock you are purchasing. Payment may be made in one (or a combination) of the following forms.
. Your personal check, a cashier's check or a money order.
. Your delivery of shares of Common Stock that have been owned by you for at least six months (or such other period of time as may be necessary to avoid adverse accounting consequences to the Company).
. To the extent that the Common Stock is publicly traded, your delivery, on a form prescribed by the Company, of an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Stock and to deliver all or part of the sales proceeds to the Company.
. To the extent that the Common Stock is publicly traded, your delivery, on a form prescribed by the Company, of an irrevocable direction to pledge all or part of the Common Stock to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.
(d) Withholding Taxes. You will not be allowed to exercise your option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the option exercise or the sale of Common Stock acquired upon exercise of your option.
5. Exercise of Option Before Vesting. You may not exercise your option before it is fully vested.
6. Resale Restrictions/Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, you shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Common Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or such underwriters (not to exceed one hundred eighty (180) days). To enforce the provisions of this paragraph, the Company
may impose stop-transfer instructions with respect to the Common Stock until the end of the applicable stand-off period. You may not sell any Common Stock at a time when applicable laws, regulations or Company or underwriter trading policies prohibit a sale.
7. Transfer of Option. Prior to your death, only you may exercise your option. You cannot transfer or assign your option. For instance, you may not sell your option or use it as security for a loan. If you attempt to do any of these things, your option will immediately become invalid. You may, however, dispose of your option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your spouse or former spouse, nor is the Company obligated to recognize such individual's interest in your option in any other way.
8. No Retention Rights. Your option does not give you the right to be retained by the Company (or any subsidiaries) in any capacity. The Company reserves the right to terminate your Service at any time and for any reason.
9. Shareholder Rights. You, or your estate or heirs, have no rights as a shareholder of the Company until a certificate for your Common Stock has been issued. No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
10. Adjustments to Common Stock. In the event of a stock split, a stock dividend or a similar change in the Company's Common Stock, the number of shares covered by your option and the exercise price per share may be adjusted pursuant to the Plan. Your option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.
11. Legends. All certificates representing the Common Stock issued upon exercise of your option shall, where applicable, have endorsed thereon any legends required by law.
12. Applicable Law. This Agreement will be interpreted and enforced under the laws of the State of California.
13. Incorporation of Plan by Reference. The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire understanding between you and the Company regarding your option. Any prior agreements, commitments or negotiations concerning your option are superseded.
NOTICE OF EXERCISE
eGain Communications Corporation
2 North First Street
San Jose, CA 95113
Re: Exercise of Stock Option
Dear Sir or Madam:
Pursuant to the Stock Option Agreement dated __________, 199___ (the "Stock Option Agreement") and the Company's 1998 Stock Plan (the "Plan"), I hereby elect to purchase _____________ shares of the common stock of the Company at aggregate exercise price of $__________. I enclose payment in the form of:
My check in the amount of $___________; and
My promissory note in the amount of $_________.
If I am exercising an unvested option, I also enclose an executed Assignment Separate From Certificate.
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: __________, 199__
PROMISSORY NOTE
$__________ ________________, California Dated as of __________, 19__
FOR VALUE RECEIVED, the undersigned, ____________________ ______________________________, promises to pay to the order of eGain Communications Corporation, a Delaware corporation (the "Company"), the principal sum of ______________________ dollars ($______________), with interest from the date hereof on the unpaid principal at the rate of __________ percent (______%) per annum (the applicable federal rate), compounded annually. The entire unpaid balance of principal and interest shall be payable on the earlier of (i) five (5) years from the date hereof or (ii) termination of the undersigned's service to the Company.
If payment is not made when due, and if action is instituted on this note, the undersigned agrees to pay the Company reasonable attorneys' fees and costs of suit, as fixed by court.
The undersigned shall have the right to prepay all or any part of the unpaid principal amount of this note, without premium, at any time prior to the maturity hereof on ten (10) days' prior written notice.
This note is a full-recourse note originally secured by a pledge of Common Stock of the Company pursuant to a Security Agreement of even date herewith, which is on file with the Secretary of the Company.
This note shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has signed, dated and delivered this note as of the date and year first above written.
SECURITY AGREEMENT
W I T N E S S E T H:
WHEREAS, the Purchaser has purchased from the Company __________ shares of the Company's Common Stock; and
WHEREAS, the Company has loaned to the Purchaser the sum of $__________ which the Purchaser has used to pay the purchase price of the Common Stock; and
WHEREAS, the Purchaser has executed and delivered to the Company a full- recourse promissory note evidencing such loan (the "Note") and has agreed to pledge all of the Common Stock to the Company as security for the payment of the Note:
NOW, THEREFORE, it is agreed as follows:
1. The Purchaser hereby delivers to the Company one or more certificates representing the Common Stock, together with two Assignments Separate From Certificate signed by the Purchaser. The Purchaser hereby pledges and grants a security interest in the Common Stock, including any shares into which the Common Stock may be converted and all proceeds of the Common Stock, as security for the timely payment of all of the Purchaser's obligations under the Note and for the Purchaser's performance of all of its obligations under this Agreement. In the event of a default in payment of the Note, the Purchaser hereby appoints the Company as his true and lawful attorney to take such action as may be necessary or appropriate to cause the Common Stock to be transferred into the name of the Company or any assignee of the Company and to take any other action on behalf of the Purchaser permitted hereunder or under applicable law.
2. The Company agrees to hold the Common Stock as security for the timely payment of all of the Purchaser's obligations under the Note and for the Purchaser's performance of all of its obligations under this Agreement, as provided herein. At no time shall the Company dispose of or encumber the Common Stock, except as otherwise provided in this Agreement.
3. At all times while the Company is holding the Common Stock as security under this Agreement, the Company shall:
(a) Collect any dividends that may be declared on the Common Stock and credit such dividends against any accrued interest or unpaid principal under the Note, as part payment;
(b) Collect and hold any shares that may be issued upon conversion of the Common Stock; and
(c) Collect and hold any other securities or other property that may be distributed with respect to the Common Stock.
Such shares and other securities or property shall be subject to the security interest granted in Section 1 of this Agreement and shall be held by the Company under this Agreement.
4. While the Company holds the Common Stock as security under this Agreement, the Purchaser shall have the right to vote the Common Stock at all meetings of the Company's shareholders; provided that the Purchaser is not in default in the performance of any term of this Agreement or in any payment due under the Note. In the event of such a default, the Company shall have the right to the extent permitted by law to vote and to give consents, ratifications and waivers and take any other action with respect to the Common Stock with the same force and effect as if the Company were the absolute and sole owner of the Common Stock.
5. Upon payment in full of the outstanding principal balance of the Note and all interest and other charges due under the Note, the Company shall release from pledge and redeliver to the Purchaser the certificate(s) representing the Common Stock and the Assignment Separate From Certificate forms.
6. In the event that the Purchaser fails to perform any term of this Agreement or fails to make any payment when due under the Note, the Company shall have all of the rights and remedies of a creditor and secured party at law and in equity, including (without limitation) the rights and remedies provided under the California Uniform Commercial Code. Without limiting the foregoing, the Company may, after giving ten (10) days' prior written notice to the Purchaser by certified mail at his residence or business address, sell any or all of the Common Stock in such manner and for such price as the Company may determine, including (without limitation) through a public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery. The Company is authorized at any such sale, if it deems it advisable to do so, to restrict the prospective bidders or purchasers of any of the Common Stock to persons who will represent and agree that they are purchasing for their own account for investment, and not with a view to the distribution or sale of any of the Common Stock, to restrict the prospective bidders or purchasers and the use any purchaser may make of the Common Stock and impose any other restriction or condition that the Company deems necessary or advisable under the federal and state securities laws. Upon any such sale the Company shall have the right to deliver, assign and transfer to the purchaser thereof the Common Stock so sold. Each purchaser at any such sale shall hold the Common Stock so sold absolute, free from any claim or right of any kind. In case of any sale of any or all of the Common Stock on credit or for future delivery, the Common Stock so sold may be retained by the Company until the selling price is paid by the purchaser thereof, but the Company shall not incur any liability in case of the failure of such purchaser to take up and pay for the Common Stock so sold and, in case of any such failure, such Common Stock may again be sold under the terms of this section. The Purchaser hereby agrees that any disposition of any or all of the Common Stock by way of a private placement or other method which in the opinion of the
Company is required or advisable under Federal and state securities laws is commercially reasonable. At any public sale, the Company may (if it is the highest bidder) purchase all or any part of the Common Stock at such price as the Company deems proper. Out of the proceeds of any sale, the Company may retain an amount sufficient to pay all amounts then due under the Note, together with the expenses of the sale and reasonable attorneys' fees. The Company shall pay the balance of such proceeds, if any, to the Purchaser. The Purchaser shall be liable for any deficiency that remains after the Company has exercised its rights under this Agreement.
7. This Agreement shall be governed by and construed in accordance with the laws of the State of California. This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and be binding upon the purchaser and the Purchaser's legal representative, heirs, legatees, distributees, assigns and transferees by operation of law. This Agreement contains the entire security agreement between the Company and the Purchaser. The Purchaser will execute any additional agreements, assignments or documents or take any other actions reasonably required by the Company to preserve and perfect the security interest in the Common Stock granted to the Company herein and otherwise to effectuate this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Purchaser has personally executed this Agreement.
eGAIN COMMUNICATIONS CORPORATION
By_________________________________
Title______________________________
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain ____________ Agreement dated as of __________, 199_, the undersigned hereby sells, assigns and transfers unto ______________________________ (__________) shares of the Common Stock of eGain Communications Corporation, a Delaware corporation, standing in the undersigned's name on the books of said corporation represented by certificate No. _________ herewith, and does hereby irrevocably constitute and appoint ______________ attorney-in-fact to transfer the said stock on the books of the said corporation with full power of substitution in the premises.
Dated: __________, 19__.
___________________ (Purchaser's spouse) indicates by the execution of this Assignment his or her consent to be bound by the terms herein as to his or her interests, whether as community property or otherwise, if any, in the Shares.
ELECTION UNDER SECTION 83(b) OF
THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
(i) The name, address and social security number of the undersigned:
Social Security No.:__________________________________
(ii) Description of property with respect to which the election is being made:
______________ shares of common stock of eGain Communications Corporation, a Delaware corporation (the "Company").
(iii) The date on which the property was transferred is _______________, 1999.
(iv) The taxable year to which this election relates is calendar year 1999.
(v) Nature of restrictions to which the property is subject:
The shares of stock transferred to the undersigned taxpayer are subject to the Company's right of repurchase the stock at the undersigned's original purchase price if the undersigned ceases to be associated with the Company, which right will generally lapse over a designated four (4) year period.
(vi) The Fair Market Value of the property at the time of transfer was _________ per share for an aggregate of $____________. The Fair market Value at the time of transfer was determined without regard to any lapse restrictions as defined in Section 1.83-3(i) of the Income Tax Regulations.
(vii) The amount paid by taxpayer for the property was $_______________.
(viii) A copy of this election has been furnished to the Company.
Dated: _______________, 1999
Signature
Exhibit 10.4
EGAIN COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
Page
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Section 1. Establishment of the Plan ................................. 1
Section 2. Definitions ............................................... 1
Section 3. Shares Authorized ......................................... 2
Section 4. Administration ............................................ 2
Section 5. Eligibility and Participation ............................. 2
Section 6. Participation Periods ..................................... 3
Section 7. Purchase Price ............................................ 3
Section 8. Employee Contributions .................................... 3
Section 9. Plan Accounts; Purchase of Shares ......................... 4
Section 10. Withdrawal From the Plan .................................. 4
Section 11. Effect of Termination of Employment or Death .............. 5
Section 12. Rights Not Transferable ................................... 5
Section 13. Recapitalization, Etc ..................................... 5
Section 14. Limitation on Stock Ownership ............................. 6
Section 15. No Rights as an Employee .................................. 6
Section 16. Rights as a Shareholder ................................... 6
Section 17. Use of Funds .............................................. 6
Section 18. Amendment or Termination of the Plan ...................... 6
Section 19. Governing Law ............................................. 6
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EGAIN COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The eGain Communications Corporation 1999 Employee Stock Purchase Plan (the "Plan") is hereby established to provide Eligible Employees with an opportunity to purchase the Company's Common Stock so that they may increase their equity interest in and share in the success of the Company. The Plan, which provides for the purchase of stock through payroll withholding, is intended to qualify under Section 423 of the Code.
(a) "Board of Directors" or "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Company" means EGain Communications Corporation, a Delaware corporation.
(d) "Compensation" means the base compensation paid to a Participant during a Participation Period in cash or in kind, excluding overtime, commissions, shift differentials and other forms of compensation for work outside the regular work schedule.
(e) "Date of Participation" means the first day of a Participation Period.
(f) "Eligible Employee" means any Employee of a Participating Company (i) whose customary employment is for at least five months per calendar year and for more than 20 hours per week and (ii) who is an Employee at the commencement of a Participation Period.
(g) "Employee" means any common-law employee of a Participating Company.
(h) "Fair Market Value" shall mean the market price of the Common Stock, determined by the Committee as follows:
(i) If the Common 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 the Common 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.
(i) Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in the Wall Street Journal or as reported directly to the Company
by Nasdaq or a stock exchange. Such determination shall be conclusive and binding on all persons.
(j) "Participant" means an Eligible Employee who elects to participate in the Plan, as provided in Section 5 hereof.
(k) "Participating Company" means the Company and such present or future Subsidiaries of the Company as the Board of Directors shall from time to time designate.
(l) "Participation Period" means a period during which contributions may
be made toward the purchase of Stock under the Plan, as determined pursuant to
Section 6.
(m) "Plan Account" means the account established for each Participant pursuant to Section 9(a).
(n) "Purchase Price" means the price at which Participants may purchase Stock under Section 5 of the Plan, as determined pursuant to Section 7.
(o) "Stock" means the Common Stock of the Company.
(p) "Subsidiary" means a subsidiary corporation as defined in Section 424 of the Code.
The maximum aggregate number of shares which may be offered under the Plan shall be 750,000 shares of Stock, which number is subject to adjustment as provided in Section 13 hereof.
(a) The Plan shall be administered by a Plan Administrator appointed by the Board of Directors. In the absence of such an appointment, the full Board of Directors shall serve as the Plan Administrator. The interpretation and construction by the Plan Administrator of any provision of the Plan or of any right to purchase stock qualified hereunder shall be conclusive and binding on all persons.
(b) All costs and expenses incurred in administering the Plan shall be paid by the Company. The Board or the Plan Administrator may request advice for assistance or employ such other persons as are necessary for proper administration of the Plan. A Participant who withdraws from the Plan in accordance with Section 10 may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Section 5(a).
(a) Any person who qualifies or will qualify as an Eligible Employee on the Date of Participation with respect to a Participation Period may elect to participate in the Plan for such Participation Period. An Eligible Employee may elect to participate by executing the participation agreement prescribed for such purpose by the Plan Administrator. The participation
agreement shall be filed with the Plan Administrator no later than the deadline stated on the participation agreement, and if none is stated, then no later than the first day of the Participation Period. The Eligible Employee shall designate on the participation agreement the percentage of his or her Compensation which he or she elects to have withheld for the purchase of Stock, which may be any whole percentage of the Participant's Compensation or fixed dollar amount specified by the Plan Administrator.
(b) By enrolling in the Plan, a Participant shall be deemed to have elected to purchase the maximum number of whole shares of Stock which can be purchased with the amount of the Participant's Compensation which is withheld during the Participation Period, subject to any limitations imposed by the Plan Administrator pursuant to Section 6, and/or Section 14.
(c) Once enrolled, a Participant will continue to participate in the Plan for each succeeding Participation Period until he or she terminates participation or ceases to qualify as an Eligible Employee. A Participant who withdraws from the Plan in accordance with Section 10 may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Section 5(a).
The Plan shall be implemented by one or more Participation Periods of not more than twenty-seven (27) months each. The Plan Administrator shall determine the commencement date and duration of each Participation Period, the purchase dates that may occur during a Purchase Period and the maximum number of shares that may be purchased by a Participant during the Participation Period.
The Purchase Price for each share of Stock shall be the lesser of (i) eighty-five percent (85%) of the Fair Market Value on the Date of Participation or (ii) eighty-five percent (85%) of the Fair Market Value on the date shares are purchased.
A Participant may purchase shares of Stock solely by means of payroll
deductions. Payroll deductions, as designated by the Participant pursuant to
Section 5(a), shall commence with the first paycheck issued during the
Participation Period and shall be deducted from each subsequent paycheck
throughout the Participation Period. If a Participant desires to decrease the
rate of payroll withholding during the Participation Period, he or she may do
so, if permitted by the Plan Administrator, by filing a new participation
agreement with the Plan Administrator. Such decrease will be effective as of the
date prescribed by the Company following the receipt of the new participation
agreement. If a Participant desires to increase the rate of payroll withholding,
he or she may do so effective for the next Participation Period by filing a new
participation agreement with the Plan Administrator on or before the date
specified by the Plan Administrator, and if none is stated, then no later than
the first day of the Participation Period for which such change is to be
effective.
(a) The Company will maintain a Plan Account on its books in the name of each Participant. At the close of each pay period, the amount deducted from the Participant's Compensation will be credited to the Participant's Plan Account.
(b) As of the last day of each Participation Period, the amount then in the Participant's Plan Account will be divided by the Purchase Price, and the number of whole shares which results (subject to the limitations described herein) shall be purchased from the Company with the funds in the Participant's Plan Account. Following the purchase of the shares, the shares will be electronically delivered to a brokerage account for the benefit of the Participant, unless the Participant elects that certificates for the shares shall be delivered to the Participant as provided in the election form prescribed by the Company.
(c) In the event that the aggregate number of shares which all Participants elect to purchase during a Participation Period shall exceed the number of shares remaining available for issuance under the Plan, then the number of shares to which each Participant shall become entitled shall be determined by multiplying the number of shares available for issuance by a fraction the numerator of which is the sum of the number of shares the Participant has elected to purchase pursuant to Section 5, and the denominator of which is the sum of the number of shares which all employees have elected to purchase pursuant to Section 5. Any cash amount remaining in the Participant's Plan Account under these circumstances shall be refunded to the Participant.
(d) Any amount remaining in the Participant's Plan Account caused by a surplus due to fractional shares after deducting the amount of the Purchase Price for the number of whole shares issued to the Participant shall be carried over in the Participant's Plan Account for the succeeding Participation Period, without interest. Any amount remaining in the Participant's Plan Account caused by anything other than a surplus due to fractional shares shall be refunded to the Participant in cash, without interest.
(e) As soon as practicable following the end of each Participation Period, the Company shall deliver to each Participant a Plan Account statement setting forth the amount of payroll deductions, the purchase price, the number of shares purchased and the remaining cash balance, if any.
A Participant may elect to withdraw from participation under the Plan at
any time up to the last day of a Participation Period by filing the prescribed
form with the Plan Administrator. As soon as practicable after a withdrawal,
payroll deductions shall cease and all amounts credited to the Participant's
Plan Account will be refunded in cash, without interest. A Participant who has
withdrawn from the Plan shall not be a Participant in future Participation
Periods, unless he or she again enrolls in accordance with the provisions of
Section 5.
(a) Termination of employment as an Eligible Employee for any reason,
including death, shall be treated as an automatic withdrawal from the Plan under
Section 10. A transfer from one Participating Company to another shall not be
treated as a termination of employment.
(b) A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant's Account under the Plan in the event of such Participant's death subsequent to the purchase of shares but prior to delivery to him of such shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant's Account under the Plan in the event of such Participant's death prior to the last day of a Participation Period.
(c) Such designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant in the absence of a valid designation of a beneficiary who is living at the time of such Participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the Participant; or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant; or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
The rights or interests of any Participant in the Plan, or 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 by any other manner other than as permitted by the Code or by will 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 as permitted by the Code or by will or the laws of descent and distribution, such act shall be treated as an automatic withdrawal under Section 10.
(a) The aggregate number of shares of Stock offered under the Plan, the number and price of shares which any Participant has elected to purchase pursuant to Section 5 and the maximum number of shares which a Participant may elect to purchase under the Plan in any Participation Period shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of a stock dividend, or other increase or decrease in such shares effected without receipt of consideration by the Company.
(b) Immediately prior to the effective time of a Corporate Reorganization, the Participation Period then in progress shall terminate and shares shall be purchased pursuant to Section 9, unless the Plan is assumed by the surviving corporation or its parent corporation pursuant to the plan of merger or consolidation. "Corporate Reorganization" means: (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 Plan shall in no event be construed to restrict in any way the Company's right to undertake a dissolution, liquidation, merger, consolidation or other reorganization.
Notwithstanding any provision herein to the contrary, no Participant shall
be permitted to elect to participate in the Plan (i) if such Participant,
immediately after his or her election to participate, would own stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or any parent or Subsidiary of the Company, or
(ii) if under the terms of the Plan the rights of the Employee to purchase Stock
under this Plan and all other qualified employee stock purchase plans of the
Company or its Subsidiaries would accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of the Fair Market Value of such Stock (determined at
the time such right is granted) for each calendar year for which such right is
outstanding at any time. For purposes of this Section 14, ownership of stock
shall be determined by the attribution rules of Section 424(d) of the Code, and
Participants shall be considered to own any stock which they have a right to
purchase under this or any other stock plan.
Nothing in the Plan shall be construed to give any person the right to remain in the employ of a Participating Company. Each Participating Company reserves the right to terminate the employment of any person at any time and for any reason.
A Participant shall have no rights as a shareholder with respect to any shares he or she may have a right to purchase under the Plan until the date such shares are actually purchased for the Participant's account, subject to the shareholders' approval of the adoption of the Plan.
All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions in separate accounts.
The Board of Directors shall have the right to amend, modify or terminate the Plan at any time without notice. An amendment of the Plan shall be subject to shareholder approval only to the extent required by applicable laws, regulations or rules.
The Plan shall be governed by, and construed and interpreted in accordance with, the laws of the State of California.
Exhibit 10.5
GOLDEN GATE COMMERCIAL
LEASE AGREEMENT
THIS LEASE, made this 21st day of July, 1998 by and between GOLDEN GATE COMMERCIAL COMPANY, a California Limited Partnership, hereinafter called Landlord and EGAIN COMMUNICATIONS CORPORATION, a Delaware corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord those certain premises (the "Premises") outlined in red on Exhibit "A," attached hereto and incorporated herein by this reference thereto more particularly described as follows:
A portion of that certain 17,840 square foot, one-story building located at 624 E. Evelyn Avenue, Sunnyvale, California 94086, consisting of approximately ten thousand seven hundred twenty (10,720) square feet. Said Premises are more particularly shown within the area outlined in Red on Exhibit "A" attached hereto. The entire parcel, of which the Premises are a part, is shown within the area outlined in Green on Exhibit "A" attached hereto. The Premises shall be improved as shown on Exhibit "B" to be attached hereto, and is leased on an "as is" basis, in its present condition, and in the configuration as shown in Red on Exhibit "B" to be attached hereto.
The word "Premises" as used throughout this lease is hereby defined to include the building and the non-exclusive use of landscaped areas, sidewalks, parking lot, and driveways in front of or adjacent to the building, and the non- exclusive use of the area directly underneath or over such sidewalks and driveways. The gross leasable area of the building shall be measured from outside of exterior walls to outside of exterior walls, and shall include any atriums, covered entrances or egresses and covered loading areas.
Said letting and hiring is upon and subject to the terms, covenants and conditions hereinafter set forth and Tenant covenants as a material part of the consideration of this Lease to perform and observe each and all of said terms, covenants and conditions. This Lease is made upon the conditions of such performance and observance.
way obstruct or interfere with the rights of other tenants or occupants of neighboring premises or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. No sale by auction shall be permitted on the Premises. Tenant shall not place any loads upon the floors, walls, or ceiling which endanger the structure, or place any harmful fluids or other materials in the drainage system of the building, or overload existing electrical or other mechanical systems. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises including the outside of the building, except in trash containers placed inside exterior enclosures designated by Landlord for that purpose or inside of the building proper where designated by Landlord. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain outside the Premises. Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises. No loudspeaker or other device, system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent of Landlord. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless against any loss, expense, damage, reasonable attorneys' fees, or liability arising out of failure of Tenant to comply with any applicable law. Tenant shall comply with any covenant, condition, or restriction ("CC&R's") affecting the Premises. The provisions of this paragraph are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Premises.
B. Possession of the Premises shall be deemed tendered and the term of the Lease shall commence on September 1, 1998, or as otherwise agreed in writing.
C. It is agreed in the event said Lease commences on a date other than the first day of the month the term of the Lease will be extended to account for the number of days in the partial month. The Basic Rent during the resulting partial month will be prorated (for the number of days in the partial month) at the Basic Rent rate scheduled for the projected commencement date as shown in Paragraph 4A.
date herein (except those delays caused by Acts of God, strikes, war, utilities, governmental bodies, weather, unavailable materials, and delays beyond Landlord's control shall be excluded in calculating such period) in which instance Tenant, at its option, may, by written notice to Landlord, terminate this Lease.
Upon execution of this Lease Agreement, the sum of TWENTY-FOUR THOUSAND ONE HUNDRED TWENTY DOLLARS ($24,120.00) shall be due, representing the rental for the period September 1, 1998 through September 30, 1998;
On October 1, 1998, the sum of TWENTY-FOUR THOUSAND ONE HUNDRED TWENTY DOLLARS ($24,120.00) shall be due, and a like sum due on the first day of each month thereafter, through and including August 31, 1999;
On September 1, 1999, the sum of TWENTY-FIVE THOUSAND ONE HUNDRED NINETY- TWO DOLLARS ($25,192.00) shall be due, and a like sum due on the first day of each month thereafter, through and including August 31, 2000;
On September 1, 2000, the sum of TWENTY-SIX THOUSAND TWO HUNDRED SIXTY- FOUR DOLLARS ($26,264.00) shall be due, and a like sum due on the first day of each month thereafter, through and including August 31, 2001;
On September 1, 2001, the sum of TWENTY-SEVEN THOUSAND THREE HUNDRED THIRTY-SIX DOLLARS ($27,336.00) shall be due, and a like sum due on the first day of each month thereafter, through and including August 31, 2002; and
On September 1, 2002, the sum of TWENTY-EIGHT THOUSAND FOUR HUNDRED EIGHT DOLLARS ($28,408.00) shall be due, and a like sum due on the first day of each month thereafter, through and including September 30, 2003, or until the entire aggregate sum of ONE MILLION SIX HUNDRED FOUR THOUSAND TWO HUNDRED FORTY-EIGHT DOLLARS ($1,604,248.00) has been paid.
B. Time for Payment. Full monthly rent is due in advance on the first day of each calendar month. In the event that the term of this Lease commences on a date other than the first day of a calendar month, on the date of commencement of the term hereof Tenant shall pay to Landlord as rent for the period from such date of commencement to the first day of the next succeeding calendar month that proportion of the monthly rent hereunder which the number of days between such date of commencement and the first day of the next succeeding calendar month bears to thirty (30). In the event that the term of this Lease for any reason ends on a date other than the last day of a calendar month, on the first day of the last calendar month of the term
hereof Tenant shall pay to Landlord as rent for the period from said first day of said last calendar month to and including the last day of the term hereof that proportion of the monthly rent hereunder which the number of days between said first day of said last calendar month and the last day of the term hereof bears to thirty (30).
C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant is in default in the payment of rental as set forth in this Paragraph 4 when due, or any part thereof, Tenant agrees to pay Landlord, in addition to the delinquent rental due, a late charge for each rental payment in default ten (10) days. Said late charge shall equal ten percent (10%) of each rental payment so in default.
D. Additional Rent. Beginning with the commencement date of the term of this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in addition to the Basic Rent and as Additional Rent the following:
(a) All Taxes related to the Premises as set forth in Paragraph 9, and
(b) All insurance premiums relating to the Premises, as set forth in Paragraph 12, and
(c) All charges, costs and expenses, which Tenant is required to pay hereunder, together with all interest and penalties, costs and expenses including reasonable attorneys' fees and legal expenses, that may accrue thereto in the event of Tenant's failure to pay such amounts, and all damages, reasonable costs and expenses which Landlord may incur by reason of default of Tenant or failure on Tenant's part to comply with the terms of this Lease. In the event of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for nonpayment of rent.
Unless otherwise provided in this Lease, the Additional Rent due hereunder shall be paid to Landlord or Landlord's agent (i) within five days for taxes and insurance and within thirty (30) days for all other Additional Rent items after presentation of invoice from Landlord or Landlord's agent setting forth such Additional Rent and/or (ii) at the option of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorata share of an amount estimated by Landlord to be Landlord's approximate average monthly expenditure for such Additional Rent items, which estimated amount shall be reconciled within 120 days of the end of each calendar year or more frequently if Landlord elects to do so at Landlord's sole and absolute discretion as compared to Landlord's actual expenditure for said Additional Rent items, with Tenant paying to Landlord, upon demand, any amount of actual expenses expended by Landlord in excess of said estimated amount, or Landlord crediting to Tenant (providing Tenant is not in default in the performance of any of the terms, covenants and conditions of this Lease) any amount of estimated payments made by Tenant in excess of Landlord's actual expenditures for said Additional Rent items.
The respective obligations of Landlord and Tenant under this paragraph shall survive the expiration or other termination of the term of this Lease, and if the term hereof shall expire or shall otherwise terminate on a day other than the last day of a calendar year, the actual Additional Rent incurred for the calendar year in which the term hereof expires or otherwise terminates shall be determined and settled on the basis of the statement of actual Additional Rent for such calendar year and shall be prorated in the proportion which the number of days in such calendar year preceding such expiration or termination bears to 365.
E. Fixed Management Fee. Beginning with the Commencement Date of the Term of this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and Additional Rent, a fixed monthly management fee ("Management Fee") equal to 3% of the Basic Rent due for each month during the Lease Term.
F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and all payments hereunder for Additional Rent shall be paid to Landlord at the office of Landlord at 360 South San Antonio Road, Suite 7, Los Altos, CA 94022 or to such other person or to such other place as Landlord may from time to time designate in writing.
G. Security Deposit. Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum of FIFTY-SIX THOUSAND EIGHT HUNDRED SIXTEEN ($56,816.00). Said sum shall be held by Landlord as a Security Deposit for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent and any of the monetary sums due herewith, Landlord may (but shall not be required to) use, apply or retain all or any part of this Security Deposit for the payment of any other amount which Landlord may spend by reason of Tenant's default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of said Deposit is so used or applied, Tenant shall, within ten (10) days after written demand therefor, deposit cash with Landlord in the amount sufficient to restore the Security Deposit to its original amount. Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant fully and faithfully performs every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord's option, to the last assignee of Tenant's interest hereunder) at the expiration of the Lease term and after Tenant has vacated the Premises. In the event of termination of Landlord's interest in this Lease, Landlord shall transfer said Deposit to Landlord's successor in interest whereupon Tenant agrees to release Landlord from liability for the return of such Deposit or the accounting therefor.
firm and in good operating condition and repair; the plumbing and electrical systems and lighting in good order and repair, including replacement of any burned out or broken light bulbs or ballasts; the lawn and shrubs in good condition including the replacement of any dead or damaged plantings; the sidewalk, driveways and parking areas in good order, condition and repair; together with all alterations, additions, and improvements which may have been made in, to, or on the Premises (except moveable trade fixtures installed at the expense of Tenant) except that Tenant shall ascertain from Landlord within thirty (30) days before the end of the term of this Lease whether Landlord desires to have the Premises or any part or parts thereof restored to their condition and configuration as when the Premises were delivered to Tenant and if Landlord shall so desire, then Tenant shall restore said Premises or such part or parts thereof before the end of this Lease at Tenant's sole cost and expense. Tenant, on or before the end of the term or sooner termination of this Lease, shall remove all of Tenant's personal property and trade fixtures from the Premises, and all property not so removed on or before the end of the term or sooner termination of this Lease shall be deemed abandoned by Tenant and title to same shall thereupon pass to Landlord without compensation to Tenant. Landlord may, upon termination of this Lease, remove all moveable furniture and equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by such removal at Tenant's sole cost. If the Premises be not surrendered at the end of the term or sooner termination of this Lease, Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant founded on such delay. Nothing contained herein shall be construed as an extension of the term hereof or as a consent of Landlord to any holding over by Tenant. The voluntary or other surrender of this Lease or the Premises by Tenant or a mutual cancellation of this Lease shall not work as a merger, and, at the option of Landlord, shall either terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord of all or any such subleases or subtenancies.
claimed to have been furnished to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10) days after the filing thereof, at the cost and expense of Tenant. Any exceptions to the foregoing must be made in writing and executed by both Landlord and Tenant.
Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of rent by reason of any interruption or failure of utility services to the Premises when such interruption or failure is caused by accident, breakage, repair, strikes, lockouts, or other labor disturbances or labor disputes of any nature, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.
and it shall be the responsibility of Tenant to pay, prior to delinquency, the applicable real property taxes and assessments pertaining to the leased Premises. The term "Real Property Taxes," as used herein, shall mean (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all installments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership of the Premises) now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed against, or with respect to the value, occupancy or use of, all or any portion of the Premises (as now constructed or as may at any time hereafter be constructed, altered, or otherwise changed) or Landlord's interest therein; any improvements located within the Premises (regardless of ownership); the fixtures, equipment and other property of Landlord, real or personal, that are an integral part of and located in the Premises; or parking areas, public utilities, or energy within the Premises; (ii) all charges, levies or fees imposed by reason of environmental regulation or other governmental control of the Premises; and (iii) all costs and fees (including reasonable attorneys' fees) incurred by Landlord in reasonably contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax. If at any time during the term of this Lease the taxation or assessment of the Premises prevailing as of the commencement date of this Lease shall be altered so that in lieu of or in addition to any Real Property Tax described above there shall be levied, assessed or imposed (whether by reason of a change in the method of taxation or assessment, creation of a new tax or charge, or any other cause) an alternate or additional tax or charge (i) on the value, use or occupancy of the Premises or Landlord's interest therein or (ii) on or measured by the gross receipts, income or rentals from the Premises, on Landlord's business of leasing the Premises, or computed in any manner with respect to the operation of the Premises, then any such tax or charge, however designated, shall be included within the meaning of the term "Real Property Taxes" for purposes of this Lease. If any Real Property Tax is based upon property or rents unrelated to the Premises, then only that part of such Real Property Tax that is fairly allocable to the Premises shall be included within the meaning of the term "Real Property Taxes." Notwithstanding the foregoing, the term "Real Property Taxes" shall not include estate, inheritance, gift or franchise taxes of Landlord or the federal or state net income tax imposed on Landlord's income from all sources.
B. Taxes on Tenant's Property. Tenant shall be liable for and shall pay ten days before delinquency, taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Premises is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord, after written notice to Tenant, pays the taxes based on such increased assessment, which Landlord shall have the right to do regardless of the validity thereof, but only under proper protest if requested by Tenant, Tenant shall upon demand, as the case may be, repay to Landlord the taxes so levied against Landlord, or the proportion of such taxes resulting from such increase in the assessment; provided that in any such event Tenant shall have the right, in the name of Landlord with Landlord's full cooperation, to bring suit in any court of competent jurisdiction to recover the amount of such taxes so paid under protest, and any amount so recovered shall belong to Tenant.
Tenant shall also maintain a policy or policies of workman's compensation insurance and any other employee benefit insurance sufficient to comply with all laws.
Certificates of Insurance with respect to all policies required by this Paragraph 11 shall be delivered to Landlord within ten (10) days after Tenant's occupancy of the Premises.
Landlord and Tenant do each hereby respectively release the other, to the extent of insurance coverage of the releasing party, from any liability for loss or damage caused by fire or any of the extended coverage casualties included in the releasing party's insurance policies, irrespective of the cause of such fire or casualty; provided, however, that if the insurance policy of either releasing party prohibits such waiver, then this waiver shall not take effect until consent to such waiver is obtained. If such waiver is so prohibited, the insured party affected shall promptly notify the other party thereof.
purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant on demand with interest at the prime rate of interest as quoted by the Bank of America.
land and buildings in which the demised Premises are located, to secure a loan from a lender (hereinafter referred to as "Lender") to Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing an agreement subordinating its rights under this Lease to the lien of such deed of trust, or, if so requested, agreeing that the lien of Lender's deed of trust shall be or remain subject and subordinate to the rights of Tenant under this Lease. Notwithstanding any such subordination, Tenant's possession under this Lease shall not be disturbed if Tenant is not in default and so long as Tenant shall pay all rent and observe and perform all of the provisions set forth in this Lease.
Within thirty (30) days after court approval of the assumption of this Lease, the trustee or receiver shall cure (or provide adequate assurance to the reasonable satisfaction of Landlord that the trustee or receiver shall cure) any and all previous defaults under the unexpired Lease and shall compensate Landlord for all actual pecuniary loss and shall provide adequate assurance of future performance under said Lease to the reasonable satisfaction of Landlord. Adequate assurance of future performance, as used herein, includes, but shall not be limited to: (i) assurance of source and payment of rent, and other consideration due under this Lease; (ii) assurance that the assumption or assignment of this Lease will not breach substantially any provision, such as radius, location, use, or exclusivity provision, in any agreement relating to the above described Premises.
Nothing contained in this section shall affect the existing right of Landlord to refuse to accept an assignment upon commencement of or in connection with a bankruptcy, liquidation, reorganization or insolvency action or an assignment of Tenant for the benefit of creditors or other similar act. Nothing contained in this Lease shall be construed as giving or granting or creating an equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or involuntary bankruptcy proceeding without the prior written consent of Landlord. In no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation made under this Lease shall constitute a default hereunder by Tenant upon expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of five (5) days from the date of written notice from Landlord within which to cure any default in the payment of rental or adjustment thereto. Tenant shall have a period of thirty (30) days from the date of written notice from Landlord within which to cure any other default under this Lease. Upon an uncured default of this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to landlord at law or in equity:
(a) The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the worth at the same time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of rental loss for the same period that
Tenant proves could be reasonably avoided, as computed pursuant to subsection
(b) of said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3)
of Section 1951.2 of the California Civil Code of the amount of rental loss that
could be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises and in the same
geographic vicinity. Such two real estate brokers shall select a third licensed
real estate broker, and the three licensed real estate brokers so selected shall
determine the amount of the rental loss that could be reasonably avoided from
the balance of the term of this Lease after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
(b) The rights and remedies provided by California Civil Code Section which allows Landlord to continue the Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover rent as it becomes due, for so long as Landlord does not terminate Tenant's right to possession; acts of maintenance or preservation, efforts to re-let the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's right to possession .
(c) The right to terminate this Lease by giving notice to Tenant in accordance with applicable law.
(d) To the extent permitted by law the right and power to enter the Premises and remove therefrom all persons and property, to store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such property and apply such proceeds therefrom pursuant to applicable California law. Landlord may from time to time sublet the Premises or any part thereof for such term or terms (which may extend beyond the term of this Lease) and at such rent and such other terms as Landlord in its reasonable sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately liable to pay Landlord, in addition to indebtedness other than rent due hereunder, the reasonable cost of such subletting, including, but not limited to, reasonable attorneys' fees, and any real estate commissions actually paid, and the cost of such reasonable alterations and repairs incurred by Landlord and the amount, if any, by which the rent hereunder for the period of such subletting (to the extent such period does not
exceed the term hereof) exceeds the amount to be paid as rent for the Premises for such period or (ii) at the option of Landlord, rents received from such subletting shall be applied first to payment of indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such subletting and of such alterations and repairs; third to payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same becomes due hereunder. If Tenant has been credited with any rent to be received by such subletting under option (i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or if such rentals received from such subletting under option (ii) during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such subletting without termination, Landlord may at any time hereafter elect to terminate this Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon application by Landlord, to take possession of the Premises and to apply any rental collected from the Premises and to exercise all other rights and remedies granted to Landlord pursuant to subparagraph d. above.
(a) Rebuild or restore the Premises to their condition prior to the damage or destruction, or
(b) Terminate this Lease (providing that the Premises is damaged to the extent of 33-1/3% of the replacement cost).
If Landlord does not give Tenant notice in writing within thirty (30) days from the destruction of the Premises of its election to either rebuild and restore them, or to terminate this Lease, Landlord shall be deemed to have elected to rebuild or restore them, in which event Landlord agrees, at its expense except for any deductible, which is the responsibility of Tenant, promptly to rebuild or restore the Premises to their condition prior to the damage or destruction. Tenant shall be entitled to a reduction in rent following such destruction and while such repair is being made in the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises. If Landlord initially estimates that the rebuilding or restoration will exceed one hundred eighty (180) days or ninety (90) days if occurring during the last twelve (12) months of the Lease term, or if Landlord does not complete the rebuilding or restoration within one hundred eighty (180) days following the date of destruction or ninety (90) days during the last twelve (12) months of the Lease term, (such period of time to be extended for delays caused by the fault or neglect of Tenant or because of Acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors, or delay of the contractors or subcontractors due to such causes or other contingencies beyond the control of Landlord), then Tenant shall have the right to terminate this Lease by giving fifteen (15) days prior written notice to Landlord. Notwithstanding anything herein to the contrary, Landlord's obligation to rebuild or restore shall be limited to the building and interior improvements constructed by Landlord as they existed as of the commencement date of the Lease and shall not include restoration of Tenant's trade fixtures, equipment, merchandise, or any improvements, alterations, or additions made by Tenant to the Premises, which Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense provided this Lease is not canceled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect. Tenant hereby expressly waives the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the California Civil Code.
In the event that the building in which the Premises are situated is damaged or destroyed to the extent of not less than 33-1/3% of the replacement cost thereof, Landlord may elect to terminate this Lease. Notwithstanding anything to the contrary herein, Landlord may terminate this Lease in the event of an uninsured event or if insurance proceeds are insufficient to cover one hundred percent of the rebuilding costs net of the deductible.
If any action or proceeding is commenced for such taking of the Premises or any part thereof, or if Landlord is advised in writing by any entity or body having the right or power of condemnation of its intention to condemn the premises or any portion thereof, then Landlord shall have the right to terminate this Lease by giving Tenant written notice thereof within sixty (60) days of the date of receipt of said written advice, or commencement of said action or proceeding, or taking conveyance, which termination shall take place as of the first to occur of the last day of the calendar month next following the month in which such notice is given or the date on which title to the Premises shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if the portion of the Premises taken or conveyed is so substantial that the Tenant can no longer reasonably conduct its business, Tenant shall have the privilege of terminating this Lease within sixty (60) days from the date of such taking or conveyance, upon written notice to Landlord of its intention so to do, and upon giving of such notice this Lease shall terminate on the last day of the calendar month next following the month in which such notice is given, upon payment by Tenant of the rent from the date of such taking or conveyance to the date of termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this Lease as provided herein, this Lease shall continue in full force and effect as to the part of the Premises not so taken or conveyed, and the rent herein shall be apportioned as of the date of such taking or conveyance so that thereafter the rent to be paid by Tenant shall be in the ratio that the area of the portion of the Premises not so taken or conveyed bears to the total area of the Premises prior to such taking.
statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant that this Lease is in full force and effect, without modification except as may be represented by landlord; that there are no uncured defaults in Landlord's performance, and that not more than one month's rent has been paid in advance.
A. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease, or for any other relief against the other party hereunder, then all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.
B. Except as otherwise provided in this Lease, should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including a reasonable attorney's fee.
A. Consumer Price Index. It is understood that on each and every anniversary of the date Tenant takes possession, the Basic Rent provided for in Paragraph 4A of the Lease shall be adjusted in accordance with the following formula based on the Consumer Price Index ("CPI") for All Urban Consumers, subgroup "All Items," San Francisco-Oakland-San Jose, California Metropolitan Area (1982-84 - 100) published by the Bureau of Labor Statistics, U.S. Department of Labor (the "Index") published nearest the date Tenant takes possession of the Premises (the "Beginning Index") and the Index which is published nearest but prior to each and every anniversary of the date on which Tenant takes possession of the Premises (the "Adjustment Index"). The CPI- adjusted Basic Rent shall be calculated by multiplying the Basic Rent provided for in Paragraph 4A of the Lease by a fraction, the numerator of which is the Adjustment Index and the denominator of which is the Beginning Index. In no event, however, shall the adjusted Basic Rent decrease below the Basic Rental provided for in Paragraph 4A of the Lease or any subsequent adjustment hereof. On such adjustment, the parties shall execute an amendment to the Lease stating the new (adjusted) Basic Rent. If the Index is changed so that the Base Year of the Index differs from that used as of the month immediately preceding the month in which the term commences, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the term, such other government index or other computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had not been discontinued or revised.
B. Increased Interest on Encumbrances. In the event that the first or any subsequent Premises Loan (as defined below) bears interest at an annual rate higher than ________, the CPI-adjusted Basic Rent provided for in Paragraphs 35A and 4A of the Lease shall be adjusted for such higher interest rate at the time the interest rate takes effect. The interest-adjusted Basic Rent shall be calculated by multiplying the aforesaid CPI-adjusted Basic Rent by a fraction, the numerator of which is the new Premises Loan interest rate and the denominator of which is _________. In no event, however, shall the interest- adjusted Basic Rent decrease below the CPI-adjusted Basic Rent provided for in Paragraphs 35A and 4A of the Lease. The phrase "Premises Loan" as used herein is any borrowing from an institutional lender by Landlord, or Landlord's predecessor in interest, whether or not secured by the Premises, the proceeds of which are used to (i) acquire, construct or improve the Premises, or (ii) repay a prior Premises Loan. For the purpose of this Paragraph, the definition of interest shall include any participation in the income, revenue or cash flow from the operation of the Premises to which any institutional lender may be entitled.
(a) the sole and exclusive remedy shall be against Landlord's interest in the Premises leased herein;
(b) no partner of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to secure jurisdiction of the partnership);
(c) no service of process shall be made against any partner of Landlord (except as may be necessary to secure jurisdiction of the partnership);
(d) no partner of Landlord shall be required to answer or otherwise plead to any service of process;
(e) no judgment will be taken against any partner of Landlord;
(f) any judgment taken against any partner of Landlord may be vacated and set aside at any time without hearing;
(g) no writ of execution will ever be levied against the assets of any partner of Landlord;
(h) these covenants and agreements are enforceable both by Landlord and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall be applicable to any covenant or agreement either expressly contained in this Lease or imposed by statute or at common law.
All approved signs or lettering on outside doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord.
Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises.
EGAIN COMMUNICATIONS CORPORATION
EGAIN.COM
This space intentionally left blank.
A. Use of Building Name. Tenant shall not, without the written consent of Landlord, use the name of the building for any purpose other than as the address of the business conducted by Tenant in the Premises.
B. Choice of Law; Severability. This Lease shall in all respects be governed by and construed in accordance with the laws of the State of California. If any provision of this Lease
shall be invalid, unenforceable or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.
C. Definition of Terms. The term "Premises" includes the space leased hereby and any improvements now or hereafter installed therein or attached thereto. The term "Landlord" or any pronoun used in place thereof includes the plural as well as the singular and the successors and assigns of Landlord. The term "Tenant" or any pronoun used in place thereof includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations, and their and each of their respective heirs, executors, administrators, successors and permitted assigns, according to the context hereof, and the provisions of this Lease shall inure to the benefit of and bind such heirs, executors, administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations. Words used in any gender include other genders. If there be more than one Tenant the obligations of Tenant hereunder are joint and several. The paragraph headings of this Lease are for convenience of reference only and shall have no effect upon the construction or interpretation of any provision hereof.
D. Time of Essence. Time is of the essence of this Lease and of each and all of its provisions.
E. Quitclaim. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days after written demand from Landlord to Tenant, any quitclaim deed or other document required by any reputable title company, licensed to operate in the State of California, to remove the cloud or encumbrance created by this Lease from the real property of which Tenant's Premises are a part.
F. Incorporation of Prior Agreements; Amendments. This instrument along with any exhibits and attachments hereto constitutes the entire agreement between landlord and Tenant relative to the Premises and this agreement and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relative to the leasing of the Premises are merged in or revoked by this agreement.
G. Recording. Neither Landlord or Tenant shall record this lease or a short form memorandum hereof without the consent of the other.
H. Amendments for Financing. Tenant further agrees to execute any amendments required by a lender to enable Landlord to obtain financing, so long as Tenant's rights hereunder are not substantially affected.
I. Additional Paragraphs. Paragraphs 39 through 55 are added hereto and are included as a part of this lease.
J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.
K. Diminution of Light, Air or View. Tenant covenants and agrees that no diminution or shutting off of light, air or view by any structure which may be hereafter erected (whether or not by Landlord) shall in any way affect his Lease, entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year last written below.
LANDLORD: TENANT:
GOLDEN GATE COMMERCIAL COMPANY EGAIN COMMUNICATIONS CORPORATION
By /s/ R Cabelict By /s/ Ashutosh Roy
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General Partner
Title CEO
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Date 7-22-98 Type or Print Name
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By /s/ Mark C. Jones By
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General Partner
Title
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Date 7/22/98
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Type or Print Name
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ADDENDUM PARAGRAPHS:
Paragraphs 39 through 54 to Lease Agreement dated July 21, 1998, by and between GOLDEN GATE COMMERCIAL COMPANY, a California Limited Partnership, as Landlord, and EGAIN COMMUNICATIONS CORPORATION, a Delaware corporation, as Tenant for 10,720+/- Square Feet of Space Located at 624 East Evelyn Avenue, Sunnyvale, California 94086.
A. As used herein, the term "Hazardous Materials" shall mean any material, waste, chemical, mixture or byproduct which is or hereafter is defined, listed or designated under
Environmental Laws (defined below) as a pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or material, or any other unwholesome, hazardous, toxic, biohazardous, or radioactive material, waste, chemical, mixture or byproduct, or which is listed, regulated or restricted by any Environmental Law (including, without limitation, petroleum hydrocarbons or any distillates or derivatives or fractions thereof, polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental Laws" shall mean any applicable Federal, State of California or local government law (including common law), statute, regulation, rule, ordinance, permit, license, order, requirement, agreement, or approval, or any determination, judgment, directive, or order of any executive or judicial authority at any level of Federal, State of California or local government (whether now existing or subsequently adopted or promulgated) relating to pollution or the protection of the environment, ecology, natural resources, or public health and safety.
B. Tenant shall obtain Landlord's written consent, which may be withheld in Landlord's discretion, prior to the occurrence of any Tenant's Hazardous Materials Activities (defined below); provided, however, that Landlord's consent shall not be required for normal use in compliance with applicable Environmental Laws of customary household and office supplies (Tenant shall first provide Landlord with a list of said materials use), such as mild cleaners, lubricants and copier toner. As used herein, the term "Tenant's Hazardous Materials Activities" shall mean any and all use, handling, generation, storage, disposal, treatment, transportation, release, discharge, or emission of any Hazardous Materials on, in, beneath, to, from, at or about the Property, in connection with Tenant's use of the Property, or by Tenant or by any of Tenant's agents, employees, contractors, vendors, invitees, visitors or its future subtenants or assignees. Tenant agrees that any and all Tenant's Hazardous Materials Activities shall be conducted in strict, full compliance with applicable Environmental Laws at Tenant's expense, and shall not result in any contamination of the Property or the environment. Tenant agrees to provide Landlord with prompt written notice of any spill or release of Hazardous Materials at the Property during the term of the Lease of which Tenant becomes aware, and further agrees to provide Landlord with prompt written notice of any violation of Environmental Laws in connection with Tenant's Hazardous Materials Activities of which Tenant becomes aware. If Tenant's Hazardous Materials Activities involve Hazardous Materials other than normal use of customary household and office supplies, Tenant also agrees at Tenant's expense: (i) to install such Hazardous Materials monitoring, storage and containment devices as Landlord reasonably deems necessary (Landlord shall have no obligation to evaluate the need for any such installation or to require any such installation); (ii) provide Landlord with a written inventory of such Hazardous Materials, including an update of same each year upon the anniversary date of the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each Anniversary Date, to retain a qualified environmental consultant, acceptable to Landlord, to evaluate whether Tenant is in compliance with all applicable Environmental Laws with respect to Tenant's Hazardous Materials Activities. Tenant, at its expense, shall submit to Landlord a report from such environmental consultant which discusses the environmental consultant's findings within two (2) months of each Anniversary Date. Tenant, at its expense, shall promptly undertake and complete any and all steps necessary, and in full compliance with applicable Environmental Laws, to fully correct any and all problems or deficiencies identified by the environmental consultant, and promptly provide Landlord with documentation of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant at its expense, shall (i) properly remove from the Property all Hazardous Materials which came to be located at the Property in connection with Tenant's Hazardous Materials Activities, and (ii) fully comply with and complete all facility closure requirements of applicable Environmental Laws regarding Tenant's Hazardous Materials Activities, including but not limited to (x) properly restoring and repairing the Property to the extent damaged by such closure activities, and (y) obtaining from the local Fire Department or other appropriate governmental authority with jurisdiction a written concurrence that closure has been completed in compliance with applicable Environmental Laws. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any such closure activities.
D. If Landlord, in its sole discretion, believes that the Property has become contaminated as a result of Tenant's Hazardous Materials Activities, Landlord in addition to any other rights it may have under this Lease or under Environmental Laws or other laws, may enter upon the Property and conduct inspection, sampling and analysis, including but not limited to obtaining and analyzing samples of soil and ground water, for the purpose of determining the nature and extent of such contamination. Tenant shall promptly reimburse Landlord for the costs of such an investigation, including but not limited to reasonable attorneys' fees Landlord incurs with respect to such investigation, that discloses Hazardous Materials contamination for which Tenant is liable under this Lease. Except as may be required of Tenant by applicable Environmental laws, Tenant shall not perform any sampling, testing, or drilling to identify the presence of any Hazardous Materials at the Property, without Landlord's prior written consent which may be withheld in Landlord's discretion. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any sampling, testing or drilling performed pursuant to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel acceptable to Landlord, whose consent shall not unreasonably be withheld) and hold harmless Landlord, its employees, assigns, successors, successors-in-interest, agents and representatives from and against any and all claims (including but not limited to third party claims from a private party or a government authority), liabilities, obligations, losses, causes of action, demands, governmental proceedings or directives, fines, penalties, expenses, costs (including but not limited to reasonable attorneys', consultants' and other experts' fees and costs), and damages, which arise from or relate to: (i) Tenant's Hazardous Materials Activities; (ii) any Hazardous Materials contamination caused by Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any obligation of Tenant under this Paragraph 41 (collectively, "Tenant's Environmental Indemnification"). Tenant's Environmental Indemnification shall include but is not limited to the obligation to promptly and fully reimburse Landlord for losses in or reductions to rental income, and diminution in fair market value of the Property. Tenant's Environmental Indemnification shall further include but is not limited to the obligation to diligently and properly implement to completion, at Tenant's expense, any and all environmental investigation, removal, remediation, monitoring, reporting, closure activities, or other environmental response action (collectively, "Response Actions"). Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any Response Actions.
It is agreed that the Tenant's responsibilities related to Hazardous Materials will survive the expiration or termination of this Lease and that Landlord may obtain specific performance of Tenant's responsibilities under this Paragraph 41.
Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of rent by reason of any interruption or failure of utility services to the Premises when such interruption or failure is caused by accident, breakage, repair, strikes, lockouts, or other labor disturbances or labor disputes of any nature, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.
Provided that Tenant is not in default in the performance or observance of
any of the terms, covenants or conditions of this Lease to be performed or
observed by it, Landlord shall furnish to the Premises between the hours of 8:00
a.m. and 6:00 p.m., Monday through Fridays (holidays excepted) and subject to
the rules and regulations of the Common Area hereinbefore referred to,
reasonable quantities of water, gas and electricity suitable for the intended
use of the Premises and heat and air conditioning required in Landlord's
judgment for the comfortable use and occupation of the Premises for such
purposes. Tenant agrees that at all times it will cooperate fully with Landlord
and abide by all regulations and requirements that Landlord may prescribe for
the proper functioning and protection of the building heating, ventilating and
air conditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the air conditioning system,
Landlord shall have the right to install supplementary air conditioning units in
the Premises and the cost thereof, including the cost of installation and the
cost of operation and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Tenant will not, without the written consent of
Landlord, use any apparatus or device in the Premises (including, without
limitation), electronic data processing machines or machines using current in
excess of 110 volts which will in any way increase the amount of electricity,
gas, water or air conditioning usually furnished or supplied to premises being
used as general office space, or connect with electric current (except through
existing electrical outlets in the Premises), or with gas or water pipes any
apparatus or device for the purposes of using electric current, gas, or water.
If Tenant shall require water, gas, or electric current in excess of that
usually furnished or supplied to premises being used as general office space,
Tenant shall first obtain the written consent of Landlord, which consent shall
not be unreasonably withheld and Landlord may cause an electric current, gas or
water meter to be installed in the Premises in order to measure the amount of
electric current, gas or water consumed for any such excess use. The cost of
any such meter and of the installation,
maintenance and repair thereof, all charges for such excess water, gas and electric current consumed (as shown by such meters and at the rates then charged by the furnishing public utility); and any additional expense incurred by Landlord in keeping account of electric current, gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay Landlord therefor promptly upon demand by Landlord.
Landlord shall operate, manage and maintain the Common Area. The manner in which the Common Area shall be maintained and the expenditures for such maintenance shall be at the discretion of Landlord.
As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay its proportionate share (calculated on a square footage or
other equitable basis as calculated by Landlord) of the reasonable cost of
operation (including common utilities), management, maintenance, and repair of
the building (including structural and common areas such as lobbies, restrooms,
janitor's closets, hallways, elevators, mechanical and telephone rooms,
stairwells, entrances, spaces above the ceiling and janitorization of said
common areas) in which the Premises are located. The maintenance items herein
referred to include, but are not limited to, all windows, window frames, plate
glass, glazing, truck doors, main plumbing systems of the building (such as
water drain lines, sinks, toilets, faucets, drains, showers and water
fountains), main electrical systems (such as panels and conduits), heating and
air conditioning systems (such as compressors, fans, air handlers, ducts,
boilers, heaters), structural elements and exterior surfaces of the building;
store fronts, roof, downspouts, building common area interiors (such as wall
coverings, window coverings, floor coverings and partitioning), ceilings,
building exterior doors, skylights (if any), automatic fire extinguishing
systems, and elevators (if any); license, permit and inspection fees; security,
supplies, materials, equipment and tools; the cost of capital expenditures which
have the effect of reducing operating expenses, provided, however, that in the
event Landlord makes such capital improvements, Landlord may amortize its
investment in said improvements (together with interest at the rate of fifteen
(15%) percent per annurn on the unamortized balance) as an operating expense in
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.
Tenant hereby waives all rights hereunder, and benefits of, subsection 1 of
Section 1932 and Sections 1941 and 1942 of the California Civil Code and under
any similar law, statute or ordinance now or hereafter in effect.
"Additional Rent" as used herein shall not include Landlord's debt repayments; interest on charges, expenses directly or indirectly incurred by Landlord for the benefit of any other tenant; cost for the installation of partitioning or any other tenant improvements; cost of attracting tenants; depreciation; interest; or executive salaries.
of Tenant's suppliers or others, in any portion of the common areas not designated by Landlord for such use by Tenant. Tenant shall not park nor permit to be parked, any inoperative vehicles or equipment on any portion of the common parking area or other common areas of the building. Tenant agrees to assume responsibility for compliance by its employees with the parking provision contained herein. If Tenant or its employees park in other than designated parking areas, then Landlord may charge Tenant, as an additional charge, and Tenant agrees to pay Ten Dollars ($10.00) per day for each day or partial day each such vehicle is parking in any area other than that designated. Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow away from the building any vehicle belonging to Tenant or Tenant's employees parking in violation of these provisions (following twenty-four hours' written notice to Tenant,) or to attach violation stickers or notices to such vehicles. Tenant shall use the parking area for vehicle parking only and shall not use the parking areas for storage.
"If Landlord and Tenant jointly and voluntarily elect, for any reason whatsoever, to terminate the Master Lease prior to the scheduled Master Lease termination date, then this Sublease (if then still in effect) shall terminate concurrently with the termination of the Master Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary termination of the Master Lease by Landlord and Tenant and the resulting termination of this Sublease shall not give Subtenant any right or power to make any legal or equitable claim against Landlord, including without limitation any claim for interference with contract or interference with prospective economic advantage, and (2) Subtenant hereby waives any and all rights it may have under law or at equity against Landlord to challenge such an early termination of the Sublease, and unconditionally releases and relieves Landlord, and its officers, directors, employees and agents, from any
and all claims, demands, and/or causes of action whatsoever (collectively, "Claims"), whether such matters are known or unknown, latent or apparent, suspected or unsuspected, foreseeable or unforseeable, which Subtenant may have arising out of or in connection with any such early termination of this Sublease. Subtenant knowingly and intentionally waives any and all protection which is or may be given by Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor.
The term of this Sublease is therefore subject to early termination. Subtenant's initials here below evidence (a) Subtenant's consideration of and agreement to this early termination provision, (b) Subtenant's acknowledgment that, in determining the net benefits to be derived by Subtenant under the terms of this Sublease, Subtenant has anticipated the potential for early termination, and (c) Subtenant's agreement to the general waiver and release of Claims above.
Initials: ___________ Initials: ____________
Subtenant Tenant
48. MAINTENANCE OF THE PREMISES: Notwithstanding anything to the contrary in
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payment to Landlord of $2,500.00 as Additional Rent. Said payment would be due in full immediately upon Tenant's execution of any extension agreement.
In addition, if Tenant's delay should in any way cause the new tenant procured by Landlord to void the new lease with Landlord, or in any way prevent the new lease from commencing, Tenant shall remain liable to Landlord for the full amount of such holding over rental for the period of such new lease or until a new tenant can be obtained by Landlord for the demised premises, whichever occurs first. Tenant shall remain liable to Landlord for any damages sustained by Landlord by reason of Tenant's delay or failure to vacate, including payment of rent and other sums due Landlord.
LANDLORD: TENANT:
GOLDEN GATE COMMERCIAL COMPANY EGAIN COMMUNICATIONS CORPORATION
By /s/ R Cabelict By /s/ Ashutosh Roy
----------------------------- ----------------------------------
General Partner
Title CEO
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Date 7-22-98
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Type or Print Name
By /s/ Mark C. Jones
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General Partner Title
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Date 7/22/98 Type or Print Name
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------------------------------------
Date
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SUPPLEMENTAL LETTER AGREEMENT
The lease agreement dated July 21, 1998 by and between GOLDEN GATE COMMERCIAL COMPANY, a California limited Partnership, hereinafter called Landlord, and EGAIN COMMUNICATIONS CORPORATION, a Delaware Corporation, hereinafter called Tenant, for a portion of the one-story building located at 624 East Evelyn Avenue, Sunnyvale, California 94086, is hereby amended as follows:
Tenant's obligations under the lease agreement are contingent upon the completion of HVAC and roof inspections by Tenant and Tenant's satisfaction that the HVAC and roof are in good condition, repair and order.
Landlord will promptly rectify any problems identified by such inspections to Tenant's reasonable satisfaction at Landlord's sole expense.
LANDLORD: TENANT:
GOLDEN GATE COMMERCIAL COMPANY EGAIN COMMUNICATIONS CORPORATION
By /s/ R Cabelict By /s/ Ashutosh Roy
------------------------------ ---------------------------------
General Partner
Title: Chief Executive Officer
-----------------------
Date 7-22-98
----------------------------
Name: Ashutosh Roy
------------
By
-------------------------------
General Partner
Date Date July 21, 1998
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Exhibit 10.6
[IMPERIAL BANK LOGO]
NOVATIVE BUSINESS BANKING
Member FDIC
STARTER KIT LOAN AND SECURITY AGREEMENT
Borrower: eGAIN COMMUNICATIONS CORPORATION Address: Two N. First St., 4th Floor
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into on the above date between IMPERIAL BANK ("Bank"), whose address is 226 Airport Parkway, San Jose, CA 95110-1024 and the party(ies) named above (jointly and severally, "Borrower'), whose chief executive office is located at the above address ("Borrower's Address").
1. Loans. Bank will make loans to Borrower (the "Loans") in amounts determined by Bank in its reasonable business judgment up to the amount (the "Credit Limit") shown on the Schedule to this Agreement (the "Schedule"), provided no Event of Default and no event which, with notice or passage of time or both, would constitute an Event of Default is occurring or has occurred. All Loans and other monetary Obligations will bear interest at the rate shown on the Schedule. Interest will be payable monthly, on the date shown on the monthly billing from Bank. Bank may, in its discretion, charge Borrower's deposit accounts maintained with Bank for any amounts coming due under this Agreement.
2. Security Interest. As security for all present and future indebtedness, guarantees, liabilities, and other obligations, of Borrower to Bank (collectively, the "Obligations"), Borrower hereby grants Bank a continuing security interest in all of Borrower's right title and interest in and to any property now or hereafter described in a security agreement executed by Borrower to Bank as well as the following types of property, whether now owned or hereafter acquired, and wherever located (collectively, the "Collateral"): All "accounts", "general intangibles," "chattel paper," "documents," "letters of "credit," "instruments," " deposit accounts," "inventory," "farm products," fixtures" and "equipment," as such terms are defined in Division 9 of the California Uniform Commercial Code in effect on the date hereof, and all products, proceeds and insurance proceeds of the foregoing.
3. Representations And Agreements of Borrower. Borrower represents to Bank as follows, and Borrower agrees that the following representations will continue to be true, and that Borrower will comply with all of the following agreements throughout the term of this Agreement:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and will continue to be, duly authorized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby have been duly and validly authorized, and do not violate any law or any provision of and are not grounds for acceleration under, any agreement or instrument which is binding upon Borrower.
3.2 Name: Places of Business. The name of Borrower set forth in this Agreement is its correct name. Borrower shall give Bank 15 days' prior written notice before changing its name. The address set forth in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the locations set forth on the Schedule. Borrower will give Bank at least 15 days prior written notice before changing its chief executive office or locating the Collateral at any other location.
3.3 Collateral. Bank has and will at all times continue to have a first- priority perfected security interest in all of the Collateral other than specific equipment identified in existing filed or to be filed Financing Statements. Borrower will immediately advise Bank in writing of any material loss or damage to the Collateral.
3.4 Financial Condition and Statements. All financial statements now or in the future delivered to Bank have been, and will be prepared in conformity with generally accepted accounting principles. Since the last date covered by any such statement, there has been no material adverse change in the financial condition or business of Borrower. Borrower will provide Bank: (i) within 30 days after the end of each month, a monthly financial statement prepared by Borrower, and such other information as Bank shall reasonably request: (ii) within 90 days following the end of Borrower's fiscal year, complete annual financial statements, certified by independent certified public accountants acceptable to Bank and accompanied by the unqualified report thereon by said independent certified public accountants: and (iii) other financial information reasonably requested by Bank from time to time.
3.5 Taxes: Compliance with Law. Borrower has filed, and will file, when due, all tax returns and reports required by applicable law, and Borrower has paid, and will pay, when due, all taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower has complied, and will comply, in all material respects, with all applicable laws, rules and regulations.
3.6 Insurance. Borrower will at all times adequately insure all of the tangible personal property Collateral and carry such other business insurance as is customary in Borrower's industry.
3.7 Access to Collateral and Books and Records. At reasonable times, on one business day's notice, Bank, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records.
3.8 Banking Relationship and Operating Accounts. Borrower shall maintain its primary operating deposit accounts with Bank. Borrower shall at all times maintain its primary banking relationship with Bank.
3.9 Additional Agreements. Borrower shall not, without Bank's prior written consent, do any of the following: (i) enter into any transaction outside the ordinary course of business except for the sale of capital stock to venture investors, provided that Borrower promptly delivers written notification to Bank of any such stock sale; (ii) sell or transfer any Collateral, except in the ordinary course of business; (iii) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower); or (iv) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock other than the repurchase of up to five percent (5%) of Borrower's then issued stock in any fiscal year from Borrower's employees or directors pursuant to written agreements with Borrower.
4. Term. This Agreement shall continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"). This Agreement may be terminated, without penalty, prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after written notice of termination is given to Bank; or (ii) by Bank at any time after the occurrence of an Event of Default, without notice, effective immediately. On the Maturity Date or on any earlier effective date of termination, Borrower shall pay all Obligations in full, whether or not such Obligations are otherwise then due and payable. No termination shall in any way affect or impair any security interest or other right or remedy of Bank, nor shall any such termination relieve Borrower of any Obligation to Bank, until all of the Obligations have been paid and performed in full.
5. Events of Default and Remedies. The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement: (a) Any representation, statement, report or certificate given to Bank by Borrower or any of its officers, employees or agents, now or in the future, is untrue or misleading in a material respect; or (b) Borrower fails to pay when due any Loan or any interest thereon or any other monetary Obligation; or (c) the total Obligations outstanding at any time exceed the Credit Limit; or (d) Borrower fails to perform any other nonmonetary Obligation, which failure is not cured within 5 business days after the date due; or (e) Dissolution, termination of existence, insolvency or business failure of Borrower or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by or against Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (f) a material adverse change in the business, operations, or financial or other condition of Borrower. If an Event of Default occurs, Bank, shall have the right to accelerate and declare all of the Obligations to be immediately due and payable, increase the interest rate by an additional five percent per annum, and exercise all rights and remedies recorded by applicable law. If any interest payment, principal payment or principal balance payment due from Borrower is delinquent ten or more days, Borrower agrees to pay Bank a late charge in the amount of 5% of the payment so due and unpaid, in addition to the payment; but nothing in this provision is to be construed as any obligation on the part of Bank to accept payment of any payment past due or less than the total unpaid principal balance after maturity. All payments shall be applied first to any late charges owing, then to interest and the remainder, if any, to principal.
6. General. If any provision of this Agreement is held to be unenforceable, the remainder of this Agreement shall still continue in full force and effect. This Agreement and any other written agreements, documents and instruments executed in connection herewith are the complete agreement between Borrower and Bank and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not in this Agreement or in other written agreements signed by the parties in connection with this Agreement. The failure of Bank at any time to require Borrower to comply strictly with any of the provisions of this Agreement shall not waive Bank's right later to demand and receive strict compliance. Any waiver of a default shall not waive any other default. None of the provisions of this Agreement may be waived except by a specific written waiver signed by an officer of Bank and delivered to Borrower. The provisions of this Agreement may not be amended, except in a writing signed by Borrower and Bank. Borrower shall reimburse Bank for all reasonable attorney's fees and all other reasonable costs incurred by Bank, in connection with this Agreement (whether or not a lawsuit is filed) including any post petition bankruptcy activities. If Bank or Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party shall be entitled to recover its reasonable costs and attorney's fees from the non-prevailing party. Borrower may not assign any rights under this Agreement without Bank's prior written consent. This Agreement shall be governed by the laws of the State of California to the jurisdiction of whose courts Borrower hereby agrees to submit.
7. Mutual Waiver of Jury Trial. BORROWER AND BANK EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF BANK OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR AFFILIATES.
b. The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, to provide all temporary and/or provisional remedies and to enter equitable orders that will be binding upon the parties. The referee shall issue a single judgment at the close of the reference proceeding which shall dispose of all of the claims of the parties that are the subject of the reference. The parties hereto expressly reserve the right to contest or appeal from the final judgment or any appealable order or appealable judgment entered by the referee. The parties expressly reserve the right to findings of fact, conclusions of law, a written statement of decision, and the right to move for a new trial
or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.
Borrower:
eGAIN COMMUNICATIONS CORPORATION
By: /s/ Gunjan Sinha ------------------------------------------------ President or Vice President By: /s/ Ashutosh Roy ------------------------------------------------ (Assistant) Secretary or Chief Financial Officer |
Bank:
IMPERIAL BANK
By: /s/ Sunita Patel
------------------------------------------------
Title: Assistant Vice President
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|
[IMPERIAL BANK LOGO]
NOVATIVE BUSINESS BANKING
Member FDIC
Master Schedule to Starter Kit Loan and Security Agreement
BORROWER: eGAIN COMMUNICATIONS CORPORATION
--------------------------------
DATE: August 7, 1998
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This Schedule is incorporated into and an integral part of the Starter Kit Loan and Security Agreement between Imperial Bank ("Bank") and the above-named Borrower of even date.
Credit Limit (Aggregate)
(Section 1) $1,000,000 (includes, without limitation,
Equipment Advances and the Merchant Services and
Business Bancard Reserve, if any)
Interest Rate (Section 1): The rate equal to Bank's Prime Rate in effect from
time to time, plus 0.25% per year. Interest shall
be calculated on the basis of a 360 day year for
the actual number of days elapsed. The Prime Rate
shall be the rate announced from time to time by
Bank as its "Prime Rate;" as a base rate upon
which other rates charged by Bank are based, and
it is not necessarily the best rate available at
Bank. The interest rate applicable to the
Obligations shall change on each date there is a
change in the Prime Rate.
Maturity Date (Section 4): February 6, 2000
Other Locations and Addresses
(Section 3.2): __________________________________________________
__________________________________________________
__________________________________________________
Other Agreements: 1. Concurrent with the execution hereof, Borrower
shall deliver to Bank that certain Warrant to
Purchase Stock issued as of the date hereof by
Borrower to Bank, which Warrant to Purchase Stock
shall have an exercise period of seven years and
shall permit Lender to purchase $30,000.00 of
Borrower's Series A Preferred Stock in the
issuance which closed on or about July 15, 1998.
2.________________________________________________
__________________________________________________
__________________________________________________
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Borrower: Bank:
eGAIN COMMUNICATIONS CORPORATION IMPERIAL BANK
By: /s/ Gunjan Sinha By: /s/ Sunita Patel
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President or Vice President Title: Assistant Vice President
By: _______________________________
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[IMPERIAL BANK LOGO]
NOVATIVE BUSINESS BANKING
Member FDIC
Schedule to
Starter Kit Loan and Security Agreement (Equipment Advances)
BORROWER: eGAIN COMMUNICATIONS CORPORATION
--------------------------------
DATE: August 7, 1998
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This Schedule is an integral part of the Loan and Security Agreement between Imperial Bank ("Bank") and the above-named Borrower of even date.
Credit Limit (Equipment)
(Section 1): $1,000,000 (such amount to be funded under the
aggregate Credit Limit). Equipment Advances will be
made only on or prior to August 6, 1999 (the "Last
Advance Date") and only for the purpose of purchasing
equipment reasonably acceptable to Bank. Borrower
must provide invoices for the equipment to Bank on or
before the Last Advance Date. Eligible invoices will
consist of purchased software and equipment. Advances
shall be 100% of eligible invoices, net of soft
costs.
Interest Rate
(Section 1): The rate equal to Bank's Prime Rate in effect from
time to time, plus 0.25% per annum. Interest shall be
calculated on the basis of a 360 day year for the
actual number of days elapsed. The Prime Rate shall
be the rate announced from time to time by Bank as
its "Prime Rate" as a base rate upon which other
rates charged by Bank are based, and it is not
necessarily the best rate available at Bank. The
interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
Maturity Date
(Section 4): After the Last Advance Date, the unpaid principal
balance of the Equipment Advances shall be repaid in
30 equal monthly installments of principal, plus
interest, commencing on September 7, 1999 and
continuing on the same day of each month thereafter
until the entire unpaid principal balance of the
Equipment Advances and all accrued unpaid interest
have been paid (subject to Bank's right to accelerate
the Equipment Advances on an Event of Default).
|
Borrower: Bank:
eGAIN COMMUNICATIONS CORPORATION IMPERIAL BANK
By: /s/ Gunjan Sinha By: /s/ Sunita Patel
---------------------------------- ------------------------------
President or Vice President Title: Assistant Vice President
By:___________________________________
9
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[IMPERIAL BANK LOGO]
NOVATIVE BUSINESS BANKING
Member FDIC
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Resolution Authorizing Credit
BORROWER: eGain Communications Corporation, a corporation organized under the
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laws of the State of Delaware.
DATE: August 7, 1998
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I, the undersigned, officer of the above-named borrower, a corporation organized under the laws of the state set forth above, do hereby certify that the following is a full, true and correct copy of resolutions duly and regularly adopted by the Board of Directors of said corporation as required by law, and by the by-laws, of said corporation, and that said resolutions are still in full force and effect and have not been in any way modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Imperial Bank ("Bank"), from time to time, such sum or sums of money as, in the judgment of the officer or officers authorized hereby, this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she is hereby authorized, in the name of this corporation, to execute and deliver to Bank the loan agreements, security agreements, notes financing statements, and other documents and instruments providing for such loans and evidencing or securing such loans and said authorized officers are authorized from time to time to execute renewals, extensions and/or amendments of said loan agreements, security agreements, and other documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby authorized, as security for any and all indebtedness of this corporation to Bank, whether arising pursuant to this resolution or otherwise, to grant to but not limited to, any and all real property, accounts, inventory, equipment, general intangibles, instruments documents, chattel paper, notes, money, deposit accounts, furniture, fixtures, goods and other property of every kind, and to execute and deliver to Bank any and all pledge agreements mortgages, deeds of trust, financing statements, security agreements and other agreements, which said instruments and the note or notes and other instruments referred to in the proceeding paragraph may contain such provisions, covenants, recitals and agreements as Bank may require, and said authorized officers may approve, and the execution thereof by said authorized officers shall be conclusive evidence of such approval.
RESOLVED FURTHER, that Bank may conclusively rely on a certified copy of these resolutions and a certificate of an officer of this corporation as to the officers of this corporation and their offices and signatures, and continue to conclusively rely on such certified copy of these resolutions and said certificate for all past, present and future
transactions until written notice of any change hereto or thereto is given to Bank by this corporation by certified mail, return receipt requested-
The undersigned further hereby certifies that the following persons are the fully elected and acting officers of the corporation named above as borrower and that the following are their actual signatures:
NAMES OFFICE(S) ACTUAL SIGNATURES ----- --------- ----------------- Ashytosh Roy Chief Executive /s/ Ashutosh Roy Gunjan Sinha President /s/ Gunjan Sinha |
IN WITNESS WHEREOF, I have hereunto set my hand as such corporate officer on the date set forth above.
X /s/ Ashutosh Roy ------------------------------------ Its:__________________________________ |
EXHIBIT 10.7
SENIOR LOAN AND SECURITY AGREEMENT NO. 6194
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6194 (this "Security Agreement") is dated as of October 15, 1998 between EGAIN COMMUNICATIONS CORPORATION, a Delaware corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an amount not to exceed $1,500,000 in the aggregate, and Lender desires to loan, subject to the terms and conditions herein set forth, such amount to Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowings shall be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security Agreement, the Notes and any other agreement between Borrower and Lender, Borrower will grant to Lender hereunder a first priority security interest in certain of its equipment, machinery, fixtures, other items and intangibles, including but not limited to personal computers, workstations, servers, office equipment, furniture and also certain custom use equipment, installation and delivery costs, purchase tax, toolings, software and other items generally considered fungible or expendable ("Soft Costs") whether now owned by Borrower or hereafter acquired, and all substitutions and replacements of and additions, improvements, accessions and accumulations to said equipment, machinery and fixtures and other items, together with all rents, issues, income, profits and proceeds therefrom (collectively, the "Collateral") which is described on the Note attached hereto or any subsequently-executed Note entered into by Lender and Borrower and which incorporates this Security Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the date set forth above and shall continue thereafter and be in effect so long as and at any time any Note entered into pursuant to this Security Agreement is in effect. The Term and monthly payment amount payable with respect to each item of Collateral shall be as set forth in and as stated in the respective Note(s). The terms of each Note hereto are subject to all conditions and provisions of this Security Agreement as it may at any time be amended. Each Note shall constitute a separate and independent Loan and contractual obligation of Borrower and shall incorporate the terms and conditions of this Security Agreement and any additional provisions contained in such Note. In the event of a conflict between the terms and conditions of this Security Agreement and any provisions of such Note, the provisions of such Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be canceled or terminated except as expressly provided herein. Borrower agrees that its obligations to pay all monthly payment amounts and other sums payable hereunder (and under any Note) and the rights of Lender and any assignee in and to such monthly payment amounts and other sums, are absolute and unconditional and are not subject to any abatement, reduction,
setoff, defense, counterclaim or recoupment due or alleged to be due to, or by reason of, any past, present or future claims which Borrower may have against Lender, any assignee, the manufacturer or seller of the Collateral, or against any person for any reason whatsoever. Notwithstanding the foregoing, nothing herein shall be deemed to limit Borrower's rights and remedies against Lender in any independent action or proceeding.
provided therein. Following payment of the Indebtedness related to each Note, Lender shall promptly return such Note, marked "canceled," to Borrower.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first security interest in all Collateral; (b) This Security Agreement secures (i) the payment of the principal of and interest on the Notes and all other sums due thereunder and under this Security Agreement (the "Indebtedness") and (ii) the performance by Borrower of all of its other covenants now or hereafter existing under the Notes, this Security Agreement and any other obligation owed by Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that (a) it is in good standing under the laws of the state of its formation, duly qualified to do business and will remain duly qualified during the term of each Loan in each state where necessary to carry on its present business and operations, including the jurisdiction(s) where the Collateral will be located as specified on each Exhibit A to each Note, except where failure to be so qualified would not have a Material Adverse Effect; (b) it has full authority to execute and deliver this Security Agreement and the Notes and perform the terms hereof and thereof, and this Security Agreement and the Notes have been duly authorized, executed and delivered and constitute valid and binding obligations of Borrower enforceable in accordance with their terms; (c) the execution and delivery of this Security Agreement and the Notes will not contravene any law, regulation or judgment affecting Borrower or result in any breach of any material agreement or other instrument binding on Borrower; (d) no consent of Borrower's shareholders or holder of any indebtedness, or filing with, or approval of, any governmental agency or commission, which has not already been obtained or performed, as appropriate, is a condition to the performance of the terms of this Security Agreement or the Notes; (e) there is no action or proceeding pending or threatened against Borrower before any court or administrative agency which might have a Material Adverse Effect on the business, financial condition or operations of Borrower, (f) at the time any Loan is made hereunder, Borrower owns and will keep all of the Collateral free and clear of all liens, claims and encumbrances, and, except for this Security Agreement, there is no deed of trust, mortgage, security agreement or other third party interest against any of the Collateral; (g) at the time any Loan is made hereunder, Borrower has good and marketable title to the Collateral; (h) at the time any Loan is made hereunder, all Collateral has been received, installed and is ready for use and is satisfactory in all respects for the purposes of this Security Agreement; (i) the Collateral is, and will remain at all times under applicable law, removable personal property, which is free and clear of any lien or encumbrance except in favor of Lender, notwithstanding the manner in which the Collateral may be attached to any real property; (j) all credit and financial information submitted to Lender herewith or at any other time is and will at the time given be true and correct in all material respects; and (k) the security interest granted to Lender hereunder is a first priority security interest, and (l) on or before January 1, 2000, Borrower's computer system shall be Year 2000 performance compliant and will thus be able to accurately process date data from, into and between the twentieth and twenty-first centuries including leap year calculations.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such address as Lender specifies in writing, all amounts payable to it under this Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located at the address (the "Collateral Location") shown on Exhibit A to each Note and shall not be moved without Lender's prior written consent which location shall in all events be within the United States. All of the records regarding the Collateral shall be located at 624 East Evelyn Avenue, Sunnyvale, California 94086, or such other location of which Borrower has given notice to Lender in accordance with this Security Agreement. Lender shall have the right to inspect Collateral, including records relating thereto, and Borrower's books and records at any time (upon reasonable notification) during regular business hours, such books and records to be maintained in accordance with generally accepted accounting principles. Borrower shall be responsible for all labor, material and freight charges incurred in connection with any removal or relocation of Collateral which is requested by Borrower and consented to by Lender, as well as for any charges due to the installation or moving of the Collateral. Payments under the Notes and under this Security Agreement shall continue during any period in which the Collateral is in transit during a relocation. During Borrower's regular business hours and upon at least two days' notice to Borrower, Lender or its agent shall mark and label Collateral, which labels (to be provided by Lender) shall state that such Collateral is subject to a security interest of Lender, and Borrower shall keep such labels on the Collateral as so labeled.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than the first payment date following such
Casualty Occurrence, or, if there is no such payment date, no later than thirty
(30) days after such Casualty Occurrence, Borrower shall, at its election,
either: (a) repair the Collateral returning it to good operating condition, or
(b) replace the Collateral with Collateral acceptable to Lender in its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect Lender's first priority security interest therein, which
replacement Collateral shall be
subject to the terms of this Security Agreement, or (c) on the first day payment is due on any Note following the Casualty Occurrence, or if there is no such payment date, thirty (30) days after such Casualty Occurrence, pay to Lender an amount equal to the Balance Due (as defined below) for each lost or damaged item of Collateral. The Balance Due for each such item is the sum of (i) all amounts for each item which may be then due or accrued to the payment date, plus (ii) as of such payment date, an amount equal to the product of the fraction specified below times the sum of all remaining payments under the respective Note, including the amount of any mandatory or optional payment required or permitted to be paid by Borrower to Lender at the maturity of the Note. The numerator of the fraction shall be the collateral value (as set forth on the applicable Note) of the item and the denominator shall be the aggregate collateral value of all item under the Note. Upon the making of such payments, Lender shall release such item of Collateral from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured against all risks of physical loss for at least the replacement value of the Collateral (including, in the case of Collateral which is vehicles, comprehensive and collision coverage) and in no event for less than the amount payable following a Casualty Occurrence (as provided in Section 9). Such insurance shall provide for a loss payable endorsement to Lender and/or any assignee of Lender. Borrower shall maintain commercial general liability insurance, including products liability and completed operations coverage, with respect to loss or damage for personal injury, death or property damage in an amount not less than $2,000,000 in the aggregate, (and in the case of Collateral which is vehicles, in an amount not less than $1,000,000 covering bodily injury and property damage in a combined single limit) naming Lender and/or Lender's assignee as additional insured. Such insurance shall contain insurer's agreement to give thirty (30) days' advance written notice to Lender before cancellation or material change of any policy of insurance. Borrower will provide Lender and any assignor, of Lender with a certificate of insurance from the insurer evidencing Lender's or such assignee's interest in the policy of insurance. Such insurance shall cover any Casualty Occurrence to any unit of Collateral. Notwithstanding anything in Section 9 or this Section 10 to the contrary, this Security Agreement and Borrower's obligations hereunder shall remain in full force and effect with respect to any unit of Collateral which is not subject to a Casualty Occurrence. If Borrower fails to provide or maintain insurance as required herein, Lender shall have the right, but shall not be obligated, to obtain such insurance. In that event, Borrower shall pay to Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the Indebtedness is unpaid and as long as any of the Obligations are outstanding Borrower will: (a) duly pay all governmental taxes and assessments at the time they become due and payable; provided, however, Borrower may contest the same in good faith so long as no payment default by Borrower has occurred and is continuing; (b) comply with all applicable material governmental laws, rules and regulations relating to its business and the Collateral where a failure to comply would have a Material Adverse Effect; (c) take no action to adversely affect Lender's security interest in the Collateral as a first and prior perfected security interest; (d) furnish Lender with its annual audited financial statements within one hundred twenty (120) days following the end of Borrower's fiscal year, unaudited quarterly financial statements within forty- five (45) days after the end of each fiscal quarter, and within thirty (30) days of the end of each month a financial statement for that month prepared by Borrower, and including an income statement and balance sheet, all of which shall be certified by an officer of Borrower as true and
correct and shall be prepared in accordance with generally accepted accounting principles consistently applied, and such other information as Lender may reasonably request; and (e) promptly (but in no event more than five (5) days after the occurrence of such event) notify Lender of any change in Borrower's condition during the commitment period which constitutes a Material Adverse Effect, and of the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless Lender and any assignees from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against Lender or any assignee of Lender by Borrower or any third party by reason of the occurrence or existence (or alleged occurrence or existence) of any act or event relating to or caused by any portion of the Collateral, or its purchase, acceptance, possession, use, maintenance or transportation, including without limitation, consequential or special damages of any kind, any failure on the part of Borrower to perform or comply with any of the terms of this Security Agreement or any Note, claim for latent or other defects, claims for patent, trademark or copyright infringement and claims for personal injury, death or property damage, including those based on Lender's negligence or strict liability in tort and excluding only those based on Lender's gross negligence or willful misconduct. In the event that any action, suit or proceeding is brought against Lender by reason of any such occurrence, Borrower, upon Lender's request, will, at Borrowers expense, resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated and approved by Lender. Borrower's obligations under this Section 12 shall survive the payment in full of all the Indebtedness and the performance of all Obligations with respect to acts or events occurring or alleged to have occurred prior to the payment in full of all the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if instructed by Lender) and any assignee of Lender for, and to indemnify and hold Lender and any assignee harmless from, all fees (including, but not limited to, license, documentation, recording and registration fees), and all sales, use, gross receipts, personal property, occupational, value added or other taxes, levies, imposts, duties, assessments, charges, or withholdings of any nature whatsoever, together with any penalties, fines, additions to tax, or interest thereon (the foregoing collectively "Impositions"), except same as may be attributable to Lender's income, arising at any time prior to or during the term of any Notes or of this Security Agreement, or upon termination or early termination of this Security Agreement and levied or imposed upon Lender directly or otherwise by any Federal, state or local government in the United States or by any foreign country or foreign or international taxing authority upon or with respect to (a) the Collateral, (b) the exportation, importation, registration, purchase, ownership, delivery, leasing, financing, possession, use, operation, storage, maintenance, repair, return, sale, transfer of title, or other disposition thereof, (c) the rentals, receipts, or earnings arising from the Collateral, or any disposition of the rights to such rentals, receipts, or earnings, (d) any payment pursuant to this Security Agreement or the Notes, or (e) this Security Agreement, the Notes or any transaction or any part hereof or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and performance of all of the Obligations, Lender shall execute UCC termination statements and
such other documents as Borrower shall reasonably request to evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT, ANY NOTE, ANY COLLATERAL, OR ANY MEREST THEREIN, (b) LEASE OR LEND COLLATERAL OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES, CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY EXCEPT TO A SUCCESSOR IN INTEREST TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OF BORROWER; PROVIDED, HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH SUCCESSOR IS GREATER THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH BY LENDER AND THE SUCCESSOR'S BUSINESS AND ITS MAJOR INVESTORS ARE REASONABLY ACCEPTABLE TO LENDER. LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY MEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If Borrower is given notice of such assignment it agrees to acknowledge receipt thereof in writing and Borrower shall execute such additional documentation as Lender's assignee and/or secured party shall reasonably require at Lender's expense. Each such assignee and/or secured party shall have all of the rights, but (except as provided in this Section 15) none of the obligations, of Lender under this Security Agreement, unless such assignee or secured party expressly agrees to assume such obligations in writing. Borrower shall not assert against any assignee and/or secured party any defense, counterclaim or offset that Borrower may have against Lender. Notwithstanding any such assignment, and providing no Event of Default has occurred and is continuing, Lender, or its assignees, secured parties, or their agents or assigns, shall not interfere with Borrower's right to quietly enjoy use of Collateral subject to the terms and conditions of this Security Agreement. Subject to the foregoing, the Notes and this Security Agreement shall inure to the benefit of, and are binding upon, the successors and assignees of the parties hereto. Borrower acknowledges that any such assignment by Lender will not change Borrower's duties or obligations under this Security Agreement and the Notes or increase any burden or risk on Borrower.
after Borrower knows of the noncompliance or nonperformance or notice from Lender or such longer period that Borrower is diligently attempting to effect such cure; (v) seizure of any of the Collateral under legal process; (vi) the filing by or against Borrower or any guarantor under any guaranty executed in connection with this Security Agreement ("Guarantor") of a petition for reorganization or liquidation under the Bankruptcy Code or any amendment thereto or under any other insolvency law providing for the relief of debtors; (vii) the voluntary or involuntary making of an assignment of a substantial portion of its assets by Borrower or by any Guarantor for the benefit of its creditors, the appointment of a receiver or trustee for Borrower or any Guarantor or for any of Borrower's or Guarantor's assets, the institution by or against Borrower or any Guarantor of any formal or informal proceeding for dissolution, liquidation, settlement of claims against or winding up of the affairs of Borrower or any Guarantor provided that in the case of all such involuntary proceedings, same are not dismissed within sixty (60) days after commencement; (viii) the making by Borrower or by any Guarantor of a transfer of all or a material portion of Borrower's or Guarantor's assets or inventory not in the ordinary course of business; or (ix) any default or breach by any Guarantor of any of the terms of its guaranty to Lender in connection with this Security Agreement.
Borrower agrees to pay all reasonable out-of-pocket costs of Lender incurred in enforcement of this Security Agreement, the Notes or any instrument or agreement required under this Security Agreement, including, but not limited to reasonable attorneys' fees and litigation expenses and
fees of collection agencies ("Remedy Expenses"). At Lender's request, Borrower shall assemble the Collateral and make it available to Lender at such time and location as Lender may reasonably designate at a location within 100 miles of Borrower's Collateral Location. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the Notes are immediately due and payable and Lender's taking possession of any or all Equipment shall not terminate this Security Agreement or any of the Notes unless Lender so notifies Borrower in writing. None of the above remedies is intended to be exclusive but each is cumulative and may be enforced separately or concurrently.
In addition to the foregoing remedies, if an Event of Default hereunder shall have occurred and be continuing, Lender shall have the right to cause its representative or representatives to attend any meeting of Borrower's Board of Directors or any committee thereof. In such case, Borrower shall provide Lender with the same notice of any such Board or committee meeting that is given to the members of Borrower's Board or committee thereof.
action against Borrower for sums owed to Lender under this Security Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any payment owed Lender by Borrower which is not paid when due (taking into account applicable grace periods), for every month such payment is not paid when due, but in no event an amount greater than the highest rate permitted by applicable law. If such amounts have not been received by Lender at Lender's place of business or by Lender's designated agent by the date such amounts are due under this Security Agreement or the Notes, Lender shall bill Borrower for such charges. Borrower acknowledges that invoices for amounts due hereunder or under the Notes are sent by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice will not relieve Borrower of its obligation to make payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or perform any act required hereunder (including, but not limited to, maintenance of any insurance required by Section 10), then Lender may, but shall not be required to, after such notice to Borrower as is reasonable under the circumstances, make such payment or perform such act with the same effect as if made or performed by Borrower. Borrower will upon demand reimburse Lender for all sums paid and all reasonable costs and expenses incurred in connection with the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of Lender's officers, employees or agents designated by Lender) with full power of substitution by Lender, as Borrower's attorney, with power to execute and deliver on Borrower's behalf, financing statements and other documents necessary to perfect and/or give notice of Lender's security interest in any of the Collateral. Notwithstanding the above, Borrower will, upon Lender's request, execute all financing statements pursuant to the Uniform Commercial Code and all such other documents reasonably requested by Lender to perfect Lender's security interests hereunder. Borrower authorizes Lender to file financing statements signed only by Lender (where such authorization is permitted by law) at all places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever, express or implied, concerning the legal character of the transaction evidenced hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender hereunder will be suspended to the extent that Lender is hindered or prevented from complying therewith because of labor disturbances, including but not limited to strikes and lockouts, acts of God, fires, floods, storms, accidents, industrial unrest, acts of war, insurrection, riot or civil disorder, any order, decree, law or governmental regulations or interference, failure of the manufacturer to deliver any item of Collateral or any cause whatsoever not within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs and expenses including reasonable attorneys fees and the fees of collection agencies, incurred by
Lender (a) in enforcing any of the terms, conditions or provisions hereof and related to the exercise of its remedies, and (b) in connection with any bankruptcy or post-judgment proceeding, whether or not suit is filed and, in each and every action, suit or proceeding, including any and all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be made to the Collateral without Lender's prior written consent, which shall not be given for changes that will affect the reliability and utility of the Collateral or which cannot be removed without damage to the Collateral, or which in any way affect the value of the Collateral for purposes of resale or lease. All attachments and improvements to the Collateral shall be deemed to be "Collateral" for purposes of the Security Agreement, and a first priority security interest therein shall immediately vest in Lender.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will be marked "Original" and all other counterparts will be duplicates. To the extent, if any, that this Security Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction) no security interest in the Security Agreement may be created in any documents other than the "Original." (b) There shall be only one original of each Note and it shall be marked "Original," and all other counterparts will be duplicates. To the extent, if any, that any Notes to this Security Agreement constitutes chattel paper (or as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction) no security interest in any Note(s) may be created in any documents other than the "Original."
SECTION 25. STOCK WARRANT. Borrower agrees that it will issue to Lender upon execution of this Security Agreement a Warrant in the form of the Warrant Agreement attached hereto as Exhibit B. Borrower and Lender agree that the value of the Warrant hereunder is ten dollars ($10.00).
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee ("Fee") of $15,000. The Fee shall be applied by Lender first to reimburse Lender for all out-of-pocket UCC and other search costs, inspections and labeling costs and appraisal fees, if any, incurred by Lender, and then proportionally to the first monthly payment for each Note hereunder in the proportion that the Collateral value for such Note bears to Lender's entire commitment. However, the portion of the Fee which is not applied to such monthly payments shall be non-refundable except if Lender defaults in its obligation to fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered mail, or reliable messenger or delivery service (including overnight service) and shall be directed, as the case may be, to Lender at 2401 Kerner Boulevard, San Rafael, California 94901, Attention: Asset Management and to Borrower at 624 East Evelyn Avenue, Sunnyvale, California 94806, Attention: Eric Smit, Director Finance.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate resolutions, financial statements and other documents as Lender shall reasonably request from time to time. (b) Borrower represents that the Collateral hereunder is used solely for business
purposes. (c) Time is of the essence with respect to this Security Agreement.
(d) Borrower acknowledges that Borrower has read this Security Agreement and the
Notes, understands them and agrees to be bound by their terms and further agrees
that this Security Agreement and the Notes constitute the entire agreement
between Lender and Borrower with respect to the subject matter hereof and
supersede all previous agreements, promises, or representations. (e) This
Security Agreement and the Notes may not be changed, altered or modified except
by an instrument signed by an officer or authorized representative of Lender and
Borrower. (f) Any failure of Lender to require strict performance by Borrower or
any waiver by Lender of any provision herein or in a Note shall not be construed
as a consent or waiver of any other breach of the same or any other provision.
(g) If any provision of this Security Agreement or any Note is held invalid,
such invalidity shall not affect any other provisions hereof or thereof. (h) The
obligations of Borrower to pay the Indebtedness and perform the Obligations
shall survive the expiration or earlier termination of this Security Agreement
and each Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full. (i)
Borrower will notify Lender at least 30 days before changing its name, principal
place of business or chief executive office. (j) Borrower will, at its expense,
promptly execute and deliver to Lender such documents and assurances (including
financing statements) and take such further action as Lender may reasonably
request in order to carry out the intent of this Security Agreement and Lender's
fights and remedies.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and each Note shall be deemed to have been made under and shall be governed by the laws of the State of California in all respects, including matters of construction, validity and performance. At Lender's sole discretion, option and election, jurisdiction and venue for any legal action between the parties arising out of or relating to this Security Agreement or any Note shall be in the Superior Court of Marin County, California, or, in cases where federal diversity jurisdiction is available, in the United States District Court for the Northern District of California located in San Francisco, California. BORROWER, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
In the event Borrower does not provide 90 days' prior written notice of its election, Borrower shall be deemed to have elected Election No. 2.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED EGAIN COMMUNICATIONS CORPORATION
By /s/ Gregory O'Kilian By /s/ Ashutosh Roy
------------------------ ----------------------
Name Gregory O'Kilian Name Ashutosh Roy
------------------------ ----------------------
Title AVP Title CEO
------------------------ ----------------------
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624 East Evelyn Avenue Sunnyvale, CA 94086 County of Santa Clara
Exhibit A - Closing Memorandum Exhibit B - Stock Warrant
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT NO. 6194
DATED OCTOBER 15,1998
1.* Duly executed Senior Loan and Security Agreement.
2. Duly executed Senior Security Promissory Note with Exhibit A Collateral
description attached.
3. Insurance certificates reflecting coverage required under Section 10 of the
Senior Loan and Security Agreement.
4.* Resolutions of Borrower's board of directors.
5. Real Property Waiver.**
6. UCC-1 Financing Statements with respect to the Collateral.
7.* Stock warrant.
8. UCC search (Lender will obtain).
9.* Payment of Commitment Fee.
10. Certificate of Chief Financial Officer stating that (i) there are no liens,
charges, security interests or other encumbrances that may affect Lender's
right, title and interest in the Collateral and there are no UCC-1
financing statements filed or in the process of being filed against any of
the Collateral, (ii) Borrower is performing according to Borrower's
business plan, (iii) no change which is a Material Adverse Effect has
occurred in the financial condition of Borrower, (iv) no default has
occurred, and (v) the representations and warranties in Section 5 of the
Senior Loan and Security Agreement are true and correct as if made on the
date of the Loan.
11.* Certificate from the Secretary of State of Borrower's state of
incorporation, and from the state in which Borrower's chief executive
office is located, if different, stating the Borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Loan (Lender will obtain).
12. Borrower's most recent financial statements.
13. List of proposed Collateral.
14. Purchase documentation verifying Borrower's ownership of equipment.
15. See Section 3 of the Senior Loan and Security Agreement for additional
conditions to closing.
16. Intercreditor Agreement, if applicable.
* First Loan only. ** Required if any Equipment is a fixture, i.e., attached to real property, or located in certain states.
CORPORATE RESOLUTION TO BORROW
RESOLVED FURTHER: That: Ashutosh Roy CEO /s/ Ashutosh Roy ---------------------- --------------------------- -------------------- (Print or type name) (Title of Corporate Officer) (specimen signature) Or Gunjan Sinha President /s/ Gunjan Sinha ---------------------- --------------------------- -------------------- (Print or type name) (Title of Corporate Officer) (specimen signature) |
of this corporation (this officer or officers authorized to act pursuant hereto being hereinafter designated as authorized officers"), are individually authorized, directed and empowered, in the name of this corporation, to execute and deliver to Lender, and Lender is requested to accept, any notes, security agreements, and other documents or agreements that may be required by Lender in connection with such borrowings.
RESOLVED FURTHER: That the authorized officers are individually authorized, directed and empowered, in the name of this corporation, to do or cause to be done all such further acts and things as they shall deem necessary, advisable, convenient, or proper in connection with the execution and delivery of any such notes, security agreements, and other documents or agreements and in connection with or incidental to the carrying of the same into effect, including without limitation, the execution, acknowledgment, and delivery of all instruments and documents which may reasonably be required by Lender under or in connection with any such borrowing.
RESOLVED FURTHER: That Lender is authorized to act upon these resolutions until written notice of their revocation is delivered to Lender, and that the authority hereby granted shall apply with equal force and effect to the successors in office of the officers herein named.
I, Stan Pierson, Secretary of EGAIN COMMUNICATIONS CORPORATION, a corporation incorporated under the laws of the State of Delaware, do hereby certify that the foregoing is a full, true and correct copy of resolutions of the Board of Directors of the said corporation, duly and regularly passed or adopted by the Board of Directors of said corporation as required by law and by the by-laws of the said corporation on the 9th day of October, 1998.
I further certify that said resolutions are still in full force and effect and have not been amended or revoked and that the specimen signatures appearing above are the signatures of the officers authorized to sign for this corporation by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and affixed the corporate seal of the said corporation, this 30th day of October, 1998.
AFFIX CORPORATE /s/ Stanley F. Pierson
----------------------------------
SEAL HERE SECRETARY OF EGAIN
COMMUNICATIONS CORPORATION
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[PERSON WHO SIGNS HERE MUST BE DIFFERENT FROM
PERSON(S) WHO SIGNED ABOVE.]
EXHIBIT 10.8
AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT
THIS AMENDMENT is made and entered into as of this 24th day of June, 1998 by and between eGain Communications Corporation, a Delaware corporation (the "Company"), and Ashutosh Roy (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are parties to a Common Stock Purchase Agreement dated as of December 16, 1997 (the "Purchase Agreement"), pursuant to which the Company sold and the Purchaser purchased 2,000,000 shares of Common Stock (the "Shares," representing 4,000,000 shares of Common Stock following the 2:1 split of the Company's Common Stock effected on June 23, 1998 (the "Split")); and
WHEREAS, the Company desires to obtain additional capital through the sale of shares of its Series A Preferred Stock to certain investors (the "Investors"); and
WHEREAS, Purchaser has a significant interest in the Company by virtue of his equity ownership and therefore would benefit from the Company's obtaining such additional funding; and
WHEREAS, in order to induce the Investors to purchase Series A Preferred Stock of the Company, the Company and Purchaser desire to amend the Purchase Agreement to provide the Company with a repurchase option on a portion of the Shares, which option will lapse over time:
NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser hereby agree as follows:
1. Section 3 of the Purchase Agreement is hereby amended to read in its entirety as follows (all figures have been adjusted to reflect the Split):
(a) In the event of the termination of employment or consulting services of Purchaser with the Company, the Company shall, upon the date of such termination (the "Termination Date"), have an irrevocable, exclusive option (the "Repurchase Option") for a period of ninety (90) days from the Termination Date to repurchase all or any portion of the Shares held by Purchaser as of the Termination Date which have not yet been released from the Repurchase Option at a purchase price of $0.037 per share, adjusted for any future stock splits, stock dividends and the like.
(b) The Repurchase Option shall be exercised by the Company by written notice to Purchaser or his executor and, at the Company's option, (i) by delivery to Purchaser or his executor with such notice of a check in the amount of the purchase price for the Shares being purchased, or (ii) in the event Purchaser is indebted to the Company, by cancellation by the Company of an amount of such indebtedness equal to the purchase price for the Shares being repurchased, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such purchase price. Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Shares being repurchased by the Company, without further action by Purchaser.
(c) The Shares held by Purchaser shall be released from the Repurchase Option under this Section 3.1 as follows (provided in each case that Purchaser's employment or consulting services have not been terminated prior to the date of any such release): 33 2/3% of the total number of Shares (1,333,333 Shares) are released from the Repurchase Option as of June 24, 1998, and an additional 1/24th of the total number of Shares (111,111.11 Shares) shall be released from the Repurchase Option at the end of each full month thereafter, until all Shares are released from the Repurchase Option. Fractional shares shall be rounded to the nearest whole share.
(d) Notwithstanding the foregoing, in the event that Purchaser's employment with or consulting services to the Company are terminated without Cause or for Good Reason (as such terms are defined below) the Repurchase Option shall immediately terminate with respect to, and Purchaser shall acquire a vested interest in, all of the then remaining unvested Shares previously subject to the Repurchase Option.
(e) For purposes of this Agreement, "Cause" shall mean the happening of one or more of the following events:
(i) Purchaser's willful misconduct or gross negligence in the performance of her duties hereunder, including Purchaser's refusal to comply in any material respect with the legal directives of the Company's Board of Directors so long as such directives are not inconsistent with Purchaser's position and duties, and such refusal to comply is not remedied within ten (10) working days after written notice from the Board of Directors, which written notice shall state that failure to remedy such conduct may result in termination for Cause;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do an injury to the Company, or conduct that materially discredits the Company or is materially detrimental to the reputation of the Company, including conviction of a felony; or
(iii) Purchaser's incurable material breach of any element of the Company's Proprietary Information and Assignment of Inventions Agreement, including, without limitation, Purchaser's theft or other misappropriation of the Company's proprietary information.
(h) For purposes of this Section 3.1 only, "disability" shall be deemed to have occurred when Purchaser's employment or consulting services with the Company are terminated because Purchaser is unable to engage in any substantial, gainful activity on behalf of the Company by reason of any medically determinable physical or mental impairment.
(i) Upon the occurrence of any one of the following events (any of such events, a "Change of Control"), the Repurchase Option shall terminate with respect to, and Purchaser shall acquire a vested interest in fifty percent (50%) of the then remaining unvested Shares:
(i) Upon the consummation of the acquisition of 51% or more of the outstanding stock of the Company pursuant to a tender offer validly made under any federal or state law (other than a tender offer by the Company);
(ii) Upon the consummation of a merger, consolidation or other reorganization of the Company (other than a reincorporation of the Company), if after giving effect to such merger, consolidation or other reorganization of the Company, the Purchasers of the Company immediately prior to such merger, consolidation or other reorganization do not represent a majority of interest of the holders of voting securities (on a fully diluted basis) with the ordinary voting power to elect directors of the surviving or resulting entity after such merger, consolidation or other reorganization;
(iii) Upon the sale of all or substantially all of the assets of the Company to a third party who is not an affiliate of the Company; or
(iv) Upon the dissolution of the Company pursuant to action validly taken by the Purchasers of the Company in accordance with applicable state law;
provided that (1) Purchaser continues his employment or consulting services with the Company at or after the commencement of a Change of Control and (2) Purchaser is still employed or providing consulting services to the Company at the time of the conclusion of such Change of Control (unless Purchaser's service by, or relationship with, the Company is terminated without Cause during the interim period between the commencement of any such Change of Control and the conclusion of that particular Change of Control).
(j) If Purchaser's employment or consulting services with the Company are terminated without Cause on or before the first anniversary of the effective date of the Change of Control, the Repurchase Option shall terminate with respect to and the Purchaser shall acquire a vested interest in all then remaining Unvested Shares.
then any new, substituted, or additional securities distributed with respect to the Shares shall be immediately subject to the provisions of this Section 3.3, to the same extent the Shares are at such time covered by such provisions. In order to enforce the provisions of this Section 3.3, the Company may impose stop-transfer instructions with respect to the Shares until the end of the applicable stand-off period."
2. Except as expressly amended herein, the Purchase Agreement shall remain in full force and effect.
3. This Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Purchaser have executed this Amendment as of the date first above written.
COMPANY:
eGAIN COMMUNICATIONS CORPORATION
By: /s/ Gunjan Sinha
-----------------------------------
Title: President
--------------------------------
|
PURCHASER:
/s/ Ashutosh Roy
--------------------------------------
Ashutosh Roy
|
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
EXHIBIT B
CONSENT OF SPOUSE
/11/
Exhibit 10.9
AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT
THIS AMENDMENT is made and entered into as of this 24th day of June, 1998 by and between eGain Communications Corporation, a Delaware corporation (the "Company"), and Gunjan Sinha (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are parties to a Common Stock Purchase Agreement dated as of December 16, 1997 (the "Purchase Agreement"), pursuant to which the Company sold and the Purchaser purchased 2,000,000 shares of Common Stock (the "Shares," representing 4,000,000 shares of Common Stock following the 2:1 split of the Company's Common Stock effected on June 23, 1998 (the "Split")); and
WHEREAS, the Company desires to obtain additional capital through the sale of shares of its Series A Preferred Stock to certain investors (the "Investors"); and
WHEREAS, Purchaser has a significant interest in the Company by virtue of his equity ownership and therefore would benefit from the Company's obtaining such additional funding; and
WHEREAS, in order to induce the Investors to purchase Series A Preferred Stock of the Company, the Company and Purchaser desire to amend the Purchase Agreement to provide the Company with a repurchase option on a portion of the Shares, which option will lapse over time:
NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser hereby agree as follows:
1. Section 3 of the Purchase Agreement is hereby amended to read in its entirety as follows (all figures have been adjusted to reflect the Split):
(a) In the event of the termination of employment or consulting services of Purchaser with the Company, the Company shall, upon the date of such termination (the "Termination Date"), have an irrevocable, exclusive option (the "Repurchase Option") for a period of ninety (90) days from the Termination Date to repurchase all or any portion of the Shares held by Purchaser as of the Termination Date which have not yet been released from the Repurchase Option at a purchase price of $0.037 per share, adjusted for any future stock splits, stock dividends and the like.
(b) The Repurchase Option shall be exercised by the Company by written notice to Purchaser or his executor and, at the Company's option, (i) by delivery to Purchaser or his executor with such notice of a check in the amount of the purchase price for the Shares being purchased, or (ii) in the event Purchaser is indebted to the Company, by cancellation by the Company of an amount of such indebtedness equal to the purchase price for the Shares being repurchased, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such purchase price. Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Shares being repurchased by the Company, without further action by Purchaser.
(c) The Shares held by Purchaser shall be released from the Repurchase Option under this Section 3.1 as follows (provided in each case that Purchaser's employment or consulting services have not been terminated prior to the date of any such release): 33 2/3% of the total number of Shares (1,333,333 Shares) are released from the Repurchase Option as of June 24, 1998, and an additional 1/24th of the total number of Shares (111,111.11 Shares) shall be released from the Repurchase Option at the end of each full month thereafter, until all Shares are released from the Repurchase Option. Fractional shares shall be rounded to the nearest whole share.
(d) Notwithstanding the foregoing, in the event that Purchaser's employment with or consulting services to the Company are terminated without Cause or for Good Reason (as such terms are defined below) the Repurchase Option shall immediately terminate with respect to, and Purchaser shall acquire a vested interest in, all of the then remaining unvested Shares previously subject to the Repurchase Option.
(e) For purposes of this Agreement, "Cause" shall mean the happening of one or more of the following events:
(i) Purchaser's willful misconduct or gross negligence in the performance of her duties hereunder, including Purchaser's refusal to comply in any material respect with the legal directives of the Company's Board of Directors so long as such directives are not inconsistent with Purchaser's position and duties, and such refusal to comply is not remedied within ten (10) working days after written notice from the Board of Directors, which written notice shall state that failure to remedy such conduct may result in termination for Cause;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do an injury to the Company, or conduct that materially discredits the Company or is materially detrimental to the reputation of the Company, including conviction of a felony; or
(iii) Purchaser's incurable material breach of any element of the Company's Proprietary Information and Assignment of Inventions Agreement, including, without limitation, Purchaser's theft or other misappropriation of the Company's proprietary information.
(h) For purposes of this Section 3.1 only, "disability" shall be deemed to have occurred when Purchaser's employment or consulting services with the Company are terminated because Purchaser is unable to engage in any substantial, gainful activity on behalf of the Company by reason of any medically determinable physical or mental impairment.
(i) Upon the occurrence of any one of the following events (any of such events, a "Change of Control"), the Repurchase Option shall terminate with respect to, and Purchaser shall acquire a vested interest in fifty percent (50%) of the then remaining unvested Shares:
(i) Upon the consummation of the acquisition of 51% or more of the outstanding stock of the Company pursuant to a tender offer validly made under any federal or state law (other than a tender offer by the Company);
(ii) Upon the consummation of a merger, consolidation or other reorganization of the Company (other than a reincorporation of the Company), if after giving effect to such merger, consolidation or other reorganization of the Company, the Purchasers of the Company immediately prior to such merger, consolidation or other reorganization do not represent a majority of interest of the holders of voting securities (on a fully diluted basis) with the ordinary voting power to elect directors of the surviving or resulting entity after such merger, consolidation or other reorganization;
(iii) Upon the sale of all or substantially all of the assets of the Company to a third party who is not an affiliate of the Company; or
(iv) Upon the dissolution of the Company pursuant to action validly taken by the Purchasers of the Company in accordance with applicable state law;
provided that (1) Purchaser continues his employment or consulting services with the Company at or after the commencement of a Change of Control and (2) Purchaser is still employed or providing consulting services to the Company at the time of the conclusion of such Change of Control (unless Purchaser's service by, or relationship with, the Company is terminated without Cause during the interim period between the commencement of any such Change of Control and the conclusion of that particular Change of Control).
(j) If Purchaser's employment or consulting services with the Company are terminated without Cause on or before the first anniversary of the effective date of the Change of Control, the Repurchase Option shall terminate with respect to and the Purchaser shall acquire a vested interest in all then remaining Unvested Shares.
then any new, substituted, or additional securities distributed with respect to the Shares shall be immediately subject to the provisions of this Section 3.3, to the same extent the Shares are at such time covered by such provisions. In order to enforce the provisions of this Section 3.3, the Company may impose stop-transfer instructions with respect to the Shares until the end of the applicable stand-off period."
2. Except as expressly amended herein, the Purchase Agreement shall remain in full force and effect.
3. This Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Purchaser have executed this Amendment as of the date first above written.
COMPANY:
eGAIN COMMUNICATIONS CORPORATION
By: /s/ Ashutosh Roy
------------------------------
Title: CEO
---------------------------
|
PURCHASER:
/s/ Gunjan Sinha
---------------------------------
Gunjan Sinha
|
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
EXHIBIT B
CONSENT OF SPOUSE
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" and to the use of our reports pertaining to eGain Communications Corporation dated July 16, 1999 and pertaining to Sitebridge Corporation dated July 16, 1999 included in the Registration Statement (Form S-1) and related Prospectus of eGain Communications Corporation for the registration of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
July 21, 1999
|
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM eGAIN COMMUNICATIONS CORPORATION'S JUNE 30, 1999 AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | JUN 30 1999 |
| PERIOD START | JUL 01 1998 |
| PERIOD END | JUN 30 1999 |
| CASH | 1,265,147 |
| SECURITIES | 0 |
| RECEIVABLES | 705,488 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 2,483,531 |
| PP&E | 1,419,051 |
| DEPRECIATION | 286,400 |
| TOTAL ASSETS | 24,460,038 |
| CURRENT LIABILITIES | 3,238,870 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 16,986,961 |
| COMMON | 7,288,859 |
| OTHER SE | (3,297,536) |
| TOTAL LIABILITY AND EQUITY | 24,460,038 |
| SALES | 1,019,343 |
| TOTAL REVENUES | 1,019,343 |
| CGS | 1,772,159 |
| TOTAL COSTS | 1,772,159 |
| OTHER EXPENSES | 10,546,788 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 116,257 |
| INCOME PRETAX | (11,304,501) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (11,304,501) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (11,304,501) |
| EPS BASIC | (2.14) |
| EPS DILUTED | (2.14) |